<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MIAMI CRUISELINE SERVICES HOLDINGS I B.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
THE NETHERLANDS 5947 98-0193197
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
STRAWINSKYLAAN 3105, 7TH FLOOR
1077 ZX AMSTERDAM, THE NETHERLANDS
(31) 20-44-211-25
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MIAMI CRUISELINE SERVICES HOLDINGS I B.V.
C/O BERKSHIRE CRUISE HOLDINGS LLC
ONE BOSTON PLACE
BOSTON, MASSACHUSETTS 02108-4401
ATTENTION: JOEL E. CUTLER
(617) 227-0050
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID C. CHAPIN STEPHEN L. BURNS
JANE D. GOLDSTEIN CRAVATH, SWAINE & MOORE
ROPES & GRAY 825 EIGHTH AVENUE
ONE INTERNATIONAL PLACE NEW YORK, NEW YORK 10019-7475
BOSTON, MASSACHUSETTS 02110-2624 (212) 474-1000
(617) 951-7000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
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(c)
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Shares, par value EUR .01 nominal value.............. $125,000,000 $34,750
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
------------------------
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 THE 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 , 1999
Shares
STARBOARD CORPORATE LOGO
Common Shares
------------------
We(1) are selling common shares, and the selling
shareholders are selling common shares. We will not receive any
of the proceeds from the common shares sold by the selling shareholders.
The underwriter has an option to purchase a maximum of
additional shares to cover over-allotments of shares.
Prior to this offering, there has been no public market for the common
shares. The initial public offering price of the common shares is expected to be
between $ and $ per share. Our common shares have been approved for
listing on The Nasdaq Stock Market's National Market under the symbol "CRUZ".
INVESTING IN THE COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 7.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO PROCEEDS TO
PRICE TO DISCOUNTS AND STARBOARD CRUISE SELLING
PUBLIC COMMISSIONS SERVICES SHAREHOLDERS
-------- -------------- ---------------- ------------
<S> <C> <C> <C> <C>
Per Share............................ $ $ $ $
Total................................ $ $ $ $
</TABLE>
Delivery of the common shares will be made on or about ,
1999.
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.
CREDIT SUISSE FIRST BOSTON
The date of this prospectus is , 1999.
- -------------------------
(1) Prior to the effectiveness of the registration statement of which this
prospectus is a part, we will change our name from Miami Cruiseline Services
Holdings I B.V. to Starboard Cruise Services N.V.
<PAGE> 3
[PHOTOS]
i
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUMMARY.................... 1
SUMMARY PRO FORMA FINANCIAL AND OTHER
DATA................................ 3
SUMMARY FINANCIAL AND OTHER DATA...... 5
RISK FACTORS.......................... 7
FORWARD-LOOKING STATEMENTS -- MARKET
DATA................................ 16
USE OF PROCEEDS....................... 17
DIVIDEND POLICY....................... 17
CAPITALIZATION........................ 18
DILUTION.............................. 19
UNAUDITED PRO FORMA CONDENSED
STATEMENTS OF OPERATIONS............ 20
SELECTED FINANCIAL DATA............... 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 30
BUSINESS.............................. 39
MANAGEMENT............................ 51
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PRINCIPAL AND SELLING SHAREHOLDERS.... 61
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS........................ 63
DESCRIPTION OF CAPITAL STOCK.......... 66
SHARE CERTIFICATES AND TRANSFER....... 70
DESCRIPTION OF CERTAIN INDEBTEDNESS... 72
SHARES ELIGIBLE FOR FUTURE SALE....... 75
TAXATION.............................. 78
UNDERWRITING.......................... 86
NOTICE TO CANADIAN RESIDENTS.......... 88
LEGAL MATTERS......................... 89
EXPERTS............................... 89
CHANGE IN ACCOUNTANTS................. 90
WHERE YOU CAN FIND MORE INFORMATION... 90
SERVICE OF PROCESS AND ENFORCEMENT OF
CIVIL LIABILITIES................... 91
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>
------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
------------------
THESE SECURITIES MAY ONLY BE OFFERED, SOLD, TRANSFERRED OR DELIVERED,
WHETHER DIRECTLY OR INDIRECTLY, TO PERSONS (INCLUDING LEGAL ENTITIES)
ESTABLISHED, DOMICILED OR RESIDENT OUTSIDE THE NETHERLANDS. THE APPLICABLE
REQUIREMENTS OF THE LAW OF ANY JURISDICTION IN WHICH PERSONS (INCLUDING LEGAL
PERSONS) TO WHOM THE OFFER IS DIRECTED ARE ESTABLISHED, DOMICILED OR RESIDENT
HAVE BEEN AND WILL BE COMPLIED WITH. A STATEMENT TO THIS EFFECT HAS BEEN
SUBMITTED TO THE DUTCH SECURITIES BOARD (STICHTING TOEZICHT EFFECTENVERKEER)
PURSUANT TO ARTICLE 3, PARA. 2 UNDER (c) OF THE EXEMPTION REGULATION PURSUANT TO
THE DUTCH ACT ON THE SUPERVISION OF THE SECURITIES TRADE 1995.
------------------
"Onboard Media" and the trademarks listed under "Business -- Intellectual
Property" are our trademarks. All other trademarks and service marks used in
this prospectus are the property of their respective owners.
------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THIS
OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
ii
<PAGE> 5
PROSPECTUS SUMMARY
The following summary contains basic information about Starboard Cruise
Services and this offering. It may not contain all the information that may be
important to you. You should read this entire prospectus, including the
financial data and related notes, and the documents to which we have referred
you before making an investment decision. The terms "Starboard Cruise Services,"
"we," "our," and "us," as used in this prospectus refer to Starboard Cruise
Services N.V. and its subsidiaries unless the context otherwise requires. Except
as otherwise noted, all information in this prospectus assumes no exercise of
the underwriter's over-allotment option and assumes the occurrence of the 250
for 1 common share split which will occur immediately prior to the offering.
This prospectus contains forward looking statements which involve risks and
uncertainties. Starboard Cruise Services' actual results could differ materially
from those anticipated in these forward-looking statements as the result of
certain factors, including those set forth under "Risk Factors" and elsewhere in
this prospectus. See "Forward Looking Statements -- Market Data".
STARBOARD CRUISE SERVICES
We are the world's leading provider of duty-free retail shops on cruise
ships and the leading provider of customized media and art auction programs to
the cruise industry. We deliver our services to 100 ships representing 26 cruise
lines worldwide, including industry leaders such as Carnival Cruise Line,
Celebrity Cruises, Costa Cruises, Cunard Line, Disney Cruise Line, Holland
America Line, Norwegian Cruise Lines, P&O Cruises, Renaissance Cruise Lines,
Royal Caribbean International and Seabourn Cruise Line. In general, we provide
our cruise-based services on an exclusive basis on the ships we service pursuant
to multi-year contracts. In addition to cruise-based services, we also operate
land-based services that complement our cruise-based business. In our land-based
services we operate duty-free retail shops at airport locations in Miami and
Fort Lauderdale, Florida, sell wholesale duty-free goods to cruise lines and
caterers serving cruise lines, and provide customized publications and videos to
hotels and resorts. For the year ended December 31, 1998, we generated pro forma
net sales of $281.2 million and EBITDA of $18.1 million. Our cruise-based
services generated $213.6 million of pro forma net sales and our land-based
services generated $67.6 million of pro forma net sales during the same period.
The passenger cruise industry has grown substantially. According to Cruise
Lines International Association (CLIA), approximately 5.4 million North American
passengers took cruises in 1998, an increase of 4.0 million from 1.4 million in
1980, representing a compound annual growth rate of approximately 8.0%. The
number of cruise ships increased 20% from 120 ships in 1993 to 144 ships as of
January 1, 1999, with the number of berths growing 32% from approximately
104,000 to 137,000 over the same period. According to CLIA and Cruise Industry
News, the number of ships is expected to grow 32% from 144 as of January 1, 1999
to 190 in 2003, with the number of berths growing 48% from approximately 137,000
to 203,000 over the same period, representing larger berth capacity of the ships
entering the market. In addition, new ships, which are generally larger,
typically contain significantly more retail space. Because of the increase in
retail selling space and the strong relationship of overall cruise demand to
demand for our services, we expect to grow along with the overall growth of the
cruise industry.
As the leader in each of the markets for our core services, we believe that
we are well positioned to benefit from these cruise industry trends. We believe
that our leading market positions are a result of the scale advantages we have
achieved in our core services. Our strong relationships with cruise lines and
our established reputation within the industry also contributes to our market
strength. In
1
<PAGE> 6
addition, we believe our experienced management and shipboard team and our
expertise in merchandising to cruise customers are further competitive
advantages. Our strategy is to:
- Expand with our cruise line customers as they grow and continue to build
new and often larger ships. We currently have contracts with our
customers giving us the opportunity to provide service to 27 of the 36
cruise ships that are currently under contract or construction;
- Increase the number of services we provide to our existing cruise
customers. Currently, almost all of the major cruise lines use at least
one of our cruise-based services and only four cruise lines use all of
our services, providing future opportunities to cross sell our services
to our cruise line customers;
- Continue to improve our merchandising. By improving product mix and
continuing to tailor our service offerings for individual cruise lines
and itineraries, we seek to increase our revenue generated per passenger
day; and
- Expand our service offerings. We plan to work with our cruise line
customers to develop and offer additional services on cruise ships.
Our principal executive office is located at Strawinskylaan 3105, 7th
Floor, 1077 ZX Amsterdam, The Netherlands. Our telephone number is
31-20-44-211-25.
THE OFFERING
Common shares offered by Starboard
Cruise Services..................... shares
Common shares offered by Selling
Shareholders........................ shares
Common shares outstanding after the
offering............................ shares(1)
Use of proceeds..................... We expect to use the net proceeds from
the offering to repay a portion of our
indebtedness, to fund payments that are
to be made in connection with this
offering, including a capital tax due
in The Netherlands and a deferred
payment to a customer, and for general
corporate purposes, including working
capital requirements and the funding of
strategic investments or future
acquisitions. See "Use of Proceeds".
Nasdaq National Market symbol....... "CRUZ".
- ---------------
(1) Except as otherwise indicated, all information in this prospectus:
- assumes no exercise of the underwriter's over-allotment option;
- excludes 1,000,000 shares subject to options outstanding as of July 31,
1999 at a weighted average price of $1.925 per share under the 1998 Stock
Option Plan; and
- assumes an effective 250 for 1 common share split to be completed prior
to the effectiveness of this offering by a 50 for 1 share split followed
immediately by a 5 for 1 stock dividend.
Please see "Capitalization" for a more complete discussion regarding our
outstanding shares, options and related matters.
2
<PAGE> 7
SUMMARY PRO FORMA FINANCIAL AND OTHER DATA
We have presented below the unaudited pro forma financial data for
Starboard Cruise Services (formerly Miami Cruiseline Services Holdings I B.V.)
which have been derived from the unaudited pro forma condensed statements of
operations included elsewhere in this prospectus. The pro forma statement of
operations and other data for the year ended December 31, 1998 give effect to
this offering and the acquisitions detailed under "Unaudited Pro Forma Condensed
Statements of Operations" as if they occurred on January 1, 1998. The pro forma
statement of operations data and other data for the six months ended June 30,
1999 give effect to this offering as if it had occurred on January 1, 1998. The
pro forma balance sheet at June 30, 1999 has been prepared as if this offering
had occurred on such date. This data should be read in conjunction with
"Unaudited Pro Forma Condensed Statements of Operations", "Selected Financial
Data", "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the consolidated financial statements and the notes thereto
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
(DOLLARS IN THOUSANDS EXCEPT
SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................ $ 281,151 $ 138,258
Cost of sales............................................ 120,917 56,888
----------- -----------
Gross profit............................................. 160,234 81,370
Selling, general and administrative expenses............. 146,149 75,857
Amortization of intangibles.............................. 5,232 2,750
----------- -----------
Income from operations................................... 8,853 2,763
Interest expense......................................... 2,996 1,249
Interest income.......................................... 972 228
Other expense............................................ 10 --
----------- -----------
Income before provision for income taxes and minority
interest............................................... 6,819 1,742
Provision for income taxes............................... 1,529 228
Minority interest........................................ 776 71
----------- -----------
Net income(a)............................................ $ 4,514 $ 1,443
=========== ===========
PER SHARE DATA:
Basic and diluted net income per share................... $ 0.15 $ 0.05
=========== ===========
Pro forma basic and diluted weighted average shares...... 29,726,250 30,476,250
=========== ===========
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
(DOLLARS AND PASSENGER DAYS IN
THOUSANDS EXCEPT SHARE
DATA)
<S> <C> <C>
OTHER DATA:
EBITDA(b)................................................ $ 18,086 $ 7,486
Net income plus amortization of intangibles.............. 10,123 4,193
Diluted net income plus amortization of intangibles per
share.................................................. 0.34 0.14
Capital expenditures..................................... 901 572
Total ships served (at end of period).................... 95 100
Ships served by cruise ship retail stores (at end of
period)................................................ 75 82
Cruise ship retail stores passenger days................. 18,438 14,346
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1999
--------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................ $ 361
Total assets............................................................. 194,020
Long-term debt........................................................... 26,536
Total shareholders' equity(a)............................................ 131,314
</TABLE>
- -------------------------
(a) Net income does not include an extraordinary charge of approximately $7.0
million related to a prepayment fee in connection with the payment of $28.3
million of our senior subordinated notes which we will record in the quarter
in which the offering is consummated. This amount has been charged against
pro forma shareholders' equity.
(b) EBITDA is defined as income from operations before depreciation and
amortization. EBITDA is presented because we believe that EBITDA is a widely
accepted financial indicator of an entity's ability to incur and service
debt. EBITDA should not be considered by an investor as an alternative to
net income or income from operations, as an indicator of our operating
performance or other combined operations or cash flow data prepared in
accordance with generally accepted accounting principles, or as an
alternative to cash flows as a measure of liquidity. Our computation of
EBITDA may differ from similarly titled computations of other companies.
4
<PAGE> 9
SUMMARY FINANCIAL AND OTHER DATA
We have presented below the summary consolidated financial data for
Starboard Cruise Services for the period from September 10, 1998 through
December 31, 1998 and for our predecessor entity, Greyhound Leisure Services,
for each of the two years in the period ended December 31, 1997 and the period
from January 1, 1998 through September 17, 1998, which have been derived from
the audited consolidated financial statements of Starboard Cruise Services and
Greyhound Leisure Services included elsewhere in this prospectus. The summary
consolidated financial data for Starboard Cruise Services for the six-month
period ended June 30, 1999, has been derived from the unaudited consolidated
financial statements of Starboard Cruise Services included elsewhere in this
prospectus, which includes all adjustments that we consider necessary for a fair
presentation of the financial position and results of operations for such
period. Operating results for the six-month period ended June 30, 1999 are not
indicative of the results that may be expected for the entire year. This data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and the notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PREDECESSOR STARBOARD CRUISE SERVICES
---------------------------------------- ----------------------------------
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, JANUARY 1, 1998 SEPTEMBER 10, 1998 SIX MONTHS
------------------- THROUGH THROUGH ENDED
1996 1997 SEPTEMBER 17, 1998 DECEMBER 31, 1998 JUNE 30, 1999
-------- -------- ------------------ ------------------ -------------
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $179,799 $188,498 $135,603 $ 71,061 $ 138,258
Cost of sales..................... 72,860 76,828 54,290 30,139 56,888
-------- -------- -------- ----------- -----------
Gross profit...................... 106,939 111,670 81,313 40,922 81,370
Selling, general and
administrative expenses......... 96,712 101,067 73,993 36,373 75,857
Amortization of intangibles....... -- -- -- 1,525 2,750
-------- -------- -------- ----------- -----------
Income from operations............ 10,227 10,603 7,320 3,024 2,763
Interest expense, net............. (113) (205) (417) (2,671) (5,819)
-------- -------- -------- ----------- -----------
Income (loss) before provision for
income taxes and minority
interest........................ 10,114 10,398 6,903 353 (3,056)
Provision for income taxes........ 2,936 2,941 2,249 359 186
Minority interest................. 1,706 957 594 182 71
-------- -------- -------- ----------- -----------
Net income (loss)................. $ 5,472 $ 6,500 $ 4,060 $ (188) $ (3,313)
======== ======== ======== =========== ===========
PER SHARE DATA:
Basic and diluted net income
(loss) per share................ $ 5,472 6,500 4,060 $ (0.01) $ (0.11)
Basic and diluted weighted average
shares outstanding.............. 1,000 1,000 1,000 23,250,000 24,000,000
</TABLE>
5
<PAGE> 10
<TABLE>
<CAPTION>
PREDECESSOR STARBOARD CRUISE SERVICES
---------------------------------------- ----------------------------------
YEAR ENDED PERIOD FROM PERIOD FROM
DECEMBER 31, JANUARY 1, 1998 SEPTEMBER 10, 1998 SIX MONTHS
------------------- THROUGH THROUGH ENDED
1996 1997 SEPTEMBER 17, 1998 DECEMBER 31, 1998 JUNE 30, 1999
-------- -------- ------------------ ------------------ -------------
(DOLLARS AND PASSENGER DAYS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Net income (loss) plus
amortization of intangibles..... $ 5,472 $ 6,500 $ 4,060 $ 1,337 $ (563)
Diluted net income (loss) plus
amortization of intangibles per
share........................... -- -- -- $ 0.06 $ (0.02)
Capital expenditures.............. $ 4,016 $ 4,353 $ 625 $ 141 $ 573
Total ships served (at end of
period)......................... 59 68 73 95 100
Ships served by cruise ship retail
stores (at end of period)....... 40 41 46 75 82
Cruise ship retail stores
passenger
days............................ 16,805 17,044 13,106 5,331 14,346
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR STARBOARD CRUISE SERVICES
----------------- --------------------------
DECEMBER 31,
----------------- DECEMBER 31, JUNE 30,
1996 1997 1998 1999
------- ------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 522 $ 262 $ 4,124 $ 361
Total assets................................................ 56,998 59,262 191,540 194,020
Total debt.................................................. -- -- 112,888 110,588
Total shareholders' equity.................................. 14,383 15,148 45,982 42,669
</TABLE>
6
<PAGE> 11
RISK FACTORS
You should carefully consider the risks described below and the other
information in this prospectus, including our financial statements and related
notes, before you purchase any common shares.
This prospectus contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are usually accompanied by words
such as "believes," "anticipates," "plans," "expects" and similar expressions.
Our actual results may differ materially from the results discussed in the
forward-looking statements because of factors such as the Risk Factors discussed
below. See "Forward-Looking Statements -- Market Data".
RISKS RELATED TO OUR MARKET AND OUR CUSTOMERS
OUR BUSINESS IS DEPENDENT ON THE CRUISE INDUSTRY -- IF THE DEMAND FOR CRUISE
VACATIONS DECREASES, WE MAY BE ADVERSELY AFFECTED.
We generate our revenues primarily from services provided to cruise ship
passengers, such as cruise-based duty-free retail services, customized media and
art auctions. As a result, the cruise industry's ability to attract passengers
affects both our financial results of operations and our ability to develop our
business. We cannot be sure that the cruise industry will continue to enjoy the
same level of popularity or growth that it has in the past.
The cruise industry is subject to several potential risks. For example,
because cruise lines compete for consumer disposable leisure spending with other
vacation alternatives, such as land-based resort or sightseeing vacations, the
demand for cruise vacations could be adversely affected by shifts in vacation
patterns or increased competition from other vacation alternatives. A general
downturn in economic conditions could also adversely affect demand for leisure
travel, including demand for cruise vacations. Moreover, cruise lines operate
throughout the world, including geographic regions that from time to time
experience political and civil unrest and armed hostilities, which can adversely
affect demand for cruise vacations. Demand for cruise vacations could also be
affected negatively by publicized operational, safety, health, litigation or
other problems related to cruises. Severe weather conditions at port or at sea
and disruptions in airline service that restrict passengers' ability to reach
their port of embarkation could reduce the number of cruise passengers as well.
In addition, the cruise industry currently relies heavily on various regulatory
exemptions in a number of jurisdictions. Changes in tax exemptions under Section
883 of the U.S. Internal Revenue Code, which exempt a substantial portion of
cruise line income from U.S. taxation and are currently being debated in
Congress, or changes in U.S. labor regulations regarding shipboard employees
could adversely affect the cruise industry. If such changes are made, cruise
lines may be required to raise prices or cut costs, possibly affecting demand
for cruise vacations and the availability of financing for new vessels. Any of
these events could negatively affect demand for cruise vacations, demand for our
services, our revenues or our margins and, as a result, have a material adverse
effect on our results of operations and ability to implement our business plan.
A FEW CRUISE COMPANIES ACCOUNT FOR A SIGNIFICANT PORTION OF OUR REVENUES -- IF
ANY LARGE CRUISE OPERATOR CEASES TO USE OUR SERVICES, WE WOULD LIKELY LOSE A
SOURCE OF A SUBSTANTIAL PORTION OF OUR REVENUES.
According to the Cruise Line Industry Association (CLIA), Carnival
Corporation (including its affiliates Carnival Cruise Lines, Costa Cruises,
Cunard Line, Holland America Line, Seabourn Cruise Line and Windstar Cruises),
Royal Caribbean Cruises Ltd. (including its affiliates Royal Caribbean
International and Celebrity Cruises), Princess Cruise Lines and Norwegian Cruise
Lines accounted for 82% of cruise industry berths as of January 1, 1999. For the
first half of 1999, 57% of our net sales came from our two largest individual
cruise line customers, and we expect a significant portion
7
<PAGE> 12
of our net sales will continue to be derived from a limited number of customers.
If any of these companies ceases to use our services, significantly reduces its
use of our services during or at the end of a contract period, or experiences
materially negative changes in its business, the negative impact on our
operational results and ability to implement our strategy would be substantial.
See "Business -- Industry Overview".
WE WILL NEED TO RENEW OR EXTEND OUR CONTRACTS WITH OUR CUSTOMERS IN THE
FUTURE -- IF OUR CUSTOMERS DO NOT EXERCISE THEIR RENEWAL OPTIONS UNDER THE
CONTRACTS OR DO NOT OTHERWISE RENEW THE CONTRACTS AFTER THEY EXPIRE, WE COULD
LOSE A SUBSTANTIAL PORTION OF OUR SALES.
Our ability to provide duty-free retail services on cruise ships and in
airports is based primarily on concession contracts with cruise operators and
airports. Our services to provide customized media and art auctions are also
contract-based. Contracts to provide duty-free retail and other cruise-based
services to cruise lines accounting for 9% of our net sales for the six months
ended June 30, 1999 expire by December 31, 2000, cruise line contracts
accounting for 8% of our net sales expire by December 31, 2001, and cruise line
contracts accounting for 54% of our net sales expire by December 31, 2002, in
each case excluding renewal options under the contracts and in each case without
giving effect to our recently executed multi-year contract with Royal Caribbean
International. In addition, our Miami airport contract expires in November 2000
with the airport having five one-year renewal options. We cannot be sure that
our customers will exercise their renewal options under the contracts or that
they will otherwise renew their contractual relationships with us once these
contracts, including all renewal periods, expire. Generally, a cruise line may
terminate these contracts early if we breach our agreements and may reduce the
number of ships covered by each contract by removing ships from service. Some
cruise lines have other termination rights including, for example, termination
upon a specified change of control or termination upon 12 months' notice.
WE ARE REQUIRED TO MAKE MINIMUM PAYMENTS UNDER MANY OF OUR CONTRACTS
IRRESPECTIVE OF THE VOLUME OF OUR SALES -- OUR SALES MIGHT NOT BE SUFFICIENT TO
MEET OUR MINIMUM PAYMENT REQUIREMENTS.
Our contracts to provide duty-free retail services on cruise ships
generally require us to pay cruise lines the greater of a percentage of revenue
or a minimum per passenger per day amount. Some media and art auction contracts
also require minimum payments, regardless of the revenues we generate under
those contracts. As a result, we could be required to pay a greater percentage
of sales to the cruise lines than we currently pay or we could be forced to pay
costs which our sales are not sufficient to cover. A reduction in our sales
could cause minimum payments to require a larger percentage of our cash flow,
limiting the cash available for other required uses or causing us to default on
our minimum payment obligations. See "Business -- Contracts".
OUR PRIMARY CUSTOMERS HAVE BECOME LARGER -- THEIR INCREASED SIZE AND MARKET
SHARE MAY GIVE THEM THE ABILITY TO NEGOTIATE MORE FAVORABLE TERMS IN THEIR
CONTRACTS WITH US.
Large cruise lines have expanded their scale through acquisitions and by
building additional ships. These cruise lines may seek more favorable terms in
their contractual relationships with us. Changes in contract terms that are more
favorable to these large customers could have a material adverse effect on our
business. See "Business -- Industry Overview".
WE FACE COMPETITION FOR PASSENGER SPENDING AND FOR CRUISE LINE CONCESSIONS FROM
A VARIETY OF SOURCES -- THIS COMPETITION MAY MAKE IT DIFFICULT FOR US TO
MAINTAIN OUR CURRENT POSITION IN THE MARKET OR TO CONTINUE TO GROW.
We compete with alternative passenger activities both on cruise ships and
at ports of call and with retail shopping venues not located on cruise ships or
in airports. We also compete with other
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companies that provide services similar to ours and with cruise lines that
provide these services themselves. Cruise vacations offer passengers a variety
of other ways to spend their time and money during a cruise besides retail
shopping in our on-board shops, shopping with on-shore retailers with whom we
contract or attending the art auctions we provide. These alternatives include
spas, shore excursions, gambling casinos, bars and sports. Moreover, many
alternatives are provided without additional cost to passengers. Furthermore, as
some cruise lines currently perform these services themselves, we cannot assure
you that other cruise lines will not decide in the future to provide the
services themselves. In addition, new competitors, some of whom may have access
to greater financial and other resources than we do, could enter the industry in
the future. See "Business -- Competition".
RISKS RELATED TO OUR OPERATIONS
WE ARE DEPENDENT ON OUR SENIOR EXECUTIVES AND KEY PERSONNEL -- IF WE LOSE SOME
OR ALL OF OUR SENIOR EXECUTIVES OR KEY PERSONNEL, WE MAY NOT BE ABLE TO FIND
APPROPRIATE REPLACEMENTS ON A TIMELY BASIS AND OUR BUSINESS COULD BE ADVERSELY
AFFECTED.
Our success will continue to depend to a significant extent on our
executive team, key management personnel and other key personnel. Many of our
executives have strong relationships with the cruise lines which we consider
important to our business. We have entered into employment agreements with four
of our executive officers, but we cannot be certain that they will remain able
and willing to continue service with us. We do not have employment agreements
with any other key employees. As we continue to grow and expand our business,
our success will also depend on our ability to retain current management and to
attract additional qualified management personnel to our executive team and
other key positions. We cannot guarantee that we will continue to find a
sufficient number of qualified individuals required for our business.
OUR INDEBTEDNESS RESTRICTS OUR FLEXIBILITY -- OUR CURRENT AND FUTURE
INDEBTEDNESS COULD LIMIT OUR FLEXIBILITY, ADVERSELY AFFECT OUR FINANCIAL HEALTH
AND LIMIT OUR ABILITY TO PLAN FOR OR RESPOND TO CHANGES IN OUR BUSINESS.
To finance our 1998 acquisitions, we incurred substantial indebtedness.
After a portion of the proceeds from this offering of common shares is used to
repay existing indebtedness, we will still owe approximately $26.5 million in
principal amount of indebtedness. We may also seek to incur additional
indebtedness when we feel the opportunities to do so are favorable and when the
proceeds of such indebtedness are needed to finance growth opportunities. Our
level of debt could have consequences for our business, including:
- we will be required to dedicate a portion of our cash flow from
operations to repayment of debt, limiting the availability of cash for
other purposes;
- we may have limited flexibility in planning for, or reacting to, changes
in our business and industry;
- we will be limited by financial and other restrictive covenants in our
credit arrangements in our borrowing of additional funds; and
- a failure to comply with the covenants under which we borrow our
indebtedness could result in an event of default. If an event of default
occurs and was not cured or waived, it could result in a substantial
amount of our indebtedness becoming immediately due and payable.
We cannot guarantee that we will be able to generate enough cash flow from
operations or that we will be able to obtain enough capital to service our
current or future debt or fund our planned capital expenditures. In addition, we
may need to refinance indebtedness on or before maturity. We
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cannot guarantee, however, that we would be able to refinance our indebtedness
on commercially reasonable terms or at all.
AS A HOLDING COMPANY, WE REQUIRE DIVIDENDS FROM OUR SUBSIDIARIES TO MEET CASH
REQUIREMENTS OR PAY DIVIDENDS -- IF OUR SUBSIDIARIES ARE UNABLE TO DIVIDEND CASH
TO US WHEN WE NEED IT, WE MAY BE UNABLE TO PAY DIVIDENDS, MAKE DISTRIBUTIONS OR
SATISFY OBLIGATIONS UNDER RELEVANT DEBT INSTRUMENTS.
Each of Starboard Cruise Services and its subsidiary holding companies is a
holding company with no business operations of its own. The only significant
assets of each holding company are the outstanding capital shares of its
subsidiaries, through which the holding companies indirectly conduct all of our
business operations. Accordingly, the only source of cash to pay dividends or
make other distributions on our capital stock or to pay interest on our
outstanding indebtedness is distributions relating to our, and our holding
company subsidiaries', ownership interest in our operating subsidiaries from the
net earnings and cash flow generated by such operating subsidiaries. We
currently expect that the earnings and cash flow of our operating subsidiaries
will be retained and used by them in their operations, and used to service the
respective debt obligations of our subsidiaries. Even if we did determine to
make a distribution in respect of the capital stock of those subsidiaries, there
can be no assurance that those subsidiaries will generate sufficient cash flow
to pay such a dividend or distribute such funds, or that applicable law and
contractual restrictions, including negative covenants contained in any debt
instruments of such subsidiaries, would permit such dividends or distributions.
The terms of our debt instruments restrict our subsidiaries' ability to pay
dividends or to make distributions. Moreover, the subsidiaries are permitted
under the terms of the relevant debt instruments to incur additional
indebtedness that may further restrict or prohibit the making of distributions,
the payment of dividends or the making of loans by such subsidiaries to
Starboard Cruise Services. See "-- Our Indebtedness Restricts Our Flexibility"
and "Description of Certain Indebtedness".
WE MAY FAIL TO EFFECTIVELY INTEGRATE ACQUIRED COMPANIES -- IF WE ARE UNABLE TO
EFFECTIVELY INTEGRATE RECENT AND FUTURE ACQUISITIONS, OUR BUSINESS MAY BE
ADVERSELY AFFECTED OR WE MAY NOT REALIZE ALL THE BENEFITS OF THESE ACQUISITIONS.
We must integrate our recent and future acquisitions for the efficient
operation of our business. We cannot guarantee that this integration will be
completed or that, if it is completed, it will be completed in a timely fashion.
Failure to adequately integrate our business could have a material adverse
effect on our results of operations.
DEMAND FOR OUR SERVICES IS SEASONAL -- AS A RESULT, OUR OPERATING RESULTS AND
REVENUES MAY FLUCTUATE DUE TO SEASONAL FACTORS, AND WE MAY NOT BE ABLE TO
GENERATE SUFFICIENT REVENUES TO COVER OUR EXPENSES DURING SOME PORTIONS OF THE
YEAR.
Demand for our services is seasonal. This may cause fluctuations in our
revenues and operating results. Net sales have historically been lower during
the third quarter when there are fewer cruises in the Caribbean. Seasonality may
continue to affect our results of operations and, if our expenses increase
during these periods, we might not generate enough revenue to offset these
expenses. The impact of our seasonality would increase if we lost major
contracts to service Alaskan or European cruises during the summer months.
YEAR 2000 COMPLIANCE PROBLEMS COULD AFFECT OUR OPERATIONS -- IF OUR COMPUTER
SYSTEMS, AND THOSE OF OTHERS ON WHOM WE RELY, DO NOT ACHIEVE YEAR 2000
COMPLIANCE, WE MAY SUFFER FINANCIAL AND OTHER HARMS.
We have reviewed and planned to ensure that our computer and network
systems, and those of parties on whom we rely, are Year 2000 compliant. We have
audited our software, undertaken
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significant changes to our information systems, and initiated formal
communications with our major suppliers and customers. We cannot guarantee that
our conversions, or those of our major suppliers and customers, will be
completed in a timely fashion. Our systems are critical to our management of
shipboard inventory, our merchandising, decisions about purchasing and
restocking, our delivery of goods from our airport duty-free stores, and our
tracking of on-ship results. We also depend upon the on-ship systems of those
customers whose on-board point-of-sale systems we use and upon our suppliers
whose readiness is critical to maintaining our supply. We cannot be sure that we
will not experience material, unanticipated negative consequences, including
material costs caused by undetected errors or defects in our or others' systems.
Such problems could have a material adverse effect on our results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000" and "Business -- Information Systems".
CURRENTLY WE OPERATE OUR ART AUCTION BUSINESS WITH A SINGLE SUPPLIER -- WE COULD
BE ADVERSELY AFFECTED IF OUR ART AUCTION SERVICES SUPPLIER FAILS TO PROVIDE
SERVICES TO US.
We conduct our art auction business pursuant to a contract with a single
supplier. Our supplier is responsible for much of the fulfillment for our art
programs. Our supplier has the right under the contract to elect not to provide
service on certain vessels subject to contractual notice periods for those
cruise lines with whom we have agreements. Because we currently do not maintain
relationships with other suppliers, we cannot guarantee that, in the event our
supplier elects not to service new customers or breaches its obligations, we
will be able to arrange an adequate alternative source of supply on a timely
basis for art and auctioneers. See "Business -- Suppliers".
RISKS RELATED TO THIS OFFERING
THE VALUE OF YOUR INVESTMENT WILL BE DILUTED -- UPON THE COMPLETION OF THIS
OFFERING, YOU WILL INCUR AN IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BASIC
VALUE OF YOUR INVESTMENT IN OUR COMPANY.
If you purchase shares in this offering, you will be paying more per share
than existing shareholders or individuals who acquired shares by exercising
options granted before this offering. As a result, the value of your investment
based on the value of our net tangible assets, as recorded on our books, will be
$ less than the amount you will pay for our common shares in this
offering. In addition, the total amount of our capital will be less than what it
would be if all of the existing shareholders and optionees had paid the same
amount per share as you will pay in this offering. See "Dilution".
WE WILL HAVE BROAD DISCRETION AS TO THE USE OF THE PROCEEDS OF THIS
OFFERING -- WE MAY NOT USE THE PROCEEDS EFFECTIVELY AND, AS A RESULT, COULD
REDUCE THE VALUE OF YOUR INVESTMENT IN OUR COMPANY.
Our management will have significant flexibility in applying any remaining
net proceeds of this offering, and investors will not have the opportunity to
evaluate the economic, financial and other relevant material that we will
consider in determining the application of net proceeds. If we do not apply the
funds we receive effectively, we may forego profit opportunities, lose
significant business opportunities or sustain losses that could reduce the value
of an investment in our company. See "Use of Proceeds".
OUR EXISTING SHAREHOLDERS WILL BE ELIGIBLE TO SELL UNREGISTERED SHARES AFTER
THIS OFFERING -- FUTURE SALES OF SHARES WHICH HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES LAWS COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES.
The market price of our common shares could decline as a result of sales by
our existing shareholders of shares which have not been registered under the
securities laws after this offering or
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the perception that these sales could occur. These sales also might make it
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate.
There will be shares of common stock outstanding immediately
after the closing of this offering, of which will not have been
registered under the securities laws in this offering. Of those unregistered
shares, will be freely transferable without restrictions or further
registration under the Securities Act, except for any shares held by our
"affiliates" as that term is defined in Rule 144 under the Securities Act and
except that our officers, directors and substantially all of our shareholders
have entered into lock-up agreements restricting transfer for a period of 180
days following the date of this prospectus. The remaining
unregistered common shares outstanding will be "restricted securities" as
defined in Rule 144. These shares may be sold in the future without registration
under the Securities Act to the extent permitted by Rule 144 or an exemption
under the Securities Act. See "Shares Eligible for Future Sale".
OUR EXISTING SHAREHOLDERS WILL CONTINUE TO HAVE SIGNIFICANT INFLUENCE OVER OUR
BUSINESS AFTER THIS OFFERING -- OUR EXISTING SHAREHOLDERS WILL HAVE SIGNIFICANT
INFLUENCE OVER MANAGEMENT, OUR BOARDS AND MATTERS REQUIRING A SHAREHOLDER VOTE,
AND THEIR INTERESTS MAY DIFFER FROM YOURS.
Our directors, executive officers and affiliated shareholders currently own
approximately 84% of our outstanding common shares and after the offering will
own % of our outstanding common shares. Accordingly, these directors,
officers and affiliated shareholders will have significant influence in managing
our company and determining the outcome of any corporate transaction or other
matter submitted to the shareholders for approval, including mergers,
consolidations and the sale of all or substantially all of our assets. These
shareholders will also have the power to prevent or cause a change in control.
The interests of these shareholders may differ from the interests of other
shareholders.
THERE IS CURRENTLY NO ACTIVE TRADING MARKET FOR OUR SHARES -- AS A RESULT, OUR
SHARE PRICE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS AND COULD DROP UNEXPECTEDLY.
There is currently no public market for our common shares and we cannot
assure you that an active trading market will develop or be sustained after this
offering. The initial public offering price will be determined through
negotiation between us and representatives of the underwriters and may not be
indicative of the market price for our common shares after this offering.
The market price of our common shares could fluctuate significantly as a
result of:
- variations in our operating results which may cause us to fail to meet
analysts' or investors' expectations;
- general economic and stock market conditions;
- changes in financial estimates by securities analysts;
- changes in business or regulatory conditions affecting us;
- announcements by us or our competitors of technological innovations or
new products or services; and
- trading of our common shares.
Other companies in our industry and the cruise industry have experienced
fluctuating stock prices, and we are likely to experience such fluctuation as
well. In addition, the stock market itself has from time to time experienced
significant price and volume fluctuations that have affected the market prices
for securities in our industry. As a result, investors in our common shares may
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experience a decrease in the value of their shares regardless of our operating
performance or prospects.
ANTITAKEOVER PROVISIONS IN OUR ARTICLES OF ASSOCIATION COULD HAVE EFFECTS THAT
CONFLICT WITH THE INTERESTS OF OUR SHAREHOLDERS -- PROVISIONS OF OUR ARTICLES OF
ASSOCIATION COULD MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE CONTROL OF
US EVEN IF SUCH A CHANGE IN CONTROL WOULD BE BENEFICIAL TO YOU.
Our Articles of Association provide for the boards which direct our company
to have a staggered membership. With our staggered boards, board members would
only be subject to reelection every three years. Such a provision could delay
the ability of a third party to exercise control over our company.
Our Articles also provide for the possible issuance of preference shares.
Preference shares may be issued pursuant to a resolution of one of our boards
without any further shareholder action pursuant to a delegation to issue shares
from the general meeting of shareholders to that board for a renewable period of
five years. The issuance of preference shares may deter or prevent a takeover
attempt, including an attempt that might result in a premium over the market
price for our shares.
Pursuant to a renewable five year delegation by the general meeting of
shareholders, one of our boards also may grant a call option on preference
shares, which will not exceed 100% of all our other outstanding shares, to an
independent foundation (referred to under Netherlands law as a stichting) to be
established under Netherlands law. In the event of an actual or threatened
hostile takeover bid, the foundation may exercise this option. The issuance of
such preference shares could therefore inhibit a change of control. See
"Description of Capital Stock".
RISKS RELATED TO U.S. AND INTERNATIONAL REGULATION
WE WILL LIKELY BE CLASSIFIED AS A CONTROLLED FOREIGN CORPORATION AND AS A
FOREIGN PERSONAL HOLDING COMPANY -- AS A RESULT, AS A SHAREHOLDER, YOU MAY HAVE
TO PAY U.S. TAXES ON OUR INCOME.
We expect to be classified for U.S. federal income tax purposes law as a
controlled foreign corporation, or CFC, after this offering. If we are deemed a
CFC for an uninterrupted period of at least 30 days during a taxable year, any
U.S. person owning 10% (by voting power) of our shares will be required to
include in gross income its pro rata share of certain types of our income
(generally passive income) to the extent of our earnings and profits for the
year (as determined for U.S. federal income tax purposes), but will not have to
include these amounts in income when they are distributed. Based on our current
plans, we do not expect to have any earnings and profits in the foreseeable
future and thus do not expect to have income subject to current inclusion under
these CFC rules. U.S. shareholders owning less than 10% of our voting power will
not be affected if we are a CFC. We also expect to be classified as a foreign
personal holding company. If we are a foreign personal holding company in any
taxable year, each U.S. person who held our shares on the last day of the year
would be required to include in gross income such person's pro rata share of our
undistributed foreign personal holding company income (generally taxable income
of the foreign personal holding company with certain adjustments, including a
deduction for dividends paid), even if no cash dividend were paid to the U.S.
shareholder. Based on our current plans, we do not expect to have any
undistributed foreign personal holding company income in the foreseeable future.
U.S. persons who acquire our shares from a decedent would not benefit from a
step-up of the tax basis to fair market value upon the transferor's death. See
"Taxation -- Controlled Foreign Corporations" and "-- Foreign Personal Holding
Companies".
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THE CRUISE LINE INDUSTRY IS SUBJECT TO BOTH U.S. AND INTERNATIONAL
REGULATIONS -- THESE REGULATIONS COULD ADVERSELY AFFECT THE CRUISE LINES WITH
WHICH WE HAVE AGREEMENTS AND, AS A RESULT, MAY AFFECT OUR ABILITY TO CONDUCT
BUSINESS.
The cruise industry is subject to significant United States and
international regulation. Regulations pertaining to financial responsibility,
environmental matters and passenger safety, among other things, can be
burdensome and place heavy constraints on how those in the cruise industry
conduct their business. For example, passenger safety standards adopted as part
of the Safety of Life at Sea Convention by the International Maritime
Organization have been phased in, and additional standards are required to be
phased in by 2010 with respect to vessel structural requirements. These
standards have resulted in the cruise lines retiring some vessels and could
otherwise adversely affect some cruise lines, including those cruise lines with
which we have contracts. Moreover, changes in the regulatory environment in the
future could have other adverse effects on the cruise industry, impacting cruise
lines with which we have concession agreements.
WE ARE SUBJECT TO CUSTOMS AND OTHER COMPLEX REGULATIONS -- FAILURE TO COMPLY
WITH REGULATIONS REGARDING OUR HANDLING AND SHIPMENT OF GOODS COULD ADVERSELY
AFFECT OUR BUSINESS.
Our operations are subject to customs, import/export, alcohol and tobacco
regulation in the U.S. and abroad. These regulations govern the manner in which
we take title to, store, ship and sell our merchandise. A failure to comply with
these regulations could result in fines, delays in providing products or
revocation of licenses and permits. Any of these results could have a material
adverse effect on our business.
RISKS RELATED TO FOREIGN LAW
PROVISIONS IN OUR ARTICLES OF ASSOCIATION LIMIT THE LIABILITY OF OUR
DIRECTORS -- YOU MAY FIND IT DIFFICULT TO PURSUE LEGAL REMEDIES AGAINST OUR
DIRECTORS IF YOU BELIEVE YOU HAVE A CLAIM AGAINST THEM.
Both our Articles of Association and our corporate affairs are governed by
Dutch corporate law. As a result, the rights of our shareholders and the
responsibilities of the boards which direct our affairs are distinct from those
established under the statutes or judicial precedent in U.S. jurisdictions.
Therefore, our public shareholders might find it more difficult to protect their
interests against actions by members of our boards or large shareholders than
they would as shareholders of a corporation incorporated in the United States.
Under our Articles of Association, once the general meeting of shareholders
adopts our annual accounts, the members of our boards will be discharged from
liability to our company, and consequently its shareholders, with respect to the
performance of their duties during the respective financial year to the extent
the actions they have taken during the year are evident to shareholders from a
review of the annual accounts or otherwise communicated to them. This is the
case unless the general meeting of shareholders explicitly reserves its rights
when approving the financial statements. See "Description of Capital
Stock -- Adoption of Annual Accounts and Discharge of Management Liability".
THE LAW OF THE NETHERLANDS GOVERNS THE STANDARD FOR LIABILITY OF OUR
DIRECTORS -- DUTCH LAW PROVIDES FOR A LOWER STANDARD OF DIRECTOR LIABILITY THAN
UNDER U.S. LAW. AS A SHAREHOLDER, IT MAY BE MORE DIFFICULT FOR YOU TO BRING A
LEGAL ACTION AGAINST OUR DIRECTORS THAN IF WE WERE A U.S. COMPANY.
The interpretation of Dutch law may provide for a lower standard of
director liability or responsibility than under U.S. law. Traditional concepts
under U.S. law such as "duty of loyalty", "duty of care", and "fiduciary
responsibility" may be interpreted and applied differently in The Netherlands
than under the laws of jurisdictions such as Delaware more familiar to U.S.
investors. In addition, under Dutch law, directors may take into consideration
corporate interests other than the
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best interest of shareholders. You may find that the law of The Netherlands
provides you with a lower level of protection and fewer opportunities to pursue
remedies than that to which you may be accustomed in U.S. jurisdictions. See
"-- Provisions in Our Articles of Association Limit the Liability of Our
Directors".
JUDGMENTS OF U.S. COURTS ARE NOT DIRECTLY ENFORCEABLE IN THE NETHERLANDS -- AS A
RESULT, YOU MAY FIND IT MORE DIFFICULT TO PROTECT YOUR RIGHTS THAN IF WE WERE A
U.S. COMPANY.
Judgments of U.S. courts, including judgments against us, our directors or
our officers that are predicated on the civil liability provisions of the
federal securities laws of the U.S., are not directly enforceable in The
Netherlands. Even if you prevail on a claim in a U.S. court, you may find it
difficult to enforce your rights in The Netherlands. See "Service of Process and
Enforcement of Civil Liabilities".
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FORWARD-LOOKING STATEMENTS--MARKET DATA
Many statements made in this prospectus under the captions "Prospectus
Summary", "Risk Factors", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business", and elsewhere, are
forward-looking statements that are not based on historical facts. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements, including those
discussed under "Risk Factors".
This prospectus contains market data related to our business and the cruise
line industry. This market data includes projections that are based on a number
of assumptions. The assumptions include that:
- the announced and/or planned increases in berth capacity will actually be
introduced into service;
- the cruise line industry will continue to operate at the same or at a
greater level of capacity utilization; and
- prospective passengers will continue to take cruises and will continue to
spend on duty-free shopping, port shopping and art at the same or at a
greater rate as they have in the past.
If any one or more of the foregoing assumptions turns out to be incorrect,
actual results may differ from projections based on these assumptions. The
cruise line industry and demand for the services we provide to the cruise lines
may not grow over the next five years at the rates projected by this market
data, or at all. The failure of these markets and demand for our services to
grow at their projected rates may have a material adverse effect on our
business, results of operations, our financial condition and the market price of
our common shares.
The forward-looking statements made in this prospectus relate only to
events as of the date on which the statements are made. We undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date on which the statements is made or to reflect the
occurrence of unanticipated events.
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USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $96.7
million (approximately $ million if the underwriter's over-allotment
option is exercised in full) from the sale of the common shares offered by us,
assuming an initial public offering price of $ , after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by us. We will not receive any proceeds from the sales of shares by the selling
shareholders.
We intend to use approximately $88.1 million of the net proceeds of the
offering to discharge a portion of the indebtedness we incurred in connection
with the acquisitions of our predecessor, Greyhound Leisure Services, and the
Onboard Group and the acquisition of certain of the assets of Nuance Global
Ships. Under the terms of our senior credit facility, we are required, in
connection with this offering, to use a portion of the net proceeds to repay
$42.3 million of our outstanding term loans of $67.5 million plus accrued
interest. The outstanding term loans bear interest at variable rates that range
from 2.25% to 3.50% over the applicable reserve adjusted Eurodollar rate and
have a maturity date of September 17, 2003.
In addition, we are required to repay our outstanding senior subordinated
notes and our outstanding junior subordinated note. The senior subordinated
notes were issued to various lenders in the aggregate principal amount of $25.2
million. The senior subordinated notes bear interest at a rate of 15% and have a
maturity date of September 15, 2006. Under the terms of the senior subordinated
notes, we must repay the outstanding principal, all accrued interest and a
prepayment fee prior to repaying the junior subordinated note we issued to Viad
Corp. in connection with our acquisition of Greyhound Leisure Services from Viad
Corp. This junior subordinated note, in aggregate principal amount of $10.0
million, bears interest at a rate of 12% and has a maturity date of May 15,
2009. Under the terms of the junior subordinated note, we are required to use
the net proceeds from this offering to pay off the note and all accrued
interest.
We also intend to use approximately $8.6 million to fund payments that are
to be made in connection with this offering. These payments include the
prepayment fee on our senior subordinated notes, a capital tax of 1% of the
gross proceeds of this offering to the company due in The Netherlands and a
contingent payment due to a customer upon the occurrence of an initial public
offering or a change of control event.
We expect that the balance of the net proceeds, if any, will be used for
general corporate purposes, including the funding of working capital
requirements and strategic investments or acquisitions. Our management will have
significant flexibility in applying the remaining balance of net proceeds of the
offering after repaying the indebtedness and funding the payments that are to be
made in connection with this offering. Pending any use, the net proceeds of this
offering may be invested in short-term, interest bearing securities or used to
pay down indebtedness under our revolving credit facility. Under the terms of
the senior credit facility we have the ability to reborrow the amounts we repay
on our revolving loans.
DIVIDEND POLICY
We have not in the past declared or paid a cash dividend on our common
shares and we do not intend to do so in the foreseeable future. Instead, we
intend to retain earnings to finance future operations and expansions, and to
reduce indebtedness. The payment of dividends by us to holders of our common
shares is restricted by our senior credit facility. As a result, we do not
intend to pay cash dividends in the foreseeable future.
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CAPITALIZATION
The following tables sets forth our capitalization as of June 30, 1999 and
gives effect to the 250 for 1 common share split which will occur immediately
before this offering:
- on an actual basis; and
- on a pro forma basis to give effect to this offering (assuming no
exercise of the underwriter's over-allotment option).
This data should be read in conjunction with "Unaudited Pro Forma Condensed
Statements of Operations", "Selected Financial Data", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and the notes thereto included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------
ACTUAL PRO FORMA
--------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt and accrued expense....... $ 11,248 $ --
======== ========
Long-term debt, less current maturities:
Revolving credit facility................................. $ 7,900 $ 1,356
Term note................................................. 56,786 25,180
Senior subordinated notes(a).............................. 28,262 --
Junior subordinated note(b)............................... 10,985 --
-------- --------
Total long-term debt................................... 114,647 26,536
Minority interest........................................... 4,326 4,326
Shareholders' equity:
Common shares, EUR .01 par value; on an actual and pro
forma basis, 120,000,000 shares authorized and
24,000,000 shares issued and outstanding; and on a pro
forma basis, 30,476,190 shares issued and
outstanding(c)......................................... 240 305
Additional paid in capital................................ 45,930 141,490
Accumulated deficit(d).................................... (3,501) (10,481)
-------- --------
Total shareholders' equity............................. 42,669 131,314
-------- --------
Total capitalization.............................. $161,642 $162,176
======== ========
</TABLE>
- -------------------------
(a) Includes $3,074 of accrued interest.
(b) Includes $985 of accrued interest.
(c) The number of common shares to be outstanding after this offering is based
on the number of shares outstanding as of June 30, 1999 and does not assume
the exercise of the underwriter's over-allotment option. Also, it does not
include 1,000,000 shares subject to options outstanding as of June 30, 1999
at a weighted average exercise price of $1.925 per share.
(d) Pro forma accumulated deficit includes an extraordinary charge of
approximately $7.0 million related to a prepayment fee in connection with
the payment of $28.3 million of our senior subordinated notes which we will
record in the quarter in which the offering is consummated.
18
<PAGE> 23
DILUTION
Dilution is the amount by which the offering price paid by purchasers of
the common shares in this offering exceeds the net tangible book value per share
of common shares immediately after the completion of this offering. Net tangible
book value per share is determined at any date by dividing the amount equal to
the total book value of our tangible assets less the sum of total liabilities
plus minority interest by the number of common shares outstanding at that date.
After giving effect to the issuance and sale of the common shares offered
by us (assuming no exercise of the underwriter's over-allotment) and after
deducting the estimated underwriting discount and offering expenses payable by
us, our pro forma net tangible book value as of June 30, 1999 would have been
$ , or $ per share, after giving effect to the 250 for 1 common share
split which will occur immediately before this offering. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing shareholders and an immediate dilution of $ per share to new
investors purchasing shares in this offering. If the initial offering price is
higher or lower, the dilution to the new investors will be greater or less,
respectively. The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share... $
Net tangible book value per share at June 30,
1999............................................ $
Increase in net tangible book value attributable
to new investors................................
--------
Pro forma net tangible book value per share after
this offering...................................
--------
Dilution per share to new investors............... $
========
</TABLE>
------------------------
The following table summarizes, on a pro forma basis as of June 30, 1999,
the difference between the number of common shares purchased from us, the
aggregate cash consideration paid to us and the average price per share paid by
existing shareholders and new investors purchasing common shares in this
offering. The calculation below is based on an assumed initial public offering
price of $ per share, before deducting the estimated underwriting discount and
offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............ % $ % $
New investors....................
-------- --- -------- --- --------
Total....................... 100% $ 100% $
======== === ======== === ========
</TABLE>
If the underwriter exercises its over-allotment option in full, the
following would occur:
- the number of common shares held by existing shareholders will decrease
to , or approximately % of the total number of common
shares outstanding; and
- the number of common shares held by new public investors will be
increased to , or approximately % of the total number of
common shares outstanding after this offering.
This discussion and table assume no exercise of any options to acquire
shares outstanding as of June 30, 1999 and gives effect to the 250 for 1 common
share split which will occur immediately before this offering. As of June 30,
1999, there were options outstanding to purchase a total of 1,000,000 common
shares with a weighted average exercise price of $1.925 per share. To the extent
that any of these options are exercised, there will be further dilution to new
investors. See "Capitalization".
19
<PAGE> 24
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS REVIEW REPORT
We have reviewed the pro forma adjustments reflecting the transaction
described in the notes and the introduction to the unaudited pro forma condensed
statements of operations and the application of those adjustments to the
historical amounts in the unaudited pro forma condensed statement of operations
of Starboard Cruise Services N.V. (formerly Miami Cruiseline Services Holdings I
B.V.) for the six months ended June 30, 1999. The historical condensed statement
of operations is derived from the historical unaudited financial statements of
Starboard Cruise Services N.V. appearing elsewhere herein. Such pro forma
adjustments are based on management's assumptions described in the notes and the
introduction. Our review was conducted in accordance with standards established
by the American Institute of Certified Public Accountants.
A review is substantially less in scope than an examination, the objective
of which is the expression of an opinion on management's assumptions, the pro
forma adjustments, and the application of those adjustments to historical
financial information. Accordingly, we do not express such an opinion on the pro
forma adjustments or the application of such adjustments to the pro forma
financial information for the six months ended June 30, 1999.
The objective of this pro forma financial information is to show what the
significant effects on the historical financial information might have been had
the transaction occurred at an earlier date. However, the pro forma condensed
statement of operations is not necessarily indicative of the results of
operations or related effects on financial position that would have been
attained had the above-mentioned transaction actually occurred earlier.
Based on our review, nothing came to our attention that caused us to
believe that management's assumptions do not provide a reasonable basis for
presenting the significant effects directly attributable to the above-mentioned
transaction described in the notes and the introduction to the unaudited pro
forma financial data, that the related pro forma adjustments do not give
appropriate effect to those assumptions, or that the pro forma column does not
reflect the proper application of those adjustments to the historical financial
statement amounts in the pro forma condensed statement of operations for the six
month period ended June 30, 1999.
Miami, Florida
August 18, 1999
The foregoing report is in the form that will be signed upon the completion
of the restatement of capital accounts and the name change described in Note 14
to the Starboard Cruise Services N.V. consolidated financial statements.
/s/ ERNST & YOUNG LLP
Miami, Florida
August 18, 1999
20
<PAGE> 25
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have examined the pro forma adjustments reflecting the transactions
described in the notes and the introduction to the unaudited pro forma condensed
statement of operations and the application of those adjustments to the
historical amounts in the accompanying unaudited pro forma condensed statement
of operations of Starboard Cruise Services N.V. (formerly Miami Cruiseline
Services Holdings I B.V.) for the year ended December 31, 1998. The historical
condensed statement of operations is derived from the historical financial
statements of Starboard Cruise Services N.V., Greyhound Leisure Services, the
Onboard Group and Nuance Global Ships which were audited by us, appearing
elsewhere herein. Such pro forma adjustments are based on management's
assumptions described in the notes and the introduction. Our examination was
made in accordance with standards established by the American Institute of
Certified Public Accountants and, accordingly, included such procedures as we
considered necessary in the circumstances.
The objective of this unaudited pro forma condensed statement of operations
is to show what the significant effects on the historical financial information
might have been had the transactions occurred at an earlier date. However, the
unaudited pro forma condensed statement of operations is not necessarily
indicative of the results of operations or related effects on financial position
that would have been attained had the above-mentioned transactions actually
occurred earlier.
In our opinion, management's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the above-mentioned
transactions described in the notes and the introduction to the unaudited pro
forma condensed statement of operations, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma column reflects the
proper application of those adjustments to the historical financial statement
amounts in the unaudited pro forma condensed statement of operations for the
year ended December 31, 1998.
Miami, Florida
August 18, 1999
The foregoing report is in the form that will be signed upon the completion
of the restatement of capital accounts and the name change described in Note 14
to the Starboard Cruise Services N.V. consolidated financial statements.
/s/ ERNST & YOUNG LLP
Miami, Florida
August 18, 1999
21
<PAGE> 26
INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
The following unaudited pro forma condensed statement of operations for the
six-month period ended June 30, 1999 has been derived from the historical
financial statements of Starboard Cruise Services and gives effect to this
offering (assuming no exercise of the underwriter's over-allotment option) as if
it had occurred at the beginning of the period. The unaudited pro forma
condensed statement of operations for the year ended December 31, 1998 was
derived from the historical financial statements of Starboard Cruise Services
and the historical financial statements of Greyhound Leisure Services, the
Onboard Group and Nuance Global Ships which were acquired by Starboard Cruise
Services and gives effect to the acquisitions and this offering (assuming no
exercise of the underwriter's over-allotment option) as if they had occurred at
the beginning of the period. The acquisitions and the related adjustments are
described below and in the accompanying notes.
Our company was formed on September 10, 1998 in order to acquire our
predecessor entity, Greyhound Leisure Services. On September 17, 1998, we
acquired 100% of the issued and outstanding shares of the capital stock of our
predecessor entity for $96.6 million. The purchase price consisted of $81.5
million in cash, a $10.0 million junior subordinated note due May 15, 2009 and
approximately $5.1 million of acquisition costs. Subsequently, on September 17,
1998, we acquired all of the outstanding shares of capital stock of the Onboard
Group. The purchase price consisted primarily of cash, which included certain
assumed indebtedness paid by us at closing and 5,912,500 of our common shares.
On December 15, 1998, we (through one of our wholly-owned subsidiaries) acquired
certain assets and assumed certain liabilities of Nuance Global Ships in
exchange for cash. The aggregate purchase price for the Onboard Group and Nuance
was approximately $64.4 million, including acquisition costs of approximately
$2.3 million.
The acquisitions we made were accounted for using the purchase method of
accounting. The purchase method of accounting allocated the aggregate purchase
price plus transaction costs to the assets acquired and the liabilities assumed
based on their respective fair values. The excess of purchase price over the
fair value of tangible and identifiable intangible assets acquired, net of
liabilities assumed, has been recorded as goodwill. Our management believes that
the preliminary allocations set forth herein are reasonable. The allocations set
forth herein are subject to revision as additional information becomes
available, and such revised allocations could differ from those set forth
herein.
The unaudited pro forma condensed statements of operations are based upon
currently available information and assumptions and estimates which our
management believes are reasonable. The unaudited pro forma condensed statements
of operations do not purport to represent what the results of operations of
Starboard Cruise Services would actually have been had the acquisitions or the
offering in fact occurred on the dates indicated or to project the results of
operations for any future period or date. You should read the unaudited pro
forma condensed statements of operations in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations", other
financial information included in this prospectus, and with our consolidated
financial statements and related notes and the audited financial statements and
the related notes of the companies we acquired included elsewhere in this
prospectus.
22
<PAGE> 27
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
STARBOARD CRUISE SERVICES
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
OFFERING PRO FORMA FOR
HISTORICAL ADJUSTMENTS OFFERING
----------- ----------- -------------
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C>
Net sales.......................................... $ 138,258 $ -- $ 138,258
Cost of sales...................................... 56,888 56,888
----------- ------- -----------
Gross profit....................................... 81,370 81,370
Selling, general and administrative expenses....... 75,857 -- 75,857
Amortization of intangibles........................ 2,750 -- 2,750
----------- ------- -----------
Income from operations............................. 2,763 2,763
Interest expense................................... 6,047 (4,798)(a) 1,249
Interest income.................................... 228 228
----------- ------- -----------
(Loss) income before provision for income taxes and
minority interest................................ (3,056) 4,798 1,742
Provision for income taxes......................... 186 42(b) 228
Minority interest.................................. 71 -- 71
----------- ------- -----------
Net (loss) income.................................. $ (3,313) $ 4,756 $ 1,443(c)
=========== ======= ===========
Pro forma basic and diluted net (loss) income per
share (d)........................................ $ (0.14) $ 0.05
=========== ===========
Pro forma basic and diluted weighted average
shares........................................... 24,000,000 30,476,250
=========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Statements of Operations
23
<PAGE> 28
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
STARBOARD CRUISE SERVICES
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
STARBOARD
CRUISE PRO FORMA PRO FORMA
SERVICES ACQUISITION FOR OFFERING FOR OFFERING
COMBINED(E) ADJUSTMENTS ACQUISITIONS ADJUSTMENTS AND ACQUISITIONS
----------- ----------- ---------------- ----------- ----------------
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales................ $ 281,151 $ -- $281,151 $ -- $ 281,151
Cost of sales............ 120,917 -- 120,917 120,917
----------- ------- -------- ------- -----------
Gross profit............. 160,234 -- 160,234 160,234
Selling, general and
administrative
expenses............... 151,262 (5,113)(f) 146,149 -- 146,149
Amortization of
intangibles............ 1,528 3,704(g) 5,232 -- 5,232
----------- ------- -------- ------- -----------
Income from operations... 7,444 1,409 8,853 8,853
Interest expense......... 3,848 8,335(h) 12,183 (9,187)(a) 2,996
Interest income.......... 972 -- 972 -- 972
Other expense............ 10 -- 10 -- 10
----------- ------- -------- ------- -----------
Income (loss) before
provision for income
taxes and minority
interest............... 4,558 (6,926) (2,368) 9,187 6,819
Provision (benefit) for
income taxes........... 2,780 (3,630)(b) (850) 2,379(b) 1,529
Minority interest........ 776 -- 776 -- 776
----------- ------- -------- ------- -----------
Net income (loss)........ $ 1,002 $(3,296) $ (2,294) $ 6,808 $ 4,514(d)
=========== ======= ======== ======= ===========
Pro forma basic and
diluted net income per
share(c)............... $ 0.15
===========
Pro forma basic and
diluted weighted
average shares......... 29,726,250
===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Statements of Operations
24
<PAGE> 29
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(a) Represents a reduction in interest expense in connection with the
anticipated use of net proceeds to repay $88,111 of long term debt as
follows:
<TABLE>
<CAPTION>
REDUCTION IN
INTEREST EXPENSE
-------------------------
PRINCIPAL PRINCIPAL SIX MONTHS
OUTSTANDING OUTSTANDING USE OF ANNUAL YEAR ENDED ENDED
DECEMBER 31, JUNE 30, PROCEEDS TO INTEREST INTEREST DECEMBER 31, JUNE 30,
1998 1999 REPAY DEBT RATE EXPENSE 1998 1999
------------ ----------- ----------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revolving Credit
Facility........... $ 10,200 $ 7,900 $ 6,544 7.81% $ 797 $ 601 $ 256
Term Note............ 67,500 67,500 42,320 7.94% 5,360 3,385 1,680
Senior Subordinated
Notes.............. 25,188 28,262 28,262 15.00% 3,956 3,956 2,189
Junior Subordinated
Note............... 10,000 10,985 10,985 12.00% 1,245 1,245 673
-------- -------- ------- ------- ------ ------
$112,888 $114,647 $88,111 $11,358 $9,187(1) $4,798(1)
======== ======== ======= ======= ====== ======
</TABLE>
- -------------------------
(1) Includes $178 and $45 of compounded interest related to the senior
subordinated notes and the junior subordinated note, respectively.
(b) Reflects increase (decrease) to the provision for income taxes associated
with the following:
<TABLE>
<CAPTION>
OFFERING ADJUSTMENTS
ACQUISITION -----------------------
ADJUSTMENTS SIX
------------ MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1998 1998 1999
------------ ------------ --------
<S> <C> <C> <C>
Provision for income taxes as if each Onboard
Group company was a C-corporation and accrued
taxes at the statutory rate of 38.5%......... $ 822 $ -- $--
Tax effect of the pro forma adjustments........ (2,376) 2,379 42
Effect of non-U.S. tax rates................... (2,076) -- --
------- ------ ---
Pro forma adjustments.......................... $(3,630) $2,379 $42
======= ====== ===
</TABLE>
(c) Does not include an extraordinary charge of approximately $7.0 million
related to a prepayment fee in connection with the payment of $28.3 million
of our senior subordinated notes which we will record in the quarter in
which the offering is consummated.
(d) Pro forma basic and diluted net income per share was computed by dividing
pro forma net income by the pro forma weighted average number of common
shares outstanding after giving effect to dilutive stock options for the
diluted computations and the issuance of shares in connection
with this offering. Retroactive restatement has been made to share and per
share amounts for the 50 for 1 common share split and the 5 for 1 stock
dividend which will occur immediately before this offering.
25
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS -- CONTINUED
(e) The historical results of operations for each of the entities we acquired
are included in our company's historical results of operations for the
period from their respective dates of acquisition through the end of the
period presented. The historical results of operations presented for each of
the acquired entities are their respective pre-acquisition results of
operations. Set forth below are the respective dates of incorporation or
acquisition:
<TABLE>
<CAPTION>
COMPANY DATE
- ------- ----
<S> <C>
Starboard Cruise Services......................... September 10, 1998
(date of incorporation)
Greyhound Leisure Services (predecessor).......... September 17, 1998
Onboard Group..................................... September 17, 1998
Nuance Global Ships............................... December 15, 1998
</TABLE>
The historical pro forma combined statements of operations for the year ended
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
GREYHOUND STARBOARD
HISTORICAL LEISURE CRUISE
STARBOARD CRUISE SERVICES ONBOARD SERVICES
SERVICES (PREDECESSOR) GROUP NUANCE(1) COMBINED
---------------- ------------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................... $71,061 $135,603 $13,205 $61,282 $281,151
Cost of sales................ 30,139 54,290 8,012 28,476 120,917
------- -------- ------- ------- --------
Gross profit................. 40,922 81,313 5,193 32,806 160,234
Selling, general and
administrative expenses.... 36,373 73,993 3,169 37,727 151,262
Amortization of
intangibles................ 1,525 -- 3 -- 1,528
------- -------- ------- ------- --------
Income (loss) from
operations................. 3,024 7,320 2,021 (4,921) 7,444
Interest expense............. 3,156 674 18 -- 3,848
Interest income.............. 485 257 141 89 972
Other expense................ -- -- 10 -- 10
------- -------- ------- ------- --------
Income (loss) before
provision for income taxes
and minority interest...... 353 6,903 2,134 (4,832) 4,558
Provision for income taxes... 359 2,249 -- 172 2,780
Minority interest............ 182 594 -- -- 776
------- -------- ------- ------- --------
Net income (loss)............ $ (188) $ 4,060 $ 2,134 $(5,004) $ 1,002
======= ======== ======= ======= ========
</TABLE>
(1) The historical statement of operations for Nuance represents the audited
statement of operations of Nuance for the period from December 26, 1997
through September 24, 1998 combined with the unaudited statement of
operations of Nuance for the period from September 25, 1998 through December
15, 1998 (the date we acquired Nuance). The unaudited interim period
statement of operations includes estimates inherent in preparing interim
financial statements and is included in the Combined Historical Statements
of Operations for Nuance for informational purposes only.
(f) In connection with the Nuance acquisitions several executive and
administrative positions were either eliminated or replaced with new
individuals or certain compensation packages were restructured. In addition,
certain intercompany charges from Nuance Global Ships' former parent Nuance
Global Traders related to corporate overhead, including legal, audit,
treasury and risk
26
<PAGE> 31
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS -- CONTINUED
assessment, were eliminated. Also a pension plan related to Greyhound Leisure
Services was eliminated in connection with that acquisition. On a stand-alone
basis, the decrease in selling, general and administrative expenses is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
---------------------------
NUANCE GREYHOUND TOTAL
------ --------- ------
<S> <C> <C> <C>
Executive positions, net.................. $ 852 $ -- $ 852
Former parent company overhead charges,
net..................................... 1,385 -- 1,385
Elimination of duplicate facilities....... 2,074 -- 2,074
Elimination of pension plan............... -- 802 802
------ ------ ------
$4,311 $ 802 $5,113
====== ====== ======
</TABLE>
(g) Reflects an increase to amortization of goodwill related to the acquisitions
of Greyhound Leisure Services and the Onboard Group and an increase to
amortization of cruise line contracts related to the acquisition of
Greyhound Leisure Services. Goodwill aggregating approximately $97.2 million
is being amortized over 25 years. Cruise line contracts valued at
approximately $5.4 million are being amortized over three to five years.
Incremental amortization of goodwill is as follows:
<TABLE>
<CAPTION>
ANNUAL AMOUNT INCREMENTAL
GOODWILL AMORTIZATION RECORDED AMOUNT
-------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Greyhound Leisure Services.............. $55,900 $2,236 $ 653 $1,583
Onboard Group........................... 41,300 1,652 482 1,170
------- ------ ------ ------
$97,200 $3,888 $1,135 $2,753
======= ====== ====== ======
</TABLE>
Incremental amortization of cruise line contracts is as follows:
<TABLE>
<CAPTION>
ANNUAL AMOUNT INCREMENTAL
CONTRACT VALUE AMORTIZATION RECORDED AMOUNT
-------------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Greyhound Leisure Services......... $5,400 $1,341 $390 $ 951
====== ====== ==== ======
</TABLE>
The total incremental amortization is as follows:
<TABLE>
<S> <C> <C> <C> <C>
Goodwill..................................................................... $2,753
Cruise line contracts........................................................ 951
------
$3,704
======
</TABLE>
(h) Represents additional interest expense related to the acquisitions of
Greyhound Leisure Services, the Onboard Group and Nuance. Incremental
interest expense is as follows:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST ANNUAL INTEREST INCREMENTAL
OUTSTANDING RATE INTEREST EXPENSE RECORDED AMOUNT
----------- -------- ---------------- -------- -----------
<S> <C> <C> <C> <C> <C>
Term Note........................ $ 67,500 7.94% $ 5,360 $1,491 $3,869
Revolving Credit Facility........ 10,200 7.81% 797 84 713
Senior Subordinated Notes........ 25,188 15.00% 3,956 1,149 2,807
Junior Subordinated Note......... 10,000 12.00% 1,245 299 946
-------- ------- ------ ------
$112,888 $11,358 $3,023 $8,335(1)
======== ======= ====== ======
</TABLE>
- -------------------------
(1) Includes $178 and $45 of compounded interest related to the senior
subordinated notes and the junior subordinated note, respectively.
27
<PAGE> 32
SELECTED FINANCIAL DATA
We have presented below the selected historical consolidated financial data
for Starboard Cruise Services for the period from September 10, 1998 through
December 31, 1998 and as of December 31, 1998 and for our predecessor entity,
Greyhound Leisure Services, for the period from January 1, 1998 through
September 17, 1998, for each of the three years in the period ended December 31,
1997 and as of December 31, 1997 which have been derived from the audited
consolidated financial statements of Starboard Cruise Services and Greyhound
Leisure Services included elsewhere in this prospectus. The historical financial
and data for our predecessor entity, Greyhound Leisure Services, as of December
31, 1996 and 1997 and as of and for the year ended December 31, 1995 have been
derived from the audited financial statements of Greyhound Leisure Services
which are not included in this prospectus. The selected historical consolidated
financial and other data for Starboard Cruise Services for the six months ended
June 30, 1999 and as of June 30, 1999 and Greyhound Leisure Services for the six
months ended June 30, 1998 and the year ended December 31, 1994 and as of
December 31, 1994 have been derived from the respective unaudited consolidated
financial statements of Starboard Cruise Services and Greyhound Leisure Services
which include adjustments which our management considers necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the entire year.
The results of operations for the six months ended June 30, 1999 for Starboard
Cruise Services are not comparable to the six months ended June 30, 1998 for
Greyhound Leisure Services due to, among other things, the acquisitions
completed on or after September 17, 1998. Results of operations of these
acquired businesses are included in Starboard Cruise Services consolidated
financial statements after the date of acquisition for the period after
September 17, 1998. This data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Results
of Operations" and the consolidated financial statements and related notes and
other financial information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PREDECESSOR
-------------------
PREDECESSOR
----------------------------------------- PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1998
----------------------------------------- THROUGH
1994 1995 1996 1997 SEPTEMBER 17, 1998
-------- -------- -------- -------- -------------------
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Net sales.................... $137,723 $136,262 $179,799 $188,498 $135,603
Cost of sales................ 58,559 58,064 72,860 76,828 54,290
-------- -------- -------- -------- --------
Gross profit................. 79,164 78,198 106,939 111,670 81,313
Selling, general and
administrative expenses.... 70,706 69,420 96,712 101,067 73,993
Amortization of
intangibles................ -- -- -- -- --
-------- -------- -------- -------- --------
Income from operations....... 8,458 8,778 10,227 10,603 7,320
Interest expense............. 575 56 625 766 674
Interest income.............. 2 206 512 561 257
-------- -------- -------- -------- --------
Income (loss) before
provision for income taxes
and minority interest...... 7,885 8,928 10,114 10,398 6,903
Provisions for income
taxes...................... 2,844 3,138 2,936 2,941 2,249
Minority interest............ 777 861 1,706 957 594
-------- -------- -------- -------- --------
Net income (loss)............ $ 4,264 $ 4,929 $ 5,472 $ 6,500 $ 4,060
======== ======== ======== ======== ========
PER SHARE DATA:
Basic and diluted net income
(loss) per share........... $ 4,264 $ 4,929 $ 5,472 $ 6,500 $ 4,060
Basic and diluted weighted
average shares
outstanding................ 1,000 1,000 1,000 1,000 1,000
<CAPTION>
PERIOD FROM
SEPTEMBER 10, 1998
SIX MONTHS ENDED JUNE 30,
------------------------------
1998 1999
THROUGH ----------- ----------------
DECEMBER 31, 1998
STARBOARD CRUISE STARBOARD CRUISE
SERVICES SERVICES
(SUCCESSOR) PREDECESSOR (SUCCESSOR)
------------------ ----------- ----------------
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Net sales.................... $ 71,061 $94,398 $ 138,258
Cost of sales................ 30,139 37,770 56,888
----------- ------- -----------
Gross profit................. 40,922 56,628 81,370
Selling, general and
administrative expenses.... 36,373 51,112 75,857
Amortization of
intangibles................ 1,525 -- 2,750
----------- ------- -----------
Income from operations....... 3,024 5,516 2,763
Interest expense............. 3,156 421 6,047
Interest income.............. 485 128 228
----------- ------- -----------
Income (loss) before
provision for income taxes
and minority interest...... 353 5,223 (3,056)
Provisions for income
taxes...................... 359 1,437 186
Minority interest............ 182 514 71
----------- ------- -----------
Net income (loss)............ $ (188) $ 3,272 $ (3,313)
=========== ======= ===========
PER SHARE DATA:
Basic and diluted net income
(loss) per share........... $ (0.01) $ 3,272 $ (0.14)
Basic and diluted weighted
average shares
outstanding................ 23,250,000 1,000 24,000,000
</TABLE>
28
<PAGE> 33
<TABLE>
<CAPTION>
SUCCESSOR
STARBOARD
PREDECESSOR CRUISE
--------------------------------------- SERVICES
DECEMBER 31, --------------------------------
--------------------------------------- DECEMBER 31, JUNE 30,
1994 1995 1996 1997 1998 1999
------- ------ ------- ------- ------------ ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ -- $1,768 $ 522 $ 262 $ 4,124 $ 361
Current assets...................................... 35,976 41,551 41,379 42,425 76,476 82,269
Total assets........................................ 40,555 54,414 56,998 59,262 191,540 194,020
Total debt.......................................... -- -- -- -- 112,888 110,588
Total shareholders' equity.......................... 13,549 13,490 14,383 15,148 45,982 42,669
</TABLE>
29
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that involve
risks and uncertainties. Starboard Cruise Services' actual results could differ
materially from those discussed in the forward-looking statements as a result of
certain factors including those set forth under "Risk Factors" and elsewhere in
this prospectus. The following discussion and analysis should be read in
conjunction with the "Selected Financial Data" and the consolidated financial
statements and related notes thereto appearing elsewhere in this prospectus.
GENERAL
Starboard Cruise Services is the leading provider of on-board duty-free
retail services to the cruise industry, operating 232 duty-free retail stores
aboard 82 ships serving 21 cruise lines. We are also the cruise industry's
leading provider of enhanced cruise services including our port lecture series,
customized in-cabin publications and on-board art auctions. We deliver our
services to the largest cruise lines in the industry including Carnival
Corporation (and its affiliated cruise lines), Norwegian Cruise Line and Royal
Caribbean Ltd. (and its affiliated cruise lines), among others. In most cases,
we are the exclusive provider of our services on ships we serve and we have
developed long-standing, strong relationships with our cruise line customers.
Our cruise-based business accounted for 77% of net sales for the first six
months of 1999. Net sales from our land-based operations accounted for 23% of
net sales for the first six months of 1999.
Net Sales. Net sales represents our gross revenues less credits and
adjustments. Our cruise-based services consist of duty-free retail stores,
in-cabin publications and video, port lecturing services and on-board art
auctions and provided most of Starboard Cruise Services' net sales. Our
land-based media and retail business consists of airport duty-free retail stores
and hotel and resort publications and provided the remainder of our net sales.
For the year ended December 31, 1998, calculated on a pro forma basis to reflect
our 1998 acquisitions, 76% of our total net sales were contributed by the
cruise-based business and 24% of net sales were contributed by the land-based
businesses.
Our cruise-based duty-free retail stores accounted for 68.1% of Starboard
Cruise Services total historical net sales in 1998 and 69.6% for the first six
months of 1999 while our other cruise-based services accounted for 7.9% and 7.0%
for the same periods, respectively.
We believe that our understanding of the cruise passengers' buying habits,
ability to source products at low cost points and innovative merchandising, and
sales techniques and our success of adding new ships allowed us to maintain a
7.2% annual net sales growth rate in our cruise-based duty-free retail business
from 1996 to 1998.
The majority of our land-based net sales are provided by the 21 duty-free
retail stores we operate in the Miami and Fort Lauderdale airports with a
smaller percentage contributed by the publications and videos we develop for
land-based leisure destinations including Las Vegas hotels and resorts in the
Caribbean. Net sales for the airport duty-free operations have grown 6.6% per
year since 1995 and are primarily correlated to the number of international
passengers traveling through the Miami and Fort Lauderdale airports each year.
Starboard Cruise Services has recently entered into a new, multi-year
contract with Royal Caribbean Ltd. to operate the on-board duty-free retail
shops aboard the 11 existing and five Royal Caribbean International vessels
under contract. The contract provides us with the option to operate duty-free
stores on all new vessels launched during the contract term. As a result of this
new contract, we will operate duty-free retail stores on almost every major
cruise line in the industry. The
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<PAGE> 35
commencement of this new contract increases our number of duty-free passenger
berths by 28% from approximately 83,000 berths as of June 30, 1999 to
approximately 105,000 berths as of November 1999.
Cost of Sales. The principal elements constituting our cost of sales
include the cost of product sold in the cruise-based and airport duty-free
retail shops and the rent paid to the cruise lines associated with the port
lecturing businesses. We believe our cost of sales for the duty-free stores are
some of the lowest in the industry due to the large scale purchasing power that
comes as a result of operating over 232 duty-free retail stores aboard 82 ships
and 21 airport duty-free stores. We also source and purchase private label logo
items worldwide, which allows us to provide high quality merchandise at higher
margins. We expect that our cost of sales for products sold through the duty-
free stores will remain at the same level or decrease slightly in the future as
our purchasing power and buying expertise continue to improve.
Selling, General and Administration. The principal elements constituting
our selling, general and administrative expenses include the percentage rent
paid to the cruise lines and airport authority for the duty-free shops,
warehousing costs, and general administration such as salaries, sales efforts,
and overhead. The rents paid to the cruise lines and airport authority are based
on a percentage of our net sales, or a minimum payment, and reflect the largest
percentage of our selling, general and administrative expenses and are based on
long-term contracts with our cruise line customers. All of our cruise line
contracts call for percentage rents on an annual basis during the contract term.
Our warehousing costs include the cost of operating our 120,000 sq. ft.
bonded, duty-free warehouse in Miami, Florida. The warehouse is used to service
operations at both airports and to replenish the cruise lines duty-free shops
when they dock in Miami and Fort Lauderdale. Our warehouse is also used as a
staging area to replenish vessels in over 40 ports worldwide. General
administration costs include the salaries, benefits and general overhead costs
associated with employing approximately 1,200 employees and operating facilities
in Miami and Miami Beach, warehouse operations at both airports and offices in
Southampton, England.
On September 17, 1998, we acquired our Predecessor, Greyhound Leisure
Services. Concurrent with the acquisition, we acquired the Onboard Group and on
December 15, 1998, we purchased the business of Nuance Global Ships. At the time
of the Nuance acquisition, Nuance operated 90 duty-free retail stores on 28
ships with 9 cruise lines, including Celebrity Cruises, Cunard Line, Holland
America Line and Seabourn Cruise Line. Prior to our acquisition, the Nuance
business was unprofitable. In the six months following the acquisition, we have
focused on improving the merchandising mix, retraining the sales force,
increasing per passenger day revenues reducing redundant overhead costs to
increase profitability to levels consistent with our existing fleet of cruise-
based duty-free retail stores.
Our results of operations for the six months ended June 30, 1999 are
compared to the results of our Predecessor for the six months ended June 30,
1998. Our 1998 results of operations, presented on a pro forma basis to give
effect to our 1998 acquisitions, are compared to the results of operations of
our Predecessor for the year ended December 31, 1997. The results of operations
for our Predecessor, however, do not include the results of operations for that
period of the On Board Group business (port lecturing, publications and art
auctions) or the Nuance business, each of which was acquired in our 1998
acquisitions. As a result, we believe our period to period comparisons may not
be indicative of the historical and future operations of our business.
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<PAGE> 36
RESULTS OF OPERATIONS
The following table sets forth our results of operations based on the
percentage relationship of certain items to revenues during the period shown.
<TABLE>
<CAPTION>
PREDECESSOR STARBOARD CRUISE SERVICES
------------------------------ ------------------------------
YEAR ENDED PRO FORMA YEAR
DECEMBER 31, SIX MONTHS ENDED SIX MONTHS
-------------- ENDED DECEMBER 31, ENDED
1996 1997 JUNE 30, 1998 1998 JUNE 30, 1999
----- ----- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales..................... 40.5 40.8 40.0 43.0 41.1
Gross profit................. 59.5 59.2 60.0 57.0 58.9
Selling, general and
administrative expenses......... 53.8 53.6 54.2 51.9 54.9
Amortization of intangibles....... -- -- -- 1.9 2.0
----- ----- ----- ----- -----
Income from operations............ 5.7% 5.6% 5.8% 3.3% 2.0%
</TABLE>
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 OF STARBOARD CRUISE SERVICES TO SIX
MONTHS ENDED JUNE 30, 1998 OF OUR PREDECESSOR.
Net Sales. Our net sales were $138.3 million for the six months ended June
30, 1999, an increase of $43.9 million or 46.5%, from $94.4 million for our
Predecessor during the same period of the prior year. Net sales increased by
$41.2 million or 43.6% due to sales related to the operations of the Onboard
Group and Nuance. Excluding the Onboard Group and Nuance, net sales increased by
$2.7 million or 2.9% primarily due to an increase in sales in our cruise-based
retail stores which were partially offset by a decrease in net sales of the
land-based services.
Cruise-based duty-free retail net sales were $96.2 million for six months
ended June 30, 1999, an increase of $35.8 million or 59.3%, from $60.4 million
for our Predecessor during the same period of the prior year. Approximately
$31.0 million of the increase was attributable to a 70% increase in duty-free
retail passenger days from approximately 8.4 million in June 30, 1998 to
approximately 14.3 million in June 30, 1999. The increase in passenger days was
attributable to the number of new ships added increasing from 40 to 82 during
the same period as a result of the Nuance acquisition and additions to the
existing fleet. Our net sales for the six months ended June 30, 1999 included
other cruise-based services with net sales of $10.2 million. Our Predecessor did
not perform these cruise-based services reflected through the Onboard Group
during the same period of the prior year.
Land-based services net sales were $31.1 million for the six months ended
June 30, 1999, a decrease of $2.0 million or 6.0%, from $33.1 million for the
same period of the prior year. This decrease was primarily attributable to the
decreased passenger traffic at Miami Airport due to poor economic conditions in
Latin America and to a lesser extent our discontinuation of certain product
categories in the Florida Export Warehouse business.
Gross Profit. Gross profit was $81.4 million for the six months ended June
30, 1999, an increase of $24.8 million from $56.6 million for the same period of
the prior year. The acquisitions of Nuance and the Onboard Group were the
primary contributors to the increase in results of operations. Our cost of sales
for the six-month period ending June 30, 1999 as a percentage of net sales was
relatively flat versus the same period of 1998, reflecting our ability to
decrease the previously higher cost of sales attributable to the Nuance
business.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $75.9 million for the six months ended June 30,
1999; an increase of $24.8 million from $51.1
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<PAGE> 37
million during the same period for our Predecessor for the six months ended June
30, 1998. Approximately $19.7 million of the increase was attributable to the
expenses related to the acquisitions of the Onboard Group and Nuance. Excluding
the effect of these acquisitions, selling, general and administrative expense
increased by $5.1 million primarily due to increases in rent expense with cruise
line customers. As a percentage of net sales, selling, general and
administrative expenses increased to 54.9% for the six months ended June 30,
1999 from 54.2% for the same period of the prior year.
Income from Operations. Income from operations was $2.8 million for the
six-month period ended June 30, 1999, a decrease of $2.7 million from $5.5
million for our Predecessor for the six months ended June 30, 1998. The majority
of the decrease was attributable to the increase of amortization of intangibles
resulting from amortization of goodwill and contracts. As a percentage of net
sales, income from operations decreased to 2.0% for the six-month period ending
June 30, 1999 compared to 5.8% for the same period of 1998.
Minority Interest. Costs reported as minority interest are attributable
solely to our duty-free retail operations at the Miami International and Fort
Lauderdale airports. Due to FAA regulations, we work with four DBE
(Disadvantaged Business Entities) partners at the Miami airport and with one DBE
at the Fort Lauderdale airport who earn a percentage of income before provision
for income taxes and after-tax earnings, respectively. For the six months ended
June 30, 1999, minority interest expense were approximately $0.1 million, a
decrease of $0.4 million compared to the six-month period ended June 30, 1998.
Interest Expense. Interest expense was $6.0 million for the six months
ended June 30, 1999 reflecting an increase of $5.6 million from $0.4 million for
the same period of the prior year, primarily due to our increased indebtedness
resulting from the debt incurred to acquire our Predecessor, the Onboard Group
and Nuance.
Provision for Income Taxes. Income taxes for the six months ended June 30,
1999, were provided at an effective tax rate of (0.6)% a decrease from a 27.5%
effective tax rate during the same period of the prior year. Our effective tax
rate decreased significantly primarily due to a net loss during this period.
Net Income (Loss). Net losses for the six months ended June 30, 1999 were
$3.3 million, a decrease of $6.6 million from net income of $3.3 million from
the same period of the prior year. The decrease in net income was primarily the
result of the increased interest expense and amortization of intangibles
associated with the acquisitions of the Onboard Group and Nuance.
COMPARISON OF STARBOARD CRUISE SERVICES PRO FORMA FOR ACQUISITIONS FOR THE YEAR
ENDED DECEMBER 31, 1998 TO OUR PREDECESSOR FOR THE YEAR ENDED DECEMBER 31, 1997.
Net Sales. Our net sales, calculated on a pro forma basis to include our
1998 acquisitions, were $281.2 million for the year ended December 31, 1998,
reflecting an increase of $92.7 million or 49.2%, from actual net sales of our
Predecessor of $188.5 million for the year ended December 31, 1997. Net sales,
calculated on a pro forma basis to include our 1998 acquisitions, increased by
$74.5 million or 39.5% primarily due to the operations of the Onboard Group and
Nuance combined with the growth in the Predecessor business.
Cruise-based retail store net sales calculated on a pro forma basis were
$191.5 million for the year ended December 31, 1998, an increase of $72.5
million or 60.9%, from $119.0 million for our Predecessor for the year ended
December 31, 1997. Approximately $61.3 million, or 84.6%, of the increase in
cruise-based retail pro forma 1998 net sales from the 1997 Predecessor was
attributable to the operations of Nuance. Excluding this acquisition, cruise
ship retail store pro forma 1998 net sales increased by $11.2 million or 15.4%
compared to our Predecessor for 1997 which was primarily
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<PAGE> 38
attributable to an increase in the number of ships served which increased to 48
during 1998 from 42 for 1997 excluding acquisitions.
Land-based services pro forma net sales were $67.6 million for the year
ended December 31, 1998, an increase of $2.1 million or 3.2%, from $65.5 million
for our Predecessor in 1997. Approximately $0.7 million of the increase was
attributable to the operations of the Onboard Group's land-based publishing
business. Excluding the Onboard Group, net sales related to land-based services
net sales increased $1.6 million primarily due to increased passenger traffic in
Miami Airport duty-free shops.
Gross Profit. Our gross profit calculated on a pro forma basis to reflect
our 1998 acquisitions was $160.2 million for the year ended December 31, 1998,
an increase from $111.7 million for our Predecessor in 1997. The increase in
gross profit was attributable primarily to the results of the operations of
Nuance and the Onboard Group. As a percentage of net sales, our pro forma cost
of sales for the period ending December 31, 1998 increased to 43.0% from 40.8%
for the period ending December 31, 1997, reflecting the higher cost of sales
attributable to Nuance operations and the inclusion of the Onboard Group's rent
expense in cost of sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $146.1 million on a pro forma basis to reflect our
1998 acquisitions for the year ended December 31, 1998, an increase from $101.1
million for our Predecessor for the year ended December 31, 1997. Approximately
$40.9 million of the increase was attributable to the selling, general and
administrative expenses related to the operations of the Onboard Group and
Nuance. Excluding the Onboard Group and Nuance, pro forma selling, general and
administrative expense increased by $4.1 million primarily due to higher sales
volume. As a percentage of net sales, pro forma selling, general and
administrative expenses decreased to 51.9% for 1998 from 53.6% for 1997. The
decrease was primarily driven by the increase in net sales attributed to the
operations of Nuance and comparatively lower levels of incremental overhead.
Income from Operations. Income from operations on a pro forma basis to
reflect our 1998 acquisitions was $8.9 million for the year ended December 31,
1998, a decrease of $1.7 million from $10.6 million for our Predecessor in 1997.
This decrease is attributable to net operating losses associated with our 1998
acquisitions and the related amortization of intangibles partially offset by a
reduction in selling, general and administrative expenses as a percentage of our
net sales and improvement in our gross profit percentage in the operations of
our predecessor for that period.
Minority Interest. Minority interest on a pro forma basis to reflect our
1998 acquisitions of $0.8 million for the year ended December 31, 1998 decreased
$0.1 million from $0.9 for our Predecessor in 1997. The lower expense was
primarily due to the elimination of an interest in a joint venture.
Interest Expense. Interest expense on a pro forma basis to reflect our
1998 acquisitions of $12.2 million for the year ended December 31, 1998
increased $12.0 million from $0.2 million for our Predecessor in 1997. The
higher interest expense was primarily due to a higher average debt balance
resulting from the debt incurred to acquire the Onboard Group and Nuance.
Provision for Income Taxes. The provision for income taxes calculated on a
pro forma basis to reflect our 1998 acquisitions for the year ended December 31,
1998, was at an effective tax rate of 22.4% an increase from a 31.2% effective
tax rate during the same period of the prior year for our Predecessor.
Net Income (Loss). Net loss on a pro forma basis to reflect our 1998
acquisitions was $2.3 million for the year ended December 31, 1998, a decrease
of $8.8 million from net income of $6.5
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<PAGE> 39
million for 1997 for our Predecessor. The decrease in net income was the result
of the factors stated above.
COMPARISON OF OUR PREDECESSOR FOR THE YEAR ENDED DECEMBER 31, 1997 TO OUR
PREDECESSOR FOR THE YEAR ENDED DECEMBER 31, 1996
Net Sales. Net sales of our Predecessor were $188.5 million for 1997, an
increase of $8.7 million or 4.8% from $179.8 million for 1996. Cruise-based
duty-free retail store sales increased to $119.0 million in 1997, or 5.0%, from
$113.3 million in 1996, primarily due to an increase in the number of ships
served. During 1997 our passenger days of 17.0 million increased 0.2 million
from 16.8 million on the same number of ships due to higher capacity utilization
rates and shorter cruise itineraries by the cruise lines. Cruise-based store
revenue per passenger day increased by 3.6% from $6.74 to $6.98 during 1997 from
1996 primarily due to improved merchandizing mix and sales techniques.
Land-based airport duty-free net sales increased by $3.2 million in 1997 from
1996 primarily due to an increase in the number of international travelers using
the Miami International Airport.
Gross Profit. Gross profit was $111.7 million for 1997, an increase of
$4.8 million from $106.9 million for 1996. As a percentage of net sales, gross
profit decreased to 59.2% for 1997 from 59.5% for 1996. The decrease was
primarily attributable to a slightly higher cost of sales in the duty-free
shops.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $101.1 million for 1997, an increase from $96.7
million for 1996. As a percentage of net sales, selling, general and
administrative expenses decreased to 53.6% for 1997 from 53.8% for 1996.
Controlling overhead costs as the company grew was the primary reason for the
decrease.
Income from Operations. Income from operations was $10.6 million for 1997,
an increase from $10.2 million for 1996. Income from operations as a percentage
of net sales decreased to 5.6% in 1997 from 5.7% in 1996. The decrease was
primarily attributable to the factors described in gross profit above.
Minority Interest. Minority interest expense of $0.9 million for 1997
decreased $0.7 million compared to 1996 due to higher depreciation levels at the
Miami International Airport which decreased minority interest.
Interest Expense. Interest expense of $0.8 million for 1997 was $0.1
million higher than interest expense of $0.6 million for 1996. The higher
interest expense was primarily due to a higher average debt balance in 1997
resulting from expenses associated with remodeling the Miami Airport.
Provision for Income Taxes. The provision for income taxes for 1997 was at
an effective tax rate of 28.3%, a decrease from 34.9% due to the implementation
of certain state tax planning strategies.
Net Income (Loss). Net income was $6.5 million for 1997, an increase of
$1.09 million from $5.5 million for 1996. The increase in net income was the
result of the factors stated above.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, we had cash and cash equivalents of $0.4 million,
compared to $4.1 million, $0.3 million, and $0.5 million as of December 31, 1998
(pro forma for acquisitions), 1997 (Predecessor) and 1996 (Predecessor),
respectively. Since September 17, 1998, we have funded our operations and the
acquisitions of our Predecessor, the Onboard Group and Nuance through cash flows
from operations and the proceeds of borrowings under our senior credit facility
and the issuance of senior subordinated notes and a junior subordinated note, as
well as equity funded by our current
35
<PAGE> 40
shareholders and management. Our senior credit facility consists of a term loan
and revolver. As of June 30, 1999, the outstanding principal balance on our term
loan was $67.5 million and the outstanding balance under our revolver was $7.9
million. Also as of June 30, 1999, we had $28.3 million of senior subordinated
notes outstanding and $10.9 million of the junior subordinated note outstanding.
We expect to repay the entire balance of our junior subordinated note and senior
subordinated notes with the proceeds of this offering. We also expect to repay
$42.3 million of our term loan. In addition, we may repay a portion of our
revolving credit facility, under which we have the ability to reborrow any
amounts we repay on our revolving loans. For a description of the terms of our
credit facility, see "Description of Certain Indebtedness".
For the years ended December 31, 1998, 1997 (Predecessor), 1996
(Predecessor), and for Starboard Cruise Services for the six months ended June
30, 1999, net cash provided by (used for operations) was $10.3 million, $4.2
million, $7.7 million and $0.7 million, respectively, provided primarily through
cash from operations. As a holding company, our cash needs are satisfied,
subject to restrictive covenants under our debt instruments, by distributions
from our subsidiaries' cash flow from operations.
We are continually evaluating the appearance of both our cruise-based and
land-based duty-free retail shops and upgrading them as appropriate. We
currently anticipate capital expenditures for the foreseeable future of
approximately $2.0 million annually as new ships are brought on line.
We believe that the net proceeds from this offering, together with our
current cash, anticipated cash flow from operations and available borrowing,
will be sufficient to meet our anticipated cash needs for working capital and
capital expenditures for at least the next 12 months following the offering.
There can be no assurance that we can generate sufficient cash flow from
operations in the future, that anticipated revenue growth will be realized or
that future borrowings or equity financings will be available in an amount
sufficient to service our indebtedness and fund operations. In addition, any
future unanticipated needs (such as acquisitions or additional capital
expenditures) may require additional equity or debt financing.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
Number 133, Accounting for Derivative Instruments and Hedging Activities. We
expect to adopt the new statement effective January 1, 2001. The statement will
require us to recognize all derivatives on our balance sheet at fair value. We
do not anticipate that the adoption of the statement will have a significant
effect on our results of operations or financial position.
SEASONALITY
Seasonal factors affect our business. Excluding the effects of the addition
of new ships, which can occur during different points of the year, we generate
the majority of our business during the winter months when there are more
Caribbean cruises. Net sales have historically been lower during the third
quarter when there are fewer cruises in the Caribbean. The effects of
seasonality on our business are partially offset by our provision of services to
Alaskan and European cruises during the summer months.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On January 28, 1997, the SEC adopted new rules (Securities Act Release No.
7386) that require disclosure about the policies used to account for derivatives
and certain quantitative and qualitative information about market risk
exposures. Market risk generally represents the risk of loss that may result
from the potential change in the value of a financial instrument as a result of
fluctuations in interest rates and market prices. We have not traded or
otherwise transacted in
36
<PAGE> 41
derivatives nor do we expect to in the future. We have established policies,
procedures and internal processes governing our management of market risks in
the normal course of our business operations.
Interest Rate Risk
The fair market value of long-term fixed interest rate debt is subject to
interest rate risk. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
interest rate changes affect the fair market value but do not impact earnings or
cash flows. The estimated fair value of our long-term debt at June 30, 1999 was
$110.6 million. The effect of an immediate 10% change in interest rates would
not have a material impact on our future operating results or cash flows. Fair
values were determined from quoted market prices.
Foreign Currency Exchange Risk
A substantial portion of our sales are denominated in U.S. dollars and as a
result, we have relatively little exposure to foreign currency exchange risk
with respect to sales made. We do not use forward exchange contracts to hedge
exposures denominated in foreign currencies or any other derivative financial
instruments for trading or speculative purposes. The effect of an immediate 10%
change in exchange rates would not have a material impact on our future
operating results or cash flows.
YEAR 2000
The Year 2000 issue arose because many existing computer programs use only
the last two digits to refer to a year. As a result, computer programs may not
properly recognize a year that begins with "20" instead of the familiar "19". If
not corrected, many businesses are at risk for possible computer application
miscalculations or systems failures causing disruptions in business operations.
These risks are commonly referred to as the "Y2K risks".
We utilize software and related technologies that may be affected by the
date change in the year 2000. We initiated a significant upgrade of our
information systems in 1997 in order to improve our operating efficiencies and
address Y2K risks at the same time. Through this effort, implemented over a
multi-year period, we believe that by the end of 1999, we will have modified or
replaced any portion of our software necessary to cause our computer systems to
function properly with respect to the dates in the year 2000 and thereafter.
We have initiated a formal project for communicating with and are in the
process of surveying our cruise line customers and major third party suppliers
of services and products in order to assess their Y2K risks that may have a
material adverse effect on our results of operations.
We depend on the point-of-sale systems of ten cruise lines to maintain
inventory and to provide sales data which we use to make merchandising
decisions. We have been advised by six of our cruise line customers that they
are in the process of upgrading their respective point-of-sale systems on which
we depend and that they expect to have their respective point-of-sale systems
Year 2000 compliant by the end of 1999.
We believe that our biggest risks related to the Year 2000 issue are
potential system failures of cruise line customers, major third party suppliers
and other third parties over whom we exert no control. The most reasonably
likely source of Y2K risk with respect to our cruise line customers would be the
disruption of transportation channels that deliver passengers to cruise ships.
The disruption of transportation channels could also impede our ability to
deliver our products to intended
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points of sale or the ability of our staff to report to the ships to which they
are assigned. Our business also faces possible disruption in the event that
point-of-sale systems on those cruise ships where we rely on the cruise ship
operator's system do not function properly. These problems could impede our
ability to maintain proper inventory or effectively use sales data to make
merchandising decisions.
We do not believe that there are contingency plans that we can effect that
can mitigate the risk of cruise line passengers being unable to reach cruise
ships as a result of any transportation disruption. We are in the process of
developing a contingency plan that would allow us to have available product
inventories sufficient for distribution to our intended points of sale in the
event a transportation disruption impairs our ability to obtain delivery of our
products. In addition, we intend to develop a schedule of deployment of our
shipboard staff to minimize the effect of any transportation disruption that
could occur around January 1, 2000. These contingency plans are subject to
uncertainties. We cannot guarantee that any estimate of the level, impact or
duration of Year 2000 non-compliance by our customers or suppliers will be
accurate, or that our contingency plans will be sufficient to mitigate these
risks.
In the event that any of our cruise line customers or major third party
suppliers do not successfully achieve Year 2000 compliance for their own
operations in a timely manner, our business or operations could be adversely
affected. The magnitude of any adverse effect cannot be quantified at this time
because of variables such as the type and importance of cruise line customers or
major third party suppliers, the unknown level and duration of noncompliance by
these customers and suppliers (and their customers and suppliers), the possible
effect on our operations, and our ability to respond to any non-compliance.
Our costs for making us Year 2000 compliant have been included in our
historical financial statements and are expensed as incurred. We have not
budgeted for any additional costs to address Y2K risks and currently anticipate
that any such costs will not be material and will be expensed as incurred.
However, in view of the uncertainties relating to the Year 2000 compliant status
of our customers and suppliers, we cannot guarantee that our cost of dealing
with the Y2K risks will be consistent with the foregoing estimate or that the
Y2K risks will not materially adversely affect our future operations.
The information presented above sets forth the steps that we have taken to
address the Y2K risks. The above discussion of our efforts and expectations
relating to Year 2000 compliance is forward-looking. You are cautioned that
forward-looking statements contained in this discussion should be read in
conjunction with our disclosure under the heading "Forward-Looking Statements --
Market Data".
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BUSINESS
GENERAL
We are the world's leading provider of duty-free retail shops on cruise
ships and the leading provider of customized media and art auctions to the
cruise industry. We deliver our services to 100 ships representing 26 cruise
lines worldwide, including industry leaders such as Carnival Cruise Line,
Celebrity Cruises, Costa Cruises, Crystal Cruises, Cunard Line, Disney Cruise
Line, Holland America Line, Norwegian Cruise Lines, P&O Cruises, Renaissance
Cruise Lines and Royal Caribbean International. In general, we provide our
cruise-based services on an exclusive basis on the ships we service pursuant to
multi-year cruise line contracts. In addition to cruise-based services, we also
operate land-based services that complement our cruise line related business.
Our land-based services are operating duty-free retail shops at airport
locations in Miami and Fort Lauderdale, Florida, selling wholesale duty-free
goods to cruise lines and caterers serving cruise lines, and providing
customized media programs to land-based hotels and resorts. For the year ended
December 31, 1998, we generated pro forma net sales and EBITDA of $281.2 million
and $18.1 million, respectively. Our cruise-based services generated $213.6
million of net sales and our land-based services generated $67.6 million in net
sales.
Our duty-free retail stores on cruise ships are the core of our
cruise-based services. Generally, our cruise line retail stores are prominently
located onboard cruise ships and are the only places on board the ship where
cruise line passengers can purchase items such as cruise ship logo apparel and
items, fashion apparel, perfume, fine gifts, accessories and jewelry, and in
bulk alcohol and tobacco on cruise ships. In addition to our cruise ship retail
store business, we offer our customized media programs to the cruise lines. In
port lecturing, we hold lectures on the shopping, recreational and cultural
highlights in various ports of call. In customized publications, we produce
cruise line passenger magazines which are customized for port destinations.
These "port publications" contain articles describing cruise destinations and
advertising from local and international businesses such as Gucci and Rolex. In
our art auction services, we conduct art auctions for cruise line passengers
during cruises. We believe that as the cruise lines launch new, larger ships we
will have the opportunity to increase our net sales from service offerings. The
following table sets forth the number of ships we currently service with our
retail and other cruise-based services as well as the number (based on industry
announcements) of future ships to which we have the right to provide service
under our contracts.
SHIPS SERVED BY STARBOARD CRUISE SERVICES
<TABLE>
<CAPTION>
STARBOARD STARBOARD CRUISE
STARBOARD CRUISE CRUISE SERVICES: OTHER
SERVICES: TOTAL SERVICES: CRUISE- CRUISE-BASED
SHIPS SERVICED BASED RETAIL(1) SERVICES(2) INDUSTRY(3)
---------------- ----------------- ---------------- -----------
<S> <C> <C> <C> <C>
Number of ships in service as of June 30,
1999................................... 100 82 46 144
Total ships in service by December 31,
1999 (industry estimates).............. 118 99 49 155
Total ships in service by December 31,
2003 (industry estimates).............. 127 118 59 190
---- --- -- ---
</TABLE>
- ---------------
(1) Includes existing ships as of the relevant date which Starboard Cruise
Services provides, or has the right under contract to provide service upon
ship introduction, with duty-free retail services under its contracts.
Includes 11 existing Royal Caribbean International Ships under contract for
service commencing November 1999.
(2) Includes existing ships as of the relevant date which Starboard Cruise
Services provides, or has the right under contract to provide service upon
ship introduction, with other cruise-based services (port publications, port
lecturing and art auctions) under its contracts.
(3) Includes the number of ships to be added into service over these time
periods in the global cruise line industry, as reported by CLIA and Cruise
Industry News.
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Our services are designed to further both our company and the cruise lines'
mutual goals of increasing sources of revenue while enhancing the cruise
passenger's overall vacation experience. Our services are also designed to be
complementary. From on-board, duty-free shopping to in-port shopping stimulated
by our lectures and magazines to buying art at sea, we present shopping as
entertainment during the entire cruise experience. We believe our approach of
working together with our cruise line customers to enhance our service offerings
and increase passenger purchases, and therefore revenues to cruise lines, has
enabled us to develop strong and mutually beneficial relationships with the
cruise lines.
INDUSTRY OVERVIEW
- - Growth of the Cruise Industry. The passenger cruise industry has grown
substantially. According to Cruise Lines International Association (CLIA),
approximately 5.4 million North American passengers took cruises in 1998, an
increase of 4.0 million from 1.4 million in 1980, representing a compound
annual growth rate of approximately 8.0%. The number of cruise ships increased
20% from 120 ships in 1993 to 144 ships as of January 1, 1999, with the number
of berths growing 32% from approximately 104,000 to 137,000 over the same
period. According to CLIA and Cruise Industry News, the number of ships are
expected to grow 32% from 144 as of January 1, 1999 to 190 in 2003 with the
number of berths growing 48% from approximately 137,000 to 203,000 over the
same period, representing larger berth capacity of the ships entering the
market. Because of the strong relationship of overall cruise demand to demand
for our services, we expect to grow along with the overall growth of the
cruise industry.
- - Expansion of Service Offerings and Outsourcing. In an effort to expand
entertainment options for passengers and increase revenues generated by
passengers, cruise line operators have introduced new on-board and on-shore
services, activities and themes. While introducing new product and service
offerings, many cruise line operators have increasingly focused on their core
business and outsourced a range of services. Cruise lines now contract with
outside providers which offer industry expertise for a range of services,
including on-board duty-free retail shopping, art auctions, port lecturing,
in-cabin media and video, health clubs, spa services, photography,
telecommunications services, and shore-side, fully arranged excursions and
tourist activities. We believe our leadership in providing a variety of
outsourced services effectively positions us to become a provider of
additional services in the future.
- - New Ships With Larger Entertainment Spaces. Recently built cruise ships and
new cruise ships under construction are generally larger than existing ships
and have also been designed with the intent of increasing service revenues
through expanded and strategically located retail and service offering areas.
For example, the latest cruise ships designed by Carnival Cruise Lines,
Celebrity Cruises and Royal Caribbean International have as much as 5,000 to
8,000 square feet of dedicated retail space, representing as much as three to
four square feet of retail space per passenger, more than double the current
average of one to two square feet of retail space per passenger on existing,
smaller vessels. These larger retail formats have generated in excess of
approximately $9.00 in revenues per passenger per day compared to the
approximate $5.00 average on earlier generation ships. In addition to
increased retail space, Carnival Cruise Line, Celebrity Cruises, Crystal
Cruises and Royal Caribbean International are testing new retail formats,
including dedicated art galleries on their ships.
- - Change in Passenger Profiles and Vacation Patterns. Cruise line passengers
are increasingly affluent and employed, as baby-boomers make up a larger
portion of the cruise lines' customer base and retirees a smaller percentage.
The increasing percentage of baby boomers has benefitted the cruise line
industry because they generally spend a larger percentage of their income on
leisure travel than older demographic groups. In addition, a larger percentage
of the population is experiencing cruise vacations. According to CLIA, while
only 3.6% of U.S. residents had cruised by 1986, 11.3% of them had taken a
cruise vacation by 1998.
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COMPETITIVE STRENGTHS
We believe that the following competitive strengths contribute to our position
as the leading provider of our core services and serve as a foundation for our
business and growth strategy.
- - Market Leadership and Scale Advantage. We are the leading provider of
on-board duty-free retailing, port lecturing, customized media, and art
auctions to the cruise industry. We currently deliver our services to 100
ships, representing 26 cruise lines. We believe that our market leading
position and experience in providing these services have enabled us to develop
an infrastructure which gives us a scale advantage over smaller providers or
cruise lines who do not outsource the services we provide.
- -- Duty-free Retail. In our duty-free retail operations, we believe that we
have achieved a competitive advantage in purchasing, where we purchase items
for both our cruise line and airport retail stores in large quantities at
competitive prices; in logistics, where we deliver over 50,000 items (SKU's)
to more than 40 ports of call, often with an eight hour window to restock
vessels and in compliance with a range of customs and import regulations; and
in merchandising, where our experience with cruise line passengers permits us
to tailor our retail and other service offerings for specific cruise lines,
passenger profiles, destinations, voyage lengths and seasons.
- -- Port Lecturing. In port lecturing, we have developed relationships with
retailers at over 300 shops in over 70 ports of call, and we have established
an infrastructure to manage the monitoring and collection of revenues,
guarantee issues and returns.
- -- Port Publications. In publishing, we have a proprietary body of content
which allows us to produce cruise line-specific and port-specific magazines
for over 70 ports of call.
- -- Art Auctions. In art auctions, we are able to source a supply of a variety
of artwork from numerous artists and are able to sell and arrange delivery
for an average of over 3,500 pieces of artwork each week.
Corporate wide, we have demonstrated our ability to recruit, hire, train and
maintain employees and independent contractors in approximately 700 on-ship
positions worldwide.
We believe our experience, expertise and scale advantage enables us to
provide our services with an efficiency and quality which makes outsourcing to
us more attractive for cruise lines than providing the services themselves or
outsourcing to one of our competitors.
- - Strong Relationships with Cruise Lines. We have been providing services to
cruise lines since 1963 and have long-term relationships with the major cruise
operators. Currently, we provide at least one of our core services to almost
every major cruise line and our customers account for over 75% of cruise ship
berths. Our relationships with the largest two cruise corporations, Carnival
Corporation and Royal Caribbean Cruises Ltd. date back to 1993 and 1984
respectively. Our offices and our customs-bonded warehouse, located in Miami,
Florida, also enable us to maintain close contact with many major cruise lines
headquartered in Miami. We work closely with the cruise lines in designing new
retail areas of ships, in making and tracking merchandising decisions, in
creating logo apparel and souvenirs and in developing new service concepts. In
only three instances have we ever lost an existing account. In each of these
cases, we reacquired the account and currently serve these customers.
- - Established Reputation. We have been on the forefront of providing cruise
lines with innovative on-board duty-free retailing since 1963 and customized
media services since 1990. Working with the cruise lines we service, we helped
transform on-board shopping into an entertainment venue for passengers and
improved the merchandising and sales of on-board duty-free goods by creating
special sales events, daily special themes and, when available, cross
promotion of our offerings through our customized media services. We also
worked with the cruise lines to formalize the port lecturing industry,
solidifying relationships with on-shore retailers to provide competitively
priced shopping, as well as service and product guarantees for cruise
passengers. In addition, we helped
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develop art auctions to create a further entertainment option during time at
sea. We believe our role in developing these markets has helped establish our
position as a market leader and enhanced our reputation in the industry.
- - Experienced Management Team. We are led by a management team with significant
experience in the cruise industry and each of our core service offerings. Our
senior management executives from Greyhound Leisure Services include
executives with a mix of cruise industry retail expertise, with key managers
having significant experience at the company, and recently added executives
bringing significant retail and other expertise. Our two senior executives
from the Onboard Group include its founder and a key executive who has been
with Onboard Media since 1990, the year the business was established. Both
have over ten years of experience in the cruise-based services industry.
- - Merchandising Expertise. Operating on-board duty-free retail stores differs
from operating traditional retail stores primarily in the merchandising
approach and in the space, delivery, international customs and restocking
constraints we face. To meet the broad on-board shopping demands of cruise
passengers, we present a wide variety of products including attractive private
labels and strong designer brands such as Gucci, Cartier, Gear, Lladro, Tag
Heuer and Fossil in an environment targeted to meet the varying tastes of the
wide variety of customers across different segments of the industry, from the
smallest luxury ships to the largest cruise ships. At the same time, we face
constraints in storage and display space and the need to tailor shop
inventories to different cruise line atmospheres, varying demographic cruise
market segments and changing seasons and itineraries. Through years of
providing on-board duty-free retail services, we have developed expertise at
retailing on cruise ships. Our buyers and district managers have been with us
for an average of over ten years and have helped us establish an institutional
knowledge base to manage the challenges of on-board retailing. We believe our
experience in addressing these challenges and our familiarity with buying
patterns on various cruise lines, ship layouts, and travel routes provides us
with a competitive advantage. We also believe our decade of experience in
presenting port shopping and recreational opportunities to passengers as well
as our experience providing entertaining art auctions provides us a further
advantage in merchandising our services to passengers.
GROWTH STRATEGY
- - Maintain and Expand With Our Cruise Line Customers As They Grow. We intend to
maintain our relationship with our customers by continuing to provide high
quality service and innovation leadership. We are well positioned to continue
to grow as our cruise line customers grow. According to the Cruise Industry
News, cruise line operators will add 46 ships over the next four years. We
currently have contracts to provide our services to approximately 27 of these
ships. In addition to increases in the number of ships, we expect that newer
ships will be generally larger, carry more passengers and have substantially
more retail, entertainment and service space. The additional space and
increased emphasis on on-board retail and other services will provide us with
the opportunity to increase our revenue per passenger per day due to increased
selection, the establishment of more boutique stores, larger designated art
galleries and other innovations in our merchandising.
- - Expand Services to Existing Cruise Line Customers. Consistent with our
strategy in forming our company, we plan to expand the breadth of use of our
services among our current customers. We have strong customer relationships
with most cruise lines and currently serve cruise lines which account for over
75% of industry berth capacity. We believe this strong position provides an
opportunity to translate our high quality service in one service offering into
use of our other core service areas. Currently, almost all of the major cruise
lines use at least one of our cruise-related services, while only four cruise
lines use all of our services, providing future opportunities to cross sell
additional services to our cruise line customers. By continuing to build on
our relationships and
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highlighting our leadership, dependability and creativity in each of our core
services, we expect to increase the number of services used by our customers.
- - Continue to Improve Merchandising. We believe that through improvements in
our product mix and presentation we can continue to increase per passenger per
day spending in our cruise-based duty-free stores. By ensuring we have
attractive, targeted items in our stores, we intend to generate further
improvements in our per passenger per day revenues in duty-free retailing. In
promotions, we intend to continue to be sure we have better and more
effectively presented port shops, restaurants and cultural highlights in our
lectures and publications. In art auctions, we will continue to seek to be
innovative in our selection and presentation of art, such as our recent
introduction of virtual galleries and test marketing of sports memorabilia. To
accomplish this, we expect to continue to work with cruise lines to understand
emerging passenger profiles and to design stores, lectures and auctions and
tailor merchandising on each ship to correspond with the vessel's overall
image and marketing strategy. We also plan to introduce theme and specialty
stores to address the evolving passenger base. Moreover, through our
experience and close relationships with cruise lines, we believe we can
quickly develop and implement appropriate new merchandising concepts. For
example, we recently began conducting special bazaars of local products on
some cruise itineraries, an idea we implemented within six months of its
development.
- - Improve and Expand Service Offerings. We have the opportunity to improve our
performance by finding better ways to deliver our services and expanding the
range of services we offer. For example, recently we began expanding our port
lecturing programs to provide service in Europe and Alaska. Coordinating with
our cruise line customers, we intend to identify other additional services to
help cruise lines enhance the cruise experience for passengers and increase
on-board revenues. In addition, we expect to expand our cruise-based services
to select land-based opportunities. For example, we have extended our cruise
line publishing business to provide magazines to theme hotels and resorts such
as Sandals and select Las Vegas hotels including Caesars Palace, MGM Grand,
New York, New York and Venetian. We plan to continue to evaluate and pursue
appropriate cruise line and land-based business opportunities, including our
recent agreement to sell cruise logo items over the Internet with a major
client, which are complementary to our core strengths and where we believe we
can develop a competitive advantage.
OUR CUSTOMERS
We provide services both to the cruise lines and their passengers. It is
therefore important that our service offerings are attractive to both groups,
providing business value to the cruise operators and an enhanced experience to
their passengers. We service almost every major North American cruise line and
provide services to most other major cruise lines worldwide. We currently
provide our services to 100 ships, representing 26 cruise lines, to which we
are, with limited exceptions, the exclusive provider of a service on board each
ship to which we provide that service. Moreover, we are the only operator of
duty-free retail stores on all ships controlled by Carnival Corporation
(including Carnival Cruise Lines, Costa Cruises, Cunard Line, Holland America
Line, Seabourn Cruise Line and Windstar Cruises). Commencing in November 1999,
we have contracted to be the only provider of duty-free retailing, as well as
the port lecturing, in-cabin media and art auctions we have already serviced, to
ships owned by Royal Caribbean Cruises Ltd. (including Royal Caribbean
International and Celebrity Cruises). We also provide our services to a wide
variety of other leading cruise lines around the world. Under our contracts with
many cruise lines we service, we have the opportunity to offer our services on
new ships as they are introduced, in some cases with respect to specified ships
or classes of ships and, in other cases, on any new ships introduced.
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The cruise lines we service and the service offerings provided to each of them
are detailed in the following chart. Cruise-based duty-free retailing accounted
for 69.6% of our revenues for the six months ended June 30, 1999, while other
cruise-related services accounted for 7.0%.
SERVICE OFFERINGS BY CRUISE LINE
<TABLE>
<CAPTION>
CRUISE LINES DUTY-FREE RETAIL PORT LECTURING PUBLISHING ART AUCTIONS
- ------------ ---------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
Canaveral Cruise Lines X
Carnival Cruise Lines X - - X
Celebrity Cruises X X X X
Commodore Cruise Lines X - -
Costa Cruises(a) X X X X
Crystal Cruises - X X X
Cunard Line X - X
Delphin/Blacksea Shipping X
Discovery Cruise Line X
Disney Cruise Line - X X
Festival Cruises X
Holland America Line(b) X - - X
Norwegian Cruise Lines(c) X - - -
P&O Cruises X
Premier Cruises X
Princess Cruises - - - -
Radisson Seven Seas X
Regal Cruise Lines X
Renaissance Cruise Lines X -
Royal Caribbean International(d) X X X X
Royal Olympic Cruises - X
Seabourn Cruise Line X
Silver Sea Cruises X -
Star Cruises X
Sun Cruises - X X X
Topaz X
Windstar Cruises X
</TABLE>
- -------------------------
NOTE: X denotes service provided by Starboard Cruise Services
- denotes service provided by competitor or cruise line itself
Where no provider is listed on the chart, the cruise line does not
offer the specified services.
(a) We provide publishing to Costa Cruises in connection with its
Caribbean cruises but not with respect to its European cruises. We
continue to provide services to Costa Cruises under the terms of a
contract which has expired.
(b) Fine Art Sales, Inc. also provides art auction services to Holland
America Line.
(c) Duty-Free.com provides retail services to one Norwegian Cruise Line
ship.
(d) Duty-free retail services to Royal Caribbean International will
commence November 1999 pursuant to a contract executed July 1999.
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CRUISE SHIP SERVICES
On-Board Duty-Free Retailing
We are the world's largest operator of duty-free retail stores on cruise
ships. As of June 30, 1999 we operated 232 stores on 82 ships, representing 21
cruise lines. An additional 62 stores on 12 ships are under contract for service
commencing in November 1999 and our contracts allow us to provide these services
on an additional 26 ships announced to be in service by December 31, 2004.
Cruise line passengers generally enjoy shopping during vacations and during days
at sea on a cruise vacation our shops often provide the only shopping
opportunity. In our cruise ship stores we sell a wide variety of quality
merchandise, such as logo apparel and souvenirs, jewelry, watches, perfume,
cosmetics, fashion apparel, crystal and fine gifts, leather goods, electronics,
snacks, toiletries, books, liquor, cigarettes, sundries and cruise-related
items. We sell both duty-free and duty-paid merchandise and carry both private
label and well-known branded items, with a focus on high quality, high margin
products. Cruise-based duty-free retailing accounted for approximately 70% of
our net sales for the six months ended June 30, 1999.
Superior merchandising is one key to the success of our cruise-based
duty-free retail operations. We pursue a strategy of offering a broad assortment
of high-quality, classic styles, while maintaining attractive pricing. We tailor
our merchandising to offer each cruise line a distinctive presentation, matching
its customer profile and adapting to changes in seasonal itineraries. Through
fashion shows and other events, we have worked with our cruise line customers to
turn cruise-based shopping into entertainment. We also have enhanced our
merchandising through the use of themes and daily specials, with daily store
display changes planned around the theme of the promoted daily features. We
employ a team of designers to work closely with cruise ship operators to design
the stores and the flow and location of display areas within stores to conform
to our marketing standards. The stores are designed and fixtured to create a
distinctive environment and store associates are trained to maintain high
standards of visual presentation and customer service. This approach allows us
to maintain a uniform appearance throughout our store base in terms of
merchandise display and location on the selling floor, and to maintain our
standards for maximizing usage and productivity of selling space. We believe our
operating philosophy is a competitive advantage, evidenced by the improved
performance of the operations we acquired from Nuance Global Ships in December
1998.
We expect recent changes in ship design to have a positive impact on our
duty-free retail merchandising strategy. Newer vessels generally have larger
retail stores in high traffic locations. On these newer ships we will generally
have more square footage than we average on existing ships, from which we expect
to generate higher revenues per passenger than on traditional vessels. We
currently expect increased space availability on new ships will enable us to
create larger store formats, product and brand-specific boutiques, and more
sophisticated store-within-a-store arrangements. These large retail formats have
generated up to approximately $9.00 in revenues per passenger per day compared
to the $5.00 average on earlier generation ships. As new ships are launched, we
expect our store mix to shift increasingly to the larger format. We anticipate
that this will allow us to expand our offerings and create an even more exciting
shopping experience on board.
Port Lecturing
We are the leading provider of port lecturing services to cruise lines. We
provide our port lecturing services to 25 ships representing seven lines and our
contracts allow us to provide these services on an additional eight ships
announced to be in service by December 2003. Many cruise line passengers have
limited knowledge of shopping opportunities in ports of call and are concerned
about the quality and authenticity of merchandise they purchase. Our port
lecturers provide cruise passengers with recommendations for shopping in ports
of call for a variety of items ranging from fine jewelry, watches and crystal to
souvenir T-shirts. For cruise line passengers our service provides a
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greater sense of comfort with the on-shore shops we recommend because our
lecturers are identified with the cruise lines and because of a 100% quality and
authenticity guarantee provided as part of the port lecturing service. Under our
guarantee, we provide passengers and cruise lines the service of managing
returns with the retailers. We believe this comfort is important to many
passengers' decision to visit and purchase items from the on-shore shops we
recommend.
We have established contractual relationships with over 300 retailers in
over 70 ports of call around the world. In exchange for participation in the
port lecture program, retailers enter into a contract with us to pay either a
flat fee or a commission based on gross sales generated by the cruise line
passengers. Additionally, our contracts generally require on-shore merchants to
guarantee the quality and authenticity of products and accept our returns for a
set period of time so that we do not bear the risk of losses related to
passenger returns. Cruise lines find contracting for this service attractive
because it permits us to offer a valuable service to cruise line passengers,
assists cruise lines in capturing a portion of passenger revenues spent on shore
and frees them from tracking sales volume, collecting revenues, arranging
contracts, and handling and guaranteeing returns.
Customized Publications and Videos
We supply in-cabin cruise line publications (also known as port magazines)
and in-room videos to several cruise lines. We provide our customized
publication and video services to 24 ships representing six cruise lines. Our
contracts allow us to provide these services on an additional eight ships
announced to be in service by December 2003. Our magazines feature articles on
port destinations, as well as paid advertisements from on-shore retailers and
international advertisers. We deliver new, high quality magazine publications
bi-annually or annually, depending on itineraries, in the fall and spring. Our
magazines are customized by cruise line, as well as by port destination. We
consider the highly tailored nature of our magazines to be a competitive
advantage and believe it enhances their usefulness to the passenger. As with the
port lectures, our magazines provide customers with valuable information on
shopping and other recreational opportunities in new destinations. Our
publications provide retailers and other businesses a focused target audience of
immediate potential customers. We also produce videos on port destinations, as
well as training and safety videos for the cruise lines. Furthermore, we provide
similar publications and videos to a limited number of other resorts with a
destination vacation environment, primarily Las Vegas hotels and Sandals
resorts. In addition to magazines, we provide one-time, special "Inaugural"
publications to commemorate the launch of a new ship. In 1998 we published 35
different editions of publications for cruise lines and hotels.
Art Auctions and Sales
We are the leader in providing art auctions on board cruise ships. We
provide our art auction services on 41 ships representing eight cruise lines and
our contracts allow us to provide these services on an additional 12 ships
announced to be in service by December 2003. We contract with the cruise lines
to hold auctions aboard each ship and offer passengers an opportunity to bid for
quality artwork ranging in price from $100 to $10,000. For many passengers, this
is often the first opportunity to participate in an art auction. We carry a
broad selection of over 4,000 pieces of artwork from numerous artists. We are
test-marketing items like sports memorabilia and continue to update our art
selection to respond to passenger demand. We also have recently opened "virtual
galleries" on the ships to give passengers a retail opportunity to view artwork
on computer generated galleries and purchase pieces from a selection of over
4,000 works. The virtual gallery concept brings us the opportunity to sell
passengers a wider selection of artwork than has typically been available on any
one ship. We arrange the guaranteed express mailing of the artwork directly to
the passenger's home after the cruise to avoid transportation difficulties for
the passenger. We currently sell an average of
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3,500 pieces of artwork each week and provide these auctions and sales through
our supplier, a leading art curator, who sources and ships the art, and helps
provide qualified auctioneers.
LAND-BASED SERVICES
We pioneered the concept of duty-free retailing in the United States with
our shops at the Miami International Airport, where we have been the sole
duty-free operator since 1958 and currently operate 19 stores with over 33,000
square feet of retail space. The Miami airport is the fourth largest airport in
the United States, after Hawaii, Los Angeles and San Francisco based on
duty-free retail sales. In 1998, 827,500 of the 7.8 million international
travelers using the Miami airport shopped at our duty-free stores. We also have
operated duty-free stores in the Fort Lauderdale-Hollywood International Airport
since 1990. This operation is smaller, with two stores totaling 2,500 square
feet. We have recently refurbished the stores in both of these airports
introducing state-of-the-art lighting, wood paneling and generous use of marble
to showcase such fine designer brands as Ferragamo, Gucci, Tag Heuer and Fendi.
In addition, four of the stores in Miami were recently converted from
full-service to semi-self service, which resulted in an increase in sales in
these stores of up to 50%. Our Miami and Fort Lauderdale airport stores serve as
a base for our cruise line business and enable us to increase the overall volume
of our duty-free purchases. In addition, through our "Florida Export Warehouse"
business, we sell wholesale duty-free liquor and cigarettes to cruise lines and
catering companies for resale on cruise lines directly.
CONTRACTS
All of our services are provided pursuant to contracts with cruise lines,
hotels, resorts or airports. Our cruise line contracts for duty-free retail
services generally give us the exclusive right to sell most retail products
on-board cruise ships in return for a payment based on a percentage of gross
sales or a minimum dollar amount per passenger day. Many of the contracts
include all of a cruise line's existing ships as well as specified new ships
currently scheduled or under construction and some include all new ships
introduced during the contract by a cruise line. Under our contracts, the
individual terms of which we negotiate with each cruise line, we generally agree
to provide duty-free retail services and take responsibility for the inventory
to be sold and the management of the shops. The cruise lines generally assume
responsibility for shop capital expenditures, construction and improvement to
the stores. We provide design assistance to ensure that the stores meet our
merchandising standards. Our on-ship duty-free retail concession agreements are
generally for three to five years, with provisions for extension or renewal.
Since 1963, we have only lost two existing duty-free retail contracts when the
cruise lines customer decided to provide their own retail operations. Since
then, we reacquired both accounts and have contracts to provide their on-ship
duty-free services.
Contracts to provide port lecturing, customized publication and art auction
services to the cruise lines are of varying length, from one to five years. Our
port lecturing and publications contracts permit us to provide these services on
cruise ships, in return for which we solicit advertising, manage collections and
returns, provide the magazines and lectures and pay the cruise lines a set
percentage of revenues from on-shore retailers and international advertisers, in
some cases with a minimum guarantee. In art auctions, we contract with the
cruise lines to provide art sales and art auctions on cruise ships and, with our
supplier, provide the art, conduct the auctions and manage the logistics of
shipping art to the passenger. We pay a percentage of revenues to the cruise
lines. With some of our promotion and art auction contracts, we have agreed to
pay the cruise lines a minimum payment.
Contracts with cruise lines accounting for 9% of our net sales for the six
months ended June 30, 1999 expire by December 31, 2000, cruise line contracts
accounting for an additional 8% of our net sales expire by December 31, 2001,
and cruise line contracts accounting for 54% of our revenues
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expire by December 31, 2002, in each case excluding renewal options under the
contracts and in each case without giving effect to our recently executed
contract with Royal Caribbean International.
We provide our airport services under concession contracts with the two
airports, under which we pay a percentage of revenues as rent, subject to
certain minimums. Our contract with Miami International Airport expires in
November 2000 and our contract with Fort Lauderdale International Airport
expires on August 30, 2002. Both are subject to renewal options. We have
operated the Miami International Airport contract since 1958 and the Fort
Lauderdale International Airport contract since 1990.
SUPPLIERS
Because of the scale of our retail purchases, we believe that we are able
to purchase duty-free and duty-paid merchandise at competitive or preferred
rates. We purchase our goods from numerous vendors, including manufacturers and
distributors. We do not have any significant long-term or exclusive purchase
commitments and we believe that alternative sources of supply are available for
each category of merchandise we purchase.
A major supplier, with whom we have a long-term relationship, supplies the
artwork sold in our art auctions. This supplier has long-term agreements with
many popular commercial artists, which allows it to maintain a constant source
of artwork. Our contract with this supplier renews automatically for successive
two year periods and the supplier has agreed not to compete with us in providing
art auction services on cruise lines for two years after it terminates the
contract.
EMPLOYEES
As of June 30, 1999 we had a total of approximately 1200 employees and 25
independent contractors. Of these employees, 500 worked in our Miami offices and
warehouse and 700 worked on ships or in offices abroad. Shipboard employees are
employed outside the United States and are typically recruited from European
countries. Approximately 50 of our warehouse employees at our Greyhound Leisure
Services headquarters in Miami are subject to a collective bargaining agreement
that runs through June 30, 2001.
FACILITIES
We have office space in Miami and Miami Beach, Florida and Southampton,
England and a 120,000 square foot warehouse, located just six miles from Miami
International Airport and 12 miles from Miami Seaport. As of June 30, 1999, we
operated 232 retail shops aboard 82 cruise ships, which operate in international
waters, 19 shops in the Miami International Airport and two shops in the Fort
Lauderdale-Hollywood International Airport. Our Miami office space and warehouse
is occupied under a lease expiring on December 31, 2002 at an aggregate annual
rental expense of approximately $650,000. We have the option of extending this
lease for another five years after December 31, 2002. Our Miami Beach office
space is occupied under leases expiring April 30, 2006 at an aggregate rental
expense of approximately $250,000 per year.
INFORMATION SYSTEMS
We have developed a sophisticated system for collecting and tracking
inventory information. Our systems are integrated to accept point-of-sale
information from the various cruise line point-of-sale systems. When a cruise
line does not have its own system, we use our own point-of-sale system. Many
cruise lines have their own systems to facilitate "cashless" purchasing during a
cruise. Our merchandising department is provided with weekly information from
our employees on the cruise ships to track inventory, sales and gross margin
data. We utilize this data in conjunction with
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information from the cruise lines about anticipated passenger profiles, voyage
routes and durations to make market-driven decisions about replenishing our
on-ship stores.
We also have developed a system to track and test port sales subject to our
port lecturing contracts by cruise line and port of call. In addition, with our
art auction supplier, we have a system providing us with the ability to track
on-board art sales and ship the art directly to the customer's home quickly.
Our airport duty-free operations are structured to comply with U.S. customs
regulations which restrict passengers from taking duty-free purchases with them
from a duty-free store. Our systems arrange for the delivery of duty-free
purchases to passengers in the departure area where purchases may be retrieved
by passengers within 30 minutes prior to their departure.
COMPETITION
Our primary competition in providing services on cruise ships is from
cruise lines which provide the services themselves. Princess Cruises is the
largest cruise line to provide the shopping on its ships. We also compete with
other operators such as Harding Brothers Duty-Free Ltd. for the right to provide
duty-free services on the cruise ships. Our competition in offering port
lecturing and publishing includes Panoff Publishing, Inc. and International
Voyager Media and cruise lines which do not outsource these services. Carnival
Cruise Lines is the largest cruise line providing its own port lecturing while
almost all of the major cruise lines outsource their publishing. Our competition
in providing art auctions includes a variety of other providers such as David
Morgan and Fine Art Sales Inc. and some in-house operations. Our main competitor
in providing airport duty-free services is Duty Free Shoppers, Inc.
GOVERNMENT REGULATION
We are subject to various national and local laws and regulations affecting
the operation of our business. The operation of our warehouse, our shipment of
goods and the operation of our shops is subject to the customs and import/export
laws of the United States and of other jurisdictions and regulation by the
Bureau of Alcohol, Tobacco and Firearms as well as by state authorities. Our
airport duty-free operations must comply with federal and local laws relating to
disadvantaged business ownership.
INTELLECTUAL PROPERTY
We own a number of licenses, trademarks, service marks and trade names in
the United States. Our principal trademarks include Mistral, Maritime Spa &
Salon and Tara Vanessa. We have applied for trademarks with respect to the names
Club Nautique, Onboard Media, Escapades, Destinations, Explore!, Land & Sea,
Buongiorno, Cruising in Style, Shopping in Paradise and Marinaio. We have also
filed trademark applications for Escapades in Jamaica, Antigua, Barbados, the
Bahamas, and St. Lucia. The Escapades trademark has been registered in Turks &
Caicos. We use the name "Greyhound" and associated marks under a royalty free,
perpetual license agreement with Greyhound Lines, Inc. This agreement provides
for exclusive usage within our duty-free business and non-exclusive use in other
businesses. In addition, from time to time we use several other marks and trade
names under licenses for the purpose of providing and selling logo items and
other goods in our duty-free stores and for the purpose of creating our
publications.
LEGAL PROCEEDINGS
Starboard Cruise Services is not a party to any material legal proceedings.
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OUR HISTORY
Starboard Cruise Services is a holding company formed in September 1998 to
acquire Greyhound Leisure Services, Inc., the leading provider of duty-free
cruise line and airport shopping operations, which was founded in 1958, and then
the Onboard Group (Onboard Media, Inc., Cruise Management International, Inc.
and Boxer Media, Inc.), the leading provider of port lecturing services,
on-board art auctions, customized publications and in-cabin media. We acquired
the on-ship duty-free retail business of Nuance Global Ships, on December 15,
1998, expanding our business by an additional 29 ships, including several ships
of Celebrity Cruises, Cunard Line, the Holland-America Line and Norwegian Cruise
Lines. We will convert from a private limited liability company (besloten
vennootschap met beperkte aansprakelijkheid or B.V.) to a public limited
liability company (naamloze vennootschap or N.V.) and change our name from Miami
Cruiseline Services Holdings I B.V. to Starboard Cruise Services N.V. effective
immediately prior to this offering.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their respective ages and
positions as of the date of this prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
Joel E. Cutler....................... 41 Chairman of the Board, Chief Executive Officer and
Managing Director
J. P. Miquel......................... 60 President and Chief Executive Officer of Greyhound
Leisure Services and Managing Director
Philip L. Levine..................... 37 President and Chief Executive Officer of Onboard Media
and Cruise Management International and Managing
Director
Jerry Chafetz........................ 42 Senior Vice President of Onboard Media and Cruise
Management International and Managing Director
William J. Fitzgerald................ 41 Acting Interim Chief Financial Officer
Bradley M. Bloom(1).................. 46 Supervisory Director
David P. Fialkow(1).................. 40 Supervisory Director
Steven S. Fischman................... 58 Supervisory Director
Randy Peeler(2)...................... 34 Supervisory Director
Leonard A. Schlesinger(1)(2)......... 47 Supervisory Director
</TABLE>
- -------------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
JOEL E. CUTLER has served as the Chairman of the Board and Chief Executive
Officer since September 1998. He has been the Co-Chairman and Co-Managing Member
of F.C. Capital Partners LLC, a private equity firm, since 1998. He has also
been an officer and principal of Alliance Development Group, Inc., a company
which creates loyalty and enhancement programs for partners in the retail and
banking industries, since 1994 and Retail Growth ATM Systems, LLC, the leading
ATM provider to the shopping mall industry, since 1997. He was the Co-Chief
Executive Officer of National Leisure Group from 1987 to 1996, a company he
co-founded with David P. Fialkow in 1987. While he was Co-Chief Executive
Officer, National Leisure Group grew to be one of the largest leisure travel
companies and cruise sellers in the U.S., developing endorsement travel programs
for major banks, credit card companies and retailers. National Leisure Group was
sold in 1995. From 1984 to 1987, he served as an executive of The Interface
Group, a national trade exhibition company (Comdex) and New England's largest
tour company (GWV). He is a member of the board of directors of General
Catalysts LLC. He earned a B.A. from Colby College and a J.D. from Boston
College Law School.
J. P. MIQUEL has served as a Managing Director of our company since
September 1998 and has been the President and Chief Executive Officer of
Greyhound Leisure Services since March 1984. Mr. Miquel joined Greyhound Corp.
in 1977 and served as President and Director of Operations -- Europe from 1978
to 1983 and Vice President -- Special Markets from 1983 to 1984. In 1984, he
became President and Chief Executive Officer of Greyhound Leisure Services, Inc.
While at Greyhound Leisure Services, Mr. Miquel was also President and Chief
Executive Officer of Premier Cruise Lines, a cruise ship business previously
operated by Viad Corp. He earned a B.S. in Hotel/ Restaurant Management from the
Hotel and Restaurant College in France and a certificate of post-
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graduate study in Business Management from the University of Brussels, Belgium.
He is very active in various industry and trade organizations and served as the
president of the French-American Chamber of Commerce of Miami/Fort Lauderdale in
1996.
PHILIP L. LEVINE has served as a Managing Director of our company since
September 1998 and has been President and Chief Executive Officer of Onboard
Media since its founding in 1990. He has also been President and Chief Executive
Officer of Cruise Management International since its founding in March 1995 and
of Boxer Media since its founding in November 1996. From 1988 to 1989, he was
employed by Carnival Cruise Lines, Inc. where he helped develop and expand its
in-house port lecturing program. He founded Onboard Media in order to
professionalize the port lecturing business and develop an industry
communications infrastructure for on-shore merchants to reach cruise line
passengers. He serves as a director of Colonial Bank South Florida Region. He
earned a B.A. from the University of Michigan and is actively involved in the
cruise line industry. He is currently a member of the Florida Caribbean Cruise
Association, the Caribbean Hotel Association, the Presidents Club of University
of Michigan and the Historical Steamship Society and was appointed to the
Mayor's Special Economic Council in Miami Beach. He is an associate member of
The International Council of Cruise Lines (ICCL) and a Member of the Founder's
Club of the Mount Sinai Hospital.
JERRY CHAFETZ has served as a Managing Director of our company since
September 1998 and has been Senior Vice President of Onboard Media since 1990.
He has also been Senior Vice President of Cruise Management International since
its founding in March 1995 and of Boxer Media since its founding in November
1996. Prior to joining Onboard, Mr. Chafetz founded and operated Chafetz
Jewelers, which was sold in 1989. He earned a B.S. from Arizona State University
and is actively involved in the cruise line industry. He is currently on the
board of governors of the Miami Beach Chamber of Commerce and a member of the
Greater Miami Convention and Visitors Bureau and the Florida Caribbean Cruise
and Caribbean Hotel Association.
WILLIAM J. FITZGERALD has served as Acting Interim Chief Financial Officer
of our company and Cruise Line Holdings Co. since August 4, 1999. He has been
Senior Vice President and Chief Financial Officer of F.C. Capital Partners LLC
since 1998, Alliance Development Group, Inc. since 1996, and Retail Growth ATM
Systems, LLC since 1996. He currently serves as a director of several privately
held companies. From 1990 to 1996, he served as Vice President and Treasurer of
HMK Enterprises Group, Inc., and Watermill Ventures, a Boston, Massachusetts
based private equity investment firm specializing in revitalizing
underperforming companies in dynamic industries. From 1985 to 1990, he was with
KPMG Peat Marwick. He earned a B.A. from The College Of The Holy Cross and a
J.D. from Suffolk University Law School, is a C.P.A. and is admitted to practice
law in Massachusetts.
BRADLEY M. BLOOM has served as a Supervisory Director of our company since
1999 and served as Managing Director from September 1998 until 1999. Since its
founding in 1986, he has been a Managing Director of Berkshire Partners LLC, a
private equity firm that manages five investment funds with total capital of
$1.6 billion. He serves as a director of several privately held companies.
Before founding Berkshire Partners in 1986, he was a partner of the Thomas H.
Lee Company for seven years and spent two years with the First National Bank of
Boston. He earned an A.B. from Harvard College and an M.B.A. from Harvard
Business School.
DAVID P. FIALKOW has served as a Supervisory Director of our company since
1999 and served as a Managing Director from September 1998 until 1999. He has
been the Co-Chairman and Co-Managing Director of F.C. Capital Partners LLC, a
private equity firm, since 1998. He has also been the co-founder, Chief
Executive Officer and principal of Alliance Development Group, Inc., a company
which creates loyalty and enhancement programs for partners in the retail and
banking industries, since 1994. He has also been an officer and principal of
Retail Growth ATM Systems, LLC since 1996 and General Catalysts LLC, a private
equity firm he co-founded to invest in on-line commerce, content and
entertainment companies, since 1999. He was Co-Chief Executive Officer of
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National Leisure Group from 1987 to 1996, a company he co-founded with Joel E.
Cutler in 1987. While he was Co-Chief Executive Officer, National Leisure Group
became one of the largest leisure travel companies and cruise sellers in the
U.S. Mr. Fialkow earned a B.A. from Colgate University and a J.D. from Boston
College Law School.
STEVEN S. FISCHMAN has served as a Supervisory Director of our company
since 1999 and served as a Managing Director from September 1998 until 1999.
Since 1992, he has been the President of New England Development, the largest
mall developer in New England. Since 1992, he has also been Vice Chairman of
WellsPark Group which develops, owns and manages shopping centers and other
commercial properties. From 1968 to 1992, he was an attorney at Goulston &
Storrs in Boston with a specialization in real estate development and finance.
While at Goulston & Storrs, he represented developers and owners of all types of
real estate and investors in real estate, including shopping centers, hotels,
office projects, housing projects and industrial properties.
RANDY PEELER has served as a Supervisory Director of our company since 1999
and served as a Managing Director from September 1998 until 1999. He is a Vice
President of Berkshire Partners LLC, a private equity investment firm, where he
has been employed since 1996. From 1994 to 1996, he was responsible for new
business ventures at Health Advances, a healthcare industry consulting firm.
From 1993 to 1994, he served as Chief of Staff to the Assistant Secretary for
Economic Policy at the U.S. Department of the Treasury. Prior to that, he was a
consultant with Cannon Associates. Mr. Peeler serves as a director of Holmes
Products Corporation and Weigh-Tronix, Inc. Mr. Peeler earned a B.A. from Duke
University and an M.B.A. from Harvard Business School.
LEONARD A. SCHLESINGER has served as a Supervisory Director of our company
since 1999 and served as a Managing Director from September 1998 until 1999.
Since October 1998, he has served as Senior Vice President for Development,
Counselor to the President and Professor of Sociology and Public Policy at Brown
University. From 1988 to 1998 and 1978 to 1985, he served as a member of the
faculty of the Harvard Business School, lastly as the George F. Baker, Jr.
Professor of Business Administration and the Chair of the Service Management
Area. From 1985 to 1988, he served as Executive Vice President and Chief
Operating Officer of Au Bon Pain Co., Inc., a chain of french bakery cafes. He
currently serves as a director of The Limited, Inc., Borders Group, Inc., GC
Companies and Pegasystems, Inc.
Our Managing Directors and Supervisory Directors are each divided into
three classes. These classes hold their seats for three-year terms, with one
class of directors expiring in each successive year at the annual general
meeting. Messrs. will be in the class of directors whose term
expires at the 2000 general meeting of our shareholders. Messrs.
will be in the class of directors whose term expires at the 2001 annual general
meeting of our shareholders. Messrs. will be in the class of
directors whose term expires at the 2002 annual general meeting of our
shareholders. At each annual general meeting of our shareholders, successors to
the class of directors whose term expires at such meeting will be appointed.
At present, all Managing Directors and Supervisory Directors are appointed
and serve until the expiration of their respective three year term of office or
their resignation, death or removal, with or without cause by the shareholders,
or in the case of Supervisory Directors, also upon reaching the mandatory
retirement age of 72. All of the Managing and Supervisory Directors listed above
were elected pursuant to the Shareholders Agreement. See "Certain Relationships
and Related Transactions -- Shareholders Agreement". There are no family
relationships between our directors or executive officers. Our executive
officers are appointed by, and serve at the discretion of, the Management Board,
subject to the approval of the Combined Board. See "Description of Capital
Stock -- Election and Tenure of Managing and Supervisory Directors".
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SUPERVISORY BOARD
Under Netherlands law and our Articles of Association, the Supervisory
Board (Raad van Commissarissen) supervises the Management Board (Directie) in
the management of our company. Under the laws of The Netherlands, Supervisory
Directors cannot at the same time be Managing Directors of the same company. The
primary responsibility of the Supervisory Board is to supervise the policies
pursued by the Management Board and the general course of affairs of the company
and its business and to advise the Management Board. In fulfilling their duties,
the members of the Supervisory Board are required to act in the best interests
of the company, its business and all its stakeholders.
Pursuant to our Articles of Association, the Supervisory Board consists of
such number of members as may be determined by the general meeting of
shareholders. The members of the Supervisory Board are appointed by the general
meeting of shareholders from binding nominations made by the Combined Board.
Under Netherlands law, the shareholders may eliminate the binding effect of such
nomination by a two-thirds of quorum vote. Resolutions of the Supervisory Board
require the approval of a majority of its members. The Supervisory Board meets
each time this is deemed necessary by one of its members or at the request of
the Management Board or Combined Board. Every retiring supervisory director may
be reappointed, provided that such Supervisory Director has not attained the age
of 72. A member of the Supervisory Board must retire not later than on the day
of the general meeting of shareholders held in the fiscal year in which such
member reaches the age of 72. See "-- Combined Board".
A member of the Supervisory Board may at any time be suspended or removed
by the general meeting of shareholders pursuant to a two-thirds of quorum vote
of the general meeting of shareholders unless the removal is proposed by
resolution of the Combined Board, in which case a simple majority vote of the
general meeting of shareholders is required. Members of the Supervisory Board
may receive such compensation as may be determined by the general meeting of
shareholders. See "Description of Capital Stock -- Election and Tenure of
Managing and Supervisory Directors".
MANAGEMENT BOARD
The management of our company is entrusted to the Management Board under
the supervision of the Supervisory Board. Our Articles of Association provide
that certain actions of the Management Board shall be subject to the approval of
the Supervisory Board.
The Management Board consists of such number of members as may be
determined by the general meeting of shareholders. In addition, the general
meeting of shareholders appoints the members of the management board from
binding nominations made by the Combined Board. Under Netherlands law, the
shareholders may eliminate the binding effect of such nominations by a two-
thirds of quorum vote.
The general meeting of shareholders has the power to suspend or dismiss
members of the Management Board pursuant to a two-thirds of quorum vote of the
general meeting of shareholders unless the removal is proposed by resolution of
the Combined Board, in which case a simple majority vote of the general meeting
is required. If a member of the Management Board is temporarily prevented from
acting, the remaining members of the Management Board shall temporarily be
responsible for the management of the company. If all members of the Management
Board are prevented from acting, a person appointed by the Supervisory Board
(who may be a member of the Supervisory Board) will be temporarily responsible
for the management of the company. The compensation and other terms and
provisions of employment of the members of the Management Board are determined
by the Supervisory Board. See "Description of Capital Stock -- Election and
Tenure of Managing and Supervisory Directors".
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COMBINED BOARD
Our Articles of Association provide for specified powers to be exercised by
the Supervisory Board and Management Board acting together as a Combined Board.
The members of the Combined Board are all the members of the Supervisory and
Management Boards, whose right to participate in the Combined Board is by virtue
of their position, as the case may be, as a member of the Supervisory Board or a
member of the Management Board.
AUDIT COMMITTEE
The Audit Committee consists of Leonard A. Schlesinger and Randy Peeler.
The Audit Committee reviews with our independent auditor the scope and timing of
its audit services, the auditor's report on our financial statements following
the completion of its audit and our policies and procedures with respect to
internal accounting and financial controls. The Audit Committee will also make
annual recommendations to the general meeting of shareholders concerning the
appointment of independent auditors for the ensuing years.
COMPENSATION COMMITTEE -- INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Bradley M. Bloom, David P. Fialkow
and Leonard A. Schlesinger. The Compensation Committee reviews and evaluates the
salaries, supplemental compensation and benefits of our employees, and makes
recommendations concerning these matters to the Combined Board. The compensation
arrangements for each of our executive officers was established pursuant to the
terms of employment agreements between us and each executive officer. The terms
of the employment agreements were established in connection with our acquisition
of Greyhound Leisure Services and the Onboard Group pursuant to arms-length
negotiations between members of the Compensation Committee and each executive
officer.
Mr. Bloom is a member of Berkshire Partners LLC and Mr. Peeler is one of
its employees. We paid Berkshire Partners LLC a financing and structuring fee of
$1.25 million plus its expenses of approximately $169,000 in connection with our
acquisitions of Greyhound Leisure Services and the Onboard Group and it is
entitled to receive fees for specific services under the Shareholders Agreement.
See "Certain Relationships and Related Transactions -- Shareholders Agreement".
Messrs. Fialkow and Cutler are each a Co-Chairman and Co-Managing Member of
F.C. Capital Partners LLC and Mr. Fitzgerald, our Interim Acting Chief Financial
Officer, is one of its employees. Through Berkshire Cruise Holdings LLC, we paid
F.C. Capital Partners LLC a financing and structuring fee $250,000 plus its
expenses of approximately $59,000 in connection with our acquisitions of
Greyhound Leisure Services and the Onboard Group. In addition, in lieu of paying
a salary to Mr. Cutler we agreed to enter into a consulting agreement as of
January 1, 1999 with F.C. Capital Partners LLC pursuant to which it receives an
annual fee of $200,000 plus reasonable out-of-pocket expenses for Mr. Cutler's
services and for the occasional services of some of its employees. We also
agreed to enter into a separate consulting agreement as of August 4, 1999 with
F.C. Capital Partners LLC for Mr. Fitzgerald's services. The agreement provides
for the payment of $12,500 per month, a pro rata portion of a $60,000 annual
performance-based bonus, benefits costs and reasonable fees and expenses in lieu
of salary for Mr. Fitzgerald. Messrs. Fialkow and Cutler are each a Co-Chairman
and Co-Managing Member of F.C. Capital Partners LLC and Mr. Fitzgerald is one of
its employees. See "Management -- Consulting Agreement with F.C. Capital
Partners LLC".
In connection with the acquisitions of Greyhound Leisure Services and the
Onboard Group, we entered into a Management Agreement with Berkshire Cruise
Holdings LLC to provide consulting and management services. In exchange for
these services, Berkshire Cruise Holdings LLC was entitled to an annual
management fee of $400,000 (payable monthly) plus reasonable out-of-pocket
expenses. The Management Agreement has an initial term of five years, subject to
automatic one
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year extensions unless we or Berkshire Cruise Holdings LLC provides written
notice of termination. We paid fees to Berkshire Cruise Holdings LLC under the
Management Agreement of $116,000 for the period from September 10, 1998 through
December 31, 1998. Berkshire Cruise Holdings LLC holds over 62% percent of our
outstanding common shares and as such may have the power to direct or cause the
direction of our management and policies. In connection with our January 1, 1999
consulting agreement with F.C. Capital Partners LLC, we will amend the
Management Agreement, to reduce the annual management fee to $200,000. Messrs.
Bloom, Fialkow, Schlesinger, Cutler, Fischman and Peeler each has a direct or an
indirect interest in Berkshire Cruise Holdings LLC. Messrs. Bloom Cutler,
Fialkow and Peeler are also each a member of the Board of Managers and an
officer of Berkshire Cruise Holdings LLC.
DIRECTOR COMPENSATION
Directors serving on the Supervisory Board and the Management Board are
currently not entitled to receive any compensation for serving on the boards.
Directors are reimbursed for their out-of-pocket expenses incurred with such
services.
EMPLOYMENT AGREEMENTS
We, through our subsidiaries, Cruise Line Holdings Co. and Greyhound
Leisure Services, have entered into an employment agreement with J. P. Miquel.
We, through our subsidiaries, Cruise Line Holdings Co. and the Onboard Group,
have also entered into employment agreements with Philip L. Levine and Jerry
Chafetz. Under their respective employment agreements, Messrs. Miquel, Levine
and Chafetz will receive:
- an annual salary of (which may be increased from time to time):
<TABLE>
<CAPTION>
NAME ANNUAL SALARY
---- -------------
<S> <C>
J. P. Miquel....................................... $300,000
Philip L. Levine................................... $250,000
Jerry Chafetz...................................... $250,000
</TABLE>
- participation in any bonus plan established by us; and
- certain fringe benefits.
The term of Mr. Miquel's employment is for three years beginning on
September 17, 1998 but may be terminated earlier by us with or without cause,
upon death or continued disability or by Mr. Miquel on 60 days' notice. The term
of Mr. Levine's and Mr. Chafetz's employment continues until terminated by us
with or without cause, upon their respective death or continued disability or by
them on 60 days' notice.
If the executive's employment is terminated without "cause" or within 18
months of a change of control (as defined in the employment agreements) or due
to a material diminution in the executive's position, duties or authority,
Greyhound Leisure Services or the Onboard Group, as the case may be, will
provide the executive with severance pay for 12 months and cover the cost of
health insurance. In addition, Greyhound Leisure Services or the Onboard Group,
as the case may be, will pay the executive any bonus to which he is entitled,
pro-rated to the date of termination. If the executive is terminated for "cause"
or if the executive resigns, the executive is only entitled to receive his
salary through the date of termination. If the executive resigns, Greyhound
Leisure Services or the Onboard Group, as the case may be, will pay him his
salary for the 60 day notice period even if we accept his
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resignation prior to the expiration of the notice period. Under each employment
agreement, the executive has agreed not to:
- compete with us or our subsidiaries during the period in which he is
employed with us and for 12 months thereafter;
- solicit or hire any of our or our subsidiaries' employees during the
period in which he is employed with us and for 12 months thereafter;
- solicit any customer, including any customers whose business we have
actively sought within the 12 months preceding his termination, or any
other entity or independent contractor who provides services to us or our
subsidiaries during the period in which he is employed with us and for 12
months thereafter; and
- disclose any confidential information during the period in which he is
employed and for all times thereafter.
Under the terms of each employment agreement, the executive has also agreed
to disclose to us and Greyhound Leisure Services or the Onboard Group, as the
case may be, any intellectual property that is applicable to our business and to
assign such intellectual property to Greyhound Leisure Services or the Onboard
Group, as the case may be.
CONSULTING AGREEMENT WITH F.C. CAPITAL PARTNERS LLC FOR JOEL E. CUTLER'S
SERVICES
In lieu of paying Joel E. Cutler, our Chairman and Chief Executive Officer,
a salary, we have agreed to enter into a consulting agreement dated as of
January 1, 1999 with F.C. Capital Partners LLC to provide consulting and
management advisory services, including Mr. Cutler's services as Chief Executive
Officer and for the occasional services of some of its employees. Mr. Cutler is
a Co-Chairman and Co-Managing Member of F.C. Capital Partners LLC. In exchange
for these services, F.C. Capital Partners LLC will receive an annual management
fee of $200,000 plus reasonable out of pocket expenses. The Consulting Agreement
will have an initial term of two years, subject to automatic one-year extensions
unless we or F.C. Capital Partners LLC provide written notice of termination. It
will also provide that F.C. Capital Partners LLC and Mr. Cutler will not compete
with us, solicit or hire our employees, or solicit our customers for services in
our line of business during the period of the engagement and for 12 months
thereafter. Mr. Cutler and F.C. Capital Partners LLC will also not disclose
confidential information during or after the engagement. Prior to entering into
the consulting agreement with F.C. Capital Partners LLC, Mr. Cutler's services
have been provided to us pursuant to our management agreement with Berkshire
Cruise Holdings LLC.
CONSULTING AGREEMENT WITH F.C. CAPITAL PARTNERS LLC FOR WILLIAM J. FITZGERALD'S
SERVICES
In lieu of paying William J. Fitzgerald, our Acting Interim Chief Financial
Officer, a salary, we have agreed to enter into a consulting agreement with F.C.
Capital Partners LLC dated as of August 4, 1999 for the provision of additional
management advisory services, including Mr. Fitzgerald's services as Acting
Interim Chief Financial Officer of the Company and its Cruise Line Holdings Co.
subsidiary. Mr. Fitzgerald is an officer of F.C. Capital Partners LLC. In
exchange for Mr. Fitzgerald's services, we have agreed to pay F.C. Capital
Partners LLC a monthly consulting fee of $12,500, a portion of an annual $60,000
performance based bonus, pro rated based on the number of months of Mr.
Fitzgerald's engagement, and reasonable out of pocket expenses. We will also
reimburse F.C. Capital Partners LLC for Mr. Fitzgerald's specified benefits
during the term of the engagement. We may terminate the engagement for Mr.
Fitzgerald's services at any time on 30 days' notice. Under the agreement, Mr.
Fitzgerald is subject to the non-competition, non-solicitation and
confidentiality restrictions applicable to F.C. Capital Partners LLC.
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SEPARATION AGREEMENT WITH JORGE A. FERNANDEZ
As of September 30, 1999 Jorge A. Fernandez has resigned as Senior Vice
President -- Finance and Chief Financial Officer of two of our subsidiaries,
Greyhound Leisure Services and Cruise Line Holdings Co. In our separation
agreement, we have agreed, among other things, to continue to pay his annual
salary of $150,000 through September 30, 2000 and his bonus through December 31,
1999 and to continue some of his benefits until, at the latest, December 31,
2001. In addition, we agreed to accelerate the vesting of a portion of his
options.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows the total
compensation paid or accrued during the fiscal year ended December 31, 1998
(September 10, 1998 through December 31, 1998) to our chief executive officer
and our four other most highly compensated officers after giving effect to the
250 for 1 common share split which will occur immediately before this offering.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION COMMON SHARES
------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(NUMBER) COMPENSATION
--------------------------- -------- -------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Joel E. Cutler(a)................... $ 58,000 -- -- -- --
Chairman and Chief Executive
Officer
J. P. Miquel........................ $ 86,400 $ 13,584 -- 250,000 --
President and Chief Executive
Officer of Greyhound Leisure
Services
Philip Levine....................... $ 72,000 -- -- -- --
President and Chief Executive
Officer of Onboard Media and
Cruise Management International
Jerry Chafetz....................... $ 72,000 -- -- 250,000 --
Senior Vice President of Onboard
Media and Cruise Management
International
Jorge A. Fernandez(b)............... $ 43,200 $ 6,336 -- 62,500 --
</TABLE>
- -------------------------
(a) In lieu of a salary to Mr. Cutler, F.C. Capital Partners LLC, of which Mr.
Cuther is Co-Chairman and Co-Managing Member, received a consulting fee from
Berkshire Cruise Holdings LLC in the amount of $58,000.
(b) Mr. Fernandez resigned as of September 30, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of options to acquire shares of
Starboard Cruise Services for our chief executive officer and our four other
most highly compensated officers for the fiscal year ended December 31, 1998
after giving effect to the 250 for 1 common share split which will occur
immediately before this offering. We have never granted any stock appreciation
rights. The potential realizable value is calculated based on the term of the
option at its time of grant. It is calculated assuming that the fair market
value of common shares on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option and that the option
is exercised and sold on the last day of its term for the appreciated share
price. These numbers are calculated based on the requirements of the Securities
and Exchange Commission. By including these
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<PAGE> 63
values in this prospectus, we do not intend to forecast the possible
appreciation in our share price nor to establish a present value of these
options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
COMMON SHARES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED EXERCISE OR FOR OPTION TERM(B)
OPTIONS GRANTED TO EMPLOYEES IN BASE PRICE PER EXPIRATION ----------------------
NAME (NUMBER) FISCAL YEAR SHARE DATE(A) 5% 10%
- ---- --------------- --------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joel E. Cutler......... -- -- -- -- -- --
J. P. Miquel........... 250,000(c) 26.3% $1.925 9/17/2008 $302,593 $766,829
Philip Levine.......... -- -- -- -- -- --
Jerry Chafetz.......... 250,000(c) 26.3% $1.925 9/17/2008 $302,593 $766,829
Jorge A.
Fernandez(d)......... 62,500 6.6% $1.925 12/21/2008 $ 75,648 $191,707
</TABLE>
- -------------------------
(a) Options expire on the earlier of 60 days after the date of termination (or
such longer period as the Combined Board may determine) or the date
indicated above.
(b) At an annual rate of appreciation of 5% per year for the option term, the
price of the common share would be approximately $3.14. At an annual rate of
appreciation of 10% per year for the option term, the price of the common
share would be approximately $4.99.
(c) 83,500 shares vest on September 17, 1999 and 83,250 shares vest on each
September 17, 2000 and September 17, 2001.
(d) Mr. Fernandez resigned as of September 30, 1999.
FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the value realized
upon exercise of options during 1998 and the number and value of unexercised
options held by our chief executive officer and our four other highly
compensated officers for the fiscal year ended at December 31, 1998 after giving
effect to the 250 for 1 common share split which will occur immediately before
this offering. There was no public trading market for the common shares as of
December 31, 1998. Accordingly, the values set forth below have been calculated
on the basis of the fair market value as of December 31, 1998 of the shares
underlying the options of $1.925 per share, less the applicable exercise price
per share, multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL-YEAR-END AT FISCAL-YEAR-END
------------------------------ ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (NUMBER) (NUMBER) ($) ($)
- ---- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Joel E. Cutler...................... -- -- -- --
J. P. Miquel........................ -- 250,000 -- 0
Philip L. Levine.................... -- -- -- --
Jerry Chafetz....................... -- 250,000 -- 0
Jorge A. Fernandez(a)............... -- 62,500 -- 0
</TABLE>
- -------------------------
(a) Mr. Fernandez resigned as of September 30, 1999.
1998 STOCK OPTION PLAN
Our 1998 Stock Option Plan was adopted by our shareholders in September
1998 and subsequently amended by our shareholders and Board of Managers. It is
administered by the Management Board and Supervisory Board meeting together as a
Combined Board. A total of
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<PAGE> 64
1,000,000 common shares have been authorized for issuance under the 1998 Stock
Option Plan, subject to an automatic increase by % each year, and the
Combined Board has been authorized to issue options for those shares. To date,
we have entered into option agreements with employees for the purchase of all
1,000,000 common shares under the plan.
Under the Plan, the Combined Board may for a period of ten years cause the
company to enter into option agreements with eligible individuals employed by or
providing service to Starboard Cruise Services to acquire shares at an exercise
price determined by the Combined Board. Employees, directors, consultants and
advisers are all eligible to receive options under the 1998 Stock Option Plan.
The Combined Board has complete discretion to determine which eligible
individuals are to receive option grants, the time of those grants, the number
of shares granted pursuant to options (subject to a 500,000 per individual limit
and an aggregate limit of 1,000,000) the status of any granted option as an
incentive stock option or a non-statutory stock option under U.S. tax laws, the
vesting schedule to be in effect for the option grant, the latest date on which
an option may be exercised (which in no case will be later than ten years from
the date the option is granted) and the elimination of statutory preemptive
rights upon any issuance of options or underlying shares.
The option agreements entered into under the 1998 Stock Option Plan provide
that the exercise price for the shares is to be paid in cash.
In the event of an acquisition of Starboard Cruise Services, whether by
merger, stock purchase or asset sale, each option which is not to be assumed by
the successor corporation or replaced by a replacement award will automatically
accelerate in full and become vested. The accelerated awards will then terminate
upon the consummation of the merger, stock sale or asset sale.
The Combined Board has the authority to effect the cancellation of
outstanding options, with the consent of the participant, and cause the company
to enter into another option agreement with such participant for the same or
another number of shares.
The Combined Board may amend or terminate the 1998 Stock Option Plan at any
time, subject to any required shareholder approval and without the consent of
any grantees so long as such parties are not adversely affected.
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<PAGE> 65
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common shares as of July 31, 1999 and as adjusted to reflect
the sale of the shares offered hereby (assuming no exercise of the underwriter's
over-allotment option) by (i) each person who is known by us to own beneficially
more than five percent (5%) of our outstanding common shares, (ii) our chief
executive and our four other most highly compensated officers for the fiscal
year ended December 31, 1998, and (iii) all directors and executive officers as
a group. This table gives effect to the 250 for 1 common share split which will
occur immediately before this offering. Unless otherwise indicated below, to our
knowledge, all persons listed below have sole voting and investment power with
respect to their common shares, except to the extent authority is shared by
spouses under applicable law.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The address for those listed below is c/o Berkshire
Cruise Holdings LLC, One Boston Place, Boston, Massachusetts 02108-4401. Except
as indicated by footnote, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect to
all common shares shown as beneficially owned by them. The number of common
shares outstanding used in calculating the percentage for each listed person
includes the common shares underlying options held by such persons that are
exercisable within 60 days of July 31, 1999, but excludes common shares
underlying options held by any other person. Percentage of beneficial ownership
is based on 24,217,000 common shares outstanding as of July 31, 1999, and
common shares outstanding after completion of this offering.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES SHARES COMMON SHARES
BENEFICIALLY SHARES BENEFICIALLY BENEFICIALLY OWNED
OWNED BEING OWNED ---------------------
PRIOR TO OFFERED AFTER THE PRIOR TO AFTER THE
OFFERING HEREBY OFFERING OFFERING OFFERING
NAME OF BENEFICIAL OWNER ------------ -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Principal and Selling
Shareholders:
Berkshire Cruise Holdings
LLC(a)........................ 14,990,250 62% %
Executive Officers and
Directors:
Joel E. Cutler(b)............... 14,990,250 62% %
J.P. Miquel(c).................. 343,250 * *
Philip L. Levine................ 4,434,250 18% %
Jerry Chafetz(d)................ 379,250 * *
Jorge A. Fernandez(e)........... 128,000 * *
Bradley M. Bloom(f)............. 14,990,250 62% %
David P. Fialkow(b)............. 14,990,250 62% %
Steven S. Fischman(g)........... -- -- --
Randy Peeler(f)................. 14,990,250 62% %
Leonard A. Schlesinger(h)....... -- -- --
All Executive Officers and
Directors as a group (11)
persons....................... 20,275,000 84% %
</TABLE>
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<PAGE> 66
- -------------------------
* Less than one percent.
(a) Berkshire Fund IV, L.P., Berkshire Fund V, L.P. and Berkshire Investors
LLC, which are all affiliated with Berkshire Partners LLC, together hold a
controlling interest in Berkshire Cruise Holdings LLC, and may therefore be
deemed to have the power to vote or dispose of the common shares held
directly by Berkshire Cruise Holdings LLC. Berkshire Fund IV, L.P.,
Berkshire Fund V, L.P. and Berkshire Investors LLC disclaim beneficial
ownership of any such shares in which they do not have a pecuniary
interest.
(b) Includes 14,990,250 common shares held by Berkshire Cruise Holdings LLC.
Messrs. Cutler and Fialkow are each a member of the Board of Managers and
an officer of Berkshire Cruise Holdings LLC. They are each a Co-Managing
Member and Co-Chairman of F.C. Cruise Holdings LLC, which is, in turn, a
member of Berkshire Cruise Holdings LLC. They are also limited partners of
Berkshire Fund IV, L.P. Messrs. Cutler and Fialkow disclaim beneficial
ownership of any common shares in which they do not have a pecuniary
interest.
(c) Includes 83,500 common shares that may be acquired upon exercise of
outstanding options that vest on September 17, 1999.
(d) Includes 83,500 common shares that may be acquired upon exercise of
outstanding options that vest on September 17, 1999.
(e) Mr. Fernandez resigned as of September 30, 1999. Includes 50,000 common
shares that may be acquired upon exercise of outstanding options.
(f) Includes 14,990,250 common shares held by Berkshire Cruise Holdings LLC.
Messrs. Bloom and Peeler are each a member of the Board of Managers of and
an officer of Berkshire Cruise Holdings LLC. Berkshire Fund IV, L.P.,
Berkshire Fund V, L.P. and Berkshire Investors together hold a controlling
interest in Berkshire Cruise Holdings LLC, and may therefore be deemed to
have the power to vote or dispose of the common shares held directly by
Berkshire Cruise Holdings LLC. Messrs. Bloom and Peeler are each members
of Fourth Berkshire Associates LLC, the general partner of the Berkshire
Fund IV; members of Fifth Berkshire Associates LLC, the general partner of
Berkshire Fund V; and members of Berkshire Investors LLC. Mr. Bloom is
also a Managing Director of each Fourth Berkshire Associates LLC, Fifth
Berkshire Associates LLC and Berkshire Investors LLC. Messrs. Bloom and
Peeler disclaim beneficial ownership of any common shares in which they do
not have a pecuniary interest.
(g) Mr. Fischman indirectly holds an interest in Berkshire Cruise Holdings LLC
but does not have or share voting or investment power with respect to
common shares directly beneficially held by Berkshire Cruise Holdings LLC.
(h) Mr. Schlesinger is a member of Berkshire Cruise Holdings LLC but does not
have or share voting or investment power with respect to common shares
directly beneficially held by Berkshire Cruise Holdings LLC.
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<PAGE> 67
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS AGREEMENT
In connection with our capitalization and the acquisition of Greyhound
Leisure Services and the Onboard Group, all of our shareholders entered into a
Shareholders Agreement. All shareholders who subsequently acquired our shares
also entered into the Shareholder Agreement. Berkshire Cruise Holdings LLC is a
party to this Agreement. Each of our Supervisory Directors and Mr. Cutler has
either a direct or indirect interest in Berkshire Cruise Holdings LLC. This
Shareholders Agreement:
- Requires all shareholders to vote in favor of transfers which the
Shareholders Agreement permits, to vote against transfers which the
Shareholders Agreement prohibits, to vote to set the number of directors
at a number specified by a majority of the voting interest of shares
originally issued to Berkshire Cruise Holdings LLC, to vote for directors
specified by three groups of shareholders (i.e., the management
investors, the subscriber investors and Berkshire Cruise Holdings LLC),
to vote to cause one of our subsidiaries to purchase the shares of New
York Life Insurance Company, The Northwestern Mutual Life Insurance
Company and American Home Assurance Company under their Put Agreements
and to approve changes to our Articles of Association in the event of a
public offering.
- Grants shareholders a right of first refusal on the sale of shares by any
other shareholder, subject to limited exceptions;
- Grants shareholders a "tag along" right on the sale of any shares by any
other shareholder. For example, if one shareholder wanted to sell 50% of
its shares, other shareholders would have the right to have 50% of their
shares included in the same sale, subject to pro rata reductions if all
the shares desired to be sold could not be included in the sale. There
are limited exceptions to these tag along rights;
- Grants Berkshire Cruise Holdings LLC (or affiliated successors to its
share ownership) the right to require other shareholders to sell their
shares in a transaction in which all Berkshire Cruise Holdings LLC shares
are sold;
- Grants Starboard Cruise Services the right to repurchase shares from any
employee shareholder at the termination of employment;
- Grants all shareholders preemptive rights over most issuances of equity
securities (including issuances to strategic investors, issuances to
employees up to 5% and a public offering) with limited exceptions; and
- Grants demand registration rights to three groups of shareholders and
"piggyback" registration rights to all shareholders.
Except for the registration rights, the Shareholders Agreement provisions
listed above will terminate upon the consummation of this offering.
The Shareholders Agreement also provides that Berkshire Partners LLC or a
designated affiliate (as defined in the Shareholders Agreement) is entitled to
an investment banking fee of a percentage of any future financing it arranges
following the acquisitions of Greyhound Leisure Services and the Onboard Group.
The acquisition of our predecessor, Greyhound Leisure Services, and the
subsequent acquisition of Onboard Group were arranged by Berkshire Partners LLC.
The Shareholders Agreement provides further that Berkshire Partners LLC or a
designated affiliate is entitled to an annual management fee of $400,000 per
year. In connection with this annual management fee, we have entered into a
management agreement with Berkshire Cruise Holdings LLC and F.C. Capital
Partners LLC. See "-- Management and Consulting Agreements". The Shareholders
Agreement also required us to pay Berkshire Partners LLC a $1.5 million fee upon
the closing of the acquisition of
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<PAGE> 68
Greyhound Leisure Services. We paid this fee pursuant to the Fee Agreements our
subsidiary, Cruise Line Holdings Co., entered into with Berkshire Partners LLC
and F.C. Capital Partners LLC. See "Management -- Compensation
Committee -- Interlocks and Insider Participation".
MANAGEMENT EQUITY HOLDINGS
Joel E. Cutler, our Chairman and Chief Executive Officer, and William J.
Fitzgerald, our Acting Interim Chief Financial Officer, each have an indirect
interest in Berkshire Cruise Holdings LLC. See " -- Shareholders Agreement".
In connection with our capitalization, J.P. Miquel, a Managing Director and
executive officer, entered into a Management Stock Subscription Agreement dated
September 15, 1998 with us, which provided for the sale of 259,750 common shares
(as adjusted for the 250 for 1 common share split which will occur immediately
before this offering) at an aggregate purchase price of $500,000. On this same
date, also in connection with our capitalization, Berkshire Partners LLC on
behalf of certain members of the management of Greyhound Leisure Services
purchased 415,750 common shares for an aggregate purchase price of $800,000.
Under a Purchase and Sale Agreement, dated November 4, 1998, Jorge A. Fernandez,
a former executive officer, purchased 78,000 common shares from Berkshire
Partners LLC.
In addition, in connection with the acquisition of the Onboard Group as
part of the consideration for the shares of these companies, we issued (through
a series of transaction involving our subsidiaries) 4,434,250 common shares to
Philip L. Levine, a director and executive officer, and 295,750 common shares to
Jerry Chafetz, a Managing Director and executive officer, (in each case as
adjusted for the 250 for 1 common share split which will occur immediately
before this offering).
PUT AGREEMENTS
New York Life Insurance Company, The Northwestern Mutual Life Insurance
Company and American Home Assurance Company have each purchased 833,250 common
shares. These shareholders have also purchased from one of our subsidiaries 15%
senior subordinated notes in the aggregate amount of $25.2 million. As an
inducement for these shareholders to purchase our senior subordinated notes, the
subsidiary entered into a Put Agreement with each of them. Under the Put
Agreements, these shareholders may cause the subsidiary at any time to
repurchase all, or any portion, of their common shares at a price equal to their
cost of the shares, or approximately $1.925 per share (as adjusted for share
splits and dividends). The put right, or the right to cause the subsidiary to
repurchase these common shares, will expire on September 15, 2006 or, if
earlier, upon the happening of specified liquidity events. These liquidity
events include a public offering of at least 25% of our shares, subject to some
conditions, the sale of all our common shares to a non-affiliate or the sale of
the subsidiary to a non-affiliate (whether accomplished by a sale of shares, a
sale of substantially all of its assets or a merger). Under the Put Agreements,
the subsidiary is required to give these shareholders written notice of the
occurrence of a liquidity event and they may exercise their put rights within 20
days following delivery of such notice. The Put Agreements will terminate upon
the expiration of the notice period related to this offering. While this
offering will trigger the put rights under the Put Agreements, we do not expect
that these shareholders will exercise their respective put rights.
LEASE ARRANGEMENT WITH MEDIA HOLDINGS
Through our subsidiaries, Onboard Media and Cruise Management
International, we have an agreement with Media Holdings, Ltd. for the lease of
an office building. Media Holdings is owned directly or indirectly by two of our
managing directors and executive officers, Philip Levine and Jerry Chafetz, and
by several of our shareholders. The term of the lease is from April 30, 1996
through
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<PAGE> 69
April 30, 2006 and requires annual rental payments of $250,000 subject to annual
adjustments plus occupancy costs, including property taxes, utilities and
repairs and maintenance. For the period from September 18, 1998 through December
31, 1998, we made payments to Media Holdings, Ltd. amounting to approximately
$66,563.
MANAGEMENT AND CONSULTING AGREEMENTS
In connection with the acquisition of Greyhound Leisure Services and the
On-Board Group, we entered into a Management Agreement with Berkshire Cruise
Holdings LLC which we intend to amend as of January 1, 1999. At the time of this
amendment, we will also enter into the consulting agreement with F.C. Capital
Partners LLC for Joel E. Cutler's services. For information regarding our
consulting agreements with our directors and executive officers, please see
"Management -- Consulting Agreement with F.C. Capital Partners LLC for Joel E.
Cutler's Services", "Management -- Consulting Agreement with F.C. Capital
Partners LLC for William J. Fitzgerald's Services" and
"Management -- Compensation Committee -- Interlocks and Insider Participation".
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DESCRIPTION OF CAPITAL STOCK
GENERAL
We were incorporated under the laws of The Netherlands as a private limited
liability company (besloten vennootschap met beperkte aansprakelijkheid or B.V.)
by a deed dated September 10, 1998, as amended. Our shareholders, pursuant to a
unanimous written consent, resolved to amend and restate our Articles of
Association to become a public limited liability company (naamloze vennootschap
or N.V.). We have our corporate seat in Amsterdam, The Netherlands, with our
principal executive offices at Strawinskylaan 3105, 7th Floor, 1077 ZX
Amsterdam, The Netherlands. We are registered under no. 33305952 with the trade
register at the Chamber of Commerce in Amsterdam, The Netherlands. Provisions of
our Articles of Association (a copy of which, together with an English
translation, has been included as an exhibit to the Registration Statement of
which this prospectus forms a part) and selected provisions of Dutch law are
summarized below. The following summary does not purport to be complete and is
qualified in its entirety by reference to the Articles of Association and such
law. The full text of our Articles of Association is available, in the Dutch and
English languages, at the address referred to above.
SHARE CAPITAL
After giving effect to the 250 for 1 common share split which will occur
immediately before this offering, our authorized share capital is 120,000,000
shares, consisting of 120,000,000 common and preferred shares, each with a par
value of EUR .01. As of July 31, 1999, 24,000,000 common shares were
outstanding, assuming the share split had already taken place, and there were 21
shareholders of record. Shares may be issued only in registered form.
DIVIDENDS
Our Combined Board may decide to add the profits made in any financial year
to our reserves. Out of our share premium reserve and other reserves available
for shareholder distributions under Dutch law, the Combined Board may declare
distributions. In the event preference shares are issued, such shares would have
a preferential dividend before distributions on the common shares. We may not
pay dividends if the payment would reduce shareholders' equity below the paid-up
portion of the share capital, plus the reserves statutorily required to be
maintained. Upon the proposal of the Combined Board, the Management Board may
resolve to pay out interim dividends, subject to certain provisions of Dutch
law. The Management Board, upon the proposal of the Combined Board, may resolve
to pay a dividend in whole or in part in the form of common shares or other
assets. Dividends which have not been claimed within five years after becoming
payable shall be forfeited to the benefit of the company.
We have not in the past declared or paid a cash dividend on our shares and
we do not intend to do so in the foreseeable future. Instead, we intend to
retain earnings to finance future operations and expansions, and to reduce
indebtedness. The payment of dividends by us to holders of our shares is
restricted by our senior credit facility. In the event that dividends are
declared, however, we expect that we would pay such dividends in U.S. dollars,
although we may declare dividends in other currencies. We will pay dividends on
shares to the person in whose name the shares are registered at the date fixed
for that purpose by the Management Board.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
Each shareholder has the right to attend general meetings of shareholders,
either in person or represented by a person holding a written proxy, to address
shareholder meetings, and to exercise voting rights, subject to the provisions
of the Articles of Association and applicable Dutch law. Our
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annual general meeting of shareholders will be held within six months after the
close of each financial year, in the municipality in which we have our official
seat, presently in Amsterdam, The Netherlands. Unless our Articles of
Association or the laws of The Netherlands otherwise require, resolutions of
general meetings of shareholders occurring outside Amsterdam are valid if the
entire share capital is present or represented (unless there are other persons,
such as pledgees or usufructuaries, that have rights to attend shareholders
meetings). We will hold extraordinary general meetings of shareholders as often
as the Combined Board deems necessary, or upon the written request of one or
more shareholders representing not less than 10% of the issued shares to the
Management Board specifying in detail the matters to be addressed at the
meeting.
We will give notice of each meeting of shareholders by mail to registered
holders of our shares and other persons who by law are entitled to attend
meetings, at the address of each shareholder or other person as set forth in the
shareholder register at least 15 days before the meeting.
Each share entitles its holder to cast one vote. Unless otherwise required
by the Articles of Association or Dutch law, resolutions of general meetings of
shareholders require the approval of an absolute majority of the votes cast.
ELECTION AND TENURE OF MANAGING DIRECTORS AND SUPERVISING DIRECTORS; POWER TO
REPRESENT AND BIND THE ISSUER.
Our Management Board is entrusted with the management of our company. Our
Supervisory Board supervises and advises the Management Board. The Management
Board will have one or more members and the Supervisory Board will have one or
more members. The Supervisory Board and the Management Board vacancies will be
filled by a vote of shareholders at the first general meeting after such vacancy
occurs or is created. The Supervisory Board and the Management Board members are
appointed by the general meeting of shareholders from binding nominations for
each vacancy made by the Combined Board. Under the law of The Netherlands and
the Articles of Association, the shareholders may eliminate the binding effect
of nominations by a resolution passed by two-thirds of the votes cast at a
meeting of shareholders at which more than half of the issued capital of the
company is represented. The members of the Supervisory Board and Management
Board are each divided into three classes. These classes hold their seats for
three year terms, with one class of directors expiring in each successive year.
Our Supervisory Directors and Managing Directors serve until the expiration
of their respective three year terms of office or their resignation, death or
removal, with or without cause, by the shareholders or, in the case of
Supervisory Directors, also upon reaching the mandatory retirement age of 72.
See "Management".
The executive power of our company resides in the members of the Management
Board acting together. For purposes of representation of the company, members of
our Management Board have been divided into Class A and Class B members. Any
Class A member may represent the company individually. Any Class B member may
represent the company together with a Class A member. The Management Board may
execute (i) a power of attorney granting certain of our officers the power to
bind us individually on certain administrative day-to-day matters and (ii) a
power of attorney to our transfer agent and registrar to acknowledge transfers
of common shares. In addition, the Management Board, subject to approval of the
Combined Board, may designate any person to represent the company.
Our Articles of Association provide that the Management Board and
Supervisory Board shall meet together in a Combined Meeting as the Combined
Board to approve actions requiring approval by the Combined Board. The Combined
Board shall meet as often as the Supervisory Board or Management Board shall
request.
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ADOPTION OF ANNUAL ACCOUNTS AND DISCHARGE OF MANAGEMENT LIABILITY
The Management Board must prepare our annual accounts within five months
after the end of each fiscal year (unless the general meeting of shareholders
has extended this period by a maximum of six additional months by reason of
special circumstances). Within six months after the end of such financial year
(or within such additional time as is approved by our shareholders), the
Management Board must present the annual accounts to the general meeting of
shareholders, accompanied by the annual report.
Adoption of our annual accounts by the general meeting of shareholders
discharges the members of the Management Board and the Supervisory Board from
liability in respect of the exercise of their duties during the financial year
concerned to the extent the actions taken by the boards during the year are
evident to the stockholders from a review of the annual accounts or otherwise
communicated to the shareholders, unless an explicit reservation is made by the
general meeting of shareholders and without prejudice to the provisions of Dutch
law relating to liability of members of supervisory boards and management boards
upon bankruptcy of a company pursuant to Sections 138 and 139 and Sections 140
and 149 of Book 2 of the Dutch Civil Code.
LIQUIDATION RIGHTS
In the event of our dissolution and winding up, the assets remaining after
payment of all liabilities shall be distributed among the shareholders in
proportion to the par value of their share holdings and in accordance with the
relevant provisions of Dutch law.
ISSUE OF COMMON SHARES; PREEMPTIVE RIGHTS
Until the fifth anniversary of the vote to convert into an N.V., the
Combined Board has the power to issue shares and grant share options, and to
determine the terms and conditions of share issuances and option issuances
pursuant to a delegation of power from the general meeting of shareholders. Each
time it expires, this delegation may be renewed for a maximum of five years.
Unless limited or excluded by the general meeting of shareholders, each
holder of our common shares has a pro rata preemptive right to subscribe for any
newly issued common shares unless payment must be made other than in cash. The
general meeting of shareholders has the power to limit or exclude preemptive
rights in connection with new issuances of shares, and may authorize the
Combined Board, for a period of no more than five years, to limit or exclude
preemptive rights (if the Combined Board has been simultaneously designated as
having the authority to issue shares). The shareholders have delegated such
rights to the Combined Board until the fifth anniversary of the vote to convert
into an N.V. Each time it expires, this delegation may be renewed for a maximum
of five years.
ISSUE OF PREFERENCE SHARES; GRANT OF CALL OPTION
Until the fifth anniversary of the vote to convert into an N.V., the
Combined Board has the power to issue preference shares pursuant to a delegation
of power from the general meeting of shareholders. Each time it expires, this
delegation may be renewed for a maximum of five years. The Combined Meeting may
grant a call option on preference shares, which will not exceed 100% of all
outstanding shares to an independent foundation established under Netherlands
law. See "Risk Factors -- Antitakeover Provisions in Our Articles of Association
Could Have Effects That Conflict with the Interests of Our Shareholders".
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ACQUISITION OF SHARES
We may acquire shares in our own share capital, subject to certain
provisions of Dutch law and of our Articles of Association, if (i) the general
meeting of shareholders has given the Management Board authorization to do so
(which authorization shall be valid for no more than 18 months, and shall
specify the number of shares that may be acquired or the permitted price range);
(ii) our shareholder capital, reduced by the acquisition price, is not less than
the sum of the paid and called-up share capital and the reserves to be
maintained pursuant to Dutch law or the Articles of Association; (iii) the par
value of the shares that we and our subsidiaries already hold does not exceed
one-tenth of our issued share capital; and (iv) the Combined Board has proposed
such acquisition to the Management Board. Shares that we hold may not be voted
and may not participate in any distribution of profits or distribution of
surplus assets after liquidation. We may only acquire shares for a consideration
within the limits set by the general meeting.
CANCELLATION OF SHARES
With the prior approval of the general meeting of shareholders, we may
cancel shares that we hold, provided that the cancellation may not cause the
paid up portion of the share capital to be reduced to less than one-fifth of the
authorized capital, and subject to certain statutory provisions.
AMENDMENT OF THE ARTICLES OF ASSOCIATION
The general meeting of shareholders may resolve to amend the Articles of
Association at the proposal of, or with the prior approval of, the Combined
Board.
LIMITATIONS ON RIGHT TO HOLD OR VOTE SHARES
There are currently no limitations imposed by Dutch law or by our Articles
of Association on the right of non-resident holders to hold or vote on their
shares.
LIABILITY OF DIRECTORS AND OFFICERS
Our Articles of Association provide that we will, to the fullest extent
permitted by the law of The Netherlands, as amended from time to time,
indemnify, and may advance expenses to, each of our now acting and former
members of the Supervisory Board, members of the Management Board and officers,
whenever any such person is made a party, or threatened to be made a party, in
any action, suit or proceeding by reason of his or her service with us. Our
Articles of Association also provide that we may purchase and maintain
directors' and officers' liability insurance. We have obtained directors' and
officers' liability insurance in amounts we believe to be reasonable.
We have also entered into indemnity agreements with Philip L. Levine and
Jerry Chafetz. The agreements provide that we will, to the fullest extent
permitted by law, indemnify Philip L. Levine and Jerry Chafetz, as the case may
be, if he is made a party, or threatened to be made a party, in any action, suit
or proceeding by reason of his service with us.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common shares will be The Bank of
New York.
LISTING
Our common shares have been approved for listing on The Nasdaq Stock
Market's National Market under the trading symbol "CRUZ".
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SHARE CERTIFICATES AND TRANSFER
Our common shares are available only in a form recorded in the name of the
holder in our share register. The transfer agent for our common shares, The Bank
of New York, maintains the book-entry share register for our shares which can be
traded in the U.S. in New York, New York. The registry of our shares which
cannot be traded in the U.S. without being entered in book entry form in our
U.S. register is held in The Netherlands by us or on our behalf. All of the
common shares to be sold in this offering will be initially represented by a
single global certificate held through Depositary Trust Corporation, or DTC, and
registered with the The Bank of New York, our New York transfer agent and
registrar, in the name of Cede & Co., the nominee of DTC. The common shares
listed in this offering will trade on The Nasdaq Stock Market's National Market.
Persons who are not DTC participants may beneficially own common shares
held by DTC only through direct or indirect participants in DTC. So long as Cede
& Co., as the nominee of DTC, is the registered owner of the listed common
shares, Cede & Co., for all purposes will be considered the shareholder of
record. Because the beneficial owner of shares is not the registered owner, any
person owning a beneficial interest in the listed shares must rely on the
procedures of DTC and, if such person is not a participant in DTC, the
procedures of the DTC participant through which such person owns its interest
(i.e., such person's broker), to exercise any rights of a shareholder. We
understand that, under existing industry practice, in the event that you desire
to take any action with respect to shares registered to Cede & Co. in which you
hold a beneficial interest that Cede & Co., as the shareholder, is entitled to
take, Cede & Co. would authorize the participants through which you hold your
beneficial interest to take such action, and the participants would authorize
you to take such action or would otherwise act on your behalf upon your
instructions. Our listed common shares which may be traded on the Nasdaq may be
transferred on our books at the office of the New York transfer agent and
registrar. Certificates representing such tradable listed shares may be
exchanged or transferred at such office for certificates representing our common
listed shares of other authorized denominations. Such certificates, if not held
by our transfer agent or a DTC participant, will need to be returned to the DTC
System in order to trade such shares. Under Dutch law, the transfer of
registered shares requires a written instrument of transfer and written
acknowledgment by us of such transfer. Transfers of beneficial ownership made
through the DTC system will not require such an instrument.
Although DTC has agreed to the procedures provided below in order to
facilitate transfers of our common shares among participants of DTC, DTC is
under no obligation to perform or continue to perform such procedures and such
procedures may be modified or discontinued at any time. We will not have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of section 17A of the Exchange
Act. DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. DTC participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations such as the
underwriters of this offering. Indirect access to the DTC system also is
available to indirect DTC participants such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
participant, either directly or indirectly.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and certain banks, the ability of an owner
of a beneficial interest in the listed shares
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to pledge such interest to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of such interest, may be
limited by the lack of a definitive certificate for such interest. The laws of
some jurisdictions require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial
interests in the listed shares to such persons may be limited. In addition,
beneficial owners of the listed shares through the DTC system will receive
dividend payments only through DTC participants.
Investors who hold their shares through DTC will follow the settlement
practices applicable to U.S. corporate common shares, including for secondary
trading. The securities custody accounts of investors will be credited with
their holdings against payment of U.S. dollars in same-day funds on the
settlement date. To the extent you elect to remove your shares from the DTC
system, you will be charged a per share fee by our transfer agent for the
issuance of new certificates and the trading of such certificates will require a
separate written instrument of transfer and acknowledgment by the company. These
fees and requirements are not applicable for transfers of beneficial interests
within the DTC system, although brokerage or trading fees may apply.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT FACILITY
Our subsidiaries entered into a five-year senior credit facility on
September 17, 1998 with Credit Suisse First Boston, NationsBank, N.A. and
various other banks and financial institutions and have amended the credit
facility on four subsequent dates. The subsidiaries entered into the credit
facility to finance our acquisition of Greyhound Leisure Services and the
subsequent acquisitions of the Onboard Group and the assets of Nuance Global
Ships as well as for other general corporate purposes. The credit facility
consists of term loans in an aggregate principal amount of $67.5 million and a
revolving credit facility of up to $35 million. The revolving credit facility
includes a sub-facility or up to $15 million for the issuance of letters of
credit. Direct borrowings under the revolving credit facility are subject to an
availability calculation based on the eligible borrowing base. At June 30, 1999,
there was $12.1 million of outstanding letters of credit and $12.1 million of
unused borrowing capacity under the revolving credit facility.
Borrowings under the credit facility will bear interest at variable rates
(based on one of the subsidiary's leverage ratio as defined in the credit
facility) and may be maintained as Eurodollar loans or Alternate Base Rate loans
(defined in the credit facility, respectively) at the borrower's option.
Eurodollar loans bear interest at 2.25% to 3.5% in excess over the applicable
reserve adjusted Eurodollar Rate (as defined in the credit facility) and
Alternative Base Rate loans bear interest at 1% to 2.5% in excess of Credit
Suisse First Boston's base rate (as defined in the credit facility).
The amounts borrowed under the revolving credit facility may be repaid and
reborrowed. The term loans under the facility will mature on September 17, 2003
with required prepayments beginning on August 31, 1999. We are required to use
50% of the net cash proceeds of some equity issuances including this offering
after paying off the junior subordinated note issued to Viad Corp. to repay the
term loans. In addition, we are required to use 100% of the net cash proceeds
from asset sales or the issuance of some indebtedness to repay the term loans.
All revolving loans incurred under the credit facility will mature on September
17, 2003.
Our subsidiary that incurred the indebtedness is required to pay the
lenders under the credit facility a commitment fee, which ranges from 0.375% to
0.5% per annum based on its leverage ratio, payable on a quarterly basis in
arrears, on the average daily unused portion of the credit facility during the
preceding quarter. The subsidiary also is required to pay the lenders a standby
letter of credit participation fee based on the average daily aggregate undrawn
amount of all outstanding letters of credit during the preceding quarter (but
excluding any trade letters of credit in an aggregate face amount up to $2
million) at a rate equal to the applicable percentage used to determine the
interest rate on revolving credit borrowings comprised of Eurodollar loans. The
subsidiary is also required to pay the lenders a trade letter of credit
participation fee based on the average daily aggregate undrawn amount of all
outstanding trade letters of credit during the preceding quarter (but excluding
trade letters of credit to the extent the face amount exceeds $2 million) at a
rate equal to the excess of the applicable percentage used to determine the
interest rate on revolving credit borrowings comprised of Eurodollar loans over
1.25%. In addition, there is a fronting fee equal to 0.25% per annum on the
aggregate outstanding face amount of all outstanding letters of credit. In
connection with the credit facility, the subsidiary is also required to pay
Credit Suisse First Boston an administrative agent fee.
The credit facility provides that all indebtedness is guaranteed and
secured by the tangible and intangible assets and the capital stock of each of
our subsidiaries, plus any present and future subsidiary guarantor.
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The credit facility contains certain covenants limiting, among other
things, additional debt, additional liens, dividends and distributions,
transactions with affiliates, mergers and consolidations, liquidations and
dissolutions, sales of assets, dividends, capital expenditures, investments,
loans and advances, prepayments and modifications of debt instruments and other
matters customarily restricted in such agreements. Under the terms of the credit
facility, the subsidiary that incurred the indebtedness is required to compute
financial ratios and certify as to other covenants on a quarterly or periodic
basis. The credit facility also contains customary events of default, such as
payment defaults, breaches of representations and warranties, covenant defaults,
events of bankruptcy and insolvency, failure of any guaranty or security
document supporting the credit facility to be in full force and effect, change
of control of the parent of the subsidiary that incurred the indebtedness (as
defined in the credit facility) and change of ownership in the shares of the
subsidiary that incurred the indebtedness.
The foregoing summary of the material provisions of the credit facility, as
amended, is qualified in its entirety by reference to all of the provisions of
the credit facility, which has been filed as an exhibit to the registration
statement of which this prospectus forms a part. See "Where You Can Find More
Information".
SENIOR SUBORDINATED NOTES
In connection with our acquisition of Greyhound Leisure Services and the
Onboard Group, one of our subsidiaries issued 15% senior subordinated notes in
an aggregate principal amount of $25.2 million to the following parties, each of
whom is also a shareholder in our company: New York Life Insurance Company, The
Northwestern Mutual Life Insurance Company and American Home Assurance Company.
The senior subordinated notes are due September 15, 2006 and are senior
subordinated unsecured obligations of the subsidiary. The interest on the senior
subordinated notes is payable semiannually in arrears, may be capitalized for
the first three years and is payable in cash beginning in the fourth year. The
senior subordinated notes are also subject to a cash payment commencing on March
15, 2004 in the event the accrued and unpaid interest exceeds a certain amount.
In the event that this cash payment is required, the holders of the notes may
require the subsidiary to purchase up to $10 million of principal of the senior
subordinated notes at a premium of 5.25%. Fifty percent (50%) of the then
outstanding principal amount of the senior subordinated notes will mature on
September 15, 2005, with the balance due September 15, 2006.
The mandatory prepayment of the junior subordinated note upon this offering
will require the prepayment of the senior subordinated notes. We intend to use a
portion of the net proceeds from this offering to repay the senior subordinated
notes, all accrued interest and all prepayment fees. Before September 15, 2001,
the senior subordinated notes may be prepaid in the event of specific qualifying
events, including this offering. After September 15, 2001, the senior
subordinated notes may be prepaid at any time. Upon prepayment, the subsidiary
is required to repay the outstanding principal and all accrued interest plus a
prepayment compensation fee. In the event of a prepayment before September 15,
2001, if the principal amount of the payment is equal to 50% or less of the
outstanding principal of the senior subordinated notes, the prepayment
compensation fee is a percentage ranging from 10.5% to 14% of the prepaid
principal based on the date of the payment. If the principal amount of the
payment is greater than 50% of the outstanding principal immediately before the
payment of the senior subordinated notes, the prepayment compensation fee is the
sum of (a) a percentage ranging from 10.5% to 14% (based on the date of the
payment) of 50% of the principal amount of the notes outstanding immediately
prior to the payment and (b) the excess of the present value of the then
remaining scheduled payments of principal and interest that would have been
payable (using a specified discount rate) over the prepaid principal calculated
with respect to any principal being repaid in excess of 50% of the principal
amount outstanding immediately before
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the payment. For prepayments on or after September 15, 2001, the prepayment
compensation fee is a percentage ranging from 1.75% to 8.75%.
Upon a change in control (as defined in the Senior Subordinated Note
Agreement), each holder of the senior subordinated notes will have the right to
require the subsidiary to repurchase the notes at 101% of the principal amount
thereof plus accrued and unpaid interest to the repurchase date. The Senior
Subordinated Note Agreement also contains covenants that, among other things,
limit (1) consolidations, mergers or transfers of assets, (2) payment of
dividends on and redemptions of capital stock by the subsidiary and its
subsidiaries, (3) incurrence of additional debt by our subsidiaries, (4)
prepayments of other debt, including the junior subordinated note and (5)
transactions with affiliates.
In connection with the issuance of the senior subordinated notes, the
issuing subsidiary has entered into a put agreement with each of the holders of
the notes. See "Certain Relationships and Related Transactions -- Put
Agreements".
The foregoing summary of the material provisions of the senior subordinated
notes is qualified in its entirety by reference to all of the provisions of the
senior subordinated notes, which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. See "Where You Can
Find More Information".
JUNIOR SUBORDINATED NOTE
We, through one of our subsidiaries, issued to Viad Corp. a 12% junior
subordinated note in an aggregate principal amount of $10 million in connection
with our acquisition of Greyhound Leisure Services from Viad. The junior
subordinated note is due May 15, 2009 and is a junior subordinated unsecured
obligation of the subsidiary. The interest on the junior subordinated note is
payable semiannually commencing March 1, 1999 and the interest payments may be
capitalized through maturity of the note with some exceptions. The terms of the
note provide that the subsidiary will be obligated to make a cash payment after
March 1, 2004 in the event the accrued and unpaid interest exceeds a certain
amount. The terms of the junior subordinated note require mandatory prepayment
upon the consummation of an initial public offering or upon a change of control
(as defined under the terms of note.) We intend to use the net proceeds from
this offering to repay the junior subordinated note and all accrued interest.
The foregoing summary of the material provisions of the junior subordinated
note is qualified in its entirety by reference to all of the provisions of the
junior subordinated note, which has been filed as an exhibit to the registration
statement of which this prospectus forms a part. See "Where You Can Find More
Information".
PERFORMANCE AND SURETY BONDS
From time to time, we provide performance and surety bonds to various
parties, including government agencies, in connection with our bonded
warehouses, our importing and exporting activities and the performance of our
various contractual obligations. As of July 31, 1999, we had outstanding
performance and surety bonds in the aggregate amount of approximately
$6,728,000.
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common shares in the public market
could adversely affect prevailing market prices of our common shares.
Furthermore, since no shares held by our existing shareholders will be available
for sale shortly after this offering because of the contractual and legal
restrictions on resale described below, sales of substantial amounts of common
shares in the public market after these restrictions lapse could adversely
affect the prevailing market price and our ability to raise equity capital in
the future.
Upon completion of this offering, we will have outstanding an aggregate of
common shares, assuming no exercise of the underwriter's over-allotment
option and no exercise of outstanding options. Of these shares, all of the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, unless the shares are purchased
by "affiliates" as that term is defined in Rule 144 under the Securities Act.
The remaining common shares held by existing shareholders are "restricted
securities". Restricted sections may be sold in the public market following
registration or pursuant to an exemption from registration under Rule 144
promulgated under the Securities Act, which rules are summarized below.
LOCK-UP AGREEMENTS
All of our officers, directors and a majority of our shareholders have
signed lock-up agreements under which they agreed not to transfer or dispose of,
directly or indirectly, or hedge any common shares or any securities convertible
into or exercisable or exchangeable for shares of common shares, for a period of
180 days after the date of this prospectus. Transfers or dispositions can be
made sooner with the prior written consent of Credit Suisse First Boston.
Subject to the provisions of Rule 144, 144(k) and 701, restricted shares
totaling will be available for sale in the public market, subject in the
case of shares held by affiliates to the volume restrictions contained in those
rules, days after the date of this prospectus.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common shares for at least one year, including the holding period of any prior
owner other than an affiliate, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
- 1% of the number of common shares then outstanding, which will equal
approximately shares immediately after this offering; or
- the average weekly trading volume of the common shares of the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
RULE 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at anytime during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
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RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchases shares from us
pursuant to securities, prior to our public offering, issued under a
compensatory stock plan or other written agreement is eligible to resell such
shares 90 days after the effective date of this offering in reliance on Rule
144, but without compliance with some of the restrictions, including the holding
period, contained in Rule 144.
REGISTRATION RIGHTS
The parties to the Shareholders Agreement have rights to have their shares
registered after this offering. The Shareholder Agreement provides that some of
our shareholders have demand registration rights. Holders of at least 25% of the
shares originally issued in connection with the formation of our company have
the right, exercisable between the first and fifth anniversaries of this
offering and subject to various conditions, to require us to register any or all
of their common shares under the Securities Act on Form S-1 on three occasions
at our expense. In addition, if we are able to file a registration statement on
Form S-3, the holders of at least 25% of the shares originally issued in
connection with the acquisition of the Onboard Group and the holders of at least
25% of the shares originally issued in connection with the issuance of the
senior subordinated notes each have the right, exercisable between the first and
fifth anniversaries of this offering and subject to various conditions, to
require us to register any or all of their common shares under the Securities
Act on Form S-1 on two occasions at our expense. In addition, if we are able to
file a registration statement on Form S-3, the holders of at least 25% of the
shares originally issued in connection with the issuance of the senior
subordinated notes are entitled to an additional registration subject to
specific restrictions and limitations.
The Shareholder Agreement also provides for "piggyback" registration
rights. The piggyback registration rights provide that any holder of registrable
shares subject to the Shareholders Agreement may request the inclusion of such
shares at our expense whenever we propose to register (whether for our account
or for the account of any holder of our common shares) any shares on a form
which would permit the registration of registrable shares for sale to the public
in a public offering other than in a registration made in conjunction with an
offering relating to an employee benefit plan or dividend reinvestment plan or
an acquisition or merger. In addition, the piggyback registration rights do not
apply in an initial public offering unless the holders of the shares originally
issued in connection with the formation of our company sell their common shares,
in which case the holders of the shares originally issued in connection with the
acquisition of the Onboard Group and the holders of the shares originally issued
in connection with the issuance of the senior subordinated notes may also sell
their common shares.
In connection with any registration of registrable securities under the
Shareholders Agreement, we have agreed to indemnify each seller, any controlling
person (and their respective director or indirect partners, advisory board
members, directors, officers, trustees, members and shareholders) and each other
person who controls any such seller or holder, against various liabilities,
including liabilities under the Securities Act and Exchange Act. In addition,
all parties to the Shareholders Agreement have agreed not to transfer any
shares, except for some permitted transfers under the Shareholders Agreement,
for a period beginning seven days prior to the effective date of any
registration statement and continuing for a period of 180 days thereafter.
STOCK PLANS
Promptly after this offering, we intend to file a registration statement
under the Securities Act covering common shares reserved for
issuance under our 1998 Stock Option Plan. This registration statement is
expected to be filed as soon as practicable after the effective date of this
offering.
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At July 31, 1999, options to purchase 1,000,000 shares were issued and
outstanding under our 1998 Stock Option Plan and otherwise. All of these shares
will be eligible for sale in the public market from time to time, commencing 90
days after the effective date of this offering, subject to vesting provisions,
Rule 144 volume limitations applicable to our affiliates and, in the case of
some of the options, the expiration of lock-up agreements.
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TAXATION
NETHERLANDS TAXATION
Each investor should consult his or her own tax advisor with respect to the
tax consequences of an investment in our common shares. The discussion of
certain Netherlands taxes set forth below is included for general information
only and does not address every potential tax consequence of an investment in
common shares under the laws of The Netherlands. The following summary of Dutch
tax considerations is limited to the tax implications for an individual or
corporate owner of common shares who owns less than 10% of the voting power of
our company, a "holder of common shares".
WITHHOLDING TAX
Dividends distributed by our company generally are subject to a Netherlands
withholding tax imposed at a rate of 25%. The expression "dividends distributed
by the company" as used in this section includes, among other things, the
following:
(i) distributions in cash or in kind, deemed and constructive
distributions and repayments of paid-in capital not recognized as capital
for Netherlands dividend withholding tax purposes;
(ii) liquidation proceeds, proceeds of redemption of common shares or,
as a general rule, consideration for the repurchase of common shares by our
company in excess of the average paid-in capital recognized as capital for
Netherlands dividend withholding tax purposes;
(iii) the par value of shares issued to a holder of common shares or
an increase of the par value of common shares, as the case may be, to the
extent that it does not appear that a contribution, recognized for
Netherlands dividend withholding tax purposes, has been made or will be
made; and
(iv) partial repayment of paid-in capital, recognized for Netherlands
dividend withholding tax purposes, if and to the extent that there are net
profits (zuivere winst), unless the general meeting of shareholders of the
company has resolved in advance to make such repayment and provided that
the par value of the common shares concerned has been reduced by an equal
amount by way of an amendment of the Articles of Association.
If a holder of common shares is resident in a country other than The
Netherlands and if a double taxation convention is in effect between The
Netherlands and such country, such holder of common shares may, depending on the
terms of such double taxation convention, be eligible for a full or partial
exemption from, or refund of, Netherlands dividend withholding tax. Prospective
investors in common shares should consult their own advisors to determine
whether they are entitled to the benefits of a double taxation convention and,
if so, what procedures must be followed in order to claim those benefits.
Residents of the United States that qualify for, and comply with the
procedures for claiming, benefits under the income tax convention between The
Netherlands and the United States, known as the U.S./NL Income Tax Treaty,
generally are eligible for a reduction of Netherlands withholding tax on
dividend income to 15%. A holder of common shares may qualify for benefits under
the U.S./ NL Income Tax Treaty if the holder (i) is the beneficial owner of the
dividends; (ii) is a resident of the United States as defined for purposes of
the U.S./NL Income Tax Treaty; (iii) does not carry on a business in The
Netherlands through a permanent establishment situated in The Netherlands, or
does not perform independent personal services from a fixed base situated in The
Netherlands and the holding in respect of which the dividends are paid forms
part of the business property of such permanent establishment or pertains to
such fixed base; and (iv) is entitled to the benefits of the U.S./NL Income Tax
Treaty pursuant to the limitation on benefits provision (Article 26) of the
U.S./NL Income Tax Treaty. The U.S./NL Income Tax Treaty provides, if certain
conditions are
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met, an exemption from taxation for dividends received by exempt pension trusts
and exempt organizations, as defined therein. Except in the case of exempt
organizations (as defined in Article 36 of the U.S./NL Income Tax Treaty), the
reduced dividend withholding rate can be applied at source upon payment of the
dividends, provided that the proper Dutch forms have been filed in advance of
the payment.
TAXES ON INCOME AND CAPITAL GAINS
A holder of common shares will not be subject to Netherlands taxes on
income or capital gains in respect of dividends distributed by us or in respect
of any gain realized on the disposal of common shares (other than the
withholding tax described above), provided that:
(i) such holder is neither resident nor deemed to be resident in The
Netherlands; and
(ii) such holder does not have an enterprise or an interest in an
enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
enterprise or part of an enterprise, as the case may be, the common shares
belong or are attributable; and
(iii) such holder does not have a substantial interest or a deemed
substantial interest in the company or, in the event that such holder does
have or is deemed to have such interest, it forms part of the assets of an
enterprise; and
(iv) such holder is not entitled to a share in the profits of an
enterprise that is effectively managed in the Netherlands, other than
through ownership of securities or through employment, to which enterprise
the common shares belong or are attributable.
Common shares will generally not form part of a substantial interest if the
holder of such shares, alone or together with his spouse, certain other
relatives (including foster children) and/or certain persons sharing his or her
household, does not own, whether directly or indirectly: (a) at least five
percent of the issued share capital of any class of shares of our company; (b)
option rights to acquire shares in our company representing at least five
percent of the issued share capital of any class of shares of our company; or
(c) profit participating certificates entitling the holder to at least five
percent of the annual profit of our company, or entitling the holder to at least
five percent of the liquidation proceeds upon liquidation of our company. A
deemed substantial interest is, for example, present if part of a substantial
interest has been disposed of, or is deemed to have been disposed of, on a
non-recognition basis. If there is any doubt whether the "substantial interest"
regulations may apply, each prospective holder of common shares should consult
his or her tax advisor regarding the tax consequences of such holding.
NET WEALTH TAX
A holder of common shares will not be subject to Netherlands net wealth tax
in respect of the common shares provided that such holder is not an individual
or, if he or she is an individual, provided that:
(i) such holder is neither resident nor deemed to be resident in The
Netherlands; and
(ii) such holder does not have an enterprise or an interest (other
than as a shareholder) in an enterprise that is, in whole or in part,
carried on through a permanent establishment or a permanent representative
in The Netherlands and to which enterprise or part of an enterprise, as the
case may be, the common shares belong or are attributable; and
(iii) such holder is not entitled to a share in the profits of an
enterprise that is effectively managed in The Netherlands, other than
through ownership of securities or through employment, to which enterprise
the common shares belong or are attributable.
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GIFT AND INHERITANCE TAXES
No gift or inheritance taxes will arise in The Netherlands with respect to
an acquisition of common shares by way of a gift by, or on the death of, a
holder of common shares who is neither resident nor deemed to be resident in The
Netherlands, unless:
(i) such holder at the time of the gift has or at the time of his
death (a) had an enterprise or an interest (other than as a shareholder) in
an enterprise that is or was, in whole or in part, carried on through a
permanent establishment or a permanent representative in The Netherlands
and to which enterprise or part of an enterprise, as the case may be, the
common shares belong or are attributable, or (b) was entitled to a share in
the profits of an enterprise that is effectively managed in The
Netherlands, other than through ownership of securities or through
employment, to which enterprise the common shares belong or are
attributable; or
(ii) in the case of a gift of common shares by an individual who at
the time of the gift was neither resident nor deemed to be resident in The
Netherlands, such individual dies within 180 days after the date of gift,
while being resident or deemed to be resident in The Netherlands.
For purposes of Netherlands gift and inheritance tax, an individual who
holds the Netherlands nationality will be deemed to be resident in The
Netherlands if he or she has been resident in The Netherlands at any time during
the ten years preceding the date of the gift or death. For purposes of
Netherlands gift tax, an individual will be deemed to be resident in The
Netherlands if he or she has been resident in The Netherlands at any time during
the twelve months preceding the date of the gift. Applicable tax treaties may
override deemed residency.
CAPITAL TAX PAYABLE BY THE COMPANY
Netherlands capital tax will be payable by our company at the rate of one
percent of any contribution to the capital of the company.
OTHER TAXES AND DUTIES
No Netherlands registration tax, stamp duty or any other similar
documentary tax or duty other than court fees will be payable in The Netherlands
in respect of or in connection with the subscription, issue, placement,
allotment or delivery of the common shares.
UNITED STATES TAXATION
The following discussion summarizes certain U.S. federal tax consequences
of the acquisition, ownership and disposition of common shares by a U.S.
Holder -- that is, a beneficial owner of common shares that is (i) a citizen or
resident of the United States, a corporation organized under the laws of the
United States or any state thereof or the District of Columbia, or any person
that will otherwise be subject to U.S. federal income tax on a net income basis
in respect of its worldwide income, and (ii) holds such common shares as a
capital asset. This summary is based upon current U.S. law and U.S. Internal
Revenue Service practice, and the U.S./NL Income Tax Treaty currently in effect
as of the date of this prospectus, all of which are subject to change at any
time, possibly with retroactive effect.
This summary does not address the tax consequences to a U.S. Holder (i)
that is resident in The Netherlands for Netherlands tax purposes, (ii) whose
holding of common shares is effectively connected with a permanent establishment
in The Netherlands through which such U.S. Holder carries on business activities
or, in the case of an individual who performs independent personal services,
with a fixed base situated therein, or (iii) that alone or together with certain
related persons, owns directly or indirectly, 10% or more of the total combined
voting power of all classes of our
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outstanding voting stock or the total value of our outstanding stock (except as
discussed below under "Controlled Foreign Corporations"). This summary also does
not address the tax treatment of U.S. Holders that may be subject to special tax
rules, such as banks, tax-exempt entities, insurance companies, securities
dealers, investors liable for alternative minimum tax, persons that hold common
shares as part of an integrated investment (including a "straddle") comprised of
common shares and one or more other positions, and persons whose functional
currency is not the U.S. dollar. In addition, this discussion assumes that any
dividends will be payable, and sales and exchanges of common shares will be
effected, in U.S. dollars.
YOU SHOULD CONSULT YOUR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF OUR SHARES IN YOUR PARTICULAR SITUATION,
INCLUDING THE EFFECT OF ANY U.S., STATE, LOCAL OR FOREIGN TAX LAWS.
TAXATION OF DIVIDENDS
We do not expect to pay dividends on our common shares in the foreseeable
future. Distributions made with respect to common shares (including amounts
withheld in respect of Dutch withholding tax) will constitute dividends for U.S.
federal income tax purposes to the extent paid out of our current or accumulated
earnings and profits as determined for U.S. federal income tax purposes.
Generally, dividends we pay will not be eligible for the dividends-received
deduction allowed to corporate shareholders under the U.S. Internal Revenue
Code.
Distributions, if any, in excess of our current and accumulated earnings
and profits will constitute a non-taxable return of capital to a U.S. Holder to
the extent of the U.S. Holder's tax basis in the common shares and will be
applied against and reduce the tax basis in the common shares. To the extent
that such distributions are in excess of a U.S. Holder's tax basis in the common
shares, the distributions will constitute capital gain.
Subject to certain complex limitations and the discussion below, the Dutch
withholding tax imposed on dividends paid to a U.S. Holder will be treated for
U.S. tax purposes as a foreign income tax that may be claimed as a foreign tax
credit against the U.S. federal income tax liability of the U.S. Holder. In
general, we are required to remit the Dutch withholding tax imposed on dividends
paid to a U.S. Holder to the Dutch tax authorities. However, under certain
circumstances we may be allowed to reduce the amount that is required to be
remitted to the Dutch tax authorities by the lesser of (i) three percent of the
portion of the dividend paid by us that is subject to the Dutch dividend
withholding tax and (ii) three percent of the dividends and profit
distributions, before deduction of foreign withholding taxes, received by us
from qualifying foreign subsidiaries in the current calendar year (up to the
date of the distribution by us) and the two preceding calendar years, to the
extent that such dividends and profit distributions have not yet been taken into
account for purposes of establishing the above-mentioned reduction. To the
extent that dividend distributions are made on the common shares, we expect to
fund them with dividends received from our subsidiaries organized outside The
Netherlands. Any amount that is withheld by us but that is not required to be
remitted to any taxation authorities in the Netherlands likely would not qualify
as a creditable tax for U.S. foreign tax credit purposes. If we distribute
dividends, they will generally constitute foreign source "passive income" for
purposes of computing allowable foreign tax credits for U.S. tax purposes.
Foreign tax credits allowable with respect to foreign source income in certain
income categories cannot exceed the U.S. federal income tax otherwise payable
with respect to foreign source taxable income in such category. The consequences
of the separate limitation calculation will depend on the nature and sources of
each U.S. Holder's income and the deductions allocable thereto.
We will likely be a "United States-owned foreign corporation" within the
meaning of sec. 904(g) under the Internal Revenue Code. As a result, for
purposes of the U.S. foreign tax credit limitation, all or a portion of any
dividend we pay may be treated as U.S. source dividend income, unless less
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than 10% of our earnings and profits for the taxable year consists of U.S.
source income (including dividends and royalties, if any, we receive from
subsidiaries). A "United States-owned foreign corporation" means any foreign
corporation that is 50% or more owned (by vote or value) by "United States
persons" (as defined in sec. 7701 (a)(30) under the Internal Revenue Code). The
U.S. source portion of a dividend would be determined by multiplying the amount
of such dividend by the percentage of U.S. source earnings and profits out of
our total earnings and profits for the taxable year in which the dividend is
paid. A U.S. Holder may elect under sec. 904(g)(10) of the Internal Revenue Code
to treat the portion of any dividend deemed to be U.S. source as foreign source
dividend income provided that the foreign tax credit limitation is applied
separately to such dividend income.
TAXATION OF CAPITAL GAINS
A U.S. Holder will, upon the sale or exchange of common shares, recognize a
gain or a loss for U.S. federal income tax purposes in an amount equal to the
difference between the amount realized and the U.S. Holder's adjusted tax basis
in the common shares. Such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the common shares were held for more than one
year. For a U.S. Holder, under most circumstances, gain or loss from the sale or
exchange of common shares will be treated as U.S. source gain or loss for
foreign tax credit purposes.
CONTROLLED FOREIGN CORPORATIONS
We will likely be a controlled foreign corporation, or CFC, which is a
foreign corporation that on any day of its taxable year is owned, directly,
indirectly or by attribution, more than 50%, by vote or by value, by "United
States Shareholders." For this purpose, a "United States Shareholder" is a
United States person (as defined in sec. 957(c) of the Internal Revenue Code)
who owns, directly, indirectly or by attribution, at least 10% of the total
combined voting power of all shares entitled to vote of the foreign corporation.
In the event that we were determined to have been a CFC for an
uninterrupted period of at least 30 days during our taxable year, and you are
one of our United States Shareholders, you must include in income for your
taxable year in which or with which our taxable year ends, the total of (i) your
pro rata share of our subpart F income for such taxable year (subpart F income
includes in general, dividends, interest, royalties and rents (other than
royalties and rents derived in the active conduct of a business and not received
from a related person) annuities, income from some transactions with or effected
on behalf of related parties and various other types of income), (ii) your pro
rata share of our previously excluded subpart F income withdrawn from
investments in less developed countries for such year, (iii) your pro rata share
of our previously excluded subpart F income from foreign base company shipping
operations for such year, and (iv) your pro rata share of our increase in
earnings invested in U.S. property for such year. In the event that we are a
CFC, amounts distributed to United States Shareholders will not be includible in
income for U.S. tax purposes to the extent that the amounts have been previously
taken into income by such United States Shareholders. The tax basis in shares
held by a United States Shareholder will be increased by any amount included in
income, and decreased by any amounts distributed but excluded from income,
pursuant to the above rules. A United States Shareholder that sells shares in a
foreign corporation that is a CFC or that has been a CFC during the preceding
five (5) years must recharacterize gain on the sale of such shares as dividend
income to the extent of the shareholder's pro rata share of the corporation's
earnings and profits for the shareholder's holding period during which the
corporation was a CFC.
Even if we are a CFC, if you are a United States person (as defined in sec.
957(c) of the Internal Revenue Code) who owns less than 10% of the total
combined voting power of all classes of our
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shares entitled to vote, directly, indirectly, and by attribution, you will not
be taxed on our undistributed income and do not recharacterize gain as dividend
income by virtue of the fact that we are a CFC. Distributions to such
shareholders will be taxed under the ordinary rules relating to the taxation of
corporate distributions and sales of stock (see above), except to the extent
that our income would be taxable to such shareholders under the rules for a
foreign personal holding company or a passive foreign investment company, as
each of these in defined for U.S. tax purposes (see below).
FOREIGN PERSONAL HOLDING COMPANIES
Starboard Cruise Services or any of our non-U.S. subsidiaries generally
will be classified as a "foreign personal holding company", or FPHC, if in any
taxable year (i) a group of five or fewer individuals who are U.S. citizens or
residents own (directly, indirectly or by attribution) more than 50% (by vote or
by value) of our shares (such persons hereafter referred to as a "U.S. group")
and (ii) at least 60% (reduced to 50% in years subsequent to the first year of
FPHC status) of our gross income or the gross income of the applicable non-U.S.
subsidiary consists of certain passive income for purposes of the FPHC rules
(generally including dividends, interest, royalties, rents, and gains from
securities and certain commodities transactions).
If we or any of our subsidiaries are or become a FPHC, each U.S. Holder of
common shares (including a U.S. corporation) who held such shares on the last
day of our or our subsidiary's taxable year, or, if earlier, the last day of its
taxable year on which a U.S. group existed with respect to us or our subsidiary,
would be required to include in gross income as a deemed dividend such U.S.
Holder's pro rata portion of our or our subsidiary's undistributed foreign
personal holding company income (generally, our taxable income or the taxable
income of our subsidiary, with certain adjustments, including a deduction for
dividends paid), up to and including the last day of the year or on which the
U.S. group existed, even if no cash dividend were paid to the U.S. Holder. In
such case, if we were a FPHC, a U.S. Holder would be entitled to increase its
tax basis in our common shares by the amount of the deemed dividend. If one of
our subsidiaries were a FPHC, it is not clear that a U.S. Holder would be
afforded similar relief.
Upon completion of the offering, five or fewer U.S. citizens or residents
likely will be deemed to own more than 50% of our outstanding shares for
purposes of the FPHC ownership test. In addition, we expect Starboard Cruise
Services, but none of our operating subsidiaries, to satisfy the FPHC gross
income test. However, based on our current plans, we do not expect to have any
undistributed foreign personal holding company income (generally taxable income
with certain adjustments, including a deduction for dividends paid) because we
do not expect to have any taxable income (as determined for U.S. federal income
tax purposes) in the foreseeable future and thus do not currently expect that
our shareholders would be required to include any amounts in gross income as a
deemed dividend as a result of our being a FPHC.
If we are a FPHC, a U.S. person who acquires common shares from a decedent
would be denied the step-up of tax basis of such shares to fair market value on
the decedent's date of death which otherwise would have been available and
instead would have a tax basis equal to the lower of fair market value or the
decedent's basis.
PASSIVE FOREIGN INVESTMENT COMPANIES
We may be classified as a "passive foreign investment company", or PFIC,
for U.S. federal income tax purposes if certain tests are met. We will be a PFIC
with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder
held common shares, either (i) 75% or more of our gross income for the taxable
year is passive income or (ii) the average value of our assets during the
taxable year which produce passive income or which are held for the production
of passive income is
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at least 50% of the average value of all of our assets for such year. Unless we
were to elect to apply the asset test using the average adjusted tax bases of
our assets (as determined for purposes of computing earnings and profits) during
the taxable year, the asset test would be applied using the average fair market
value of our assets. For this purpose, passive income means, in general,
dividends, interest, royalties, rents (other than rents and royalties derived in
the active conduct of a trade or business and not received from a related
person), annuities and gains from assets which would produce such income, other
than the sale of inventory.
For the purpose of the PFIC tests, if a foreign corporation owns, directly
or indirectly, at least 25% by value of the stock of another corporation, the
foreign corporation is treated as owning its proportionate share of the assets
of the other corporation, and as if it had received directly its proportionate
share of the income of such other corporation. The effect of this special
provision with respect to us and our direct and indirect subsidiaries is that
we, for purposes of the income and asset tests described above, will be treated
as owning directly our proportionate share (presently 100%) of the assets of our
subsidiaries and of receiving directly our proportionate share of each of those
companies' income, if any, so long as we own, directly or indirectly, at least
25% by value of the particular company's stock or shares. Income of our
subsidiaries that does not constitute "passive income" as discussed above will
be treated as other than passive income of Starboard Cruise Services for
purposes of the PFIC rules.
Common shares held by a U.S. Holder will be treated as stock in a PFIC if,
at any time during the holding period of the U.S. Holder with respect to such
common shares, the company was a PFIC and the U.S. Holder did not elect to
recognize gain as of the last day of the last taxable year for which the company
was a PFIC.
If we were to be classified as a PFIC, a U.S. Holder would be subject to an
interest charge on taxes deemed deferred by such U.S. Holder on receipt of
certain "excess distributions" by us to the U.S. Holder and on recognition of
gain on disposition of any common shares by the U.S. Holder (which distributions
and the portion of such gains not attributable to the current taxable year or to
years before we were a PFIC would be taxable at the maximum ordinary income
rates in effect for each year to which the amounts are allocated with the
remainder taxable as ordinary income at the current rates then applicable to the
holder). The foregoing will not apply if either (a) we were to agree to comply
with certain reporting requirements, and the U.S. Holder were to elect to be
currently taxable on such U.S. Holder's pro rata share of our earnings and
profits (excluding net capital gain) and net capital gains for each year (at
ordinary and long-term capital gains rates, respectively), ("a QEF election"),
even if no distributions were received (although such U.S. Holder may elect to
defer payment of tax on certain undistributed income until such amounts are
distributed or the holder disposes of the shares, subject to an interest charge)
or (b) the U.S. Holder made an election to mark-to-market its common shares as
of the close of each taxable year. If a mark-to-market election were made, the
U.S. Holder would include in income each year an amount equal to the excess, if
any, of the fair market value of the PFIC stock over the U.S. Holder's adjusted
basis in such stock. The U.S. Holder also would be allowed a deduction for the
excess, if any, of the adjusted basis of the PFIC stock over its fair market
value, to the extent of net mark-to-market gains previously included in income
by such U.S. Holder with respect to such stock. If a mark-to-market election
were made, the amount included in income and any gain on the sale of such stock
would be treated as ordinary income.
If we were both a CFC and a PFIC, and you were a United States Shareholder
(as described above), you would continue to be subject to the CFC current income
inclusion rules described above, but would not also be subject to the PFIC
provisions. The PFIC provisions would still apply to U.S. Holders that were not
United States Shareholders.
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We do not expect to be classified as a PFIC. However, we cannot assure you
that we will not become a PFIC in the future. If we were classified as a PFIC,
we cannot assure you that we would satisfy the reporting requirements necessary
to permit a U.S. Holder to make a QEF election.
As noted above, some U.S. tax consequences turn on the composition of our
income and that of our subsidiaries. The tax law is not entirely clear as to the
proper classification of all relevant types of income which we and our
subsidiaries may realize. Accordingly, there can be no assurance that our
management's expectations described above will be fulfilled.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Some U.S. Holders may be subject to information reporting and backup
withholding with respect to dividends on, or the proceeds from the disposition
of, our common shares. In order to avoid backup withholding of 31% on amounts
received, U.S. Holders may be required to provide their taxpayer identification
number and comply with certain other requirements concerning information
reporting; or otherwise qualify for an exemption. Any amounts withheld will be
allowed as a credit against or refund of such holder's U.S. federal income tax
liability, provided that the required information is furnished to the IRS.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999 we and the selling shareholders have
agreed to sell to the underwriters named below, for whom Credit Suisse First
Boston Corporation is acting as a representative, the following respective
numbers of common shares:
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
----------- --------
<S> <C>
Credit Suisse First Boston Corporation......................
--------
Total..................................................
========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the common shares in the offering if any are purchased, other than
those shares covered by the over-allotment option described below. The
underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common shares may be terminated.
We and the selling shareholders have granted to the underwriters a 30-day
option to purchase on a pro rata basis up to additional shares from us
and an aggregate of additional shares from the selling shareholders at
the initial public offering price less the underwriting discounts and
commissions. The option may be exercised only to cover any over-allotments of
common shares.
The underwriters propose to offer the common shares initially at the public
offering price on the cover page of this prospectus and to selling group members
at that price less a concession of $ per share. The underwriters and selling
group members may allow a discount of $ per share on sales to other
broker/dealers. After the initial public offering, the public offering price and
concession and discount to broker/dealers may be changed by the representatives.
The following table summarizes the compensation and estimated expenses we
and the selling shareholders will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us............ $ $ $ $
Expenses payable by us.............. $ $ $ $
Underwriting discounts and
commissions paid by selling
shareholders...................... $ $ $ $
Expenses payable by selling
shareholders...................... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect sales to
discretionary accounts to exceed 5% of the common shares being offered.
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We, each of our officers, directors and our other shareholders have agreed
that we will not offer, sell, contract to sell, announce our intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act of 1933 relating to any additional common shares or securities convertible
into or exchangeable or exercisable for any of our common shares without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, except in our case issuances
pursuant to the exercise of employee stock options outstanding on the date
hereof.
We and the selling shareholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments which
the underwriters may be required to make in respect thereof.
Our common shares have been approved for listing on The Nasdaq Stock
Market's National Market.
In connection with the acquisitions of our predecessor, Greyhound Leisure
Services, and the Onboard Group and the acquisition of certain of the assets of
Nuance Global Ships, we entered into a five-year credit facility on September
17, 1998 with Credit Suisse First Boston, New York branch and various other
banks and financial institutions in order to finance the acquisitions. Under the
credit facility, we are required to pay Credit Suisse First Boston, New York
branch certain fees, including a commitment fee and administrative agent fee.
See "Description of Certain Indebtedness". In addition, from time to time,
certain of the underwriters have provided advisory and investment banking
services to us, for which customary compensation has been received. It is
expected that such underwriters will continue to provide such services to us in
the future.
Prior to this offering, there has been no public market for our common
shares. The initial public offering price will be negotiated between us and the
underwriters. Among the factors to be considered in such negotiations are:
- the history of, and prospects for, our company and the industry in which
we compete;
- the past and present financial performance of our company;
- an assessment of our management;
- the present state of our development;
- the prospects for our future earnings;
- the prevailing market conditions of applicable U.S. securities markets at
the time of this offering; and
- market valuations of publicly traded companies that we and the
underwriters believe to be comparable to our company.
The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common shares in
the open market after the distribution has been completed in order to
cover syndicate short positions.
87
<PAGE> 92
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common shares originally sold by such
syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of such transactions. These transactions may be effected on
Nasdaq or otherwise and, if commenced, may be discontinued at any time.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of our common shares in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
shareholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of our common shares are effected.
Accordingly, any resale of our common shares in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction and which may require resales to be made in accordance
with available statutory exemptions or under a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of our common shares.
REPRESENTATIONS OF PURCHASERS
Each purchaser of our common shares in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling shareholders and the
dealers from whom such purchase confirmation is received that:
- such purchaser is entitled under applicable provincial securities laws to
purchase our common shares without the benefit of a prospectus qualified
under such securities laws;
- where required by law, that such purchaser is purchasing as principal and
not as agent; and
- such purchaser has reviewed the text above under "Resale Restrictions".
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of our directors and officers as well as the experts named herein and
the selling shareholders may be located outside of Canada and, as a result, it
may not be possible for Canadian purchasers to effect service of process within
Canada upon the issuer or such persons. All or a substantial portion of the
assets of the issuer and such persons may be located outside of Canada and, as a
result, it may not be possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such issuer or persons outside of Canada.
88
<PAGE> 93
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of our common shares to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
common shares acquired by such purchaser through this offering. Such report must
be in the form attached to British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from us. Only one such report must
be filed in respect of our common shares acquired on the same date and under the
same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of our common shares should consult their own legal and
tax advisors with respect to the tax consequences of an investment in our common
shares in their particular circumstances and with respect to the eligibility of
our common shares for investment by the purchaser under relevant Canadian
legislation.
LEGAL MATTERS
The validity of the common shares offered hereby will be passed upon for us
by Stibbe Simont Monahan Duhot, Amsterdam, The Netherlands, as Netherlands
counsel. Other legal matters in connection with the offering made hereby will be
passed upon for us by Ropes & Gray, Boston, Massachusetts. The underwriters have
been represented by Cravath, Swaine & Moore, New York, New York. An investment
partnership composed of members of Ropes & Gray has an indirect equity interest
in Starboard Cruise Services.
EXPERTS
Ernst & Young LLP, independent certified public accountants, have audited
our consolidated financial statements and schedule at December 31, 1998 and for
the period from September 10, 1998 (date of inception) through December 31,
1998, as set forth in their reports. We have included our consolidated financial
statements and schedule in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's reports, given on their authority
as experts in accounting and auditing.
Ernst & Young LLP, independent certified public accountants, have audited
the consolidated financial statements of Greyhound Leisure Services and
subsidiaries for the period from January 1, 1998 through September 17, 1998, as
set forth in their report. We have included the consolidated financial
statements of Greyhound Leisure Services and subsidiaries in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
reports, given on their authority as experts in accounting and auditing.
The consolidated financial statements of Greyhound Leisure Services and
subsidiaries at December 31, 1997 and for the two years in the period ended
December 31, 1997 included in this prospectus and the related financial
statement schedule included elsewhere in the registration statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the registration statement, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
Ernst & Young LLP, independent certified public accountants, have audited
the combined financial statements of Onboard Media, Cruise Management
International and Boxer Media for the period from January 1, 1998 through
September 17, 1998, as set forth in their report. Goldstein Schechter Price
Lucas Horwitz & Co., P.A., independent certified public accountants, have
audited the combined financial statements of Onboard Media, Cruise Management
International and Boxer
89
<PAGE> 94
Media at December 31, 1997 and for each of the two years in the period ended
December 31, 1997, as set forth in their report. We have included the combined
financial statements of Onboard Media, Cruise Management International and Boxer
Media in the prospectus and elsewhere in the registration statement in reliance
on Ernst & Young LLP's and Goldstein Schechter Price Lucas Horwitz & Co., P.A.'s
reports, given on their authority as experts in accounting and auditing.
Ernst & Young LLP, independent certified public accountants, have audited
the financial statements of Nuance Global Ships for the period from January 1,
1998 through September 24, 1998 as set forth in their report. We have included
the financial statements of Nuance Global Ships in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.
Ernst & Young LLP, independent certified public accountants, have examined
the pro forma adjustments to the historical financial statements of our company,
Greyhound Leisure Services and subsidiaries, Onboard Media, Cruise Management
International and Boxer Media, and Nuance Global Ships for the year ended
December 31, 1998 appearing in the unaudited pro forma condensed statement of
operations in the prospectus, as set forth in their report. We have included the
unaudited pro forma condensed statement of operations in the prospectus in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
CHANGE IN ACCOUNTANTS
Deloitte & Touche LLP were the independent accountants to our predecessor
entity, Greyhound Leisure Services, and its parent, Viad Corp. Because Deloitte
& Touche LLP had been engaged by Viad Corp., following our acquisition of
Greyhound Leisure Services from Viad Corp., Deloitte & Touche LLP no longer
served as the independent accountants to Greyhound Leisure Services. Prior to
our acquisition of Greyhound Leisure Services, we engaged Ernst & Young LLP to
provide specific accounting services to our company. On November 18, 1999, we
sent out requests for proposals for independent accounting services to several
accounting firms including Deloitte & Touche LLP and Ernst & Young LLP. Each of
those firms, along with other accounting firms, submitted proposals to us. In
December, 1998, we engaged Ernst & Young LLP as independent accountants to our
company including our subsidiaries. The decision to engage Ernst & Young LLP was
approved by our Board of Managers.
We believe, and have been advised by Deloitte & Touche LLP that it concurs
in such belief, that, for the period from January 1, 1996 through September 17,
1998, Greyhound Leisure Services and Deloitte & Touche LLP did not have any
disagreement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of Deloitte & Touche LLP, would have caused it to
make reference in connection with its report on Greyhound Leisure Services'
consolidated financial statements to the subject matter of the disagreement. The
reports of Deloitte & Touche LLP on Greyhound Leisure Services' consolidated
financial statements for each of the two fiscal years in the period ended
December 31, 1997 did not contain an adverse opinion or a disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. During those years and for the period from January 1, 1998 through
September 17, 1998, there were no "reportable events" within the meaning of Item
302(a)(1)(v) of Regulation S-K promulgated under the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits and schedules thereto) under the
Securities Act with respect to the common shares to be sold in this offering.
This prospectus, which constitutes a part of the registration
90
<PAGE> 95
statement, does not contain all of the information set forth in the registration
statement or the exhibits and schedules which are part of the registration
statement. For further information with respect to Starboard Cruise Services and
the common shares, reference is made to the registration statement and the
exhibits and schedules thereto.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information in Starboard Cruise Services' files
in the Commission's public reference room at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C., 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
request copies of these documents upon payment of a duplicating fee, by writing
to the Commission. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Starboard Cruise
Services' Commission filings, including the registration statement, will also be
available to you on the Commission's Internet site (http://www.sec.gov).
We intend to furnish our shareholders with annual reports containing
financial statements audited by our independent auditors and to make available
to our shareholders quarterly reports containing unaudited financial data for
the first three quarters of each fiscal year.
We will also comply with our obligations under the law of The Netherlands
to prepare annual financial statements complying with Dutch corporate law and
file our financial statements at the Commercial Register of The Chamber of
Commerce and Industry in Amsterdam, The Netherlands.
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
We are a limited liability company (naamloze vennootschap or N.V.)
organized under the laws of The Netherlands. All or a substantial portion of our
assets are located outside the United States. As a result, it may not be
possible for investors to enforce against us in United States courts judgments
predicated upon the civil liability provisions of the federal securities laws of
the United States. We have been advised by our Netherlands counsel, Stibbe
Simont Monahan Duhot, that the United States and The Netherlands do not
currently have a treaty providing for reciprocal recognition and enforcement of
judgments (other than arbitration awards) in civil and commercial matters. In
the opinion of such counsel, a final judgment for the payment of money rendered
by any federal or state court in the United States based on civil liability,
whether or not predicated solely upon the federal securities laws of the United
States, would not be directly enforceable in The Netherlands. However, if the
party in whose favor such final judgment is rendered brings a new suit in a
competent court in The Netherlands, such party may submit to a Netherlands court
the final judgment that has been rendered in the United States. If a Netherlands
court finds that the jurisdiction of the federal or state court in the United
States has been based on the grounds that are internationally acceptable and
that proper legal procedures and elementary principles of fair trial have been
observed, the court in The Netherlands would, under current practice, give
binding effect to the final judgment that has been rendered in a defended action
in the United States unless such judgment contravenes The Netherlands' public
policy.
91
<PAGE> 96
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Starboard Cruise Services N.V.
Unaudited Consolidated Balance Sheet at June 30, 1999....... F-3
Unaudited Consolidated Statements of Operations for the six
months ended June 30, 1998 and 1999....................... F-4
Unaudited Consolidated Statement of Shareholders' Equity for
the six months ended June 30, 1999........................ F-5
Unaudited Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1999....................... F-6
Notes to Unaudited Consolidated Financial Statements........ F-7
Report of Ernst & Young LLP, Independent Certified Public
Accountants............................................... F-9
Consolidated Balance Sheet as of December 31, 1998.......... F-10
Consolidated Statements of Operations for the period from
September 10, 1998 (date of incorporation) through
December 31, 1998......................................... F-11
Consolidated Statements of Shareholders' Equity for the
period from September 10, 1998 (date of incorporation)
through December 31, 1998................................. F-12
Consolidated Statements of Cash Flows for the period from
September 10, 1998 (date of incorporation) through
December 31, 1998......................................... F-13
Notes to Consolidated Financial Statements.................. F-15
Greyhound Leisure Services, Inc. and Subsidiaries
Report of Ernst & Young LLP, Independent Certified Public
Accountants............................................... F-27
Report of Deloitte & Touche LLP, Independent Auditors....... F-28
Consolidated Balance Sheet as of December 31, 1997.......... F-29
Consolidated Statements of Income for the years ended
December 31, 1996 and 1997 and for the period from January
1, 1998 through September 17, 1998........................ F-30
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1996 and 1997 and for the period
from January 1, 1998 through September 17, 1998........... F-31
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1997 and for the period from January
1, 1998 through September 17, 1998........................ F-32
Notes to Consolidated Financial Statements.................. F-33
</TABLE>
F-1
<PAGE> 97
<TABLE>
<S> <C>
On Board Media, Inc., Cruise Management International, Inc.
and Boxer Media, Inc.
Report of Ernst & Young LLP, Independent Certified Public
Accountants............................................... F-41
Combined Statement of Income for the period from January 1,
1998 through September 17, 1998........................... F-42
Combined Statement of Cash Flows for the period from January
1, 1998 through September 17, 1998........................ F-43
Notes to Combined Financial Statements...................... F-44
Report of Goldstein Schechter Price Lucas Horwitz & Co.,
P.A., Independent Certified Public Accountants............ F-48
Combined Balance Sheet as of December 31, 1997.............. F-49
Combined Statements of Income for the years ended December
31, 1996 and 1997......................................... F-50
Combined Statements of Changes in Stockholders' Equity for
the years ended December 31, 1996 and 1997................ F-51
Combined Statements of Cash Flows for the years ended
December 31, 1996 and 1997................................ F-52
Notes to Combined Financial Statements...................... F-54
Nuance Global Ships, Inc.
Report of Ernst & Young LLP, Independent Certified Public
Accountants............................................... F-60
Consolidated Statement of Operations and Accumulated Deficit
for the period from December 26, 1997 through September
24, 1998.................................................. F-61
Consolidated Statement of Cash Flows for the period from
December 26, 1997 through September 24, 1998.............. F-62
Notes to Financial Statements............................... F-63
</TABLE>
F-2
<PAGE> 98
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1999
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 360,562
Trade accounts receivable, net of allowance for doubtful
accounts of $557,770................................... 13,217,109
Inventories, net.......................................... 63,981,155
Prepaid expenses and other current assets................... 4,709,862
------------
Total current assets........................................ 82,268,688
Property and equipment, net................................. 7,394,971
Investment in unconsolidated subsidiary..................... 1,143,780
Other assets................................................ 246,892
Notes receivable from minority interest holders............. 1,416,177
Intangible assets, net...................................... 98,764,782
------------
Total assets................................................ $194,019,974
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 13,532,909
Accrued expenses.......................................... 20,491,838
Current portion of long-term debt......................... 10,714,284
Deferred revenue.......................................... 1,416,177
Due to affiliates......................................... 100,002
Deferred income taxes..................................... 895,314
------------
Total current liabilities................................... 47,150,524
Long term-debt, net of current portion...................... 99,874,168
Minority interest........................................... 4,326,432
Commitments and contingencies
Shareholders' equity:
Common stock, EUR .01 par value; 50,000,000 authorized
shares; 24,000,000 issued and outstanding shares....... 49,920
Additional paid-in capital................................ 46,120,070
Accumulated deficit....................................... (3,501,140)
------------
Total shareholders' equity.................................. 42,668,850
------------
Total liabilities and shareholders' equity.................. $194,019,974
============
</TABLE>
See accompanying notes.
F-3
<PAGE> 99
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1998 1999
------------- ------------
(PREDECESSOR)
<S> <C> <C>
Net sales................................................... $94,397,639 $138,258,164
Cost of sales............................................... 37,770,106 56,887,519
----------- ------------
Gross profit................................................ 56,627,533 81,370,645
Selling, general and administrative expenses................ 51,111,548 75,856,706
Amortization of intangibles................................. -- 2,750,499
----------- ------------
Total expenses.............................................. 51,111,548 78,607,205
----------- ------------
Income from operations...................................... 5,515,985 2,763,440
Other (income) expense:
Interest expense.......................................... 421,454 6,047,679
Interest income........................................... (128,282) (228,582)
----------- ------------
Total other expense......................................... 293,172 5,819,097
----------- ------------
Income (loss) before provision for income taxes and minority
interest.................................................. 5,222,813 (3,055,657)
Provision for income taxes.................................. 1,437,255 186,151
Minority interest........................................... 513,645 71,451
----------- ------------
Net income (loss)........................................... $ 3,271,913 (3,313,259)
=========== ============
Basic and diluted net (loss) per share...................... $ (0.14)
============
Basic and diluted weighted average shares................... 24,000,000
============
</TABLE>
See accompanying notes.
F-4
<PAGE> 100
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1998...................... 24,000,000 $49,920 $46,120,070 $ (187,881) $45,982,109
Net loss (unaudited)........ -- -- -- (3,313,259) (3,313,259)
---------- ------- ----------- ----------- -----------
Balance at June 30, 1999
(unaudited)............... 24,000,000 $49,920 $46,120,070 $(3,501,140) $42,668,850
========== ======= =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 101
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1998 1999
------------- ------------
(PREDECESSOR)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 3,271,913 $ (3,313,259)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation.............................................. 1,735,395 1,978,514
Amortization of intangible assets......................... -- 2,750,499
Provision for shrinkage reserve........................... (120,399) 427,075
Deferred income taxes..................................... (1,005,106) 442,348
Provision for bad debts................................... 488 (68,591)
Changes in operating assets and liabilities, net of assets
acquired and liabilities assumed:
Accounts receivable....................................... (776,054) 1,642,631
Inventory................................................. 2,337,878 (12,386,825)
Prepaid expenses and other current assets................. (345,150) 829,738
Notes receivables from minority interest.................. 1,335 (16,670)
Investment in unconsolidated subsidiary................... (9,021) (127,304)
Other assets.............................................. -- (246,892)
Intangible assets......................................... -- (453,958)
Due to affiliates......................................... 669,827 (16,665)
Accounts payable.......................................... (4,016,460) 4,695,298
Accrued expenses.......................................... 364,135 3,330,444
Deferred revenue.......................................... 441,579 (257,465)
Minority interest......................................... 513,639 71,447
----------- ------------
Net cash provided by (used in) operating activities......... 3,063,999 (719,635)
INVESTING ACTIVITIES
Purchases of property and equipment......................... (499,672) (572,922)
Disposals of property and equipment......................... 129,845 1,033
Payments to minority shareholders........................... (256,229) (172,105)
----------- ------------
Net cash used in investing activities....................... (626,056) (743,994)
FINANCING ACTIVITIES
Repayments on the line of credit............................ -- (2,300,000)
Dividends paid to Viad...................................... (2,700,000) --
----------- ------------
Net cash used in financing activities....................... (2,700,000) (2,300,000)
Net decrease in cash and cash equivalents................... (262,057) $ (3,763,629)
Cash and cash equivalents, beginning of period.............. 262,057 4,124,191
----------- ------------
Cash and cash equivalents, end of period.................... $ -- $ 360,562
=========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid during the period............................. $ 508,149 $ 3,028,125
=========== ============
Cash paid to Viad for income taxes.......................... 1,369,797 --
=========== ============
Income taxes paid during the period......................... $ -- $ 345,000
=========== ============
</TABLE>
See accompanying notes.
F-6
<PAGE> 102
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Starboard Cruise Services N.V. and subsidiaries (formerly Miami Cruiseline
Services Holdings I B.V.) (the "Company") for the periods indicated herein have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission and in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the six months
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. The consolidated financial
statements include the accounts of the Company and all majority owned
subsidiaries over which the Company has control. All significant intercompany
accounts and transactions have been eliminated. The interim financial statements
for the six months ended June 30, 1998 are the financial statements of the
Company's predecessor, Greyhound Leisure Services, Inc. For further information,
refer to the Company's 1998 consolidated financial statements and notes thereto.
The Company experiences seasonality in its quarterly results of operations
as a result of fluctuations in the demand for cruises. Historically, the demand
has been greater during the summer months.
2. ACQUISITIONS
On September 17, 1998, the Company acquired 100% of the issued and
outstanding shares of the capital stock of GLSI for a purchase price of
approximately $96.6 million. The purchase price, which is subject to net asset
balance adjustments, consisted of approximately $81.5 million in cash, a $10.0
million Junior Subordinated Note due May 15, 2009 and approximately $5.1 million
of acquisition costs. The GLSI acquisition was accounted for using the purchase
method of accounting and, accordingly, the purchase price was allocated to the
assets acquired and the liabilities assumed based on estimates of their
underlying fair values. The fair value of net assets acquired, including
approximately $5.4 million allocated to acquired cruise line contracts, was
approximately $40.7 million. The excess purchase price over the fair value of
the assets acquired of approximately $55.9 million has been classified as
goodwill and is being amortized over 25 years. The allocation of the purchase
price is preliminary pending finalization of estimates. The GLSI acquisition was
primarily financed through a $63.0 million term loan, a $2.5 million drawdown on
a $35.0 million revolver loan, and $25.2 million of senior subordinated notes
(see Note 3).
On September 17, 1998, the Company acquired 100% of the issued and
outstanding shares of the capital stock of On-Board Media Group for a purchase
price of approximately $47.0 million. The purchase price consisted of
approximately $33.3 million in cash, which includes approximately $3.3 million
of assumed indebtedness paid by the Company at closing, 5,912,500 shares of the
Company's common stock valued at approximately $11.4 million and approximately
$2.3 million of acquisition costs. The On-Board Media Group acquisition was
accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to the assets acquired and the liabilities assumed
based on estimates of their underlying fair values. The fair value of net assets
acquired was approximately $5.7 million. The excess purchase price over the fair
value of the assets acquired of
F-7
<PAGE> 103
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS (CONTINUED)
approximately $41.3 million has been classified as goodwill and is being
amortized over 25 years. The allocation of the purchase price is preliminary
pending finalization of estimates.
On December 15, 1998, Starboard entered into an Asset Purchase Agreement
with Nuance Global Traders Ltd. for the purchase of certain of the assets and
assumption of certain liabilities of Nuance Global Traders, an operator of duty
free stores on cruise ships, for a purchase price of approximately $17.4 million
in cash (the Nuance acquisition). The Nuance acquisition was accounted for using
the purchase method of accounting and, accordingly, the purchase price was
allocated to the assets acquired and liabilities assumed based on estimates of
their underlying fair value. The fair value of net assets acquired was
approximately $17.4 million. The allocation of the purchase price is preliminary
pending finalization of estimates.
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
1999
------------
<S> <C>
Term Note bearing interest at a variable rate (8.00% at June
30, 1999). Interest payable quarterly..................... $ 67,500,000
$35.0 million revolving credit facility bearing interest at
LIBOR plus 2.75% (8.57% at June 30, 1999); expiring
September 17, 2003. Interest payable semi-annually........ 7,900,000
Senior subordinated notes bearing interest at 15%; due
September 17, 2006. Interest payable semi-annually........ 25,188,452
Junior subordinated notes bearing interest at 12%; due May
15, 2009. Interest payable quarterly...................... 10,000,000
------------
Total....................................................... 110,588,452
Less current portion........................................ (10,714,284)
------------
$ 99,874,168
============
</TABLE>
F-8
<PAGE> 104
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Starboard Cruise Services N.V.
and Subsidiaries
We have audited the accompanying consolidated balance sheet of Starboard
Cruise Services N.V. and subsidiaries (formerly Miami Cruiseline Services
Holdings I B.V.) as of December 31, 1998 and the related consolidated statements
of operations, shareholders' equity and cash flows for the period from September
10, 1998 (date of incorporation) through December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides 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 Starboard
Cruise Services N.V. and subsidiaries at December 31, 1998, and the consolidated
results of their operations and their cash flows for the period from September
10, 1998 (date of incorporation) through December 31, 1998, in conformity with
generally accepted accounting principles.
Miami, Florida
March 22, 1999, except as to Note 14, as to
which the date is September , 1999
The foregoing report is in the form that will be signed upon completion of
the restatement of capital accounts and the name change described in Note 14 to
the consolidated financial statements.
/s/ ERNST & YOUNG LLP
Miami, Florida
August 18, 1999
F-9
<PAGE> 105
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,124,191
Trade accounts receivable, net of allowance for doubtful
accounts of $626,361................................... 14,791,149
Inventories, net.......................................... 52,021,405
Prepaid expenses and other current assets................. 5,539,600
------------
Total current assets........................................ 76,476,345
Property and equipment, net................................. 8,801,596
Investment in unconsolidated subsidiary..................... 1,016,476
Notes receivable from minority interest holders............. 4,184,191
Intangible assets, net...................................... 101,061,323
------------
Total assets................................................ $191,539,931
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 8,837,611
Accrued expenses.......................................... 17,161,394
Current portion of long-term debt......................... 5,357,142
Deferred revenue.......................................... 1,673,642
Due to affiliates......................................... 116,667
Deferred income taxes..................................... 452,966
------------
Total current liabilities................................... 33,599,422
Long term-debt, net of current portion...................... 107,531,310
Minority interest........................................... 4,427,090
Commitments and contingencies
Shareholders' equity:
Common shares EUR $.01 par value; 120,000,000 authorized
shares; 24,000,000 issued and outstanding shares....... 240,000
Additional paid-in capital................................ 45,929,990
Accumulated deficit....................................... (187,881)
------------
Total shareholders' equity.................................. 45,982,109
------------
Total liabilities and shareholders' equity.................. $191,539,931
============
</TABLE>
See accompanying notes.
F-10
<PAGE> 106
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 10,
1998 (DATE OF
INCORPORATION)
THROUGH
DECEMBER 31,
1998
--------------
<S> <C>
Net sales................................................... $71,061,304
Cost of sales............................................... 30,139,145
-----------
Gross profit................................................ 40,922,159
Selling, general and administrative expenses................ 36,372,811
Amortization of intangibles................................. 1,525,266
-----------
Total expenses.............................................. 37,898,077
-----------
Income from operations...................................... 3,024,082
Other (income) expense:
Interest expense.......................................... 3,156,404
Interest income........................................... (485,462)
-----------
Total other expense......................................... 2,670,942
-----------
Income before provision for income taxes and minority
interest.................................................. 353,140
Provision for income taxes.................................. 359,195
Minority interest........................................... 181,826
-----------
Net loss.................................................... $ (187,881)
===========
Basic and diluted net loss per share........................ $ (0.01)
===========
Basic and diluted weighted average shares................... 23,250,000
===========
</TABLE>
See accompanying notes.
F-11
<PAGE> 107
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------- PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Initial capitalization.............. 10,000,000 $100,000 $ (79,200) $ -- $ (79,200)
Issuance of common stock.......... 8,087,500 80,875 34,689,315 -- 34,770,190
Common Stock issued in connection
with the Onboard Media Group
acquisition.................... 5,912,500 39,125 11,319,875 -- 11,379,000
Net loss.......................... -- -- -- (187,881) (187,881)
---------- -------- ----------- --------- -----------
Balance at December 31, 1998...... 24,000,000 $240,000 $45,929,990 $(187,881) $45,982,109
========== ======== =========== ========= ===========
</TABLE>
See accompanying notes.
F-12
<PAGE> 108
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 10, 1998
(DATE OF
INCORPORATION)
THROUGH
DECEMBER 31, 1998
------------------
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (187,881)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation.............................................. 1,055,826
Amortization of intangible assets......................... 1,525,266
Provision for inventory obsolescence and shrinkage
reserve................................................ (61,342)
Deferred income taxes..................................... 452,966
Provision for bad debts................................... 108,363
Changes in operating assets and liabilities, net of assets
acquired and liabilities assumed:
Accounts receivable.................................... (1,992,402)
Inventory.............................................. 1,107,784
Prepaid expenses and other current assets.............. (1,566,882)
Notes receivables from minority interest holders....... (420,391)
Investment in unconsolidated subsidiary................ (21,000)
Accounts payable....................................... 93,634
Accrued expenses....................................... 8,958,320
Deferred revenue....................................... (2,890,842)
Minority interest...................................... 181,826
-------------
Net cash provided by operating activities................... 6,343,245
INVESTING ACTIVITIES
Purchases of property and equipment......................... (141,334)
Disposals of property and equipment......................... 3,997
Acquisition of GLSI, net of cash acquired................... (96,604,851)
Acquisition of Onboard Media Group, net of cash acquired.... (35,635,181)
Proceeds from redemptions of marketable securities.......... 63,184
Dissolution of minority interest in European Cruise Shops... (3,017,562)
Acquisition of Nuance Global Traders........................ (17,396,307)
-------------
Net cash used in investing activities....................... (152,728,054)
FINANCING ACTIVITIES
Borrowings under line of credit............................. 112,888,452
Repayments on the line of credit............................ (1,000,100)
Payments to minority shareholders........................... (97,445)
Due to affiliates........................................... 3,927,103
Proceeds from issuance of common stock...................... 34,790,990
-------------
Net cash provided by financing activities................... 150,509,000
Net increase in cash and cash equivalents................... 4,124,191
Cash and cash equivalents, beginning of period.............. --
-------------
Cash and cash equivalents, end of period.................... $ 4,124,191
=============
</TABLE>
F-13
<PAGE> 109
STARBOARD CRUISE SERVICES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 10, 1998
(DATE OF
INCORPORATION)
THROUGH
DECEMBER 31, 1998
------------------
<S> <C>
SUPPLEMENTAL NONCASH DISCLOSURE OF INVESTING ACTIVITY
Common stock issued in connection with the Onboard Media
Group acquisition......................................... $ 11,379,000
=============
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid during the period............................. $ 390,396
=============
Income taxes paid during the period......................... $ 75,000
=============
</TABLE>
See accompanying notes.
F-14
<PAGE> 110
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION AND NATURE OF BUSINESS
Organization
Starboard Cruise Services N.V., (formerly Miami Cruiseline Services
Holdings I B.V.) a Netherlands corporation, was incorporated on September 10,
1998 for the purpose of effecting certain acquisitions through a series of
intermediary holding companies, Miami Cruiseline Services Holdings II B.V.
(Holdings II), Miami Cruiseline Services Holdings III B.V.(Holdings III) and
Cruiseline Holdings Co. (CLH).
On September 17, 1998, pursuant to a Share Purchase Agreement dated as of
July 31, 1998, among VIAD Corp. and CLH, CLH acquired all of the outstanding
shares of Greyhound Leisure Services, Inc. a wholly owned subsidiary of VIAD
Corp. (the GLSI acquisition) (see Note 3).
On September 17, 1998, pursuant to the Stock Subscription and Exchange
Agreement dated as of August 27, 1998, among Holdings I and Phillip Levine,
Jerry Chafetz and several Trusts, Holdings I acquired all of the outstanding
shares of Onboard Media, Cruise Management International and Boxer Media, Inc.
(collectively, the Onboard Media Group) (the Onboard Media Group acquisition)
(see Note 3).
Nature of Business
GLSI operates duty free stores on cruise ships and has several duty free
boutiques and stores at Miami International Airport and Ft. Lauderdale/Hollywood
International Airport. At December 31, 1998, GLSI operated 230 retail stores on
80 cruise ships, 19 retail stores at Miami International Airport and two retail
stores in Ft. Lauderdale/Hollywood International Airport. Onboard Media Group
sells advertising in books, magazines and videos which are published for hotels
and cruise lines primarily in the United States, Mexico and the Caribbean.
Onboard Media Group also sells promotional advertising which is delivered to
cruise passengers through a live on-board promotion programs (port lecturing).
In addition, Onboard Media Group also administers art auctions aboard various
cruise ships.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Starboard
Cruise Services N.V., its wholly owned subsidiaries (Holdings II, Holdings III,
CLH, GLSI, Onboard Media Group, and Starboard Holdings Ltd. (Starboard
Holdings)), and a 66% owned subsidiary (collectively herein, the Company). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company defines as cash equivalents all highly liquid investments with
a maturity of three months or less at the time of purchase.
Accounts Receivable
The Company's accounts receivable are due primarily from cruise line
companies. Approximately 18% of the accounts receivable balance at December 31,
1998 is due from one customer. Settlement
F-15
<PAGE> 111
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of amounts due from the cruise line companies occurs upon completion of each
voyage. The Company's policy is not to require collateral on accounts
receivable. Credit losses are provided for in the financial statements and have
been within management's expectations.
Inventories
Inventories, which consist primarily of duty-free merchandise, are stated
at the lower of cost or market determined on a first-in, first-out basis.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed by use
of the straight-line method over the estimated useful life of vehicles,
furniture, fixtures and equipment, which ranges from 2 to 7 years. Leasehold
costs and improvements are amortized over the lesser of their estimated useful
lives or the remaining lease terms.
Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD DECEMBER 31,
(YEARS) 1998
------------ ------------
<S> <C> <C>
Contracts............................................ 3-5 $ 5,362,000
Goodwill............................................. 25 97,224,589
------------
102,586,589
Accumulated amortization............................. (1,525,266)
------------
$101,061,323
============
</TABLE>
Goodwill represents the excess of purchase price over the fair value of net
assets acquired. Goodwill, net of accumulated amortization, totaled $96,090,302
at December 31, 1998. Other identifiable intangibles, comprised of cruise line
contracts, are being amortized over a period of three to five years. These
intangibles, net of accumulated amortization, totaled $4,971,021 at December 31,
1998.
The carrying value of goodwill is reviewed by the Company's management if
the facts and circumstances suggest that it may be impaired. If this review
indicates that these costs will not be recoverable, as determined based on the
expected undiscounted cash flows of the entity to which the goodwill is
associated over the remaining amortization period, the carrying value of
goodwill would be reduced by the estimated shortfall of cash flows.
Deferred Revenue and Revenue Recognition
Deferred revenue reflects advertising revenue which has been sold in
advance of the publication of the related books, magazines and videos. Revenue
is recognized upon publication of the related books, magazines and videos.
Revenue from retail product sales is recorded upon customer purchase.
F-16
<PAGE> 112
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred
income tax assets and liabilities are determined based upon differences between
the financial statement and income tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Deferred income tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
of the tax assets will not be realized.
Accounting for Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, became effective
January 1, 1996. The new standard defines a fair value method of accounting for
issuance of stock options and other equity instruments. Under the fair value
method, compensation cost is measured at the grant date based on the fair value
of the award and is recognized over the service period, which is usually the
vesting period. Pursuant to SFAS No. 123, companies are encouraged, but not
required to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB Opinion 25), but are required to disclose in a
note to the consolidated financial statements pro forma net income as if the
Company had applied the new method of accounting.
The Company applies APB Opinion 25 and Related Interpretations in
accounting for its employee stock-based transactions and has complied with the
disclosure requirements of SFAS No. 123.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in financial statements.
The adoption of SFAS No. 130 had no impact on the Company's net loss or
stockholders' equity. There are no other components of comprehensive loss other
than the Company's net loss for the period from September 10, 1998 (date of
incorporation) through December 31, 1998 (period ended December 31, 1998).
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
Loss Per Share
Basic and diluted loss per share (see Note 13) was computed by dividing net
loss by the weighted average number of shares of common stock. Common stock
equivalents were antidilutive and therefore were not included in the computation
of weighted average shares used in computing diluted loss per share.
F-17
<PAGE> 113
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACQUISITIONS
On September 17, 1998, the Company acquired 100% of the issued and
outstanding shares of the capital stock of GLSI for a purchase price of
approximately $96.6 million. The purchase price, which is subject to net asset
balance adjustments, consisted of approximately $81.5 million in cash, a $10.0
million Junior Subordinated Note due May 15, 2009 and approximately $5.1 million
of acquisition costs. The GLSI acquisition was accounted for using the purchase
method of accounting and, accordingly, the purchase price was allocated to the
assets acquired and the liabilities assumed based on estimates of their
underlying fair values. The fair value of net assets acquired, including
approximately $5.4 million allocated to acquired cruise line contracts, was
approximately $40.7 million. The excess purchase price over the fair value of
the assets acquired of approximately $55.9 million has been classified as
goodwill and is being amortized over 25 years. The allocation of the purchase
price is preliminary pending finalization of estimates. The GLSI acquisition was
primarily financed through a $63.0 million term loan, a $2.5 million drawdown on
a $35.0 million revolver loan, $10 million Note due to Viad, and $25.0 million
of senior subordinated notes (see Note 6).
On September 17, 1998, the Company acquired 100% of the issued and
outstanding shares of the capital stock of Onboard Media Group for a purchase
price of approximately $47.0 million. The purchase price consisted of
approximately $33.3 million in cash, which includes approximately $3.3 million
of assumed indebtedness paid by the Company at closing, 5,912,500 shares of the
Company's common stock valued at approximately $11.4 million and approximately
$2.3 million of acquisition costs. The Onboard Media Group acquisition was
accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to the assets acquired and the liabilities assumed
based on estimates of their underlying fair values. The fair value of net assets
acquired was approximately $5.7 million. The excess purchase price over the fair
value of the assets acquired of approximately $41.3 million has been classified
as goodwill and is being amortized over 25 years. The allocation of the purchase
price is preliminary pending finalization of estimates.
On December 15, 1998, Starboard Holdings entered into an Asset Purchase
Agreement with Nuance Global Traders Ltd. for the purchase of certain of the
assets and assumption of certain liabilities of Nuance Global Traders Ltd., an
operator of duty free stores on cruise ships, for a purchase price of
approximately $17.4 million in cash (the Nuance acquisition). The Nuance
acquisition was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on estimates of their underlying fair values. The fair
value of net assets acquired was approximately $17.4 million. The allocation of
the purchase price is preliminary pending finalization of estimates.
F-18
<PAGE> 114
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACQUISITIONS (CONTINUED)
Summary unaudited pro forma results of operations for the year ended
December 31, 1998 for the acquisitions discussed above, as if such acquisitions
had occurred on January 1, 1998 is as follows (dollars in thousands, except per
share data):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Net sales................................................... $ 281,151
Loss before income taxes and minority interest.............. (2,368)
Net loss.................................................... (2,294)
Basic and diluted net loss per share........................ $ (0.10)
Basic and diluted weighted average shares................... 23,250,000
</TABLE>
These unaudited pro forma results of operations for the year ended December
31, 1998 do not purport to represent what the Company's actual results of
operations would have been if the acquisitions had occurred on January 1, 1998
and should not serve as a forecast of the Company's operating results for future
periods. The pro forma adjustments are based solely on the available information
and certain assumptions that management believes are reasonable. Management
believes the full impact of potential cost savings has not been reflected in the
pro forma results presented above, although there can be no assurances such cost
savings will be achieved. Subsequent adjustments may be necessary upon final
determination of the allocation of the purchase prices.
4. NOTES RECEIVABLE FROM MINORITY INTEREST HOLDERS
The notes receivable from minority interest holders mature on November 30,
2000 and accrue interest, payable quarterly, at the prime rate (7.75% at
December 31, 1998). The loans are secured by the minority interest holders'
equity interest in a subsidiary.
5. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES DECEMBER 31,
(IN YEARS) 1998
------------ ------------
<S> <C> <C>
Vehicles.............................................. 5 $ 36,768
Furniture, fixtures, and equipment.................... 2-7 5,525,691
Leasehold improvements................................ 2-7 4,294,963
-----------
9,857,422
Accumulated depreciation.............................. (1,055,826)
-----------
$ 8,801,596
===========
</TABLE>
F-19
<PAGE> 115
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Term Note bearing interest at a variable rate (7.94% at
December 31, 1998). Interest payable quarterly............ $ 67,500,000
$35.0 million revolving credit facility bearing interest at
LIBOR plus 2.75% (7.81% at December 31, 1998); expiring
September 17, 2003. Interest payable semi-annually........ 10,200,000
Senior subordinated notes bearing interest at 15%; due
September 17, 2006. Interest payable semi-annually........ 25,188,452
Junior subordinated notes bearing interest at 12%; due May
15, 2009. Interest payable quarterly...................... 10,000,000
------------
Total debt.................................................. 112,888,452
Less current portion........................................ (5,357,142)
------------
Total long-term debt........................................ $107,531,310
============
</TABLE>
On September 17, 1998, Holdings II and Holdings III entered into a credit
agreement with several banks to extend term loans in an aggregate principal
amount of $63.0 million (the Term Note) and obtain borrowings under a Revolving
Credit Facility. The Term Note was increased to $67.5 million on December 15,
1998. The Term Note bears interest at a variable rate based on the Company's
leverage ratio (as defined at December 31, 1998). The Term Note expires on
September 17, 2003 with quarterly principal payments beginning on August 31,
1999, in an amount equal to a certain percentage of the outstanding principal
amount (as defined). The proceeds from the Term Note were used to fund portions
of the GLSI acquisition and the Nuance acquisition.
The Revolving Credit Facility provides for aggregate borrowings of up to
$35 million and issuances of letters of credit of up to $15 million. Direct
borrowings under the Revolving Credit Facility are subject to an availability
calculation based on the eligible borrowing base. The Revolving Credit Facility
matures on September 17, 2003. Based on the availability calculation,
approximately $17.8 million of additional borrowings were available under this
credit facility at December 31, 1998. Outstanding letters of credit under the
credit facility for the purpose of purchasing inventory amounted to
approximately $98,000 at December 31, 1998.
The Term Note and the Revolving Credit Facility contain covenants that
among other things, restrict the payments of dividends and restrict additional
indebtedness and obligations, and require the Company to maintain certain
minimum financial ratios. This credit agreement is guaranteed by each of the
subsidiaries of the Company and is collaterized by substantially all of the
assets of the Company.
In connection with the GLSI and Onboard Media Group acquisitions (see Note
3), Holdings II entered into a debt securities purchase agreement with several
financial institutions to issue approximately $25.2 million in aggregate
principal amount of its 15% Senior subordinated notes due September 15, 2006
(the Notes). The interest on the Senior subordinated notes is payable
semiannually in arrears, may be capitalized for the first three years and is
payable in cash beginning
F-20
<PAGE> 116
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
in the fourth year. The Senior subordinated notes are also subject to a cash
payment commencing on March 15, 2004 in the event the accrued and unpaid
interest exceeds a certain amount. In the event that this cash payment is
required, the holders of the Senior subordinated notes may require Holdings II
to purchase up to $10 million of principal of the Senior subordinated notes at a
premium of 5.25%. Fifty percent of the then outstanding principal amount of the
Senior subordinated notes will mature on September 15, 2005, with the balance
due September 15, 2006.
The Company's subsidiary, Holdings II, entered into a Put Agreement with
the Senior Subordinated Note holders. Under the Put Agreements, these
shareholders may cause Holdings II at any time to repurchase all, or any
portion, of their common shares at a price equal to their cost of the shares, or
approximately $1.925 per share (as adjusted for share splits and dividends). The
put right, or the right to cause Holdings II to repurchase these common shares,
will expire on September 15, 2006 or, if earlier, upon the occurrence of certain
events.
Upon a Change of Control as defined in the Notes, the Company would be
required to offer to repurchase the Notes at a purchase price equal to 101% of
the aggregate principal amount plus accrued and unpaid interest thereon.
The Notes contain certain financial and operational covenants and customary
events of default, including, among others, payment defaults and default in the
performance of other covenants, breach of representations or warranties,
cross-default to other indebtedness, certain bankruptcy or ERISA defaults, the
entry of certain judgments against the Company or any subsidiary, and any
security interest or guarantees that cease to be in effect.
The proceeds from the Notes were used to fund a portion of the acquisition
price of GLSI and On Board Media Group.
In connection with the GLSI acquisition (see Note 3), Holdings II, provided
to VIAD Corp. 12% Junior Subordinated Notes due May 15, 2009 (Junior Notes)
which were issued in an aggregate principal amount of $10 million and are junior
subordinated unsecured obligations of Holdings II. The interest on the Junior
Notes is payable semiannually commencing March 1, 1999 and the interest payments
may be capitalized through maturity of the notes with some exceptions. Upon a
change of control as defined in the Junior Notes agreement or consummation of an
initial public offering, the Company would be required to prepay the Junior
Notes at a price equal to 100% of the aggregate principal amount plus accrued
and unpaid interest thereon.
F-21
<PAGE> 117
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
Scheduled maturities on long-term debt during the next five years are as
follows:
<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $ 5,357,000
2000...................................................... 11,786,000
2001...................................................... 15,000,000
2002...................................................... 18,214,000
2003...................................................... 17,143,000
Thereafter................................................ 45,388,000
------------
Total....................................................... $112,888,000
============
</TABLE>
7. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, short-term investments,
accounts receivable, accounts payable and accrued expenses approximate fair
value because of their short duration to maturity.
The carrying amounts of long-term debt approximate the fair value of the
Company's long-term debt at December 31, 1998. The fair value of long-term debt
is estimated based on the quoted market prices for the same issues or on current
rates offered to the Company for debt of the same remaining maturities. The
estimated fair value of long-term debt and the bank borrowings under the credit
agreement approximated its carrying value. Because judgment is required in
interpreting market data to develop estimates of fair value, the estimates are
not necessarily indicative of the amounts that could be realized or would be
paid in a current market exchange. The effect of using different market
assumptions or estimation methodologies may be material to the estimated fair
value amounts.
8. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998
------------
<S> <C>
CURRENT
U.S. Federal................................................ $ 372,290
State....................................................... 56,736
Foreign..................................................... 67,000
---------
Total....................................................... 496,026
DEFERRED
U.S. Federal................................................ (136,831)
---------
Total....................................................... $ 359,195
=========
</TABLE>
F-22
<PAGE> 118
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES (CONTINUED)
The differences between the reported provision from income taxes and income
taxes computed at the U.S. statutory federal income tax rate are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998
------------
<S> <C>
Income tax expense computed at the U.S. statutory rate of
34%....................................................... $ 58,247
State taxes, net of federal benefit......................... 37,446
Effect of non-U.S. operations and tax rates................. 78,161
Non-deductible items........................................ 200,203
Other, net.................................................. (14,862)
--------
Total....................................................... $359,195
========
</TABLE>
Significant components of the Company's net deferred income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Deferred income tax assets:
Allowance for bad debts................................... $ 15,367
Miscellaneous accruals.................................... 35,258
---------
Total current deferred income tax asset..................... 50,625
Deferred income tax liabilities:
Depreciation and amortization............................. (61,243)
Cash to accrual conversion................................ (442,348)
---------
Net deferred income tax liabilities......................... $(452,966)
=========
</TABLE>
9. STOCK OPTION PLAN
On September 15, 1998, the Company adopted the 1998 Stock Option Plan (the
Plan) which provides for the granting of incentive and non-incentive stock
options to purchase shares of the Company's common stock to officers, directors
and key employees responsible for the direction and management of the Company
and to non-employee consultants and independent contractors. The Company is
authorized to grant options for up to 1,000,000 common shares under the Plan, of
which 950,000 common shares have been granted as of December 31, 1998. The
vesting period of the incentive stock options granted are established by the
Management Board of the Company (the Board). Of the 950,000 options granted,
500,000 vest ratably over a three year period and 450,000 vest ratably over a
four year period, with the vesting beginning on the first anniversary of the
date of grant. The exercise price of common stock purchasable under a stock
option shall be determined by the Board at the time of grant but shall not be
less than 100% of the fair market value of the underlying stock; nor shall the
exercise price be less, in the case of an original issue of authorized stock,
than par value. The exercise price of the options granted is $1.925 per share,
which was determined by the Board to be the fair value at the date of grant.
F-23
<PAGE> 119
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. STOCK OPTION PLAN (CONTINUED)
The Company has adopted the disclosure only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the plan. Had
compensation cost for the Plan been determined based on the fair value at the
date of grant in 1998 consistent with the provisions of SFAS No. 123, the
Company's net loss would have been increased to the pro forma amount indicated
below:
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998
------------
<S> <C>
Net loss -- as reported..................................... $(187,881)
Net loss -- pro forma....................................... (198,802)
Basic and diluted net loss per share -- pro forma........... $ (0.01)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Minimum Value fair value model with the following weighted-average
assumptions used for the 1998 grants: dividend yield of 0.0%, risk-free interest
rate of 6%, and average expected life of 3.5 years.
The weighted average fair value of options granted for 1998 is $0.36 per
share. At December 31, 1998, the weighted average exercise price of the options
outstanding is $1.925, and the weighted average remaining contractual life of
those options is 9.75 years.
10. RELATED PARTY TRANSACTIONS
Berkshire Cruise Holdings LLC provides the Company with certain
administrative services for an annual management fee of approximately $400,000.
The Company paid Berkshire Cruise Holdings approximately $116,000 for the period
ended December 31, 1998.
The Onboard Media Group has an agreement with Media Holdings, Ltd. for the
lease of an office building. Media Holdings, Ltd. is a limited partnership which
is owned by certain shareholders of the Company. The term of the lease is from
April 30, 1996 through April 30, 2006 and requires annual rental payments of
$250,000 plus occupancy costs which include property taxes, utilities, and
repairs and maintenance. The Company made payments to Media Holdings, Ltd.
amounting to approximately $66,563 for the period ended December 31, 1998.
11. SIGNIFICANT CUSTOMERS
Sales to certain customers, each constituting 10% or more of the total
sales, were approximately $20,848,000 for the period ended December 31, 1998.
12. COMMITMENTS AND CONTINGENCIES
The Company leases office, warehouse facilities and retail stores under non
cancelable operating leases. The leases for the retail stores provide for
additional rentals contingent upon increases in the operating expenses of the
lessors. In addition, the Company pays concession fees, calculated as a
percentage of sales, for certain store leases. Certain of the Company's leases
contain scheduled rent increases during the term of the leases. Rent expense,
including contingent rent and concession fees, was approximately $23.0 million
for the period ended December 31, 1998.
F-24
<PAGE> 120
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under these operating leases at December 31,
1998 are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $ 5,317,000
2000...................................................... 4,864,000
2001...................................................... 915,000
2002...................................................... 915,000
2003...................................................... 266,000
Thereafter................................................ 621,000
-----------
Total....................................................... $12,898,000
===========
</TABLE>
Future minimum lease payments do not include a minimum annual guarantee of
$10,268,000, subject to adjustment under certain circumstances, through 2000
under an airport duty-free concession agreement.
The Company is a party to litigation matters and claims, which are in the
normal course of its operations. While the results of litigation and claims
cannot be predicted with certainty, management believes that the final outcome
of such matters will not have a material adverse effect on the Company's
consolidated financial position.
The Onboard Media Group has executed contracts with various cruise lines
and hotels which grant it the exclusive right to publish and sell advertising in
books, magazines and videos, and to conduct live on-board promotion programs and
art auctions on cruise ships. The contracts range from several months to five
years and require various guaranteed minimum payments. Obligations for
guaranteed minimum payments under such contracts as of December 31, 1998 are as
follows:
<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $ 8,027,000
2000...................................................... 6,394,000
2001...................................................... 3,663,000
2002...................................................... 3,593,000
2003...................................................... 180,000
-----------
Total....................................................... $21,857,000
===========
</TABLE>
Total cruise line fees and magazine royalties under the above agreements
amounted to $2,661,000 for the period ended December 31, 1998.
Outstanding surety bonds, principally related to importation of products,
amounted to $6,728,000 at December 31, 1998.
F-25
<PAGE> 121
STARBOARD CRUISE SERVICES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. LOSS PER SHARE
The following table sets forth the computation of basic and diluted net
loss per share:
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 10,
1998 (DATE OF
INCORPORATION)
THROUGH
DECEMBER 31,
1998
--------------
<S> <C>
Numerator:
Net loss.................................................... $ (187,881)
Denominator:
Denominator for basic and diluted net loss per
share -- weighted average shares....................... 23,250,000
Basic and diluted net loss per share........................ $ (0.01)
</TABLE>
14. SUBSEQUENT EVENT
On , 1999, the Company's shareholders approved an amendment to
its Articles of Association, which among other things, converts the Company from
a B.V. to an N.V., changes the Company's name from Miami Cruiseline Services
Holdings I. B.V. to Starboard Cruise Services N.V., increases the Company's
authorized share capital to 120,000,000 shares each with a par value of EUR .01
and effects a 50 for 1 share split. Immediately after the effectiveness of the
amendment, the Company will issue a 5 for 1 share dividend. The effectiveness of
the amendment and share dividend will take place immediately prior to the
consummation of the Company's initial public offering. All common share and per
common share amounts have been adjusted for all periods to reflect the share
split and share dividend.
F-26
<PAGE> 122
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholder
Greyhound Leisure Services, Inc.
and Subsidiary
We have audited the accompanying consolidated statements of income,
stockholder's equity and cash flows of Greyhound Leisure Services, Inc. and
subsidiaries (a wholly-owned subsidiary of Viad Corp.) for the period from
January 1, 1998 through September 17, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations, stockholder's equity and
cash flows of Greyhound Leisure Services, Inc. and subsidiaries for the period
from January 1, 1998 through September 17, 1998, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Miami, Florida
May 7, 1999
F-27
<PAGE> 123
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Greyhound Leisure Services, Inc.
We have audited the accompanying consolidated balance sheet of Greyhound Leisure
Services, Inc., and subsidiaries (the "Company"), a wholly owned subsidiary of
Viad Corp., as of December 31, 1997, and the related consolidated statements of
income, stockholder's equity and cash flows for each of the two years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1997, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
July 31, 1998
F-28
<PAGE> 124
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 262
Accounts receivable, net of allowance for doubtful
accounts of $327....................................... 6,108
Inventories............................................... 32,907
Deferred income taxes..................................... 2,122
Prepaid expenses and other current assets................. 1,026
-------
Total current assets........................................ 42,425
Property and equipment:
Furniture, fixtures and other equipment................... 10,681
Leasehold improvements.................................... 8,632
Accumulated depreciation.................................. (9,762)
-------
Total property and equipment, net........................... 9,551
Loans receivable from minority interest shareholders........ 3,771
Other assets................................................ 1,028
Deferred income taxes....................................... 2,487
-------
Total assets................................................ $59,262
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $10,528
Accrued expenses.......................................... 3,129
Due to Viad............................................... 11,171
Other current liabilities................................. 1,750
-------
Total current liabilities................................... 26,578
Other liabilities and deferred items........................ 10,405
Minority interest........................................... 7,131
Commitments and contingencies (Note 8)
Stockholder's equity:
Common stock, $100 par value, 3,000 shares authorized;
1,000 shares issued and outstanding.................... 100
Additional paid-in capital................................ 12,918
Retained earnings......................................... 2,285
Treasury stock -- 400 shares at cost...................... (155)
-------
Total stockholder's equity.................................. 15,148
-------
Total liabilities and stockholder's equity.................. $59,262
=======
</TABLE>
See accompanying notes
F-29
<PAGE> 125
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1998
YEAR ENDED DECEMBER 31, THROUGH
------------------------ SEPTEMBER 17,
1996 1997 1998
---------- ---------- ---------------
<S> <C> <C> <C>
Net sales.......................................... $179,799 $188,498 $135,603
Cost of sales...................................... 72,860 76,828 54,290
-------- -------- --------
Gross profit....................................... 106,939 111,670 81,313
Selling, general and administrative expenses....... 96,712 101,067 73,993
-------- -------- --------
Income from operations............................. 10,227 10,603 7,320
Other (income) expense:
Interest expense................................. 625 766 674
Interest income.................................. (512) (561) (257)
-------- -------- --------
Total other expense................................ 113 205 417
-------- -------- --------
Income before provision for income taxes and
minority interest................................ 10,114 10,398 6,903
Provision for income taxes......................... 2,936 2,941 2,249
Minority interest.................................. 1,706 957 594
-------- -------- --------
Net income......................................... $ 5,472 $ 6,500 $ 4,060
======== ======== ========
Basic and diluted net income per common share...... $ 5,472 $ 6,500 $ 4,060
======== ======== ========
Basic and diluted weighted average shares
outstanding...................................... 1,000 1,000 1,000
======== ======== ========
</TABLE>
See accompanying notes.
F-30
<PAGE> 126
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------ ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995...... 1 $100 $12,918 $ 627 $(155) $13,490
Net income...................... -- -- -- 5,472 -- 5,472
Capital distribution............ -- -- -- (4,579) -- (4,579)
-- ---- ------- ------- ----- -------
Balance at December 31, 1996...... 1 100 12,918 1,520 (155) 14,383
Net income...................... -- -- -- 6,500 -- 6,500
Capital distribution............ -- -- -- (5,735) -- (5,735)
-- ---- ------- ------- ----- -------
Balance at December 31, 1997...... 1 100 12,918 2,285 (155) 15,148
Net income...................... -- -- -- 4,060 -- 4,060
Capital contribution............ -- -- 16,630 -- -- 16,630
Capital distribution............ -- -- -- (2,700) -- (2,700)
-- ---- ------- ------- ----- -------
Balance at September 17, 1998..... 1 $100 $29,548 $ 3,645 $(155) $33,138
== ==== ======= ======= ===== =======
</TABLE>
See accompanying notes.
F-31
<PAGE> 127
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1998
------------------------ THROUGH
1996 1997 SEPTEMBER 17, 1998
---------- ---------- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................................ $ 5,472 $ 6,500 $ 4,060
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 1,628 2,746 2,461
Provision for inventory obsolence and shrinkage
reserve...................................... -- -- (106)
Deferred income taxes........................... (284) 757 372
Provision for doubtful accounts receivable...... 76 43 114
Other........................................... 1,102 276 --
Changes in operating assets and liabilities:
Accounts receivable.......................... (1,746) 506 (237)
Inventories.................................. 797 (2,434) (978)
Prepaid expenses and other current assets.... (256) 314 (601)
Other assets................................. -- (131) --
Loans receivables from minority interest
shareholders............................... -- -- 7
Investment in unconsolidated subsidiary...... -- -- 33
Accounts payable............................. 561 (2,902) (2,021)
Accrued expenses............................. -- -- 121
Other current liabilities.................... 140 29 --
Other liabilities and deferred items......... 211 (1,461) 229
------- ------- -------
Net cash provided by operating activities......... 7,701 4,243 3,454
INVESTING ACTIVITIES
Purchases of property and equipment............... (4,016) (4,353) (625)
Other............................................. -- 98 --
------- ------- -------
Net cash used in investing activities............. (4,016) (4,255) (625)
FINANCING ACTIVITIES
Due to/from Viad, net............................. (352) 5,487 (346)
Capital distribution.............................. (4,579) (5,735) (2,700)
------- ------- -------
Net cash used in financing activities............. (4,931) (248) (3,046)
------- ------- -------
Net decrease in cash and cash equivalents......... (1,246) (260) (217)
Cash and cash equivalents, beginning of period.... 1,768 522 262
------- ------- -------
Cash and cash equivalents, end of period.......... $ 522 $ 262 $ 45
======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURE
Income taxes paid during the period............... $ -- $ -- $ 1,370
======= ======= =======
Cash paid to Viad for income taxes................ $ 2,952 $ 3,745 $ --
======= ======= =======
</TABLE>
See accompanying notes
F-32
<PAGE> 128
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Nature of Business
Greyhound Leisure Services, Inc. and subsidiaries (GLSI) operate duty free
stores on cruise ships and operate several duty free boutiques and stores at
Miami International Airport and Ft. Lauderdale/Hollywood International Airport.
At September 17, 1998, GLSI operated 120 retail stores on 40 cruise ships, 19
retail stores at Miami International Airport and two retail stores in Ft.
Lauderdale/Hollywood International Airport. GLSI was a wholly owned subsidiary
of Viad Corp ("Viad"). (See Note 10.)
Basis of Presentation
The accompanying financial statements include costs allocated to GLSI by
Viad for certain functions and services they performed centrally. All
allocations and estimates were based on assumptions Viad's management believed
were reasonable in the circumstances. These allocations and estimates are not
necessarily indicative of the costs and expenses that would have resulted if
GLSI had been operated as a separate entity. See Note 7 for a description of the
functions and services and the amounts allocated.
Certain reclassifications were made to the prior years' financial
statements to conform with the current period presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements at December 31, 1997 include the
accounts of GLSI, a 66% owned subsidiary and another majority-owned subsidiary,
which was dissolved in May 1998. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company defines as cash equivalents all highly liquid investments with
a maturity of three months or less at the time of purchase.
Accounts Receivable
The Company's accounts receivable are due primarily from cruise line
companies. Approximately 33% of the accounts receivable balance at December 31,
1997 is due from two customers. Settlement of amounts due from the cruise line
companies occurs upon completion of each voyage. The Company's policy is not to
require collateral on accounts receivable. Credit losses are provided for in the
financial statements and have been within management's expectations.
Inventories
Inventories, which consist primarily of duty-free merchandise, are stated
at the lower of cost or market determined on a first-in, first-out basis.
F-33
<PAGE> 129
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed by use of the straight-line method over the estimated
useful life of vehicles, furniture, fixtures and equipment, which ranges from 5
to 7 years. Leasehold costs and improvements are amortized over the lesser of
their estimated useful lives or the remaining lease terms.
Earnings Per Share
Basic earnings per share is computed based on the weighted average number
of common shares outstanding and diluted earnings per share is computed based on
the weighted average number of common and potential common shares outstanding.
There were no potential common shares outstanding.
Revenue Recognition
Revenue from retail product sales is recorded upon customer purchase.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred
income tax assets and liabilities are determined based upon differences between
the financial statement and income tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Deferred income tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
of the deferred income tax assets will not be realized.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in financial
statements. The adoption of SFAS No. 130 had no impact on the Company as it had
no elements of comprehensive income.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
Impairment of Long-Lived Assets
The Company reviews the carrying values of its long-lived assets and
identifiable intangibles for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of assets to be held and used
may not be recoverable. For assets to be held and used, if the sum of the
expected future undiscounted cash flows is less than the carrying amount of the
asset, an
F-34
<PAGE> 130
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
impairment loss should be recognized, measured as the amount by which the
carrying amount exceeds the fair value of the asset. The Company reports any
long-lived assets and certain identifiable intangibles to be disposed of at the
lower of carrying amount or fair value less cost to sell.
3. LOANS RECEIVABLE FROM MINORITY INTEREST SHAREHOLDERS
The loans receivable from minority interest holders mature on November 30,
2000 and accrue interest, payable quarterly, at the prime rate (8.50% at
December 31, 1997). The loans are secured by the minority interest holders'
equity interest in a subsidiary.
Other Assets at December 31, 1997 consisted of the following (in
thousands):
<TABLE>
<S> <C>
Investment in unconsolidated affiliate, accounted for using
the equity method......................................... $ 981
Intangible pension asset.................................... 47
------
$1,028
======
</TABLE>
4. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, short-term investments,
accounts receivable, accounts payable and accrued expenses approximate fair
value because of their short duration to maturity.
5. INCOME TAXES
The Company files a consolidated federal and various state income tax
returns with Viad and other eligible subsidiaries of Viad. A verbal intercompany
tax agreement requires the Company to pay Viad an amount which approximates the
income tax it would pay if it were filing separate consolidated income tax
returns. In addition, Viad credits the Company for an allocated portion of the
state income tax savings which Viad and its subsidiaries realize upon filing
combined or consolidated income tax returns in certain states.
Deferred income tax assets (liabilities) included in the consolidated
balance sheet at December 31, 1997 related to the following (in thousands):
<TABLE>
<CAPTION>
1997
------
<S> <C>
Pension, compensation and other employee benefits........... $3,506
Self-insurance reserve...................................... 423
Reserve for inventory obsolescence and shrinkage............ 757
Deferred state income taxes................................. 282
Bad debt reserve............................................ 78
Depreciation................................................ (112)
Other....................................................... (325)
------
Deferred income taxes....................................... $4,609
======
</TABLE>
F-35
<PAGE> 131
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES (CONTINUED)
The provision for income taxes for the years ended December 31, 1996 and
1997 and the period from January 1, 1998 through September 17, 1998 consisted of
the following (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31, 1998 THROUGH
---------------- SEPTEMBER 17,
1996 1997 1998
------ ------ -------------
<S> <C> <C> <C>
Current:
Federal....................................... $3,135 $2,089 $2,490
State......................................... 85 95 131
------ ------ ------
3,220 2,184 2,621
Deferred........................................ (284) 757 (372)
------ ------ ------
Provision for income taxes.................... $2,936 $2,941 $2,249
====== ====== ======
</TABLE>
A reconciliation of the provision for income taxes and the amount that
would be computed using statutory federal income tax rates for the years ended
December 31, 1996 and 1997 and for the period from January 1, 1998 through
September 17, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31, 1998 THROUGH
--------------- DECEMBER 31,
1996 1997 1998
------ ------ ------------
<S> <C> <C> <C>
Income tax at statutory federal income tax rate of
35%............................................... $2,943 $3,304 $2,145
Tax effect of:
State income taxes, net of federal benefit........ 30 33 217
Other............................................. (37) (396) (113)
------ ------ ------
Provision for income taxes........................ $2,936 $2,941 $2,249
====== ====== ======
</TABLE>
6. OTHER LIABILITIES AND DEFERRED ITEMS
Other liabilities and deferred items at December 31, 1997 consisted of the
following (in thousands):
<TABLE>
<S> <C>
Accrued pension and other postretirement benefits costs..... $ 6,913
Insurance liability......................................... 1,374
Deferred compensation....................................... 1,282
Other....................................................... 836
-------
$10,405
=======
</TABLE>
F-36
<PAGE> 132
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. RELATED PARTY TRANSACTIONS
Viad provided the Company certain corporate general and administrative
services including legal, treasury and finance. Fees allocated to the Company
related to such services aggregated $517,000, $529,000 and $510,000 for the
years ended December 31, 1996 and 1997 and for the period from January 1, 1998
through September 17, 1998, respectively. Management believes that these
allocations are reasonable. These amounts are not necessarily indicative of the
costs that the Company would have incurred as a stand-alone entity.
Viad manages cash and financing requirements of all its business units. The
Company's available cash is swept into the Viad account and the Company's cash
requirements are paid from the Viad account, as needed. Interest expense
reflected in the consolidated statements of income is charged by Viad based on
the prime lending rate but does not necessarily reflect the interest expense the
Company would have incurred as a stand-alone entity. Because Viad manages the
cash and financing requirements of the Company, it is not practicable to
estimate cash paid for interest.
On September 16, 1998 Viad forgave and converted $16,630,000 due from the
Company into equity. Included in this conversion was approximately $9.3 million
of liabilities related to various Viad sponsored pension and post-retirement
benefit plans which effective August 31, 1998 were assumed by Viad (see Note
10). Such conversion represents a noncash transaction and accordingly is
excluded from the statement of cash flows for the period from January 1, 1998
through September 17, 1998.
8. COMMITMENTS AND CONTINGENCIES
The Company leases office, warehouse facilities and retail stores under non
cancelable operating leases. The leases for the retail stores provide for
additional rentals contingent upon increases in the operating expenses of the
lessors. In addition, the Company pays concession fees, calculated as a
percentage of sales, for certain store leases. Certain of the Company's leases
contain scheduled rent increases during the term of the leases. Rent expense,
including contingent rent and concession fees, was approximately $61,105,000,
$65,264,000 and $48,034,000 respectively, for the years ended December 31, 1996
and 1997 and the period from January 1, 1998 through September 17, 1998.
Future minimum lease payments under these operating leases at December 31,
1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998................................................... $ 4,746
1999................................................... 4,705
2000................................................... 4,729
2001................................................... 609
2002................................................... 609
-------
$15,398
=======
</TABLE>
Net operating lease rentals and future minimum rental payments do not
include a minimum annual guarantee of $9,600,000, subject to adjustment under
certain circumstances, through 2000 under an airport duty-free concession
agreement.
Outstanding letters of credit, principally related to purchases of
inventory, amounted to approximately $600,000 at December 31, 1997.
F-37
<PAGE> 133
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is a party to litigation matters and claims, which are in the
normal course of its operations. While the results of litigation and claims
cannot be predicted with certainty, management believes that the final outcome
of such matters will not have a material adverse effect on the Company's
consolidated financial position.
9. PENSION AND OTHER BENEFITS
Pension Benefits
The Company is a participating employer in the Viad Companies Retirement
Income Plan. The plan administrator is Viad Corp.
The plan is a noncontributory defined benefit pension plan covering all
employees who meet certain age and length of service requirements. Benefits are
based on final average compensation and years of credited service. It is the
Company's policy to fund the minimum required contribution for the year.
The Greyhound Leisure Services, Inc. Supplemental Executive Retirement Plan
(SERP) is a nonqualified plan which provides postretirement income to eligible
employees selected by the Viad Board of Directors such that SERP will be
eligible for exemption under Parts Two, Three and Four of Title I of the
Employee Retirement Income Security Act of 1974. Pension expense is calculated
based on establishing a reserve, which will accumulate at the valuation rate of
interest, less any benefit payments actually made.
Net periodic pension cost for the years ended December 31, 1996 and 1997
for all of the Company's plans included the following components (in thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Service cost -- benefits earned during the year............. $306 $326
Interest cost on projected benefit obligation............... 332 366
Actual return on plan assets................................ (296) (670)
Net amortization and deferral............................... 111 448
Other items, primarily defined contribution and
multiemployer plans....................................... 154 181
---- ----
Net pension cost............................................ $607 $651
==== ====
</TABLE>
Weighted average assumptions used were:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Discount rate of obligation................................. 8.0% 7.5%
=== ===
Rate of increase in compensation levels..................... 5.0% 4.5%
=== ===
Long-term rate of return on assets.......................... 9.5% 9.5%
=== ===
</TABLE>
F-38
<PAGE> 134
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. PENSION AND OTHER BENEFITS (CONTINUED)
The following table indicates the plans' funded status and amounts
recognized in the Company's consolidated balance sheet at December 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
UNDERFUNDED OVERFUNDED
PLANS PLANS
(ACCUMULATED (ASSETS
BENEFITS EXCEED
EXCEED ACCUMULATED
ASSETS) BENEFITS)
--------------- --------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ 1,298 $3,215
======= ======
Accumulated benefit obligation....................... $ 1,318 $3,431
======= ======
Projected benefit obligation......................... $ 1,612 $3,790
Market value of plan assets, primarily equity and
fixed income securities............................ -- 3,737
------- ------
Plan assets under projected benefit obligation....... (1,612) (53)
Unrecognized net transition gain..................... (7) (52)
Unrecognized prior service cost...................... 280 (18)
Unrecognized net (gain) loss from experience
differences........................................ 68 (69)
Additional minimum liability......................... (47) --
------- ------
Accrued pension cost................................. $(1,318) $ (192)
======= ======
</TABLE>
POST RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has unfunded defined benefit postretirement plans that provide
medical and life insurance for eligible employees, retirees and dependents.
The status of such medical and life insurance plans as of December 31, 1997
is as follows (in thousands):
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $1,235
Fully-eligible active plan participants................... 1,807
Other active plan participants............................ 2,447
5,489
Unrecognized prior service cost............................. (9)
Unrecognized net loss from experience differences........... (77)
------
Accrued postretirement benefit cost....................... $5,403
======
Discount rate for obligation................................ 7.5%
======
</TABLE>
F-39
<PAGE> 135
GREYHOUND LEISURE SERVICES, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF VIAD CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. PENSION AND OTHER BENEFITS (CONTINUED)
The assumed health care cost trend rate used in measuring the 1997
accumulated postretirement benefit obligation was 10%, gradually declining to 5%
by the year 2002 and remaining at that level thereafter for retirees below age
65, and 7.5%, gradually declining to 5% by the year 2002 and remaining at that
level thereafter for retirees above age 65.
A one-percent-point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1997 by approximately 16% and the ongoing annual expense by
approximately 19%.
The net periodic postretirement benefit cost for the years ended December
31, 1996 and 1997 includes the following components (in thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Service cost benefits earned during the period.............. $225 $299
Interest cost on accumulated postretirement benefit
obligation................................................ 273 364
Net amortization and deferral............................... (104) (46)
---- ----
Net periodic postretirement benefit cost.................... $394 $617
==== ====
</TABLE>
The Plans discussed above were assumed by Viad effective September 16,
1998. The Company incurred approximately $802,000 of benefit costs related to
such Plans for the period from January 1, 1998 through September 17, 1998. The
assumptions used in connection with recognizing such costs were not
significantly different than the assumptions used for the year ended December
31, 1997.
10. SUBSEQUENT EVENT
On September 17, 1998, pursuant to a Share Purchase Agreement dated as of
July 31, 1998, among Viad and Cruiseline Holdings Co. (CLH), CLH acquired all of
the outstanding shares of the Company.
F-40
<PAGE> 136
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders and
Board of Directors
Onboard Media, Inc.
Cruise Management International, Inc.
Boxer Media, Inc.
We have audited the accompanying combined statements of operations and cash
flows of Onboard Media, Inc., Cruise Management International, Inc., and Boxer
Media, Inc. for the period from January 1, 1998 through September 17, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of operations and cash flows of
Onboard Media, Inc., Cruise Management International, Inc., and Boxer Media,
Inc. for the period January 1, 1998 through September 17, 1998, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Miami, Florida
April 27, 1999
F-41
<PAGE> 137
ONBOARD MEDIA, INC.
CRUISE MANAGEMENT INTERNATIONAL, INC.
BOXER MEDIA, INC.
COMBINED STATEMENT OF INCOME
PERIOD FROM JANUARY 1, 1998 THROUGH SEPTEMBER 17, 1998
<TABLE>
<S> <C>
Net sales................................................... $13,204,983
Cost of sales............................................... 8,011,718
-----------
Gross profit................................................ 5,193,265
Selling, general and administrative expenses................ 3,034,384
Depreciation and amortization............................... 137,409
-----------
Total expenses.............................................. 3,171,793
-----------
Income from operations...................................... 2,021,472
Other (income) expense:
Interest expense.......................................... 18,096
Interest and dividend income.............................. (140,987)
Other expense............................................. 10,148
-----------
Total other income.......................................... (112,743)
-----------
Net income.................................................. 2,134,215
Pro forma provision for income taxes (unaudited)............ 822,000
-----------
Pro forma net income (unaudited)............................ $ 1,312,215
===========
</TABLE>
See accompanying notes.
F-42
<PAGE> 138
ONBOARD MEDIA, INC.
CRUISE MANAGEMENT INTERNATIONAL, INC.
BOXER MEDIA, INC.
COMBINED STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 1, 1998 THROUGH SEPTEMBER 17, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $2,134,215
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization............................. 137,409
Provision for bad debts................................... 22,065
Changes in operating assets and liabilities:
Trade accounts receivable.............................. 1,114,788
Due from stockholders.................................. (471,544)
Other receivables...................................... 160,984
Work in process........................................ (426,203)
Advances to cruise lines............................... (3,013,000)
Prepaid expenses and other current assets.............. (14,465)
Accounts payable and accrued expenses.................. 1,042,174
Other current liabilities -- related party............. 23,427
Deferred revenue....................................... 3,164,765
Due to art gallery..................................... 1,613,254
Due to cruise lines.................................... 786,027
----------
Net cash provided by operating activities................... 6,273,896
INVESTING ACTIVITY
Purchases of property and equipment......................... (127,522)
----------
Net cash used in investing activity......................... (127,522)
FINANCING ACTIVITIES
Payment of current portion of long-term debt -- related
party..................................................... (183,750)
Proceeds from line of credit................................ 1,000,000
Payment of line of credit................................... (700,000)
Payment of subscription receivable.......................... 100
Dividends................................................... (5,947,661)
----------
Net cash used in financing activities....................... (5,831,311)
Net increase in cash........................................ 315,063
Cash at beginning of period................................. 433,853
----------
Cash at end of period....................................... $ 748,916
==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid during the period............................. $ 11,725
==========
Net change in unrealized loss on marketable securities...... $ (55,168)
==========
</TABLE>
See accompanying notes.
F-43
<PAGE> 139
ONBOARD MEDIA, INC.
CRUISE MANAGEMENT INTERNATIONAL, INC.
BOXER MEDIA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 17, 1998
1. ORGANIZATION AND NATURE OF BUSINESS
Onboard Media, Inc., Cruise Management International, Inc., and Boxer
Media, Inc. (collectively the Companies) are Florida corporations.
Onboard Media, Inc. sells advertising in books, magazines, and videos which
are published and distributed to hotels and cruise lines primarily in the United
States, Mexico, and the Caribbean. Onboard Media, Inc. also sells promotional
advertising which is delivered to cruise passengers through a live on-board
promotions program (port lecturing).
Cruise Management International, Inc. administers art auctions aboard
various cruise ships. The art auction program is administered in collaboration
with an art gallery which provides the art and conducts the auctions.
Boxer Media, Inc. performs marketing services for certain Onboard Media,
Inc. publications.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The Companies' combined financial statements include the accounts of
Onboard Media, Inc., Cruise Management International, Inc., and Boxer Media,
Inc. All significant intercompany accounts and transactions have been eliminated
in combination.
Revenue Recognition
Revenue is recognized upon publication of the related books, magazines, and
videos.
Advertising Expense
The Companies expense advertising costs as incurred. Advertising expense
was $81,086 for the period from January 1, 1998 through September 17, 1998
(period ended September 17, 1998.)
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed by use
of the straight-line method over the estimated useful lives of office technology
and equipment which range from 5-10 years. Leasehold improvements are amortized
over the lesser of their estimated useful lives or the remaining lease term.
Marketable Securities
The Companies account for investments using Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS No. 115). Under this standard, the Companies have
classified their marketable securities as available-for-sale. Accordingly, these
marketable securities are stated at fair value with unrealized gains and losses
reported in a component of comprehensive income in the combined statement of
stockholders' equity.
F-44
<PAGE> 140
ONBOARD MEDIA, INC.
CRUISE MANAGEMENT INTERNATIONAL, INC.
BOXER MEDIA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Companies, with the consent of their stockholders, have elected under
the Internal Revenue Code to be taxed as S corporations. In lieu of corporate
income taxes, the stockholders of S corporations are taxed on their
proportionate share of the Companies' income.
The proforma provision for income taxes represents a provision for income
taxes as if the Company had operated as a subchapter C corporation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
3. CONCENTRATION OF CREDIT RISKS
The Companies earned commissions of approximately $1,036,000 from two
cruise lines under common ownership which approximated 76% of total commissions
for the period ended September 17, 1998.
The Companies have an exclusive, multi-year agreement with one art gallery
to provide all of the art and conduct all of the auctions aboard the cruise
ships. The Companies do not anticipate any interruptions in the agreement with
the gallery. However, in the event that the agreement is disrupted for any
reason, management believes that a similar agreement could be obtained with
another gallery.
4. PROPERTY AND EQUIPMENT
Depreciation expense for the period ended through September 17, 1998 was
$134,173.
5. RELATED PARTY TRANSACTIONS
The Companies entered into a lease with a limited partnership which is
owned by certain shareholders of the Companies. The lease commenced on April 30,
1996 and is for a term of ten years (see Note 6).
6. COMMITMENTS AND CONTINGENCIES
The Companies have executed contracts with various cruise lines and hotels
which grant them the exclusive right to publish and sell advertising in books,
magazines and videos and to conduct live on-board promotions programs on the
cruise ships. The contracts range from one to six years and
F-45
<PAGE> 141
ONBOARD MEDIA, INC.
CRUISE MANAGEMENT INTERNATIONAL, INC.
BOXER MEDIA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
require various guaranteed minimum payments. Obligations for guaranteed minimum
payments under such contracts as of September 17, 1998 are as follows:
<TABLE>
<S> <C>
1998 (September 18 through December 31)..................... $ 1,260,750
1999........................................................ 7,010,000
2000........................................................ 6,249,000
2001........................................................ 3,557,500
2002........................................................ 3,500,000
2003........................................................ 180,000
-----------
$21,757,250
===========
</TABLE>
Total cruise line fees and magazine royalties under the above agreements
amounted to $6,106,556 for the period ended September 17, 1998.
Stockholder Agreement
In 1994, the Companies entered into an agreement with two of their
stockholders. The agreement provides one of the Companies' stockholders a base
minimum salary of $100,000 annually subject to $25,000 annual increases and
contains a noncompete clause for the term of the agreement and for two years
thereafter. The agreement provides another stockholder of the Companies a base
minimum annual consulting fee of $6,000 subject to $6,250 annual increases and
contains a noncompete clause for the term of the agreement and for an indefinite
period of time thereafter. The total salary and consulting fees paid to these
stockholders for the period ended September 17, 1998 was $127,885 and $16,667,
respectively.
Operating leases
During 1996, the Company entered into a 10 year operating lease agreement
with a limited partnership which is owned by certain shareholders of Companies.
Rental payments including sales tax are $22,188 per month. In addition, the
lease requires the Company to pay all operating costs associated with the
building. Rent expense and operating costs including sales tax paid to the
partnership under this agreement was $198,688 for the period of January 1, 1998
through September 17, 1998. Future minimum lease payments including sales tax as
of September 17, 1998 are as follows:
<TABLE>
<S> <C>
1998 (September 18 through December 31)..................... $ 76,177
1999........................................................ 266,250
2000........................................................ 266,250
2001........................................................ 266,250
2002........................................................ 266,250
2003........................................................ 266,250
Thereafter.................................................. 621,250
----------
$2,028,677
==========
</TABLE>
F-46
<PAGE> 142
ONBOARD MEDIA, INC.
CRUISE MANAGEMENT INTERNATIONAL, INC.
BOXER MEDIA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. RETIREMENT PLAN
The Companies have a qualified retirement plan for all eligible employees
under Section 401(k) of the Internal Revenue Code. Under the plan, the
Companies' contribution for any year is determined at the discretion of the
Board of Directors; however, in no event may elective deferrals exceed a
specific dollar amount determined by the Internal Revenue Service. Total
contributions made to the 401(k) plan were approximately $26,236 for the period
ended September 17, 1998.
8. IMPACT OF YEAR 2000 -- UNAUDITED
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer programs
that have time sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations, causing disruptions of operations, including, but not limited
to, a temporary inability to process transactions, send invoices, or engage in
similar normal business activities.
The Companies have developed and are in the process of implementing a
comprehensive Year 2000 plan which is intended to ensure that the Year 2000
issue will not pose significant operational problems for its computer systems.
Both the development of this plan and its implementation, which is ongoing, are
being conducted by the Companies' personnel under the supervision of a third
party consultant. Management of the Companies expects that its Year 2000 plan
will successfully identify and rectify any potential computer system
deficiencies by its expected completion date in July, 1999. As a result,
management believes that no materially significant adverse consequences
regarding the Year 2000 issue will be encountered by the Companies.
9. SUBSEQUENT EVENT
On September 17, 1998, pursuant to a Stock Subscription and Exchange
Agreement dated as of August 27, 1998, among Cruiseline Holdings Co. (CLH) and
Philip Levine, Jerry Chafetz and several trusts, CLH acquired all of the
outstanding common stock of the Companies.
F-47
<PAGE> 143
INDEPENDENT AUDITORS' REPORT
The Stockholders and
Board of Directors
On-Board Media, Inc. and affiliates
We have audited the accompanying combined balance sheet of On-Board Media,
Inc. and affiliates (the "Company") as of December 31, 1997 and the related
combined statements of income, changes in stockholders' equity and cash flows
for the years ended December 31, 1996 and 1997. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of On-Board Media, Inc.
and affiliates as of December 31, 1997 and the results of their operations and
their cash flows for the years ended December 31, 1996 and 1997 in conformity
with generally accepted accounting principles.
/s/ GOLDSTEIN SCHECHTER PRICE LUCAS HORWITZ & CO.,
P.A.
Miami, Florida
May 20, 1998
F-48
<PAGE> 144
ON-BOARD MEDIA, INC. AND AFFILIATES
COMBINED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 433,853
Trade accounts receivable, net of allowance for doubtful
accounts of $57,100.................................... 7,170,724
Due from affiliates....................................... 12,613
Due from stockholder...................................... 64,267
Other receivables......................................... 255,679
Prepaid expenses and other current assets................. 1,329,763
-----------
Total Current Assets.............................. 9,266,899
-----------
PROPERTY AND EQUIPMENT, NET................................. 794,048
-----------
OTHER ASSETS:
Organization costs, net................................... 1,044
Marketable securities..................................... 118,351
Other assets.............................................. 10,352
-----------
Total Other Assets................................ 129,747
-----------
TOTAL ASSETS...................................... $10,190,694
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt, related party.......... $ 183,750
Accounts payable and accrued expenses..................... 425,283
Due to art gallery........................................ 1,749,560
Deferred revenue.......................................... 1,399,720
Line of credit............................................ 700,100
-----------
Total Current Liabilities......................... 4,458,413
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock.............................................. 1,600
Additional paid-in capital................................ 129,500
Retained earnings......................................... 5,609,821
Accumulated other comprehensive loss...................... (8,540)
-----------
5,732,381
Less subscriptions receivable............................. (100)
-----------
Total Stockholders' Equity........................ 5,732,281
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $10,190,694
===========
</TABLE>
See Accompanying Notes to Combined Financial Statements
F-49
<PAGE> 145
ON-BOARD MEDIA, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
NET SALES................................................... $14,060,959 $18,292,148
COST OF PRODUCTS SOLD....................................... 9,549,008 10,978,575
----------- -----------
GROSS PROFIT................................................ 4,511,951 7,313,573
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 3,297,208 3,805,404
AMORTIZATION OF INTANGIBLES................................. 585,931 5,447
----------- -----------
3,883,139 3,810,851
INCOME FROM OPERATIONS BEFORE OTHER INCOME (EXPENSE)........ 628,812 3,502,722
OTHER INCOME (EXPENSE):
Interest expense.......................................... (75,504) (50,044)
Interest income........................................... 97,603 142,270
Loss on sale of property and equipment.................... (34,782) --
Write-off of loans to affiliate........................... (13,294) --
Gain on sale of marketable securities..................... -- 68,419
----------- -----------
(25,977) 160,645
----------- -----------
NET INCOME.................................................. 602,835 3,663,367
PRO FORMA PROVISION FOR INCOME TAXES (unaudited)............ 232,000 1,410,000
----------- -----------
PRO FORMA NET INCOME (unaudited)............................ $ 370,835 $ 2,253,367
=========== ===========
</TABLE>
See Accompanying Notes to Combined Financial Statements
F-50
<PAGE> 146
ON-BOARD MEDIA, INC. AND AFFILIATES
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
SHARES
--------------- ACCUMULATED
COMMON STOCK OTHER
--------------- COMPREHENSIVE
NON- PAID-IN (LOSS) RETAINED COMPREHENSIVE
VOTING VOTING AMOUNT CAPITAL INCOME EARNINGS INCOME TOTAL
------ ------ ------ -------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- January 1, 1996..... 850 -- $ 850 $ 30,150 ($7,002) $2,392,696 $ -- $2,416,694
COMPREHENSIVE
INCOME:
Net Income................... 602,835 602,835 602,835
Changes in unrealized gain in
marketable securities..... 16,329 16,329 16,329
----------
$ 619,164
==========
DIVIDEND DISTRIBUTIONS......... (712,982) (712,982)
SURRENDERED STOCK.............. (137) (137) (650) (787)
REPLACEMENT STOCK ISSUED....... 713 74 787 100,000 100,787
ISSUANCE OF STOCK.............. 100 100 100
----- -- ------ -------- -------- ---------- ----------
BALANCE -- January 1, 1997..... 1,526 74 1,600 129,500 9,327 2,282,549 2,422,976
COMPREHENSIVE
INCOME:
Net Income................... 3,663,167 3,663,367 3,663,367
Changes in unrealized loss in
marketable securities..... (17,867) (17,867) (17,867)
----------
$3,645,500
==========
DIVIDEND DISTRIBUTIONS......... (336,095) (336,095)
----- -- ------ -------- -------- ---------- ----------
BALANCE -- December 31, 1997... 1,526 74 $1,600 $129,500 ($8,540) $5,609,821 $5,732,381
===== == ====== ======== ======== ========== ==========
</TABLE>
See Accompanying Notes to Combined Financial Statements
F-51
<PAGE> 147
ON-BOARD MEDIA, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 602,835 $ 3,663,367
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization........................................... 585,932 5,447
Depreciation........................................... 99,455 158,343
Write-off of loans to affiliate........................ 13,294 --
Loss on sale of marketable securities.................. -- (68,419)
Loss on sale of property and equipment................. 34,782 --
Write-off of receivables............................... -- 72,543
Provision for bad debt................................. -- 16,248
Compensation for stock issuance........................ 100,000 --
Changes in operating assets and liabilities:
Trade accounts receivable, net of allowance for
doubtful accounts..................................... (1,917,655) (1,751,354)
Other receivables...................................... -- (255,679)
Prepaid expenses and other current assets.............. (455,661) (729,984)
Other assets........................................... (5,200) 5,965
Accounts payable and accrued expenses.................. 294,662 (182,259)
Due to art gallery..................................... 680,943 725,928
Other current liabilities.............................. 17,046 (17,046)
Deferred revenue....................................... 952,844 (353,150)
----------- -----------
Total Adjustments.................................... 400,442 (2,373,417)
----------- -----------
Net Cash Provided by Operating Activities................. 1,003,277 1,289,950
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to affiliates....................................... (55,635) 27,002
Loans to stockholders..................................... -- (64,267)
Purchases of marketable securities........................ (3,547) (366,338)
Proceeds from sale of marketable securities............... -- 415,290
Proceeds from sale of property and equipment.............. 2,549 --
Purchases of property and equipment....................... (567,383) (293,003)
----------- -----------
Net Cash Used in Investing Activities................ (624,016) (281,316)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt, related party.................. (245,000) (245,000)
Proceeds from line of credit.............................. 750,000 700,000
Payment of line of credit................................. -- (749,900)
Payment of note payable................................... -- (200,000)
Proceeds from borrowings from affiliates.................. 5,104 --
Payments of due to affiliates............................. -- (5,104)
Change in subscriptions receivable........................ 9,900 --
Distributions............................................. (712,982) (336,095)
Issuance of common stock.................................. 100 --
----------- -----------
Net Cash Used in Financing Activities................ (192,878) (836,099)
----------- -----------
</TABLE>
F-52
<PAGE> 148
ON-BOARD MEDIA, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
NET INCREASE IN CASH........................................ 186,383 172,535
CASH:
Beginning of year......................................... 74,935 261,318
----------- -----------
End of year............................................... $ 261,318 $ 433,853
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................. $ 78,189 $ 54,008
=========== ===========
Net change in unrealized holding (loss) gain on available
for sale securities.................................... $ (16,329) $ (17,867)
=========== ===========
</TABLE>
See Accompanying Notes to Combined Financial Statements
F-53
<PAGE> 149
ON-BOARD MEDIA, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
NOTE 1 -- THE COMPANY
On-Board Media, Inc. and affiliates (the "Company"), sells advertising in
books, magazines, and videos which are published and distributed to hotels and
cruise ships primarily in the United States, Mexico, and the Caribbean. The
Company also sells promotional advertising which is delivered to cruise
passengers through a live on-board promotions program ("port lecturing").
In addition, the Company administers art auctions aboard various cruise
ships primarily in the Caribbean and Mexico. The Company has contracts with
various cruise lines which grant the Company the exclusive right to administer
these art auctions. The Company has a contract with an art gallery which
provides the art and conducts the auctions.
The accompanying combined financial statements include the accounts of
On-board, Media, Inc., Cruise Management International, Inc. and Boxer Media,
Inc.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination -- The accompanying combined financial statements
include the accounts of the companies listed in Note 1, all of which have common
control. All significant intercompany transactions have been eliminated in the
combination.
Cash and Cash Equivalents -- All highly liquid investments with a maturity
of three months or less from the date of purchase are considered cash
equivalents. The Company maintains its cash in bank deposit accounts which, at
times, exceed federally insured limits. The amount in excess of insured limits
was approximately $221,000 at December 31, 1997. In addition during the year
ended December 31, 1997, the Company maintained two other bank accounts which
are not insured by the Federal Deposit Insurance Corporation. The federally
uninsured amount was approximately $2,829,000 at December 31, 1997. The Company
has not experienced any losses in such accounts. The Company's management
believes that the Company is not exposed to any significant credit risk on its
cash balances.
Trade Accounts Receivable -- The Company's policy is not to require
collateral on trade accounts receivable, which includes port lecturing,
publishing and video receivables. Trade accounts receivable includes
approximately $1,281,000 of receivables at December 31, 1997 which are related
to unpublished books, magazines and videos.
Work-in-Process -- Publication and video costs are deferred along with the
corresponding revenue until the related publications and videos are published.
Work-in-process amounted to $217,377 at December 31, 1997 and is included in
prepaid expenses and other current assets.
Deferred Revenue and Revenue Recognition -- Deferred revenue reflects
advertising revenue which has been sold in advance of the publication of the
related books, magazines, and videos. Revenue is recognized upon publication of
the related books, magazines, and videos.
Due from Cruise Lines and Due to Art Gallery -- The cruise lines collect
all of the revenues from art auction sales made on their cruise ships and submit
the proceeds to the Company net of the cruise lines' fees. The Company then
remits the balance due to the art gallery after deducting its commission, which
is recorded as revenues in the appropriate period. In addition, the cruise lines
may retain additional contractual fees at a higher revenue-sharing rate. Such
additional fees are expended when incurred (see Note 7). Due from cruise lines
amount to $1,697,006 at December 31, 1997 and is included in trade accounts
receivable.
F-54
<PAGE> 150
ON-BOARD MEDIA, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment -- Property and equipment are stated at cost.
Depreciation expense has been recorded by the Company utilizing the
straight-line method over the assets estimated useful lives.
The estimated useful lives for depreciation are as follows:
<TABLE>
<S> <C>
Office and technology equipment............................ 5 - 7 years
Leasehold improvements..................................... 5 - 10 years
</TABLE>
Marketable Securities -- The Company's investment in marketable equity
securities is classified as available for sale and is recorded at fair market
value. Unrealized holding gains and losses are reported as a separate component
of stockholders' equity.
Income Taxes -- The Company has elected to be treated as an S corporation
whereby the profits and losses of the Company are passed directly to the
stockholders for inclusion in their individual tax returns. Therefore, no
provision for income taxes is reflected in the accompanying combined financial
statements.
The Pro Forma provision for income taxes represents a provision for income
taxes as if the Company had operated as a subchapter C corporation.
Management Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions. Those estimates and assumptions affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at December 31, 1997 and the reported amounts of revenues
and expenses during the years ended December 31, 1996 and 1997. Actual results
could differ from those estimates.
Recently Adopted Accounting Pronouncement -- The Company adopted SFAS No.
130, "Reporting Comprehensive Income" on December 31, 1997. The Company reported
comprehensive income in its combined statement of changes in stockholders'
equity. The adoption of SFAS No. 130 resulted in revised and additional
disclosures but had no effect on the financial position or results of operations
of the Company.
NOTE 3 -- CONCENTRATIONS
At December 31, 1997, the Company's trade accounts receivable concentrated
approximately in the following geographic regions:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Caribbean................................................... 66%
United States............................................... 23
Other....................................................... 11
---
100%
===
</TABLE>
In addition, the Company has earned commissions of approximately $485,000
and $870,000 from one cruise line which approximated 49% and 55% of total
commissions for the years ended December 31, 1996 and 1997, respectively. This
same cruise line's balance of approximately
F-55
<PAGE> 151
ON-BOARD MEDIA, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- CONCENTRATIONS (CONTINUED)
$1,147,500 due to the Company at December 31, 1997 represents approximately 68%
of the total due from all cruise lines (included in trade accounts receivable).
The Company has an exclusive, multi-year agreement with one art gallery to
provide all of the art and conduct all of the auctions aboard the cruise ships.
The Company does not anticipate any interruptions in the agreement with the
gallery. However, in the event that the agreement was disrupted for any reason,
management believes that a similar agreement could be obtained with another art
gallery.
NOTE 4 -- PROPERTY AND EQUIPMENT
At December 31, 1997 property and equipment consisted of the following:
<TABLE>
<S> <C>
Office and technology equipment............................. $ 865,763
Leasehold improvements...................................... 257,257
----------
1,123,020
Less accumulated depreciation............................... 328,972
----------
$ 794,048
==========
</TABLE>
Depreciation expense for the years ended December 31, 1996 and 1997 was
$99,455 and $158,343, respectively.
NOTE 5 -- MARKETABLE SECURITIES
The Company has a cash management program which provides for the investment
of excess cash balances in marketable securities. These marketable securities
consist primarily of equity securities from various public companies traded
overseas and in the United States.
The Company has adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" and,
therefore, marketable securities are adjusted to fair value which at December
31, 1997 is as follows:
<TABLE>
<S> <C>
Marketable securities, at cost.............................. $126,891
Unrealized loss............................................. (8,540)
--------
Fair value.................................................. $118,351
========
</TABLE>
The Company sold $415,290 of marketable securities at a gain of $68,419
during the year ended December 31, 1997. No marketable securities were sold
during the year ended December 31, 1996.
F-56
<PAGE> 152
ON-BOARD MEDIA, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- COMMON STOCK
A summary of common stock is as follows:
<TABLE>
<CAPTION>
ONBOARD CRUISE
MEDIA, INC. MANAGEMENT
---------------- INTERNATIONAL, INC.
NON- -------------------- BOXER
VOTING VOTING VOTING NON-VOTING MEDIA, INC. COMBINED
------ ------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Value.............. $ 713 $ 37 $ 713 $ 37 $ 100 $1,600
====== ====== ====== ====== ======= ======
Par value per share...... $ 1 $ 1 $ 1 $ 1 $ 1
Authorized shares........ 1,000 1,000 1,000 1,000 10,000
Shares issued and
outstanding............ 713 37 713 37 100
</TABLE>
NOTE 7 -- ART AUCTION FEES
The Company entered into a four-year agreement with a cruise line which
commenced in July 1996 and called for a higher revenue-sharing percentage to the
cruise line during the first nine months of the agreement, up to a predetermined
maximum amount. The Company recorded this increase in revenue-sharing percentage
as art auction fees in the amount of $47,812 and $104,276 included in cost of
products sold for the years ended December 31, 1996 and 1997, respectively.
NOTE 8 -- RELATED PARTY TRANSACTIONS
Due from Affiliates -- The Company made advances to affiliated entities
which are related through common ownership. These advances are due on demand and
bear interest at 7% per annum and amounted to $12,613 at December 31, 1997.
Due from Stockholder -- The amount due from stockholder arises from
non-interest bearing short-term cash advances. The outstanding balance of these
advances at December 31, 1997 amounted to $64,267.
Common Stock -- During 1996, the majority stockholder of the Company
returned 137 shares of stock to the Company which then concurrently issued 787
shares to a senior executive of the Company, the value of which was recorded as
compensation.
Note Payable -- related party -- At December 31, 1996, the Company had a
$200,000 note payable to a member of the majority stockholder's immediate
family. Interest on this note was payable quarterly at 10% per annum. Interest
expense for the year ended December 31, 1997 was $11,288. On July 25, 1997, the
note was paid in full.
Long-Term Debt -- related party -- See Note 10.
Operating Lease -- The Company entered into an agreement with a partnership
related through common ownership to lease its administrative offices. The lease
commenced on April 30, 1996 and is for a term of ten years (Note 12).
NOTE 9 -- LINE OF CREDIT
The Company has available a $750,000 line of credit with a bank. The line
of credit is collateralized by all of On-Board Media, Inc.'s assets and is
personally guaranteed by one of the
F-57
<PAGE> 153
ON-BOARD MEDIA, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- LINE OF CREDIT (CONTINUED)
Company's stockholders. Interest is payable on a monthly basis at the bank's
base rate of 8.5% per annum.
NOTE 10 -- LONG-TERM DEBT -- RELATED PARTY
The Company has an outstanding balance of $183,750 on a note payable to a
partnership owned by one of the stockholders of the Company at December 31,
1997. The note matures on September 1, 1998 and is payable $61,250 quarterly,
plus interest at 10%.The note is collateralized by substantially all of On-Board
Media, Inc.'s assets and the principal stockholder's stock in On-Board Media,
Inc. The loan is also guaranteed by an affiliate related through common
ownership. Interest expense, relating to this note was $52,960 and $32,003 for
the years ended December 31, 1996 and 1997, respectively.
NOTE 11 -- STOCK-BASED COMPENSATION
On October 19, 1996, a senior executive of the Company received 37.5 shares
of stock, which are fully vested as compensation. The fair market value of the
stock of $100,000 was computed by management as of October 19, 1996 and was
recorded as a contribution to capital.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
Contractual agreements -- The Company has executed contracts with various
cruise lines and hotels which grant it the exclusive right to publish and sell
advertising in books, magazines and videos and to conduct live on-board
promotions programs on the cruise ships. The contracts range from 1 to 6 years
and require various guaranteed minimum payments.
Obligations for guaranteed minimum payments under such contracts as of
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................. $ 3,499,250
1999............................................. 3,921,500
2000............................................. 2,787,500
2001............................................. 97,500
2002............................................. 50,000
-----------
$10,355,750
===========
</TABLE>
Total cruise line fees and magazine royalties under the above agreements
amounted to approximately $6,603,000 and $7,598,000 for the years ended December
31, 1996 and 1997, respectively.
The Company has executed contracts with various cruise lines which grant it
the exclusive right to administer art auctions on the cruise ships. The
contracts range from several months to more than 4 years and require various
guaranteed minimum payments during the first few years of the
F-58
<PAGE> 154
ON-BOARD MEDIA, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
agreements. Obligations for guaranteed minimum payments under such contracts as
of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998.................................................. $530,500
1999.................................................. 85,000
2000.................................................. 4,000
--------
$619,500
========
</TABLE>
Total art auction fees under the above agreements are included in cost of
products sold and amounted to approximately $627,000 and $183,000 for the years
ended December 31, 1996 and 1997, respectively.
Stockholder Agreement -- In 1994 the Company entered into an agreement with
two of its stockholders. The agreement provides one of the Company's
stockholders a base minimum salary of $100,000 annually subject to $25,000
annual increases and contains a non-compete clause for the term of the agreement
and for two years thereafter. The agreement provides another stockholder of the
Company a base minimum annual consulting fee of $6,000 subject to $6,250 annual
increases and contains a non-compete clause for the term of the agreement and
for an indefinite period of time thereafter. The total salary and consulting
fees paid to these stockholders was $21,208 and $156,616 for the years ended
December 31, 1996 and 1997, respectively.
Operating leases -- During 1996, the Company entered into a 10-year
operating lease agreement with a partnership related through common control for
its administrative offices. Rental payments, including sales tax, are
approximately $22,000 per month. In addition, the lease requires the Company to
pay all operating costs associated with the building. The Company, along with
one of its stockholders, are guarantors on the $1.5 million mortgage associated
with this building.
Future minimum lease payments, including sales tax, as of December 31, 1997
are as follows:
<TABLE>
<S> <C>
1998................................................ $ 259,750
1999................................................ 259,750
2000................................................ 259,750
2001................................................ 259,750
2002................................................ 259,750
Thereafter.......................................... 865,833
----------
$2,164,583
==========
</TABLE>
Rent expense and operating costs, including sales tax, was approximately
$196,000 and $419,000 for the years ended December 31, 1996 and 1997,
respectively.
Retirement Plan -- The Company has a qualified retirement plan for all
eligible employees under sec. 401 of the Internal Revenue Code. Under the plan,
the Company's contribution for any year is determined at the discretion of the
Board of Directors; however, in no event may elective deferrals exceed a
specific dollar amount determined by the Internal Revenue Service. Total
contributions made to the 401(K) plan were $0 and $21,793 for the years ended
December 31, 1996 and 1997, respectively.
F-59
<PAGE> 155
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Nuance Global Ships, Inc.
We have audited the accompanying statements of operations and cash flows of
Nuance Global Ships, Inc. (a wholly owned subsidiary of Nuance Global Traders
Inc.) for the period from December 26, 1997 through September 24, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Nuance
Global Ships, Inc. for the period from December 26, 1997 through September 24,
1998, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Miami, Florida
July 16, 1999
F-60
<PAGE> 156
NUANCE GLOBAL SHIPS, INC.
(A WHOLLY OWNED SUBSIDIARY OF
NUANCE GLOBAL TRADERS INC.)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
PERIOD FROM DECEMBER 26, 1997
THROUGH SEPTEMBER 24, 1998
<TABLE>
<S> <C>
Net sales................................................... $ 52,209,630
Cost of sales............................................... 25,001,906
------------
Gross profit................................................ 27,207,724
Selling, general and administrative expenses................ 30,914,258
------------
Loss from operations........................................ (3,706,534)
Other (income) expense:
Management fee to Nuance Global Traders Inc............... 566,000
Interest income........................................... (82,770)
Total other expense......................................... 483,230
Loss before income taxes.................................... (4,189,764)
Provision for income taxes.................................. 172,460
------------
Net loss.................................................... $ (4,362,224)
============
Retained earnings at beginning of year...................... $ 15,338,713
Distribution to parent...................................... (12,280,825)
------------
Accumulated deficit at end of year.......................... $ (1,304,346)
============
</TABLE>
See accompanying notes.
F-61
<PAGE> 157
NUANCE GLOBAL SHIPS, INC.
(A WHOLLY OWNED SUBSIDIARY OF
NUANCE GLOBAL TRADERS INC.)
STATEMENT OF CASH FLOWS
PERIOD FROM DECEMBER 26, 1997
THROUGH SEPTEMBER 24, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(4,362,224)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 350,127
Provision for shrinkage reserve........................... 71,977
Deferred income taxes..................................... 2,247
Changes in operating assets and liabilities:
Accounts receivable.................................... (581,893)
Notes receivable....................................... 418,128
Inventory.............................................. (4,516,754)
Prepaid expenses and other current assets.............. 80,487
Accounts payable....................................... 268,998
Accrued expenses....................................... (1,343,537)
-----------
Net cash used in operating activities..................... (9,612,444)
INVESTING ACTIVITIES
Purchases of property and equipment......................... (281,136)
Proceeds from sale of property and equipment................ 448,784
-----------
Net cash provided by investing activities................... 167,648
-----------
FINANCING ACTIVITIES:
Due to affiliates, net.................................... 6,962,019
-----------
Net cash provided by financing activities................... 6,962,019
Net decrease in cash and cash equivalents................... (2,482,777)
Cash and cash equivalents, beginning of period.............. 3,033,881
-----------
Cash and cash equivalents, end of period.................... $ 551,104
===========
SUPPLEMENTAL NON-CASH DISCLOSURE
Assets transferred from affiliate........................... $ 552,314
===========
</TABLE>
See accompanying notes.
F-62
<PAGE> 158
NUANCE GLOBAL SHIPS, INC.
(A WHOLLY OWNED SUBSIDIARY OF
NUANCE GLOBAL TRADERS INC.)
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Nature of Business
Nuance Global Ships, Inc. (the Company), a Florida corporation and a wholly
owned subsidiary of Nuance Global Traders Inc., operates duty free retail stores
on cruise ships.
Basis of Presentation
The cruise ship operations for the period from December 26, 1997 through
June 25, 1998 were included in the consolidated accounts of Nuance Global
Traders (USA), Inc., a California corporation and a wholly owned subsidiary of
Nuance Global Traders Inc., and were not presented as a separate reporting
entity. Accordingly, the cruise ship operations for the period from December 26,
1997 through June 25, 1998 included in the accompanying financial statements
were carved out of Nuance Global Traders (USA) Inc.'s historical accounting
records. The cruise ship operations for the period from June 26, 1998 through
September 24, 1998 were included in the accounts of Nuance Global Ships, Inc.
and presented as a separate reporting entity.
The accompanying financial statements include costs allocated to Nuance
Global Ships, Inc. by Nuance Global Traders Inc. for certain functions and
services they performed centrally. All allocations and estimates were based on
assumptions Nuance Global Traders Inc.'s management believed were reasonable in
the circumstances. These allocations and estimates are not necessarily
indicative of the costs and expenses that would have resulted if Nuance Global
Ships, Inc. had operated as a separate entity. See Note 4 for a description of
the functions and services and the amounts allocated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounts Receivable
Settlement of amounts due from the cruise line companies occurs upon
completion of each voyage. Credit losses are provided for in the financial
statements and have been within management's expectations.
Property and Equipment
Depreciation is computed by use of the straight-line method over the
estimated useful life of vehicles, furniture, fixtures and equipment, which
ranges from 3 to 5 years.
Revenue Recognition
Revenue from retail product sales is recorded upon customer purchase.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred
income tax assets and liabilities are determined based upon differences between
the financial statement and income tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of
F-63
<PAGE> 159
NUANCE GLOBAL SHIPS, INC.
(A WHOLLY OWNED SUBSIDIARY OF
NUANCE GLOBAL TRADERS INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
management, it is more likely than not that some portion of the income tax
assets will not be realized.
Advertising Expense
The Company expenses advertising costs as incurred. Advertising expense for
the period from December 26, 1997 through September 24, 1998 (period ended
September 24, 1998) amounted to approximately $17,000.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in financial
statements. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. The adoption of SFAS No. 130 had no impact on the Company's net loss.
There are no other components of comprehensive loss other than the Company's net
loss for the period ended September 24, 1998.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
3. INCOME TAXES
The United States and foreign components of (loss) income before income
taxes are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 24,
1998
-------------
<S> <C>
U.S........................................................ $(4,910,774)
Foreign.................................................... 721,010
-----------
Total...................................................... $(4,189,764)
===========
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 24,
1998
-------------
<S> <C>
U.S........................................................ $ --
Foreign.................................................... 172,460
--------
Total...................................................... $172,460
========
</TABLE>
F-64
<PAGE> 160
NUANCE GLOBAL SHIPS, INC.
(A WHOLLY OWNED SUBSIDIARY OF
NUANCE GLOBAL TRADERS INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The differences between the reported provision from income taxes and income
taxes computed at the U.S. statutory federal income tax rate are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER 24,
1998
-------------
<S> <C>
Income tax expense computed at the U.S. statutory rate of
34%...................................................... $(1,424,520)
State income taxes, net of federal impact.................. (251,386)
Increase in valuation allowance............................ 1,848,366
-----------
Total...................................................... $ 172,460
===========
</TABLE>
4. RELATED PARTY TRANSACTIONS
Nuance Global Traders Inc. provided the Company with certain corporate
general and administrative services including legal, treasury and finance fees
paid to Nuance Global Traders Inc. for such services aggregated approximately
$1,407,000 for the period ended September 24, 1998, of this amount, $566,000 is
classified as a management fee. The remainder is included in selling, general
and administrative expenses.
5. COMMITMENTS AND CONTINGENCIES
The Company leases office, warehouse facilities and retail stores under
non-cancelable operating leases. The leases for the retail stores provide for
additional rentals contingent upon increases in the operating expenses of the
lessors. In addition, the Company pays concession fees, calculated as a
percentage of sales, for certain store leases. Certain of the Company's leases
contain scheduled rent increases during the term of the leases. Rent expense,
including contingent rent and concession fees, were approximately $19,880,000
for the period ended September 24, 1998.
6. SUBSEQUENT EVENT
On December 15, 1998, pursuant to an Asset Purchase Agreement, among
Starboard Holdings LTD (Starboard) and Nuance Global Traders Ltd., the parent
company of Nuance Global Traders, Inc., Starboard acquired certain assets and
assumed certain liabilities of Nuance Global Ships, Inc.
F-65
<PAGE> 161
STARBOARD CORPORATE LOGO
<PAGE> 162
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be paid solely by
the Registrant in connection with the sale and distribution of the securities
being registered, other than the underwriting discounts and commissions. All
amounts shown are estimates, except the Securities and Exchange Commission
registration fee and the National Association of Securities Dealers, Inc. filing
fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- -------
<S> <C>
SEC Registration Fee........................................ $34,750
NASD Filing Fee............................................. 13,000
Nasdaq National Market Listing Fee.......................... *
Blue Sky Fees and Expenses (including attorney's fees and
expenses)................................................. *
Transfer Agent and Registrar Fees........................... *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Printing Expenses........................................... *
Miscellaneous............................................... *
-------
Total.................................................. $ *
=======
</TABLE>
- -------------------------
* To be provided by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Amended and Restated Articles of Association provides for
the indemnification of members of the Supervisory Board and Management Board and
officers to the fullest extent permitted by the law of The Netherlands.
The Registrant has entered into indemnity agreements with Philip L. Levine
and Jerry Chafetz. The agreements provide that the Registrant will, to fullest
extent permitted by law, indemnify Philip L. Levine and Jerry Chafetz, as the
case may be, if he is made a party, or threatened to be made a party, in any
action, suit or proceeding by reason of his service with the Registrant.
The Registrant has also obtained directors' and officers' liability
insurance in amounts that it believes are reasonable under the circumstances.
In connection with any registration of registrable securities under the
Shareholders Agreement, the Registrant has agreed to indemnify each seller, any
controlling person (and their respective director or indirect partners, advisory
board members, directors, officers, trustees, members and shareholders) and each
other person who controls any such seller or holder, against various
liabilities, including liabilities under the Securities Act and Exchange Act.
II-1
<PAGE> 163
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the last three years, the Registrant has issued the following
securities without registration under the Securities Act of 1933 as amended (the
"Securities Act") (in each case, except for the issuance described in paragraph
9, giving effect to the 250 for 1 common share split):
1. On September 10, 1998, the Registrant issued and sold 10,000,000 of its
common shares and on September 17, 1998 issued and sold 4,912,250 of its
common shares to our initial investor for an aggregate of $28,700,000.
2. On September 17, 1998, the Registrant issued and sold 2,499,750 of its
common shares to lenders of subordinated debt for an aggregate of
$4,811,548.
3. On September 17, 1998, the Registrant issued and sold 259,750 of its
common shares to a management employee for an aggregate of $500,000.
4. On September 17, 1998, the Registrant issued and sold 415,750 common
shares to an affiliate of our initial investor purchasing on behalf of
management employees for an aggregate of $800,000.
5. On September 17, 1998, the Registrant issued 5,912,500 of its common
shares to the former shareholders of Onboard Media, Inc., Cruise
Management International, Inc. and Boxer Media, Inc. in connection with
the acquisition of these three companies.
6. On September 17, 1998, the Registrant granted options for no
consideration to purchase an aggregate of 500,000 shares at an exercise
price of $1.925 to two employees pursuant to the 1998 Stock Option Plan.
7. On December 21, 1998, the Registrant granted options for no
consideration to purchase an aggregate of 450,000 common shares to 19
employees at an exercise price of $1.925 per share pursuant to the 1998
Stock Option Plan.
8. On February 25, 1999, the Registrant granted options for no
consideration to purchase an aggregate of 50,000 common shares to two
employees at an exercise price of $1.925 per share pursuant to the 1998
Stock Option Plan.
9. On , 1999, pursuant to an amendment to its Articles of
Association, the Registrant effected a 50 for 1 share split, followed
immediately by a 5 for 1 stock dividend.
The common shares issued pursuant to paragraphs 1 through 5 above were
issued in reliance on the exemption from registration under Section 4(2) of the
Securities Act as a transaction not involving a public offering.
The options issued pursuant to paragraphs 6 through 8 above, and any shares
issued upon the exercise of such options, were issued in reliance on the
exemption from registration under Section 4(2) of the Securities Act as a
transaction not involving a public offering.
The common shares issued pursuant to paragraph 9 were issued in a
transaction not involving a "sale" under the Securities Act.
II-2
<PAGE> 164
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following is a list of exhibits filed as a part of this registration
statement.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Amended and Restated Articles of Association of the Company
and English translation.
*4.1 Specimen Certificate for Common Shares.
4.2 12% Junior Subordinated Note issued to Viad Corp.
4.3 Note Agreement, dated as of September 17, 1998, among Miami
Cruiseline Services Holdings II, New York Life Insurance
Company, American Home Assurance Company and The
Northwestern Mutual Life Insurance Company with Form of
Senior Subordinated Note.+
4.4 Debt Securities Purchase Agreement, dated as of September
17, 1998, among Miami Cruiseline Services Holdings II, New
York Life Insurance Company, American Home Assurance Company
and The Northwestern Mutual Life Insurance Company.+
*5.1 Opinion of Stibbe Simont Monahan Duhot.
10.1 Share Purchase Agreement, dated July 31, 1998, between
Cruise Line Holdings Co. and Viad Corp.+
10.2 Stock Subscription and Exchange Agreement, dated as of
August 27, 1998, among Cruise Line Holdings Co., Philip L.
Levine, Jerry Chafetz and the other stockholders named
therein.+
10.3 Asset Purchase Agreement, dated December 15, 1998, between
Starboard Holdings Ltd. and Nuance Global Traders.+
10.4 Employment Agreement, dated as of September 17, 1998, by and
between Cruiseline Holdings Co., Greyhound Leisure Services
and J.P. Miquel.
10.5 Employment Agreement, dated as of September 17, 1998, by and
between Cruiseline Holdings Co., the Onboard Group and
Philip L. Levine.
10.6 Employment Agreement, dated as of September 17, 1998, by and
between Cruiseline Holdings Co., the Onboard Group and Jerry
Chafetz.
*10.7 Separation Agreement, dated August 3, 1999, between Miami
Cruiseline Services and Jorge Fernandez.+
*10.8 Consulting Agreement, dated as of January 1, 1999, between
Miami Cruiseline Services and F.C. Capital Partners LLC.
*10.9 Consulting Agreement, dated as of August 4, 1999, between
Miami Cruiseline Services, Cruiseline Holdings Co. and F.C.
Capital Partners LLC.
*10.10 1998 Stock Option Plan.
10.11 Shareholders Agreement, dated as of September 17, 1998,
among Miami Cruiseline Services, Berkshire Cruise Holdings
LLC and other investors listed on the signature pages
thereto with Joinder Agreements, dated as of November 13,
1998.+
10.12 Indemnity Agreement, dated September 15, 1998, between Miami
Cruiseline Services and Philip Levine.
10.13 Indemnity Agreement, dated September 15, 1998, between Miami
Cruiseline Services and Jerry Chafetz.
</TABLE>
II-3
<PAGE> 165
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*10.14 Management Agreement, dated as of September 17, 1998,
between Miami Cruiseline Services and Berkshire Cruise
Holdings LLC, as amended by Amendment, dated January 1,
1999.
10.15 Fee letter, dated as of September 17, 1998, between
Cruiseline Holdings Co. and Berkshire Partners LLC.
10.16 Fee letter, dated as of September 17, 1998, between
Cruiseline Holdings Co. and F.C. Capital Partners LLC.
*10.17 Lease, dated July 10, 1996, between MICC Venture and
Greyhound Leisure Services.+
*10.18 Lease, dated April 16, 1996, as amended, between Media
Holdings, Ltd. and Onboard Media.
*10.19 Lease, dated April 16, 1996, between Media Holdings, Ltd.
and Cruise Management International.
*10.20 Amendment to Lease, dated September 17, 1998, between Media
Holdings, Ltd. and Onboard Media and Cruise Management
International.
*10.21 Credit Agreement, dated as of September 17, 1998, among
Miami Cruiseline Services Holdings III, Miami Cruiseline
Services Holdings II, Credit Suisse First Boston,
NationsBank, N.A., First Source Financial, Inc. and the
lenders named therein., as amended by First Amendment to the
Credit Agreement, dated October 6, 1998, Second Amendment to
the Credit Agreement, dated November 30, 1998, Third
Amendment to the Credit Agreement, dated March 30, 1999.+
10.22 Form of Put Agreement with Miami Cruiseline Services
Holdings II B.V.
10.23 Joint Venture Agreement for Operation of Miami Airport Duty
Free Joint Venture, dated August 31, 1995, by and among,
Greyhound Leisure Services, Century Duty Free, Inc., Media
Consultants, Inc., Maria J. Argudin and Bayside Company
Stores as amended by First Addendum, dated October 25, 1995.
10.24 Concession Agreement for Operation of Nonexclusive Duty and
Tax Free Concession, Terminal Building, Miami International
Airport between Board of County Commissioners of Dade
County, Florida and Miami Airport Duty Free Joint Venture.+
*#10.25 Agreement, dated April 11, 1996, between Cruise Management
and Park West at Sea, Inc., as amended by Letter Agreement,
dated June 11, 1998 [other Amendments].
*#10.26 Concession Agreement, dated November 23, 1992, by and
between Carnival Cruise Lines, Inc. and Greyhound Leisure
Services as amended by Letter Agreement dated January 4,
1993, Addendum #1, dated January 12, 1993, and Addendum #2,
dated March 3, 1999.
*#10.27 Concession Agreement, dated July 15, 1999, between Royal
Caribbean Cruise Lines and Starboard Holdings Ltd.
*#10.28 Concession Agreement, dated February 25, 1998, between
Holland America Line-Westours, Inc. and Greyhound Leisure
Services.
*#10.29 Concession Agreement, dated January 18, 1996, between
Holland America-Westours, Inc. and Allders International
(USA), Inc., as amended by Amendment, dated March 5, 1999,
between Holland America-Westours, Inc. and Starboard
Holdings Ltd.
*#10.30 Concession Agreement, dated January 18, 1996, between
Holland America-Westours, Inc. and Allders International
(USA), Inc., as amended by Amendment to Concession
Agreement, dated December 15, 1998, between Holland
America-Westours, Inc. and Starboard Holdings Ltd.
</TABLE>
II-4
<PAGE> 166
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
21.1 Subsidiaries.
*23.1 Consent of Stibbe Simont Monahan Duhot (Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Goldstein Schechter Price Lucas Horwitz & Co.,
P.A.
24.1 Power of Attorney (please see signature page).
27.1 Financial Data Schedule.
99.1 Letter from Deloitte & Touche LLP regarding change in
accountants.
</TABLE>
- ---------------
* To be filed by Amendment.
# Confidential treatment request as to certain portions. The term "confidential
treatment" and the mark "#" as used throughout this exhibit means that
material has been omitted and separately filed with the Commission.
+ The Registrant agrees to furnish supplementally to the Commission a copy of
any omitted schedule or exhibit to such agreement upon request by the
Commission.
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
INDEX
-----
<S> <C>
Report of Independent Certified Public Accountants.......... S-1
Report of Independent Certified Public Accountants.......... S-2
Schedule II -- Valuation and Qualifying Accounts............ S-3
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions, are inapplicable or not material, or the information called for
thereby is otherwise included in the financial statements and therefore has been
omitted.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) 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 provisions described under "Item
14 -- Indemnification of Directors and Officers" above, 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.
II-5
<PAGE> 167
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-6
<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, Massachusetts on
this 19th day of August, 1999.
Miami Cruiseline Services Holdings I
B.V.
By: /s/ JOEL E. CUTLER
------------------------------------
Joel E. Cutler
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby authorizes Joel E. Cutler and Bradley M. Bloom, and each of them, with
full power to them, to execute in the name and on behalf of such person any
amendment (including any post-effective amendment) to this Registration
Statement (or any other registration statement for the same offering that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act) and
to file the same, with exhibits thereto, and other documents in connection
therewith, making such changes in this Registration Statement as the person(s)
so acting deems appropriate, and appoints each of such persons, each with full
power of substitution, attorney-in-fact to sign any amendment (including any
post-effective amendment) to this Registration Statement (or any other
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act) and to file the same, with
exhibits thereto, and other documents in connection therein.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOEL E. CUTLER Chairman of the Board and Chief August 19, 1999
- --------------------------------------------------- Executive Officer
Joel E. Cutler
/s/ WILLIAM J. FITZGERALD Acting Interim Chief Financial August 19, 1999
- --------------------------------------------------- Officer (Principal Financial
William J. Fitzgerald Officer and Accounting
Officer)
/s/ BRADLEY M. BLOOM Class A Managing Director August 19, 1999
- ---------------------------------------------------
Bradley M. Bloom
/s/ RANDY PEELER Class A Managing Director August 19, 1999
- ---------------------------------------------------
Randy Peeler
</TABLE>
II-7
<PAGE> 169
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JERRY CHAFETZ Class B Managing Director August 19, 1999
- ---------------------------------------------------
Jerry Chafetz
/s/ DAVID P. FIALKOW Class B Managing Director August 19, 1999
- ---------------------------------------------------
David P. Fialkow
/s/ STEVEN S. FISCHMAN Class B Managing Director August 19, 1999
- ---------------------------------------------------
Steven S. Fischman
/s/ PHILIP L. LEVINE Class B Managing Director August 19, 1999
- ---------------------------------------------------
Philip L. Levine
/s/ J. P. MIQUEL Class B Managing Director August 19, 1999
- ---------------------------------------------------
J. P. Miquel
/s/ LEONARD A. SCHLESINGER Class B Managing Director August 19, 1999
- ---------------------------------------------------
Leonard A. Schlesinger
Registrant's Agent for Service in the United States:
/s/ JOEL E. CUTLER August 19, 1999
- ---------------------------------------------------
Joel E. Cutler
</TABLE>
II-8
<PAGE> 170
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the consolidated financial statements of Greyhound Leisure
Services, Inc. and subsidiaries as of December 31, 1997, and for each of the two
years in the period ended December 31, 1997, and have issued our report thereon
dated July 31, 1999, (included elsewhere in this Registration Statement). Our
audits also included the financial schedule listed in Item 16(b) of this
Registration Statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
July 31, 1999
S-1
<PAGE> 171
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the consolidated financial statements of Starboard Cruise
Services N.V. (formerly Miami Cruiseline Services Holdings I.B.V.) as of
December 31, 1998, and for the period from September 10, 1998 through December
31, 1998, and have issued our report thereon dated March 22, 1999, except as to
Note 14 as to which the date is September , 1999 (included elsewhere in this
Registration Statement). Our audit also included the financial statement
schedule listed in Item 16(b) of this Registration Statement. This schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audit.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Miami, Florida
August 18, 1999
The foregoing report is in the form that will be signed upon completion of
the restatement of capital accounts and the name change described in Note 14 to
the consolidated financial statements.
/s/ ERNST & YOUNG LLP
Miami, Florida
August 18, 1999
S-2
<PAGE> 172
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
STARBOARD CRUISE SERVICES N.V.
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS(A) DEDUCTIONS YEAR
- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PREDECESSOR:
Year ended December 31, 1996
Deducted from asset accounts:
Allowance for doubtful
accounts..................... $357,698 $ 75,600 $ -- $113,853 $319,445
======== ======== ======== ======== ========
Year Ended December 31, 1997
Deducted from asset accounts:
Allowance for doubtful
accounts..................... $319,445 $ 43,274 $ -- $ 35,450 $327,269
======== ======== ======== ======== ========
Period Ended September 17, 1998
Deducted from asset accounts:
Allowance for doubtful
accounts..................... $327,269 $114,564 $ -- $ -- $441,833
======== ======== ======== ======== ========
SUCCESSOR:
Period Ended December 31, 1998
Deducted from asset accounts:
Allowance for doubtful
accounts..................... $ -- $108,363 $520,071 $ 2,073 $626,361
======== ======== ======== ======== ========
Six Months Ended June 30, 1999
(unaudited)
Deducted from asset accounts:
Allowance for doubtful
accounts..................... $626,361 $ 48,373 $ -- $116,964 $557,770
======== ======== ======== ======== ========
</TABLE>
- -------------------------
(a) Acquired in connection with the Greyhound Leisure Services, Inc. and the
Onboard Group acquisitions.
S-3
<PAGE> 173
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Amended and Restated Articles of Association of the Company
and English translation.
*4.1 Specimen Certificate for Common Shares.
4.2 12% Junior Subordinated Note issued to Viad Corp.
4.3 Note Agreement, dated as of September 17, 1998, among Miami
Cruiseline Services Holdings II, New York Life Insurance
Company, American Home Assurance Company and The
Northwestern Mutual Life Insurance Company with Form of
Senior Subordinated Note.+
4.4 Debt Securities Purchase Agreement, dated as of September
17, 1998, among Miami Cruiseline Services Holdings II, New
York Life Insurance Company, American Home Assurance Company
and The Northwestern Mutual Life Insurance Company.+
*5.1 Opinion of Stibbe Simont Monahan Duhot.
10.1 Share Purchase Agreement, dated July 31, 1998, between
Cruise Line Holdings Co. and Viad Corp.+
10.2 Stock Subscription and Exchange Agreement, dated as of
August 27, 1998, among Cruise Line Holdings Co., Philip L.
Levine, Jerry Chafetz and the other stockholders named
therein.+
10.3 Asset Purchase Agreement, dated December 15, 1998, between
Starboard Holdings Ltd. and Nuance Global Traders.+
10.4 Employment Agreement, dated as of September 17, 1998, by and
between Cruiseline Holdings Co., Greyhound Leisure Services
and J.P. Miquel.
10.5 Employment Agreement, dated as of September 17, 1998, by and
between Cruiseline Holdings Co., the Onboard Group and
Philip L. Levine.
10.6 Employment Agreement, dated as of September 17, 1998, by and
between Cruiseline Holdings Co., the Onboard Group and Jerry
Chafetz.
*10.7 Separation Agreement, dated August 3, 1999, between Miami
Cruiseline Services and Jorge Fernandez.+
*10.8 Consulting Agreement, dated January 1, 1999, between Miami
Cruiseline Services and F.C. Capital Partners LLC.
*10.9 Consulting Agreement, dated August 4, 1999, between Miami
Cruiseline Services, Cruiseline Holdings Co. and F.C.
Capital Partners LLC.
*10.10 1998 Stock Option Plan.
10.11 Shareholders Agreement, dated as of September 17, 1998,
among Miami Cruiseline Services, Berkshire Cruise Holdings
LLC and other investors listed on the signature pages
thereto with Joinder Agreements, dated as of November 13,
1998.+
10.12 Indemnity Agreement, dated September 15, 1998, between Miami
Cruiseline Services and Philip Levine.
10.13 Indemnity Agreement, dated September 15, 1998, between Miami
Cruiseline Services and Jerry Chafetz.
*10.14 Management Agreement, dated as of September 17, 1998,
between Miami Cruiseline Services and Berkshire Cruise
Holdings LLC as amended by Amendment, dated January 1, 1999.
</TABLE>
<PAGE> 174
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.15 Fee letter, dated as of September 17, 1998, between
Cruiseline Holdings Co. and Berkshire Partners LLC.
10.16 Fee letter, dated as of September 17, 1998, between
Cruiseline Holdings Co. and F.C. Capital Partners LLC.
*10.17 Lease, dated July 10, 1996, between MICC Venture and
Greyhound Leisure Services.+
*10.18 Lease, dated April 16, 1996, as amended, between Media
Holdings, Ltd. and Onboard Media.
*10.19 Lease, dated April 16, 1996, between Media Holdings, Ltd.
and Cruise Management International.
*10.20 Amendment to Lease, dated September 17, 1998, between Media
Holdings, Ltd. and Onboard Media and Cruise Management
International.
*10.21 Credit Agreement, dated as of September 17, 1998, among
Miami Cruiseline Services Holdings III, Miami Cruiseline
Services Holdings II, Credit Suisse First Boston,
NationsBank, N.A., First Source Financial, Inc. and the
lenders named therein., as amended by First Amendment to the
Credit Agreement, dated October 6, 1998, Second Amendment to
the Credit Agreement, dated November 30, 1998, Third
Amendment to the Credit Agreement, dated March 30, 1999.+
10.22 Form of Put Agreement with Miami Cruiseline Services
Holdings II B.V.
10.23 Joint Venture Agreement for Operation of Miami Airport Duty
Free Joint Venture, dated August 31, 1995, by and among,
Greyhound Leisure Services, Century Duty Free, Inc., Media
Consultants, Inc., Maria J. Argudin and Bayside Company
Stores as amended by First Addendum, dated October 25, 1995.
10.24 Concession Agreement for Operation of Nonexclusive Duty and
Tax Free Concession, Terminal Building, Miami International
Airport between Board of County Commissioners of Dade
County, Florida and Miami Airport Duty Free Joint Venture.+
*#10.25 Agreement, dated April 11, 1996, between Cruise Management
and Park West at Sea, Inc., as amended by Letter Agreement,
dated June 11, 1998 [other Amendments].
*#10.26 Concession Agreement, dated November 23, 1992, by and
between Carnival Cruise Lines, Inc. and Greyhound Leisure
Services as amended by Letter Agreement dated January 4,
1993, Addendum #1, dated January 12, 1993, and Addendum #2,
dated March 3, 1999.
*#10.27 Concession Agreement, dated July 15, 1999, between Royal
Caribbean Cruise Lines and Starboard Holdings Ltd.
*#10.28 Concession Agreement, dated February 25, 1998, between
Holland America Line-Westours, Inc. and Greyhound Leisure
Services.
*#10.29 Concession Agreement, dated January 18, 1996, between
Holland America-Westours, Inc. and Allders International
(USA), Inc., as amended by Amendment, dated March 5, 1999,
between Holland America-Westours, Inc. and Starboard
Holdings Ltd.
*#10.30 Concession Agreement, dated January 18, 1996, between
Holland America-Westours, Inc. and Allders International
(USA), Inc., as amended by Amendment to Concession
Agreement, dated December 15, 1998, between Holland
America-Westours, Inc. and Starboard Holdings Ltd.
21.1 Subsidiaries.
*23.1 Consent of Stibbe Simont Monahan Duhot (Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
</TABLE>
<PAGE> 175
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
23.3 Consent of Ernst & Young LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Goldstein Schechter Price Lucas Horwitz & Co.,
P.A.
24.1 Power of Attorney (please see signature page).
27.1 Financial Data Schedule.
99.1 Letter from Deloitte & Touche LLP regarding change in
accountants.
</TABLE>
- ---------------
* To be filed by Amendment.
# Confidential treatment request as to certain portions. The term "confidential
treatment" and the mark "#" as used throughout this exhibit means that
material has been omitted and separately filed with the Commission.
+ The Registrant agrees to furnish supplementally to the Commission a copy of
any omitted schedule or exhibit to such agreement upon request by the
Commission.
<PAGE> 1
Exhibit 4.2
EXECUTION COPY
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT. FURTHERMORE, THIS NOTE MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED OTHER THAN IN COMPLIANCE WITH THE PROVISIONS OF SECTION
4 OF THIS NOTE.
THIS NOTE AND ALL OBLIGATIONS OF THE COMPANY HEREUNDER ARE SUBORDINATE AND
JUNIOR TO THE PRIOR PAYMENT IN FULL IN CASH OF ALL SENIOR INDEBTEDNESS AS
DEFINED HEREIN.
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.
Junior Subordinated Note due May 15, 2009
US$10,000,000 May 15, 2009
FOR VALUE RECEIVED, the undersigned Miami Cruiseline Services Holdings
II B.V., a Dutch private company with limited liability (the "Company"), hereby
promises to pay to the order of Viad Corp., a Delaware corporation (the
"Seller"), or its registered assigns, at the address set forth in Section 13.6
of the Share Purchase Agreement dated as of July 31, 1998, between the Seller
and the Company (the "Share Purchase Agreement"), or at such other place as the
Holder of this Note shall from time to time have designated to the Company in
writing, on May 15, 2009 (the "Maturity Date"), Ten Million United States
Dollars (US $10,000,000), and to pay interest thereon as provided in Section 2
hereof.
1. THE NOTE. This Note is the junior subordinated note of the Company referred
to in Section 3.2 of the Share Purchase Agreement. Certain capitalized terms are
used herein as defined in Section 7 of this Note; other terms defined in the
Share Purchase Agreement and not otherwise defined in Section 7 hereof or
elsewhere in this Note are used herein with the meanings as defined in the Share
Purchase Agreement. The Company will furnish a copy of the Share Purchase
Agreement to any Holder of this Note free of charge upon written request.
2. PAYMENT OF INTEREST.
2.1. Payment of Interest. This Note shall accrue interest from the date
hereof, on the principal amount hereof from time to time unpaid, at a rate per
annum equal to twelve percent (12%) (compounded quarterly on the basis of a year
of 365 days, actual days elapsed). The interest shall be payable in the manner
set forth below, semiannually on March 1, and September
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1, of each year and on the Maturity Date (unless such day is not a business day,
in which event on the next succeeding business day), with the first interest
payment to be made on March 1, 1999 (each of such dates being an "Interest
Payment Date").
Each payment of interest shall be payable in cash; provided, however,
that, subject to Section 2.2 hereof, prior to the Maturity Date, interest
payments on this Note may, at the Company's election, be paid by issuing
additional subordinated notes (the "PIK Notes") in an original principal amount
equal to such interest payment. PIK Notes issued hereunder shall have terms
substantially identical to the terms of this Note but shall be dated and bear
interest from the Interest Payment Date for which each such PIK Note is
issuable.
2.2. Applicable High Yield Discount Obligation Payments.
Notwithstanding Section 2.1, if the aggregate amount of accrued and unpaid
interest (including all interest in respect of the PIK Notes) and all unpaid
original issue discount on any Interest Payment Date following the fifth
anniversary of the issuance of this Note would, but for this provision, exceed
an amount equal to the product of (x) the issue price (as defined in Code
Sections 1273(b) and 1274(a)) of this Note and (y) the yield to maturity
(interpreted in accordance with Code Section 163(i)) of this Note (such product
being the "Maximum Accrual") then all accrued and unpaid interest (including, if
necessary, interest in respect of the PIK Notes) and original issue discount on
this Note in excess of an amount equal to the Maximum Accrual shall be paid in
cash by the Company to the holders of this Note on such Interest Payment Date.
3. PAYMENT OF PRINCIPAL. The Company covenants that so long as this Note is
outstanding:
3.1. Payment at Maturity of Note. On the Maturity Date, or on any
accelerated maturity of this Note, the Company shall pay the entire principal
amount of the Notes then outstanding, together with all accrued and unpaid
interest thereon.
3.2. Voluntary Prepayments.
3.2.1 Prepayment. The Company may at any time and from
time to time prepay without penalty or premium all or part of the
principal amount of the Notes then outstanding, at 100% of the
principal amount being prepaid, together with all accrued interest
thereon and all other amounts payable in connection therewith. From and
after the date such payment is made, the interest on the principal
amount so prepaid shall cease to accrue.
3.2.2 Selection of Notes for Voluntary Prepayment. Each
prepayment permitted by Section 3.2 shall be made so that the Notes
then held by each Holder shall be prepaid in a principal amount which
shall bear the same ratio, as nearly as may be, to the total principal
amount being prepaid as the principal amount of such Notes held by such
Holder shall bear to the aggregate principal amount of all Notes then
outstanding.
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3.3. Mandatory Prepayments.
3.3.1 Mandatory Prepayment upon Consummation of Initial
Public Offering. Immediately upon the consummation of an Initial Public
Offering, the Company shall prepay the entire principal amount of all
of the Notes outstanding, on a date no later than 30 days following the
consummation of the Initial Public Offering, at a prepayment price
equal to 100% of the aggregate principal amount thereof, together with
all accrued interest thereon and all other amounts payable in
connection therewith, in cash. From and after the date such prepayment
is made, interest on the principal amount so prepaid shall cease to
accrue.
3.3.2 Mandatory Prepayment in the Event of a Change of
Control. In the event of a Change of Control, the Company shall prepay
the entire principal amount of all of the Notes then outstanding, on a
date no later than 30 days following the Change of Control, at a
prepayment price equal to 100% of the aggregate principal amount
thereof, together with all accrued interest thereon and all other
amounts payable in connection therewith, in cash. From and after the
date such prepayment is made, interest on the principal amount so
prepaid shall cease to accrue.
3.4. Permanent Retirement of Notes. Notes prepaid in full or otherwise
acquired by the Company shall be permanently retired and canceled and shall not
under any circumstances be reissued or resold.
3.5. Setoff. The Company hereby waives any right to setoff or
counterclaim it might have against any Holder of a Note in respect of any amount
payable by the Company thereunder.
3.6. Reports. The Company will furnish to the Holder: (i) 90 days after
the end of each fiscal year of the Company or at such other time as they are
first made available to any holder of Senior Indebtedness, the consolidated
balance sheet of the Company and its Subsidiaries as at the end of such fiscal
year and the consolidated statements of income, cash flows and changes in
stockholders' equity of the Company and its Subsidiaries for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
accompanied by the report of independent certified public accountants of
recognized national standing issued with respect thereto and (ii) 45 days after
the end of the first three fiscal quarters of each fiscal year of the Company or
at such other time as they are made available to any holder of Senior
Indebtedness, the consolidated balance sheet of the Company and its Subsidiaries
as at the end of such quarter and the consolidated statements of income, cash
flows and changes in stockholders' equity for such quarter and the portion of
the fiscal year then ended of the Company and its Subsidiaries, setting forth in
each case in comparative form the figures for the corresponding periods of the
previous fiscal year.
3.7. Notification. The Company shall promptly (i) notify each Holder of
a Note of any amendment to any Senior Indebtedness and (ii) send each Holder a
copy of such amendment.
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3.8. No Cash Dividend Payments on any Preferred Stock or Common Stock.
So long as the Notes remain outstanding, in whole or in part, the Company shall
not pay cash dividends on any preferred or common stock of the Company without
the prior written consent of the Holders of a majority of the principal amount
outstanding of the Notes.
4. RESTRICTIONS ON TRANSFER; RELATED PROCEDURES.
4.1. Transfer Limitations. The Notes may be transferred to a third
party (including an affiliate of Viad Corp.), in whole or in part; provided,
that (i) such transfer is of not less than $1,000,000 in the aggregate, in
denominations of not less than $10,000 and (ii) such transferee shall not be
engaged in any business similar to or in competition with the businesses
heretofore or hereafter engaged in by Greyhound Leisure Services, Inc. and its
subsidiaries. Except as specifically permitted in this Section 4, the Holder may
not sell, assign, transfer or otherwise grant any direct or indirect interest in
this Note or the Indebtedness evidenced hereby.
4.2. Registration, Transfer and Exchange of Notes. The Company shall
keep at its principal office a register in which shall be entered the name and
address of the registered Holders of the Notes and all transfers, exchanges and
other issuances of the Notes or any replacement or substitute Notes. The
ownership of the Notes shall be proven by such register; provided, however, that
such register shall not be conclusive as to ownership of any Note in the event
of manifest error in such register. In connection with each proposed transfer of
Notes, the Holder will deliver written notice (the "Transfer Notice") to the
Company not fewer than five (5) business days prior to the proposed transfer,
describing in reasonable detail the proposed transfer (including, without
limitation, the identity of the transferee and the nature of its affiliation
with the Holder, together with an opinion of counsel, in form and substance and
from counsel reasonably satisfactory to the Company, to the effect that such
transfer of Notes may be effected without registration of such Notes under the
Securities Act of 1933, as amended). Thereafter, at any time prior to maturity
or redemption of such Notes, the Holder thereof may surrender such Notes
(subject to compliance with the applicable provisions of this Section 4)
together with a request to transfer at said office of the Company. Thereafter,
if and only if such transfer complies with Section 4.1, without expense (other
than transfer taxes, if any) to the Holder, the Company shall (so long as the
other provisions of this Section 4 have been satisfied) promptly issue in
exchange therefor another Note or Notes, dated the most recent date upon which
interest has been paid (whether in cash or by issuance of PIK Notes) on the
surrendered Notes (or, if no interest has been paid, September __, 1998), for
the same aggregate principal amount as the unpaid principal amount of the Notes
so surrendered, having the same maturity and rate of interest, containing the
same provisions and subject to the same terms and conditions as the Notes so
surrendered. Subject to the limitations provided in Section 4.1, each such new
Note shall be registered in the name of the transferee designated in the
Transfer Notice by the surrendering Holder.
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5. SUBORDINATION TO THE SENIOR INDEBTEDNESS. The obligations of the
Company in respect of all Subordinated Indebtedness are hereby made subordinate
and junior to the prior payment in full of all Senior Indebtedness, to the
extent and in the manner hereinafter provided in this Section 5:
5.1. The obligations of the Company in respect of the principal amount
of and interest on, and for payment of any other amounts in respect of, the
Subordinated Indebtedness shall be subordinate and junior in right of payment,
to the extent and in the manner provided in this Section 5, to any Senior
Indebtedness, and the Subordinated Indebtedness is hereby subordinated as a
claim against the Company or any of its assets to the prior payment in full of
all Senior Indebtedness, in each case whether such right of payment or claim in
respect of the Subordinated Indebtedness be (i) in the ordinary course of
business, or (ii) in the event of any distribution of the assets of the Company
upon any voluntary or involuntary dissolution, winding-up, total or partial
liquidation or reorganization, restructuring or refinancing, whether by judicial
proceedings or otherwise, or bankruptcy, insolvency, receivership or other
statutory or common law proceedings or arrangements, including without
limitation any proceeding under the Bankruptcy Code of the Netherlands,
involving the Company, Miami Cruiseline Services Holdings I B.V., Miami
Cruiseline Services Holdings III B.V., any subsidiary thereof or any successor
of any thereof (each a "Loan Party"), the readjustment of the liabilities of any
Loan Party or any assignment for the benefit of creditors or any marshaling of
the assets or liabilities of any Loan Party (collectively referred to
hereinafter as a "Reorganization").
5.2. Notwithstanding anything to the contrary contained in this Note,
(a) the Company will not make, and no Holder of Subordinated Indebtedness will
accept or receive from, or on behalf of, the Company, any payment of any
Subordinated Indebtedness, whether in cash, securities or other property or by
way of conversions, exchange or otherwise, and (b) no such payment shall become
(or be considered) due, in each case until all amounts outstanding under the
Senior Loan Agreements and the Senior Notes have been paid in full and all
obligations to extend credit under the Senior Loan Agreements shall have been
irrevocably terminated; provided, however, that (i) the Company shall issue and
the Holder may accept and receive PIK Notes or, so long as no default should
exist or be created thereby in respect of the Senior Loan Agreements or the
Senior Notes, cash in payment of regularly scheduled interest obligations under
the Notes, and (ii) on and after the Maturity Date, so long as no default (or
event or circumstance which, whether with or without notice or passage of time
or both, would constitute a default or an event of default) under or with
respect to any Senior Indebtedness shall have occurred and then be continuing,
the Company may make, and the Holder may accept and receive, payments of
principal and interest.
5.3. In the event of any Reorganization relative to the Company or its
property, then all Senior Indebtedness shall first be paid in full before any
payment of any kind or character (whether in cash, securities or otherwise) is
made on account of any Subordinated Indebtedness, and in any such proceedings
seeking to effect a Reorganization any payment or distribution of any kind or
character, whether in cash or property or securities which may be payable or
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deliverable in respect of any Subordinated Indebtedness, shall be paid or
delivered directly to the holders of the Senior Indebtedness or their
representative or representatives under the agreements pursuant to which the
Senior Indebtedness may have been issued for application in payment of the
Senior Indebtedness, unless and until all such Senior Indebtedness shall have
been paid and satisfied in full.
5.4. In any proceedings with respect to a Reorganization relating to
the Company or its property, unless and until all Senior Indebtedness shall have
been paid in full, each Holder of Subordinated Indebtedness hereby irrevocably
authorizes the holders of the Senior Indebtedness: (i) to prove and enforce any
claims on the Subordinated Indebtedness either in their own name or in the name
of the Holder of Subordinated Indebtedness as such Holder's attorney-in-fact,
(ii) to the extent not prohibited by provisions of applicable law which cannot
be waived, to vote claims comprising Subordinated Indebtedness and to accept or
reject on behalf of the Holders of Subordinated Indebtedness any plan proposed
in connection with any such Reorganization, (iii) to accept any payment or
distribution made with respect to the Subordinated Indebtedness and to apply
such payment or distribution to the payment of the Senior Indebtedness, and (iv)
to do any and all things and to execute any and all instruments necessary to
effectuate the foregoing either in their own name or in the name of the Holder
of Subordinated Indebtedness as such Holder's attorney-in-fact.
5.5. If, notwithstanding the foregoing, the Company, or any person or
entity on behalf of the Company, makes any payment on account of the
Subordinated Indebtedness at a time when such payment is not permitted by the
Notes or any payment or distribution of the assets of the Company of any kind or
character shall be received by any Holder of Subordinated Indebtedness (other
than any payments in cash or in kind as contemplated by Section 2 of this Note,
payments of principal permissible under Section 5.2 and any payments to Seller
under the Stock Purchase Agreement) before all amounts outstanding under the
Senior Loan Agreements or the Senior Notes have been paid in full, such payment
or distribution shall be held in trust by such Holder of Subordinated
Indebtedness apart from such Holder's other assets for the benefit of the
holders of Senior Indebtedness and paid over to such holders of Senior
Indebtedness or their representative or representatives under the agreements
pursuant to which the Senior Indebtedness may have been issued (who shall have
the right to convert any such assets into cash) for application (including the
application of such cash and cash proceeds) to the payment of Senior
Indebtedness until all Senior Indebtedness shall have been paid in full in
accordance with its terms, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
5.6. Except for the act of acceleration (and not any enforcement in
respect thereof) provided for in Section 6 hereof, no Holder of Subordinated
Indebtedness shall, without the prior written consent of a majority of the
holders of the outstanding principal amount of the Senior Indebtedness and a
majority in outstanding principal amount of the Senior Notes, accelerate the
maturity of, or institute proceedings (whether in an action at law, suit in
equity, arbitration proceeding or other proceeding of a litigation or dispute
settlement nature) to enforce, any
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Subordinated Indebtedness notwithstanding any term or provision to the contrary
contained in the Notes or the Share Purchase Agreement or in any agreement or
instrument relating thereto; provided, however, that the provisions of this
sentence shall not apply to an action instituted on or after the Maturity Date
(unless there shall have occurred and been continuing on such day any default or
event or circumstance which (whether with or without notice or passage of time
or both), would constitute a default or an event of default under the Senior
Loan Agreements or in respect of any other Senior Indebtedness then outstanding,
in which case such provisions shall not apply to an action instituted on or
after the later of (i) the Maturity Date or (ii) sixty days after the Holder
notifies the Company or the lenders under the Senior Loan Agreements of its
intent to institute such action). Without limiting the generality of the
foregoing sentence, in no event shall any Holder of Subordinated Indebtedness,
without such written consent, commence or join with any other creditor or
creditors of any Loan Party in commencing any proceeding against any Loan Party
seeking to effect a Reorganization of any Loan Party.
5.7. For the purposes of this Section 5, no Senior Indebtedness shall
be deemed to have been paid in full unless the holder thereof shall have
received and have been permitted to retain cash equal to the amount thereof then
outstanding.
5.8. Each Holder of this Note, by its acceptance hereof, agrees that,
until all Senior Indebtedness is repaid in full, it will not exercise any right
of reimbursement, subrogation, contribution, offset or other claim against any
creditor of any Loan Party arising by contract or operation of law in connection
with any payment made or required to be made by such Holder. After payment in
full, of all Senior Indebtedness, any Holder shall be entitled to such rights of
reimbursement, subrogation, contribution and offset to the fullest extent
permitted by law.
5.9. The provisions of this Section 5 are for the benefit of the
holders of Senior Indebtedness and may be enforced directly by them against any
Holder of the Notes. Each Holder of this Note acknowledges and agrees, by
acceptance hereof, that the holders of the Senior Indebtedness have relied upon
and will continue to rely upon the subordination provided for herein in entering
into the Senior Loan Agreements and any other agreements relating to the Senior
Indebtedness to which they are a party and making the extensions of credit
provided for therein or otherwise constituting Senior Indebtedness. The Holder
of this Note hereby waives notice of or proof of reliance hereon.
5.10. The provisions of this Section 5 are for the purpose of defining
the relative rights of the holders of the Senior Indebtedness on the one hand,
and the Holder of the Notes on the other hand, and none of such provisions shall
impair, as between the Company and the Holders of the Notes, the obligation of
the Company, which is unconditional and absolute, to pay to any such Holder the
principal thereof and interest thereon.
5.11. No holder of Senior Indebtedness shall be prejudiced in its right
to enforce the subordination contained herein in accordance with the terms
hereof by any act or failure to act on the part of the Company.
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5.12. The subordination provisions contained herein may not be
rescinded, canceled, amended or modified in any way without the prior written
consent thereto of the holders of at least a majority in principal amount of the
Senior Indebtedness to be affected by such rescission, cancellation, amendment,
modification or shortening.
5.13. The subordinations effected, and the rights created, by this
Section 5 shall not be affected by (i) any amendment of or any addition of or
supplement to any instrument, document or agreement relating to any Senior
Indebtedness, (ii) any exercise or non-exercise of any right, power or remedy
under or in respect of any Senior Indebtedness or any instrument, document or
agreement relating thereto, (iii) the release, sale, exchange or surrender, in
whole or in part, of any part of the assets, property or business of any Loan
Party to which the holders of, or any guarantor of or pledgor securing, any
Senior Indebtedness may be entitled or any security for such pledge or guaranty,
or (iv) any waiver, consent, release, indulgence, extension, renewal,
modification, delay, or other action, or inaction or omission in respect of any
Senior Indebtedness or any instrument, document or agreement relating thereto or
any security therefor or pledge or guaranty thereof, whether or not the Holder
of this Note shall have had notice or knowledge of any of the foregoing and
regardless of whether the Holder of this Note shall have consented or objected
thereto.
5.14. The Company agrees not to publish or give, or to permit any of
its subsidiaries, affiliates or agents to publish or give, or to acquiesce in
the publishing or giving of, any financial statement or other credit information
to any creditor or prospective creditor of the Company or any of its
subsidiaries which refers to or indicates the existence of the Subordinated
Indebtedness without also stating that the Subordinated Indebtedness is
subordinated to the prior payment in full of all Senior Indebtedness on the
terms and conditions contained in this Section 5.
6. ACCELERATION.
6.1. Automatic Acceleration Upon Certain Events. If (a) the
Indebtedness evidenced by the Senior Notes and the Senior Loan Agreements shall
be accelerated pursuant to the default provisions thereof or (b) the Company
shall (i) commence a voluntary case under the Bankruptcy Code of the Netherlands
as from time to time in effect, or authorize, by appropriate proceedings of its
board of directors or other governing body, the commencement of such a voluntary
case; (ii) have entered against it an order for relief in any involuntary case
under the Bankruptcy Code of the Netherlands which order remains undischarged
and unstayed for ninety (90) consecutive days; (iii) seek relief as a debtor
under any applicable law, other than the Bankruptcy Code of the Netherlands, of
any jurisdiction relating to the liquidation or reorganization of debtors or to
the modification or alteration of the rights of creditors, or consent to or
acquiesce in such relief; (iv) be the subject of an order by a court of
competent jurisdiction (A) finding it to be bankrupt or insolvent, (B) ordering
or approving its liquidation, reorganization or any modification or alteration
of the rights of its creditors, or (C) assuming custody of, or appointing a
receiver or other custodian for, all or substantially all of its property which
remains undischarged and
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unstayed for more than sixty (60) consecutive days; or (v) make an assignment
for the benefit of, or enter into a composition with, its creditors, or appoint
or consent to the appointment of a receiver or other custodian for all or
substantially all of its property; then, the unpaid balance of the Notes shall
automatically become due and payable, together with interest accrued hereon,
without presentation, presentment, protest or further demand or notice of any
kind, all of which are hereby expressly waived, and the Holder may proceed,
subject to Section 5 hereof, to enforce payment of such amount or part thereof
in such manner as it may elect.
6.2. Optional Acceleration upon Event of Default. If the Company fails
(i) to make any payment of interest under the Notes on an Interest Payment Date
(whether in cash or by delivery of additional PIK Notes) in accordance with
Section 2 hereof, (ii) to pay in cash all principal and interest outstanding
under the Notes by the close of business on the Maturity Date or (iii) to comply
with Section 3.3.1, 3.3.2 or 3.8, then any Holder may notify the Company of such
default. The Company will promptly notify all other Holders of Notes of such
default. If such default shall not have been cured or waived by the Holders of a
majority of the principal amount outstanding of the Notes within 30 days of
receipt of such default notice by the Company, the Holders of a majority of the
principal amount outstanding of the Notes may declare all amounts thereunder to
be immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Company and the Holder
may proceed, subject to Section 5 hereof, to enforce payment of such amount or
part thereof in such manner as it may elect.
7. DEFINITIONS. As used herein, the following terms shall have the meanings
indicated:
7.1. The term "Change of Control" shall mean such time as: (a)
Berkshire Cruise Holdings LLC, and its affiliates (collectively, "Berkshire")
beneficially own securities of the Company representing less than eighty percent
(80%) of the voting power of all classes of voting securities of the Company
that Berkshire beneficially owned on the date of the closing under the Share
Purchase Agreement; or (b) a sale or transfer of all or substantially all of the
assets of the Company to any person or group has been consummated; or (c) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any new
directors whose election was approved by a vote of a majority of the directors
then still in office, who either were directors at the beginning of such period
or whose election or nomination for the election was previously so approved)
cease for any reason to constitute a majority of the directors of the Company
then in office.
7.2. The term "Company" shall have the meaning set forth in the first
paragraph of this Note.
7.3. The terms "consolidated" and "consolidating", when used with
reference to any term, shall mean that term as applied to the accounts of the
Company and all of its subsidiaries.
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7.4. The term "Holder" shall mean the payee of this Note and each payee
of any PIK Note, unless such payee shall have presented such Note to the Company
for transfer, in whole or in part, in accordance with the terms and in
compliance with the conditions of Section 4 hereof, in which case the term
"Holder" shall mean each subsequent holder of an interest in this Note or any
PIK Note.
7.5. The term "Indebtedness" shall mean all liabilities and obligations
(including without limitation obligations to repay the principal amounts of
borrowed money, pay interest thereon and prepayment or other premiums or
penalties and to pay or reimburse fees, indemnities and expenses) in respect of
debt (including without limitation obligations for borrowed money, obligations
evidenced by bonds, notes, debentures or similar instruments, obligations in
respect of the deferred purchase price for goods and services other than trade
payables incurred in the ordinary course of business and obligations in respect
of capital leases), or under any interest rate cap, swap, collar or other
agreements or arrangements intended to protect against fluctuations in interest
rates, or under any reimbursement obligation relating to a letter of credit, or
any guarantee in respect of any of the foregoing.
7.6. The term "Initial Public Offering" shall mean an underwritten
public offering of Common Stock pursuant to an effective registration statement
under the Securities Act of 1933, as amended, and shall, in addition, include
any sale, pursuant to such an underwritten registered public offering of any
common stock by any affiliate of the Company, the net proceeds of which are
contributed or loaned to the Company.
7.7. The term "Interest Payment Date" shall have the meaning set forth
in Section 2 of this Note.
7.8. The term "legal requirement" shall mean any federal, state, local
or foreign law, statute, standard, ordinance, code, order, rule, regulation,
resolution, promulgation, or any order, judgment or decree of any court,
arbitrator, tribunal or governmental authority, or any license, franchise,
permit or similar right granted under any of the foregoing, or any similar
provision having the force and effect of law.
7.9. The term "Loan Party" shall have the meaning set forth in Section
5.1 of this Note.
7.10. The term "Maturity Date" shall have the meaning set forth in the
first paragraph of this Note.
7.11. The term "Note" or "Notes" shall mean this Note, the PIK Notes
and any notes issued in partial or full exchange for this Note or any PIK Note
pursuant to Section 4 hereof.
7.12. The term "PIK Notes" shall have the meaning set forth in Section
2 of this Note.
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7.13. The term "Reorganization" shall have the meaning set forth in
Section 5.1 of this Note.
7.14. The term "Seller" shall have the meaning set forth in the first
paragraph of this Note.
7.15. The term "Senior Indebtedness" shall mean: (i) all Indebtedness
of the Company and its subsidiaries arising under the Credit Agreement dated as
of the date hereof among Miami Cruiseline Services Holdings III B.V., the
Company, the Lenders named therein and Credit Suisse First Boston (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or restructuring (including, without limitation, increasing the amount
of available borrowings thereunder) all or a portion of the Indebtedness under
any such agreement or any successor or replacement agreement and whether by the
same or any other agents, lender or group of lenders (collectively, the "Senior
Loan Agreements"); (ii) all Indebtedness evidenced by the Notes (as defined in
the Debt Securities Purchase Agreement dated as of the date hereof (the "Senior
Note Purchase Agreement") among the Company, New York Life Insurance Company,
American Home Assurance Company and The Northwestern Mutual Life Insurance
Company, as may be amended from time to time, including any notes issued in
replacement thereof upon any transfer of such Notes (collectively, the "Senior
Notes"); (iii) all Indebtedness of the Company and its subsidiaries arising
under, or in respect of, any interest rate cap, swap, collar or other agreements
or arrangements intended to protect against fluctuations in interest rates with
respect to any Senior Indebtedness; (iv) all other Indebtedness of the Company
or any subsidiary of the Company whether incurred prior to, on or after the date
hereof, unless, in the case of any particular Indebtedness, the instruments
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Notes; (v) the principal of, and premium, if any, on, all
renewals, extensions, restructurings and refundings of Senior Indebtedness as
defined in clauses (i), (ii), (iii) and (iv) above, and guarantees of the
foregoing; (vi) all fees, costs, indemnities, expenses, reimbursement
obligations and other obligations payable under the Senior Loan Agreements or
any other agreement relating thereto or in respect of Senior Indebtedness as
defined in clauses (i), (ii), (iii), (iv) and (v) above accrued to the date of
payment, whether before or after the institution by or against the Company or
any of its subsidiaries of proceedings under the Bankruptcy Code of the
Netherlands, and guarantees of the foregoing; and (vii) without limiting the
generality of the foregoing, all interest arising on or with respect to Senior
Indebtedness as defined in clauses (i), (ii), (iii), (iv), (v) and (vi) above
accrued to the date of payment, whether before or after the institution by or
against the Company or any of its subsidiaries of proceedings under the
Bankruptcy Code of the Netherlands at the rate provided for in the documentation
with respect to such Senior Indebtedness, whether or not such interest is an
allowed claim under applicable law, and guarantees of the foregoing. Any and all
amounts of Senior Indebtedness outstanding shall continue to constitute Senior
Indebtedness for all purposes of the Notes notwithstanding that such Senior
Indebtedness or any claim in respect thereof may
-11-
<PAGE> 12
be disallowed, avoided or subordinated pursuant to insolvency law or equitable
principles for any reason, including, without limitation, as a fraudulent
transfer or conveyance.
7.16. The term "Senior Loan Agreements" shall have the meaning set
forth in Section 7.15 of this Note.
7.17. The term "Senior Notes" shall have the meaning set forth in
Section 7.15 of this Note.
7.18. The term "Share Purchase Agreement" shall have the meaning set
forth in the first paragraph of this Note.
7.19. The term "Subordinated Indebtedness" shall mean (i) the principal
of and interest and all other obligations arising on or with respect to all
Indebtedness of the Company to the Holder evidenced by the Notes, and (ii) any
and all claims, damages and liabilities of any nature whatsoever arising
hereunder or with respect to any Subordinated Indebtedness as defined in clause
(i) above which the Holder of Subordinated Indebtedness may now or hereafter
have against the Company or any of its subsidiaries.
7.20. The term "Transfer Notice" shall have the meaning set forth in
Section 4.2 of this Note.
8. MISCELLANEOUS.
8.1. Confidentiality. Unless such information is otherwise publicly
available, all information furnished to or obtained by any Holder of this Note
or any or its affiliates pursuant to Section 3.6 shall be deemed proprietary and
confidential, and shall be held in confidence by the recipient thereof;
provided, that any or all such information may be disclosed to any prospective
purchaser of Notes so long as such prospective purchaser agrees, in writing, to
hold such information in confidence.
8.2. Notices. Any notice or other communication to the Company or the
Seller in connection with this Note shall be deemed to be delivered and received
by such addressee if delivered or made in the manner stipulated in the notice
provisions of the Share Purchase Agreement and to the addresses specified
therein. Notice to any other holder of record of a Note will be made in such
manner to such holder at its address set forth in the register referred to in
Section 4 hereof.
8.3. Withholding of Taxes, etc. There shall be withheld from any
payment of the principal of, or interest on, this Note, any and all amounts (in
respect of Taxes or otherwise) required to be withheld under legal requirements
applicable to the Company, the Notes or the payee in question. The Seller and
each transferee or prospective transferee of this Note, by its acceptance of
this Note, agrees to execute and deliver to the Company any and all Tax related
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<PAGE> 13
forms, certificates or other documents that the Company may request in
connection with this Note or the payment of the principal of this Note or
interest thereon including, without limitation, documentation in form and
substance satisfactory to the Company in its reasonably exercised discretion
necessary to support any reduction in withholding of Taxes, and otherwise to
comply with all applicable legal requirements.
8.4. Waiver of Presentment, etc. The parties hereto, including the
undersigned maker and all guarantors and endorsers, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically otherwise provided herein, and assent to extensions of the time of
payment, or forbearance or other indulgence without notice.
8.5. Headings. The headings in this Note are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof.
8.6. Binding Effect. The terms of this Note shall bind and inure to the
benefit of the Company, the Seller and their respective successors, permitted
assigns and representatives.
8.7. Governing Law. This Note shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
8.8. WAIVER OF RIGHT TO JURY TRIAL. EACH OF THE COMPANY, BY ITS
EXECUTION HEREOF AND THE HOLDER, BY ITS ACCEPTANCE HEREOF, WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS NOTE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS NOTE, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE
COMPANY AND THE HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER
IN ENTERING INTO THE SHARE PURCHASE AGREEMENT PURSUANT TO WHICH THIS NOTE HAS
BEEN ISSUED AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE COMPANY AND THE HOLDER FURTHER WARRANT AND REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE. IN THE EVENT OF LITIGATION, THIS NOTE MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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<PAGE> 14
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed by its officer thereunto duly authorized.
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.
By /s/ Bradley Bloom
---------------------------------------
Title: Director A
The undersigned accepts
the terms of this Note:
VIAD CORP.
By /s/ Wayne A. Wright
--------------------------------
Title: Vice President
-14-
<PAGE> 1
EXHIBIT 4.3
================================================================================
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.
-----------------------------
NOTE AGREEMENT
-----------------------------
DATED AS OF SEPTEMBER 17, 1998
US$25,188,452 15% SENIOR SUBORDINATED NOTES DUE SEPTEMBER 15, 2006
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(NOT PART OF AGREEMENT)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. PAYMENTS............................................................................................... 1
1.1 Interest Payments............................................................................. 1
1.2 Maximum Accrual Payment....................................................................... 2
1.3 Scheduled Principal Payments.................................................................. 2
1.4 Optional Principal Payments................................................................... 3
1.5 Offer to Pay Upon Change in Control........................................................... 4
1.6 Offer to Pay on First Catch-Up Date........................................................... 6
1.7 Application of Payments; Payments Among Noteholders........................................... 7
1.8 Notation of Notes on Payment.................................................................. 8
1.9 No Other Payments of Principal; Acquisition of Notes.......................................... 8
1.10 Manner of Payments............................................................................ 9
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.......................................................... 9
2.1 Registration of Notes......................................................................... 9
2.2 Exchange of Notes............................................................................. 10
2.3 Replacement of Notes.......................................................................... 10
2.4 Issuance Taxes................................................................................ 11
3. GENERAL COVENANTS...................................................................................... 11
3.1 Payment of Taxes and Claims................................................................... 11
3.2 Maintenance of Properties; Corporate Existence; etc........................................... 11
3.3 Payment of Notes and Maintenance of Office.................................................... 12
3.4 Pension Plans................................................................................. 12
3.5 Year 2000 Compliance.......................................................................... 13
4. NEGATIVE COVENANTS..................................................................................... 13
4.1 Mergers and Consolidations.................................................................... 13
4.2 Restricted Payments........................................................................... 14
4.3 Incurrence of Debt............................................................................ 15
4.4 Transactions with Affiliates.................................................................. 16
4.5 Restrictive Agreements........................................................................ 17
4.6 Private Offering.............................................................................. 17
4.7 Seniority to Junior Subordinated Debt......................................................... 17
5. REPORTING COVENANTS.................................................................................... 17
5.1 Financial and Business Information............................................................ 17
5.2 Officer's Certificates........................................................................ 21
5.3 Accountants' Certificates..................................................................... 21
5.4 Inspection.................................................................................... 21
6. EVENTS OF DEFAULT...................................................................................... 22
6.1 Events of Default............................................................................. 22
6.2 Default Remedies.............................................................................. 24
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (CONTINUED)
(NOT PART OF AGREEMENT)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.3 Annulment of Acceleration of Notes............................................................ 26
7. SUBORDINATION.......................................................................................... 26
7.1 General....................................................................................... 26
7.2 Insolvency.................................................................................... 26
7.3 Proofs of Claim............................................................................... 27
7.4 Payment Default in Respect of Senior Debt..................................................... 27
7.5 Specified Nonpayment Default in Respect of Senior Debt........................................ 28
7.6 Turnover of Payments.......................................................................... 29
7.7 Subordination Unaffected by Certain Events.................................................... 30
7.8 Waiver and Consent............................................................................ 30
7.9 Reinstatement of Subordination................................................................ 30
7.10 Obligations Not Impaired...................................................................... 31
7.11 Payment of Senior Debt; Subrogation........................................................... 31
7.12 Reliance of Holders of Senior Debt............................................................ 31
7.13 Identity of Holders of Senior Debt............................................................ 32
7.14 Amendments to Senior Credit Facility.......................................................... 32
8. TAX INDEMNIFICATION; CURRENCY OF PAYMENT; USURY SAVINGS................................................ 32
8.1 Tax Indemnification........................................................................... 32
8.2 Currency of Payment........................................................................... 35
8.3 General Interest Provisions................................................................... 36
9. INTERPRETATION OF THIS AGREEMENT....................................................................... 37
9.1 Terms Defined................................................................................. 37
9.2 Accounting Principles......................................................................... 55
9.3 Directly or Indirectly........................................................................ 55
9.4 Section Headings and Table of Contents and Construction....................................... 55
9.5 Governing Law................................................................................. 56
10. MISCELLANEOUS.......................................................................................... 56
10.1 Communications................................................................................ 56
10.2 Reproduction of Documents..................................................................... 57
10.3 Survival; Entire Agreement.................................................................... 57
10.4 Successors and Assigns........................................................................ 57
10.5 Amendment and Waiver.......................................................................... 58
10.6 Expenses...................................................................................... 59
10.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc............................................ 60
10.8 Indemnification of Each Holder of the Notes................................................... 61
10.9 Execution in Counterpart...................................................................... 62
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS (CONTINUED)
(NOT PART OF AGREEMENT)
PAGE
----
Annex 1 -- Address of Purchasers; Payment Instructions
Annex 2 -- Address of Company
Attachment A -- Form of Note
iii
<PAGE> 5
NOTE AGREEMENT
NOTE AGREEMENT, dated as of September 17, 1998, among MIAMI CRUISELINE
SERVICES HOLDINGS II B.V., a besloten vennootschap met beperkte
aansprakelijkheid (private company with limited liability) organized under the
laws of The Netherlands, having its legal seat in Amsterdam (together with its
successors and assigns, the "COMPANY"), and NEW YORK LIFE INSURANCE COMPANY,
AMERICAN HOME ASSURANCE COMPANY and THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY (each, together with its successors and assigns, a "PURCHASER" and
collectively, the "PURCHASERS").
RECITALS
WHEREAS, pursuant to the Debt Securities Purchase Agreements, the
Purchasers have agreed to purchase from the Company, and the Company has agreed
to sell to the Purchasers, Twenty-Five Million One Hundred Eighty-Eight Thousand
Four Hundred Fifty-Two United States Dollars (US$25,188,452) in aggregate
principal amount of the Notes; and
WHEREAS, the Company and the Purchasers wish to enter into this
Agreement to govern the terms of the Notes;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties to this Agreement hereby agree as
follows:
1. PAYMENTS
1.1 INTEREST PAYMENTS.
Interest payable on each Note shall be computed on the basis of a
360-day year of twelve 30-day months on the unpaid principal balance thereof
from the date of such Note at the rate of fifteen percent (15%) per annum (the
"CONTRACT RATE"), and shall be payable, in arrears, semiannually on the
fifteenth day of March and September in each year, commencing with the March 15
or September 15 next succeeding the date thereof, until the principal thereof
shall have become due and payable, and interest shall be payable on demand on
any overdue principal (including any overdue partial payment of principal) and
overdue Prepayment Compensation Amount, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest (the due date of such
payments to be determined without giving effect to any grace period), at the
Default Rate; provided, that on any semiannual interest payment date commencing
on March 15, 1999 through and including September 15, 2001 (each such interest
payment date is referred to herein as a "CAPITALIZED INTEREST PAYMENT DATE"), so
long as the principal amount of any of the Notes shall not have become due and
payable at such time, the Company may satisfy its obligation to pay interest at
the Contract Rate for the semiannual period ending on a Capitalized Interest
Payment Date by:
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<PAGE> 6
(a) paying on such Capitalized Interest Payment Date, in cash,
none, any part or all of the interest accrued on the principal amount
of such Note for such semiannual period at the Contract Rate; and
(b) capitalizing on such Capitalized Interest Payment Date the
portion of such interest not paid in cash pursuant to the immediately
preceding clause (a) (all such accrued interest capitalized from time
to time is referred to herein as "CAPITALIZED INTEREST") by adding such
Capitalized Interest to the principal amount of such Note.
Capitalized Interest on any Note shall be deemed for all purposes to be
principal of such Note, whether or not such Note is marked to indicate the
addition of such Capitalized Interest to the principal amount thereof pursuant
to Section 1.8. Interest shall begin to accrue on Capitalized Interest beginning
on and including the interest payment date on which such Capitalized Interest is
added to the principal amount of the related Note, and such interest shall
accrue and be paid, together with the interest on the remaining principal amount
of the Note, in accordance with this Section 1.1. The Company shall provide to
each holder of Notes prompt written notice of any such payment of interest in
cash and/or capitalization of interest, in accordance with the notice provisions
of Section 10.1.
1.2 MAXIMUM ACCRUAL PAYMENT.
Notwithstanding Section 1.1(b), if the aggregate amount of accrued and
unpaid interest (including Capitalized Interest) and all unpaid original issue
discount on any interest payment date following the fifth anniversary of the
issuance of the Notes (the first such date, being March 15, 2004, is referred to
herein as the "FIRST CATCH-UP DATE") would, but for this provision, exceed an
amount equal to the product of:
(a) the issue price (as defined in sections 1273(b) and
1274(a) of the IRC) of the Notes; and
(b) the yield to maturity (interpreted in accordance with
section 163(i) of the IRC) of the Notes (such product, the "MAXIMUM
ACCRUAL");
then all accrued and unpaid interest (including, if necessary, Capitalized
Interest) and original issue discount on the Notes in excess of an amount equal
to the Maximum Accrual shall be paid in cash by the Company to the holders of
the Notes on such interest payment date.
1.3 SCHEDULED PRINCIPAL PAYMENTS.
On September 15, 2005, the Company shall pay, and there shall become
due and payable, an amount equal to fifty percent (50%) of the then remaining
principal amount of the Notes (including Capitalized Interest, if any) remaining
outstanding at such time, at one hundred percent (100%) of the principal amount
paid, together with interest accrued and unpaid thereon to the date of payment.
The entire principal of the Notes remaining outstanding on September 15, 2006,
together with interest accrued thereon, shall become due and payable on such
date. The payment required to be made on September 15, 2005 and the payment
required to be made at maturity on September 15, 2006 are each hereinafter
referred to as a "REQUIRED PRINCIPAL PAYMENT."
2
<PAGE> 7
1.4 OPTIONAL PRINCIPAL PAYMENTS.
(a) OPTIONAL PRINCIPAL PAYMENTS ON OR AFTER THIRD ANNIVERSARY.
In addition to prepayments made pursuant to Section 1.4(b), at any time
on or after the third anniversary of the Closing Date, the Company may
pay the principal of the Notes, in whole or in part, in an amount not
less than the Minimum Note Denomination (or, if the aggregate
outstanding principal amount of the Notes is less than the Minimum Note
Denomination at such time, then such principal amount), together with
interest on such principal amount then being paid accrued to the
payment date, and the Prepayment Compensation Amount determined with
respect to the principal being so paid.
(b) OPTIONAL PRINCIPAL PAYMENT IN CONNECTION WITH QUALIFIED
EXIT. In addition to prepayments made pursuant to Section 1.4(a), at
any time prior to the third anniversary of the Closing Date and within
thirty (30) days after the consummation of a Qualified Exit, the
Company may prepay the principal of the Notes, in whole or in part, in
an amount not less than the Minimum Note Denomination (or, if the
aggregate outstanding principal amount of the Notes is less than the
Minimum Note Denomination at such time, then such principal amount),
together with interest on such principal amount then being paid accrued
to the payment date, and the Prepayment Compensation Amount determined
with respect to the principal being so paid.
(c) NOTICE OF OPTIONAL PRINCIPAL PAYMENT. The Company will
give notice of any optional payment of the Notes made pursuant to this
Section 1.4 to each holder of the Notes not less than thirty (30) days
or more than sixty (60) days before the date fixed for payment
(provided that the Company shall promptly update and amend such notice
with respect to the payment date in the case of payments made pursuant
to Section 1.4(b), specifying:
(i) such date;
(ii) the Section under which the payment is to be
made;
(iii) the principal amount of each Note to be paid on
such date;
(iv) the interest to be paid on each such Note,
accrued to the date fixed for payment; and
(v) the Prepayment Compensation Amount (or, if any
Standard Prepayment Compensation Amount shall be payable, an
estimate thereof), if any, due in connection with such
payment.
Such notice shall
(A) certify all facts that are conditions precedent
to any such payment, and
(B) in the case where such payment is to be made
pursuant to Section 1.4(b), set forth a detailed description
of the terms of such Qualified Exit and, if
3
<PAGE> 8
any Standard Prepayment Compensation Amount shall be payable
as a result thereof, a detailed calculation of the estimate
thereof.
In the event that any Standard Prepayment Compensation shall be payable
as a result of such prepayment, the Company shall deliver a detailed
calculation of the actual Prepayment Compensation Amount one (1)
Business Day prior to the date of such prepayment.
(d) PAYMENT OF NOTES. Notice of payment having been so given,
the aggregate principal amount of the Notes specified in such notice,
together with the Prepayment Compensation Amount and accrued interest
thereon shall become due and payable on the specified payment date;
provided, however, that in the case where such payment is to be made
pursuant to Section 1.4(b), such payment shall not be due and payable
on such date if
(I) the Company shall fail to consummate such
Qualified Exit, or such transaction shall be consummated but
shall fail to meet the definition of a Qualified Exit; and
(II) the Company shall have delivered a certificate
to the holders of the Notes, on or prior to the Business Day
immediately preceding such specified payment date, certifying
that the condition set forth in the immediately preceding
clause (I) has been satisfied, together with an explanation
thereof.
1.5 OFFER TO PAY UPON CHANGE IN CONTROL.
(a) NOTICE OF CHANGE IN CONTROL NOTICE EVENT. In the event of
the obtaining of knowledge of a Change in Control Notice Event by any
Senior Officer (including, without limitation, via the receipt of
notice of a Change in Control Notice Event from any holder of Notes),
the Company will, within five (5) Business Days after the occurrence of
such event, give notice of such Change in Control Notice Event to each
holder of Notes. Each such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) refer to this Section 1.5; and
(iv) specify, in reasonable detail, the nature and
date of the Change in Control Notice Event.
(b) OFFER IN RESPECT OF A CHANGE IN CONTROL. In the event of a
Change in Control, the Company, within five (5) Business Days after the
occurrence of such event (or, in the case of any Change in Control the
consummation or finalization of which would involve any action of the
Company or the Parent, at least twenty (20) days prior to such Change
in Control), will give notice of such Change in Control to each holder
of Notes. Such notice shall contain an irrevocable separate offer to
each holder of Notes to
4
<PAGE> 9
repurchase all, but not less than all, of the Notes held by such holder
on a date (the "CHANGE IN CONTROL PAYMENT DATE") specified in such
notice that is not less than twenty (20) days and not more than thirty
(30) days after the date of such notice, at a purchase price equal to
one hundred one percent (101%) of the aggregate principal amount
thereof and all interest accrued and unpaid on the principal amount
thereof to the Change in Control Payment Date. Each such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) specify, in reasonable detail, the nature and
date of the Change in Control;
(iv) specify the Change in Control Payment Date;
(v) specify the principal amount of each Note
outstanding;
(vi) specify the interest that would be due on each
Note offered to be paid, accrued to the Change in Control
Payment Date; and
(vii) specify that the Notes shall be prepaid at a
purchase price equal to one hundred one percent (101%) of the
aggregate principal amount thereof and all interest accrued
and unpaid on the principal amount thereof to the Change in
Control Payment Date.
If the Company shall not have received a written response to such
notice from any holder of Notes within ten (10) Business Days after the
date of posting of such notice to such holder of Notes, then the
Company shall immediately send a second notice to each such holder of
Notes.
(c) ACCEPTANCE, REJECTION. Each holder of Notes shall have the
option to accept or reject such offered payment. In order to accept
such offered payment, a holder of Notes shall cause a notice of such
acceptance to be delivered to the Company at least five (5) days prior
to the Change in Control Payment Date. A failure to accept in writing
such written offer of payment as provided in this Section 1.5(c), or a
written rejection of such offered prepayment, shall be deemed to
constitute a rejection of such offer.
(d) PAYMENT. The offered payment shall be made at one hundred
one percent (101%) of the principal amount of the Notes to be prepaid,
together with interest accrued to and determined as of the Change in
Control Payment Date.
(e) EFFECT OF OPTIONAL PRINCIPAL PAYMENT. In the event that,
in connection with any transaction which would result in a Change in
Control, the Company duly shall have exercised its rights pursuant to
Section 1.4 with respect to:
5
<PAGE> 10
(i) all of the Notes prior to the date upon which it
is required to make the offer pursuant to Section 1.5(b), the
Company shall not be required to comply with this Section 1.5;
and
(ii) less than all of the Notes prior to the date
upon which it is required to make the offer pursuant to
Section 1.5(b), the Company shall be required to comply with
this Section 1.5 with respect to that portion of the Notes
with respect to which it has not exercised its rights pursuant
to Section 1.4.
1.6 OFFER TO PAY ON FIRST CATCH-UP DATE.
(a) OFFER ON FIRST CATCH-UP DATE. The Company will, at least
twenty (20) days, but not more than thirty (30) days, prior to the
First Catch-Up Date, give notice of the First Catch-Up Date to each
holder of Notes. Such notice shall contain an irrevocable separate
offer to each holder of Notes to repurchase, on the First Catch-Up
Date, Notes held by such holder in a principal amount equal to the
product of Ten Million Dollars ($10,000,000) multiplied by such
holder's Pro Rata Share at a purchase price equal to one hundred five
and twenty-five one-hundredths percent (105.25%) of the aggregate
principal amount so repurchased together with all interest accrued and
unpaid on such principal amount to the First Catch-Up Date. Each such
notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) specify the First Catch-Up Date, namely, March
15, 2004;
(iv) specify the principal amount of each Note
outstanding;
(v) specify the interest that would be due on each
Note offered to be paid, accrued to the First Catch-Up Date;
and
(vi) specify that the Notes shall be prepaid at a
purchase price equal to one hundred five and twenty-five
one-hundredths percent (105.25%) of the aggregate principal
amount thereof and all interest accrued and unpaid on the
principal amount thereof to the First Catch-Up Date.
If the Company shall not have received a written response to such
notice from any holder of Notes within ten (10) Business Days after the
date of posting of such notice to such holder of Notes, then the
Company shall immediately send a second notice to each such holder of
Notes.
(b) ACCEPTANCE, REJECTION. A holder of Notes shall have the
option to accept or reject the offer to prepay made pursuant to this
Section 1.6 by causing a notice of such acceptance or rejection to be
delivered to the Company at least five (5) days prior to the First
Catch-Up Date. A failure by a holder to respond to the offer to prepay
made
6
<PAGE> 11
pursuant to Section 1.6(a) within five (5) days prior to the First
Catch-Up Date shall be deemed to constitute a rejection of such offer
by such holder.
(c) PAYMENT. The offered payment shall be made at one hundred
five and twenty-five one-hundredths percent (105.25%) of the principal
amount of the Notes to be prepaid, together with interest accrued to
and determined as of the First Catch-Up Date.
(d) EFFECT OF OPTIONAL PRINCIPAL PAYMENT. In the event that,
in connection with the First Catch-Up Date, the Company duly shall have
exercised its rights pursuant to Section 1.4 with respect to:
(i) all of the Notes prior to the date upon which it
is required to make the offer pursuant to Section 1.6(a), the
Company shall not be required to comply with this Section 1.6;
and
(ii) less than all of the Notes prior to the date
upon which it is required to make the offer pursuant to
Section 1.6(a), the Company shall be required to comply with
this Section 1.6 with respect to that portion of the Notes
with respect to which it has not exercised its rights pursuant
to Section 1.4.
1.7 APPLICATION OF PAYMENTS; PAYMENTS AMONG NOTEHOLDERS.
(a) EFFECT OF OPTIONAL PARTIAL PAYMENTS ON REQUIRED PAYMENTS.
Each payment of principal of any Notes made pursuant to Section 1.4
shall be applied, with respect to any Note being prepaid:
(i) first, to Capitalized Interest remaining unpaid
at such time; and
(ii) second, after payment in full of all unpaid
Capitalized Interest in respect of such Note, to reduce the
then remaining Required Principal Payments with respect to
such Note in inverse order of the maturities thereof.
(b) EFFECT OF OTHER PARTIAL PAYMENTS ON REQUIRED PAYMENTS.
Each payment of principal of any Notes made pursuant to Section 1.5 or
Section 1.6 shall be applied, with respect to any Note being prepaid:
(i) first, to Capitalized Interest remaining unpaid
at such time; and
(ii) second, after payment in full of all unpaid
Capitalized Interest in respect of such Note, to reduce each
of the then remaining Required Principal Payments due with
respect to such Note ratably.
(c) APPLICATION AMONG NOTEHOLDERS. If at the time that any
payment of interest by the Company is made pursuant to the provisions
of Section 1.1 there is more than one Note outstanding, each of the
aggregate amount of the interest payment made in cash and the aggregate
amount of interest capitalized pursuant to Section 1.1 shall be
allocated among the Notes at the time outstanding pro rata in
proportion to the respective unpaid principal amounts of all such
outstanding Notes, such that the proportion of the
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individual interest payments in respect of each Note on the date such
interest is paid which is paid in cash is identical. If at the time any
payment of the principal of the Notes made pursuant to Section 1.3 or
Section 1.4 is due there is more than one Note outstanding, the
aggregate principal amount of each such required or optional partial
payment of the Notes shall be allocated among the Notes at the time
outstanding pro rata in proportion to the respective unpaid principal
amounts of all such outstanding Notes. If, at the time any payment of
the principal of the Notes made pursuant to Section 1.5 or Section 1.6
is due there is more than one Note outstanding, the aggregate principal
amount of each such payment of the Notes shall be allocated solely to
the Note or Notes so being paid.
1.8 NOTATION OF NOTES ON PAYMENT.
Upon:
(a) any partial payment of a Note; or
(b) any Capitalized Interest being added to the principal
amount of any Note pursuant to Section 1.1;
the holder of such Note may (but shall not be required to), at its option:
(i) surrender such Note to the Company pursuant to
Section 2.2 in exchange for a new Note in a principal amount
equal to the principal amount remaining unpaid on the
surrendered Note;
(ii) make such Note available to the Company for
notation thereon of the portion of the principal so paid or so
added to the principal amount thereof in respect of
Capitalized Interest; or
(iii) mark such Note with a notation thereon of the
portion of the principal so paid or so added to the principal
amount thereof in respect of Capitalized Interest.
In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
1.9 NO OTHER PAYMENTS OF PRINCIPAL; ACQUISITION OF NOTES.
Except for payments of principal made in accordance with this Section
1, the Company may not make any payment of principal in respect of the Notes.
The Company will not, and will not permit any Subsidiary or any Affiliate to,
directly or indirectly, acquire or make any offer to acquire any Notes.
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1.10 MANNER OF PAYMENTS.
(a) MANNER OF PAYMENT. The Company shall pay all amounts
payable with respect to each Note (without any presentment of such
Notes and without any notation of such payment being made thereon) by
crediting, by federal funds bank wire transfer, the account of the
holder thereof in any bank in the United States of America as may be
designated in writing by such holder, or in such other manner as may be
reasonably directed or to such other address in the United States of
America as may be reasonably designated in writing by such holder (and
as to which (absent subsequent notice from such holder pursuant to this
Section 1.10(a)) the Company may conclusively rely). Annex 1 shall be
deemed to constitute notice, direction or designation (as appropriate)
by the Purchasers to the Company with respect to payments to be made to
the Purchasers as aforesaid. In the absence of such written direction,
all amounts payable with respect to each Note shall be paid by check
mailed and addressed to the registered holder of such Note at the
address shown in the register maintained by the Company pursuant to
Section 2.1.
(b) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with
respect to, any Note shall fall due on a day other than a Business Day,
then such payment shall be made on the first Business Day following the
day on which such payment shall have so fallen due; provided that if
all or any portion of such payment shall consist of a payment of
interest, for purposes of calculating such interest, such payment shall
be deemed to have been originally due on such first following Business
Day, such interest shall accrue and be payable to (but not including)
the actual date of payment, and the amount of the next succeeding
interest payment shall be adjusted accordingly.
(c) PAYMENTS, WHEN RECEIVED. Any payment to be made to the
holders of Notes hereunder or under the Notes shall be deemed to have
been made on the Business Day such payment actually becomes available
at such holder's bank prior to 12:00 noon (local time of such bank),
or, if such payment becomes available after 12:00 noon on such Business
Day, such payment shall be deemed to have been received on the next
Business Day.
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
2.1 REGISTRATION OF NOTES.
The Company will keep at its office, maintained pursuant to Section
3.3, a register for the registration and transfer of Notes. The name and address
of each holder of one or more Notes, each transfer thereof made in accordance
with Section 2.2 and the name and address of each transferee of one or more
Notes shall be registered in such register. The Person in whose name any Note
shall be registered shall be deemed and treated as the owner and holder thereof
for all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 2.2.
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2.2 EXCHANGE OF NOTES.
(a) EXCHANGE OF NOTES. Upon surrender of any Note at the
office of the Company maintained pursuant to Section 3.3, duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder's attorney duly
authorized in writing, the Company will execute and deliver, at the
Company's expense (except as provided in Section 2.2(b)), a new Note or
Notes in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note
shall be registered in the name of such Person as such holder may
request, shall be substantially in the form of Attachment A. Each such
new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date
of the surrendered Note if no interest shall have been paid thereon.
Each such new Note shall carry the same rights to unpaid interest and
interest to accrue that were carried by the Note so exchanged or
transferred. Notes shall not be transferred in denominations of less
than the Minimum Note Denomination, provided that a holder of Notes may
transfer its entire holding of Notes regardless of the principal amount
of such holder's Notes.
(b) COSTS. The Company will pay the cost of delivering to or
from such holder's home office or custodian bank from or to the
Company, the surrendered Note and any Note issued in substitution or
replacement for the surrendered Note. The Company may require payment
of a sum sufficient to cover any stamp tax or governmental charge
imposed in respect of any such transfer of Notes.
2.3 REPLACEMENT OF NOTES.
Upon receipt by the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of an
institutional investor, notice from such institutional investor of such loss,
theft, destruction or mutilation), and:
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company; provided, however, that if the
holder of such Note is a Purchaser, an institutional investor or a
nominee either, the unsecured agreement of indemnity of such Purchaser
or institutional investor (but not of any nominee therefor) shall be
deemed to be satisfactory; or
(b) in the case of mutilation, upon surrender and cancellation
thereof;
the Company at its own expense will execute and deliver, in lieu thereof, a
replacement Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
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2.4 ISSUANCE TAXES.
The Company will pay all taxes (if any) due in connection with and as
the result of the initial issuance and sale of the Notes and in connection with
any modification, waiver or amendment of this Agreement or the Notes and shall
save each holder of Notes harmless without limitation as to time against any and
all liabilities with respect to all such taxes.
3. GENERAL COVENANTS
The Company covenants that on and after the Closing Date and so long as
any of the Notes shall be outstanding:
3.1 PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each Subsidiary to, pay before they
become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its Property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, vendors, landlords and other like Persons that, if
unpaid, might result in the creation of a statutory, regulatory or
common law Lien upon its Property;
provided, that items of the foregoing description need not be paid so long as
such items are being actively contested in good faith and by appropriate
proceedings and reasonable book reserves in accordance with GAAP have been
established and maintained with respect thereto.
3.2 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.
The Company will, and will cause each Subsidiary to:
(a) PROPERTY -- maintain its Property in good condition,
ordinary wear and tear and obsolescence excepted, and make all
necessary renewals, replacements, additions, betterments and
improvements thereto; provided, however, that this Section 3.2(a) shall
not prevent the Company or any Subsidiary from discontinuing the
operation and the maintenance of any of its Properties if such
discontinuance is desirable in the conduct of its business and such
discontinuance could not reasonably be expected to have a Material
Adverse Effect;
(b) INSURANCE -- maintain, with financially sound and
reputable insurers, insurance with respect to its Property and business
against such casualties and contingencies, of such types and in such
amounts as is customary in the case of corporations of established
reputations engaged in the same or a similar business and similarly
situated;
(c) FINANCIAL RECORDS -- keep proper books of record and
account, in which full and correct entries shall be made of all
dealings and transactions of or in relation to
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the Properties and business thereof, and which will permit the
production of financial statements in accordance with GAAP;
(d) CORPORATE EXISTENCE AND RIGHTS -- do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence, corporate rights (charter and statutory) and
corporate franchises except as permitted by Section 4.1;
(e) COMPLIANCE WITH LAW -- comply with all laws, ordinances
and governmental rules and regulations to which it is subject
(including, without limitation, any Environmental Protection Law) and
obtain all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of its
Properties and the conduct of its business except for such violations
and failures to obtain that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; and
(f) ENVIRONMENTAL LIABILITIES -- conduct its business so as
not to become subject to any liability under any Environmental
Protection Law that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
3.3 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Company will punctually pay, or cause to be paid, the principal of
and interest (and Prepayment Compensation Amount, if any) on, the Notes, as and
when the same shall become due according to the terms hereof and of the Notes,
and will maintain an office at the address of the Company as provided in Section
10.1 where notices, presentations and demands in respect hereof or the Notes may
be made upon it. Such office will be maintained at such address until such time
as the Company notifies the holders of the Notes of any change of location of
such office, which will in any event be located within the United States of
America.
3.4 PENSION PLANS.
(a) COMPLIANCE. The Company will, and will cause each ERISA
Affiliate to, at all times with respect to each Plan, comply with all
applicable provisions of ERISA and the IRC, if and to the extent
applicable, except for such failures to comply that, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(b) PROHIBITED ACTIONS. The Company will not, and will not
permit any ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as such
term is defined in section 406 of ERISA or section 4975 of the
IRC) or "reportable event" (as such term is defined in section
4043 of ERISA) that could result in the imposition of a tax or
penalty;
(ii) incur with respect to any Plan any "accumulated
funding deficiency" (as such term is defined in section 302 of
ERISA), whether or not waived;
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(iii) terminate any Plan in a manner that could
result in the imposition of a Lien on the Property of the
Company or any Subsidiary pursuant to section 4068 of ERISA or
the creation of any liability under section 4062 of ERISA;
(iv) fail to make any payment required by section 515
of ERISA;
(v) incur any withdrawal liability under Title IV of
ERISA with respect to any Multiemployer Plan or any liability
as a result of the termination of any Multiemployer Plan; or
(vi) incur any liability or suffer the existence of
any Lien on the Property of the Company or any ERISA
Affiliate, in either case pursuant to Title I or Title IV of
ERISA or pursuant to the penalty or excise tax or security
provisions of the IRC;
if the aggregate amount of the taxes, penalties, funding deficiencies,
interest, amounts secured by Liens, and other liabilities in respect of
any of the foregoing at any time could reasonably be expected to have a
Material Adverse Effect.
(c) FOREIGN PENSION PLANS. The Company will, and will cause
each Subsidiary to, at all times, comply in all material respects with
all laws, regulations and orders applicable to the establishment,
operation, administration and maintenance of all Foreign Pension Plans,
and pay when due all premiums, contributions and any other amounts
required by applicable Foreign Pension Plan documents or applicable
laws, except where the failure to comply with such laws, regulations
and orders, and to make such payments, in the aggregate for all such
failures, could not reasonably be expected to have a Material Adverse
Effect.
3.5 YEAR 2000 COMPLIANCE.
The Company and the Subsidiaries' internal computing systems will be
Year 2000 Compliant in a timely manner and the advent of the year 2000 and its
impact on such computer systems shall not have a Material Adverse Effect.
4. NEGATIVE COVENANTS
4.1 MERGERS AND CONSOLIDATIONS.
The Company will not merge with or into or consolidate with any other
Person, permit any other Person to merge or consolidate with or into it or
Transfer all or substantially all of its Property to any other Person; provided,
however, that the foregoing restriction does not apply to the merger or
consolidation of the Company with another corporation or Transfer of all or
substantially all of the Property of the Company to any other Person if:
(a) the corporation that results from such merger or
consolidation or to which all or substantially all of the Property of
the Company is Transferred (the "SURVIVING CORPORATION") is organized
under the laws of The Netherlands, the United States of America or any
jurisdiction or jurisdictions thereof, and conducts substantially all
of its business and has substantially all of its Properties within the
United States of America;
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(b) the due and punctual payment of the principal of and
Prepayment Compensation Amount, if any, and interest on all of the
Notes, according to their tenor, and the due and punctual performance
and observance of all the covenants in the Notes, this Agreement and
each other Financing Document to be performed or observed by the
Company, are expressly assumed by the Surviving Corporation pursuant to
such assumption agreements and instruments in such forms as shall be
approved reasonably by the Required Holders, and the Company causes to
be delivered to each holder of Notes an opinion, satisfactory in form
and substance to the Required Holders, of independent counsel to the
effect that such agreements and instruments are enforceable in
accordance with their terms (subject to customary and usual exceptions
and assumptions);
(c) immediately prior to, and immediately after the
consummation of the transaction, and after giving effect thereto, no
Default or Event of Default exists or would exist; and
(d) immediately after giving effect to such transaction, the
Surviving Corporation would be permitted by the provisions of Section
4.3(h) to incur at least One Dollar ($1.00) of additional Debt owing to
a Person other than a Subsidiary of the Surviving Corporation.
Notwithstanding the foregoing, a Subsidiary may merge into the Company so long
as the Company is the Surviving Corporation.
4.2 RESTRICTED PAYMENTS.
The Company will not, nor will it permit any Subsidiary to, at any
time, declare or make or incur any liability to declare or make any Restricted
Payment, except that:
(a) on the fifteenth day of March next following the fifth
anniversary of the issuance of the Viad Note, if
(i) the aggregate amount of accrued and unpaid
interest (including capitalized interest) and all unpaid
original issue discount on the Viad Note will (but for this
provision), on any interest payment date exceed an amount
equal to the product of:
(A) the issue price (as defined in sections
1273(b) and 1274(a) of the IRC) of the Viad Note; and
(B) the yield to maturity (interpreted in
accordance with section 163(i) of the IRC) of the
Viad Note;
and
(ii) no Default or Event of Default shall then exist;
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then all accrued and unpaid interest (including, if necessary,
capitalized interest) and original issue discount on the Viad Note in
excess of such amount may be paid in cash by the Company to the holder
of the Viad Note on such date;
(b) on each interest payment date following March 15, 2004, if
no Default or Event of Default shall exist or would result therefrom,
the Company may pay accrued and unpaid cash interest on the Viad Note
on a current basis at the contract rate in effect on the Closing Date;
(c) the Subsidiaries shall be permitted to distribute amounts
to the Company to enable the Company to pay, to each holder of
Specified Parent Stock, the cash purchase price for the Specified
Parent Stock held by such holder, in accordance with terms of the Put
Rights Agreement; and
(d) the Company and the Subsidiaries may declare and pay such
other dividends and make such other payments and distributions as are
permitted pursuant to the provisions of Section 6.06 of the Senior
Credit Agreement, as in effect on the Closing Date (including, without
limitation, payments of principal and interest on intercompany notes).
4.3 INCURRENCE OF DEBT.
The Company will not, and will not permit any Subsidiary to, incur,
create or assume any Debt, other than:
(a) Debt existing on the Closing Date and set forth in PART
2.2 OF ANNEX 3 of the Debt Securities Purchase Agreement, but not any
extensions, renewals or replacements of such Debt;
(b) Debt arising under this Agreement and the Notes and the
related intercompany notes;
(c) Senior Debt and related intercompany notes; provided that
the aggregate principal amount of all Senior Debt shall not at any time
exceed the Maximum Senior Debt Amount;
(d) the Viad Note and related intercompany notes;
(e) the Put Obligation;
(f) Debt in respect of performance bonds, bid bonds, surety
bonds and similar obligations and trade letters of credit, in each case
provided in the ordinary course of business, including those incurred
to secure health, safety and environmental obligations in the ordinary
course of business;
(g) Debt of a Subsidiary owing to the Company or another
Subsidiary; and
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(h) other Debt, in addition to that permitted by clauses (a)
through (g) above, consisting of either:
(i) obligations under Capital Leases incurred in the
ordinary course of business after the Closing Date; or
(ii) any other Debt not secured by any Lien;
provided that, immediately after giving effect to the incurrence of any
such other Debt, the Leverage Ratio (as defined in the Senior Credit
Agreement) would not be in excess of 5.00 to 1.00.
4.4 TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any Subsidiary to, enter into
any transaction, including, without limitation, the purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate, except
in the ordinary course of and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and reasonable terms no
less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate; provided,
however, that the Company and the Subsidiaries shall be permitted to:
(a) pay fees and expenses in connection with the closing of
the Acquisitions (as defined in the Debt Securities Purchase
Agreements) and the other transactions involving the Company
contemplated by the Financing Documents;
(b) so long as no Default or Event of Default shall have
occurred and be continuing, pay management fees to the Parent in an
aggregate amount not to exceed Four Hundred Forty Thousand Dollars
($440,000) in any fiscal year of HoldCo-III;
(c) so long as no Default or Event of Default shall have
occurred and be continuing, pay a one percent (1%) fee to Berkshire in
consideration of the arrangement of any future debt or equity financing
or refinancing for the Company, provided that no such fee shall be paid
prior to the closing of any such financing; and
(d) make loans and advances to employees
(i) for moving, entertainment, travel and similar
expenses in the ordinary course of business,
(ii) to refinance existing Debt of such employees
incurred to purchase stock of the Parent, and
(iii) to purchase stock of the Parent,
not to exceed Seven Hundred Fifty Thousand Dollars ($750,000) in the
aggregate at any time outstanding.
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4.5 RESTRICTIVE AGREEMENTS.
The Company will not, and will not permit any Subsidiary to, enter into
any contract or agreement that restricts, directly or indirectly, the right or
ability of any Subsidiary to:
(a) declare, make or pay any dividend or distribution in
respect of its Capital Stock to the Company; or
(b) make or repay any loans or advances to the Company or
another Subsidiary
other than, in the case of the Senior Credit Agreement or another Acceptable
Credit Facility, pursuant to restrictions no more onerous than those contained
in the Senior Credit Agreement as in effect on the date hereof.
4.6 PRIVATE OFFERING.
The Company will not, and will not permit any Subsidiary, Affiliate or
other Person acting on its behalf to, offer the Notes or any part thereof or any
similar Securities for issue or sale to, or solicit any offer to acquire any of
the same from, any Person so as to bring the issuance and sale of the Notes
within the provisions of section 5 of the Securities Act.
4.7 SENIORITY TO JUNIOR SUBORDINATED DEBT.
The Company will not incur, assume or Guaranty any Debt which is
subordinated in right of payment to any other Debt of the Company unless such
Debt is also subordinated in right of payment to the obligations of the Company
in respect of the Notes and this Agreement on terms reasonably acceptable to the
Required Holders in their discretion. The Company will not incur or create any
Debt in favor of an Affiliate (other than Debt in favor of the Company) unless
such Debt is also subordinated in right of payment to the obligations of the
Company in respect of the Notes and this Agreement on terms reasonably
acceptable to the Required Holders in their discretion.
5. REPORTING COVENANTS
5.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes:
(a) MONTHLY FINANCIAL STATEMENTS -- as soon as practicable
after the end of each of the first two calendar months in each fiscal
quarter of the Company, and in any event within thirty (30) days
thereafter:
(i) a consolidated balance sheet as at the end of
such month; and
(ii) consolidated statements of income, stockholders'
equity and cash flows for such month and the then-elapsed
portion of the fiscal year of the Company;
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for the Company and the Subsidiaries, setting forth in each case, in
comparative form, the financial statements for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared
in accordance with GAAP consistently applied, subject to normal
year-end adjustments, and certified as complete and correct by a Senior
Financial Officer;
(b) QUARTERLY FINANCIAL STATEMENTS -- as soon as practicable
after the end of each quarterly fiscal period in each fiscal year of
the Company (other than the last quarterly fiscal period of each such
fiscal year), and in any event within forty-five (45) days thereafter:
(i) a consolidated balance sheet as at the end of
such quarter; and
(ii) consolidated statements of income, stockholders'
equity and cash flows for such quarter and (in the case of the
second and third quarters) for the portion of the fiscal year
ending with such quarter;
for the Company and the Subsidiaries, setting forth in each case, in
comparative form, the financial statements for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared
in accordance with GAAP applicable to quarterly financial statements
generally, and certified as complete and correct by a Senior Financial
Officer, and accompanied by the certificate required by Section 5.2;
(c) ANNUAL FINANCIAL STATEMENTS -- as soon as practicable
after the end of each fiscal year of the Company, and in any event
within ninety (90) days thereafter:
(i) a consolidated balance sheet as at the end of
such year; and
(ii) consolidated statements of income, stockholders'
equity and cash flows for such year;
for the Company and the Subsidiaries, setting forth, in comparative
form, the financial statement for the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP, and accompanied
by:
(A) an audit report thereon of independent certified
public accountants of recognized national standing, which
report shall state without qualification (including, without
limitation, qualifications related to the scope of the audit,
the compliance of the audit with generally accepted auditing
standards, or the ability of the Company or a material
subsidiary thereof to continue as a going concern), that such
financial statements have been prepared and are in conformity
with GAAP; and
(B) the certificates required by Section 5.2 and
Section 5.3;
(d) SEC AND OTHER REPORTS -- promptly upon their becoming
available, and in any event within fifteen (15) days thereafter:
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(i) each financial statement, report, notice or proxy
statement sent by the Company or the Parent to stockholders
generally;
(ii) each regular or periodic report and any
registration statement which shall have become effective, and
each final prospectus and all amendments thereto filed by the
Company or any Subsidiary with the SEC; and
(iii) all press releases and other statements made
available by the Company or any Subsidiary to the public
concerning material developments in the business of the
Company or the Subsidiaries;
(e) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- within two
(2) Business Days of becoming aware:
(i) of the existence of any condition or event which
constitutes a Default or an Event of Default; or
(ii) that the holder of any Note, or of any Debt,
shall have given notice or taken any other action with respect
to a claimed Default, Event of Default or default or event of
default;
a notice specifying the nature of the claimed Default, Event of Default
or default or event of default and the notice given or action taken (if
any) by such holder and what action the Company is taking or proposes
to take with respect thereto;
(f) ERISA --
(i) within two (2) Business Days of becoming aware of
the occurrence of any "reportable event" (as such term is
defined in section 4043 of ERISA) for which notice thereof has
not been waived pursuant to regulations of the DOL or
"prohibited transaction" (as such term is defined in section
406 of ERISA or section 4975 of the IRC) in connection with
any Plan or any trust created thereunder, a notice specifying
the nature thereof, what action the Company is taking or
proposes to take with respect thereto, and, when known, any
action taken by the Internal Revenue Service, the DOL or the
PBGC with respect thereto; and
(ii) prompt notice of and, where applicable, a
description of:
(A) any notice from the PBGC in respect of
the commencement of any proceedings pursuant to
section 4042 of ERISA to terminate any Plan or for
the appointment of a trustee to administer any Plan,
and any distress termination notice delivered to the
PBGC under section 4041 of ERISA in respect of any
Plan, and any determination of the PBGC in respect
thereof;
(B) the placement of any Multiemployer Plan
in reorganization status under Title IV of ERISA, any
Multiemployer Plan becoming "insolvent" (as such term
is defined in section 4245 of ERISA) under Title
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IV of ERISA, or the whole or partial withdrawal of
the Company or any ERISA Affiliate from any
Multiemployer Plan and the withdrawal liability
incurred in connection therewith; or
(C) the occurrence of any event, transaction
or condition that could result in the incurrence of
any liability of the Company or any ERISA Affiliate
or the imposition of a Lien on the Property of the
Company or any ERISA Affiliate, in either case
pursuant to Title I or Title IV of ERISA or pursuant
to the penalty or excise tax or security provisions
of the IRC;
provided, however, that the Company shall not be required to deliver
any such notice at any time when the aggregate amount of the actual or
potential liability of the Company and the Subsidiaries in respect of
all such events at such time could not reasonably be expected to have a
Material Adverse Effect;
(g) AUDITOR'S REPORTS -- promptly upon receipt thereof, a copy
of each report or management letter submitted to the Company or any
Subsidiary by independent accountants in connection with any annual,
interim or special audit made of the books of the Company or any
Subsidiary;
(h) ACTIONS, PROCEEDINGS -- promptly after the commencement of
any action or proceeding relating to the Company or any Subsidiary in
any court or before any Governmental Authority or arbitration board or
tribunal as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect, a notice specifying the
nature and period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(i) ACCEPTABLE CREDIT FACILITIES -- promptly after execution
thereof, a copy of each Acceptable Credit Facility entered into by the
Company, HoldCo-III and the Senior Lenders or any other holder of
Senior Debt and each amendment, modification or waiver entered into by
the Company, HoldCo-III and the Senior Agent and/or the Senior Lenders
or any other holder of Senior Debt with respect to any Acceptable
Credit Facility;
(j) ANNUAL BUDGET -- prior to January 31 of each fiscal year,
a copy of the budget for the Company's consolidated balance sheet and
related statements of income and cash flows for each quarter of such
fiscal year;
(k) OTHER CREDITORS -- promptly upon the reasonable request of
any holder of Notes, copies of any statement, report or certificate
furnished to any holder of Debt to the extent that the information
contained in such statement, report or certificate has not already been
delivered to each holder of Notes;
(l) RULE 144A -- promptly upon the request of any holder of
Notes, information required to permit the holder to comply with 17
C.F.R. Section 230.144A, as amended from time to time, in connection
with a transfer of any Note; and
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(m) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information as from time to time may be reasonably
requested by any holder of Notes, including, without limitation, any
information required to determine whether the Company and the
Subsidiaries are or will be Year 2000 Compliant.
5.2 OFFICER'S CERTIFICATES.
Each set of financial statements delivered to each holder of Notes
pursuant to Section 5.1(b) or Section 5.1(c) shall be accompanied by a
certificate of a Senior Financial Officer, setting forth:
(a) COVENANT COMPLIANCE -- the financial information
(including detailed calculations) required in order to establish
whether the Company was in compliance with the requirements of Section
4 (in each case where such Section imposes numerical financial
requirements) as of the end of the period covered by the financial
statements then being furnished (including with respect to such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Section, and the calculation of the amount, ratio or
percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that the signer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision or authority, a review of the transactions
and conditions of the Company and the Subsidiaries from the beginning
of the accounting period covered by the income statements being
delivered therewith to the date of the certificate and that such review
shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default
or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.
5.3 ACCOUNTANTS' CERTIFICATES.
Each set of annual financial statements delivered pursuant to Section
5.1(c) shall be accompanied by a certificate of the accountants who were engaged
to audit such financial statements, stating that they have reviewed this
Agreement and stating further, whether, in making their audit, such accountants
have become aware of any condition or event that then constitutes a Default or
an Event of Default, and, if such accountants are aware that any such condition
or event then exists, specifying the nature and period of existence thereof.
5.4 INSPECTION.
The Company will permit the representatives of each holder of Notes to
visit and inspect any of the Properties of the Company or any of the
Subsidiaries, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the finances and affairs of the Company
and the Subsidiaries) all at such reasonable times and as often as may be
reasonably requested. At all times during which there
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exists a Default or Event of Default, expenses incurred by the holders of the
Notes in connection with this Section 5.4 shall be paid in accordance with
Section 10.6.
6. EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" exists at any time if any of the following both
occurs and is continuing thereafter for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
(a) PAYMENTS ON NOTES --
(i) PRINCIPAL OR PREPAYMENT COMPENSATION AMOUNT
PAYMENTS -- the Company fails to make any payment of principal
or Prepayment Compensation Amount on any Note on or before the
date such payment is due; or
(ii) INTEREST PAYMENTS -- the Company fails to make
any payment of interest on any Note on or before five (5)
Business Days after the date such payment is due;
(b) OTHER DEFAULTS --
(i) FINANCIAL COVENANT DEFAULTS -- the Company or any
Subsidiary fails to comply with any provision of Section 4; or
(ii) OTHER DEFAULTS -- the Company or any Subsidiary
fails to comply with any other provision hereof or of any
other Financing Document, and such failure continues for more
than thirty (30) days after such failure shall first become
known to any Senior Officer;
(c) WARRANTIES OR REPRESENTATIONS -- any warranty,
representation or other statement by or on behalf of the Company
contained in the Debt Securities Purchase Agreements, this Agreement,
the Notes, and any other agreement, certificate or instrument executed
pursuant to the terms of each of the foregoing, or in any written
amendment, supplement, modification or waiver with respect to any such
agreement or document or in any instrument furnished in compliance
herewith or therewith or in reference hereto or thereto, shall have
been false or misleading in any material respect when made;
(d) ACCELERATION OF DEBT -- any event shall occur or any
condition shall exist in respect of the Senior Debt, or under any
agreement securing or relating to the Senior Debt, and in either case,
as a result thereof:
(i) the maturity of the Senior Debt, or a portion
thereof, is accelerated; or
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(ii) any one or more of the holders thereof or a
trustee therefor is permitted to require the Company or any
Subsidiary to repurchase such Senior Debt from the holders
thereof, and any such trustee or holder exercises such option;
(e) INSOLVENCY --
(i) INVOLUNTARY BANKRUPTCY PROCEEDINGS --
(A) a receiver, liquidator, custodian,
curator or trustee of the Parent, the Company or any
Subsidiary, or of all or any substantial part of the
Property of any of them, is appointed by court order
and such order remains in effect for more than sixty
(60) days; or an order for relief is entered with
respect to the Company or any Subsidiary, or the
Company or any Subsidiary is adjudicated a bankrupt
or insolvent;
(B) all or any substantial part of the
Property of the Parent or the Company or any
Subsidiary is sequestered by court order and such
order remains in effect for more than sixty (60)
days; or
(C) a proceeding for a faillisement is filed
against the Company or any Subsidiary, or a petition
is filed against the Parent, the Company or any
Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and, in any case,
is not dismissed within sixty (60) days after such
filing;
(ii) VOLUNTARY PETITIONS -- the Parent, the Company
or any Subsidiary commences a proceeding for a faillisement or
surseance van betaling or otherwise files a petition in
voluntary bankruptcy or seeks relief under any provision of
any bankruptcy, reorganization, arrangement, moratorium,
suspension of payments, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether
now or hereafter in effect, or consents to the filing of any
petition against it under any such law; or
(iii) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. --
the Parent, the Company or a Subsidiary makes an assignment
for the benefit of its creditors, or admits in writing its
inability, or fails, to pay its debts generally as they become
due, or consents to the appointment of a receiver, liquidator,
curator or trustee of the Company or a Subsidiary or of all or
a substantial part of its Property;
(f) UNDISCHARGED FINAL JUDGMENTS -- a final, non-appealable
judgment or final, non-appealable judgments for the payment of money
aggregating in excess of Two Million Five Hundred Thousand Dollars
($2,500,000) is or are outstanding against one or more of the Parent,
the Company and the Subsidiaries and any one of such judgments shall
have been outstanding for more than thirty (30) days from the date of
its entry and shall not have been discharged in full or stayed;
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(g) FINANCING DOCUMENTS -- any Financing Document shall cease
to be in full force and effect or shall be declared by a court or other
Governmental Authority of competent jurisdiction to be void, voidable
or unenforceable against the Company or any Affiliate party thereto;
the validity or enforceability of any Financing Document against the
Company or any Affiliate shall be contested by the Company or any
Subsidiary or Affiliate party thereto; or the Company or any Subsidiary
or Affiliate shall deny that the Company or any Affiliate has any
further liability or obligation under any Financing Document; or
(h) PARENT'S BUSINESS ACTIVITIES -- the Parent shall
(i) own, hold or acquire any Property other than the
Capital Stock of the Company,
(ii) conduct any business other than through the
Company and the Subsidiaries,
(iii) create, incur, assume or permit to exist any
Debt or other obligations of the Parent, other than pursuant
to and in respect of any Right to purchase or acquire shares
of its Common Stock;
(iv) Guaranty, directly or indirectly, the Debt or
other obligations of any other Person; or
(v) fail to own at any time one hundred percent
(100%) of the issued and outstanding Capital Stock of the
Company.
6.2 DEFAULT REMEDIES.
(a) ACCELERATION OF MATURITY OF NOTES.
(i) ACCELERATION ON EVENT OF DEFAULT.
(A) AUTOMATIC. If any Event of Default
specified in Section 6.1(e) shall exist, all of the
Notes at the time outstanding shall automatically
become immediately due and payable together with
interest accrued thereon and, to the extent permitted
by law, the Prepayment Compensation Amount at such
time with respect to the principal amount of such
Notes, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly
waived.
(B) BY ACTION OF HOLDERS. If any Event of
Default other than those specified in Section 6.1(e)
shall exist, the Required Holders may exercise any
right, power or Remedy permitted to such holder or
holders by law, and shall have, in particular,
without limiting the generality of the foregoing, the
right to declare the entire principal of, and all
interest accrued on, all the Notes then outstanding
to be due and payable, and such Notes shall thereupon
become forthwith due and payable, without any
presentment, demand, protest or other notice of any
kind, all of which
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are hereby expressly waived, and the Company shall,
subject to Section 7, forthwith pay to the holder or
holders of all the Notes then outstanding the entire
principal of, and interest accrued on, the Notes and,
to the extent permitted by law, the Prepayment
Compensation Amount at such time with respect to such
principal amount of such Notes.
(ii) ACCELERATION ON PAYMENT DEFAULT. During the
existence of an Event of Default described in Section 6.1(a),
and irrespective of whether the Notes then outstanding shall
have become due and payable pursuant to Section 6.2(a)(i)(B),
any holder of Notes who or which shall have not consented to
any waiver with respect to such Event of Default may, at his
or its option, by notice in writing to the Company, declare
the Notes then held by such holder to be, and such Notes shall
thereupon become, forthwith due and payable together with all
interest accrued thereon, without any presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived, and the Company shall, subject to Section 7,
forthwith pay to such holder the entire principal of and
interest accrued on such Notes and, to the extent permitted by
law, the Prepayment Compensation Amount at such time with
respect to such principal amount of such Notes.
(b) VALUABLE RIGHTS. The Company acknowledges, and the parties
hereto agree, that the right of each holder to maintain its investment
in the Notes free from repayment by the Company (except as herein
specifically provided for) is a valuable right and that the provision
for payment of a Prepayment Compensation Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an
Event of Default is intended to provide compensation for the
deprivation of such right under such circumstances.
(c) OTHER REMEDIES. During the existence of an Event of
Default and irrespective of whether the Notes then outstanding shall
become due and payable pursuant to Section 6.2(a), and irrespective of
whether any holder of Notes then outstanding shall otherwise have
pursued or be pursuing any other rights or Remedies, any holder of
Notes may proceed to protect and enforce its rights hereunder and under
such Notes by exercising such Remedies as are available to such holder
in respect thereof under applicable law, either by suit in equity or by
action at law, or both, whether for specific performance of any
agreement contained herein or in aid of the exercise of any power
granted herein; provided, however, that the maturity of such holder's
Notes may be accelerated only in accordance with Section 6.2(a).
(d) NONWAIVER; REMEDIES CUMULATIVE. No course of dealing on
the part of any holder of Notes nor any delay or failure on the part of
any holder of Notes to exercise any right shall operate as a waiver of
such right or otherwise prejudice such holder's rights, powers and
Remedies. All rights and Remedies of each holder of Notes hereunder and
under applicable law are cumulative to, and not exclusive of, any other
rights or Remedies any such holder of Notes would otherwise have.
(e) SUBORDINATION. The rights of the holders of the Notes to
receive payments in respect of this Agreement and the Notes, solely as
between the holders of the Notes
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and the holders of the Senior Debt, shall be subject in all respects to
the provisions of Section 7; provided, however, that all such rights
shall remain unconditional and absolute as between the holders of the
Notes and the Company.
6.3 ANNULMENT OF ACCELERATION OF NOTES.
If a declaration is made pursuant to Section 6.2(a)(i)(B), then and in
every such case, the holders of seventy percent (70%) in principal amount of the
Notes at the time outstanding (exclusive of Notes then owned by any one or more
of the Company, any Subsidiary or any Affiliate) may, by written instrument
filed with the Company, rescind and annul such declaration, and the consequences
thereof; provided, however, that at the time such declaration is annulled and
rescinded:
(a) no judgment or decree shall have been entered for the
payment of any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all of the Notes and all of
the other sums payable hereunder and under the Notes (except any
principal of, or interest or Prepayment Compensation Amount on, the
Notes which shall have become due and payable by reason of such
declaration under Section 6.2(a)(i)(B)) shall have been duly paid; and
(c) each and every other Default and Event of Default shall
have been waived pursuant to Section 10.5 or otherwise made good or
cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
7. SUBORDINATION
7.1 GENERAL.
The Subordinated Debt is subordinate and junior in right of payment to
all Senior Debt to the extent provided in this Section 7.
7.2 INSOLVENCY.
In the event of:
(a) any insolvency, faillisement, bankruptcy, receivership,
liquidation, reorganization, readjustment, accoord, composition,
surseance van betaling, suspension of payments or other similar
proceeding relating to the Company, its creditors or its Property;
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings;
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(c) any assignment by the Company for the benefit of
creditors; or
(d) any other marshalling of the assets of the Company;
all Senior Debt shall first be paid in full, in cash or cash equivalents, before
any payment or distribution, whether in cash, Securities or other Property
(other than Reorganization Securities), shall be made to any holder of any
Subordinated Debt on account of any Subordinated Debt. Any payment or
distribution, whether in cash, Securities or other Property (other than
Reorganization Securities), which would otherwise (but for this Section 7) be
payable or deliverable in respect of Subordinated Debt shall be paid or
delivered directly to the holders of Senior Debt in accordance with the
priorities then existing among such holders until all Senior Debt shall have
been paid in full, in cash or cash equivalents.
7.3 PROOFS OF CLAIM.
If any holder of Subordinated Debt does not file a proper claim or
proof of debt therefor prior to ten (10) days before the expiration of the time
to file such claim or proof, then the Senior Agent is hereby permitted (but not
obligated) for the specific and limited purpose set forth in this Section 7.3,
to file such claim or proof for or on behalf of such holder; provided, however,
that the Senior Agent:
(a) shall have, prior to taking any such action, given fifteen
(15) days prior written notice (which notice may be given up to sixty
(60) days prior to the expiration of the time to file such claim) to
such holder of Subordinated Debt that it intends to file such claim or
proof of debt; and
(b) shall promptly deliver a copy of any such claim or proof
so filed to such holder of Subordinated Debt.
No provision of this Agreement shall be deemed to authorize the Senior Agent or
the holders of Senior Debt to authorize or consent to or accept or adopt on
behalf of any holder of Subordinated Debt any plan of reorganization,
arrangement, adjustment, accoord, composition or surseance van betaling
affecting the Subordinated Debt, to exercise the right of any holder of
Subordinated Debt in respect of any plan of reorganization, arrangement,
adjustment or composition affecting the Subordinated Debt, or to vote in respect
of the claim of any holder of Subordinated Debt in any such proceeding.
7.4 PAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.
In the event the Company shall default in the payment of any principal
of or premium, if any, or interest on, or any unused line fee, early termination
fee, letter of credit fee, swap fee, bond purchase fee or other compensation
with respect to, any Senior Debt (a "PAYMENT DEFAULT") when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration, demand upon or under any Guaranty included in the
Senior Debt or otherwise, then, unless and until such default shall have been
cured or waived or shall have ceased to exist, no direct or indirect payment (in
cash, Property or Securities or by set-off or otherwise) shall be made or agreed
to be made on account of any Subordinated Debt,
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or as a sinking fund for any Subordinated Debt, or in respect of any redemption,
retirement, purchase, prepayment or other acquisition or payment of any
Subordinated Debt.
The Company shall give prompt written notice to each holder of
Subordinated Debt of any Payment Default.
7.5 SPECIFIED NONPAYMENT DEFAULT IN RESPECT OF SENIOR DEBT.
Upon:
(a) the happening of any Specified Nonpayment Default; and
(b) receipt by the Company from the Senior Agent of written
notice (a "SPECIFIED NONPAYMENT DEFAULT NOTICE") of the happening of
such Specified Nonpayment Default, stating that such notice is a
payment blockage notice pursuant to Section 7.5 of this Agreement;
no direct or indirect payment (in cash, property or Securities or by set-off or
otherwise) shall be made or agreed to be made for or on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any redemption, retirement, repurchase, prepayment, purchase or other
acquisition or payment of any Subordinated Debt, for a period (each, a "PAYMENT
BLOCKAGE PERIOD") commencing on the date of receipt by the Company of such
notice from the Senior Agent (or holders of Senior Debt, as applicable) and
ending on the earliest of:
(A) the date such Specified Nonpayment Default shall have been
cured or waived in writing or shall have ceased to exist;
(B) the date such Payment Blockage Period shall have been
terminated by written notice to the Company from the Senior Agent;
(C) the date of the repayment in full in cash or cash
equivalents of the Senior Debt; and
(D) solely in the event of a Specified Nonpayment Default
arising solely out of an "Event of Default" (as such term is defined in
the Senior Credit Agreement) under Article VII(l) of the Senior Credit
Agreement, the date one hundred eighty (180) days after the
commencement of such Payment Blockage Period.
All payments in respect of Subordinated Debt postponed under Section
7.4 or during any Payment Blockage Period shall be immediately due and payable
upon the termination thereof (together with such additional interest as is
provided for herein and in the Notes for late payment of principal, Prepayment
Compensation Amount and interest).
The Company shall give prompt written notice to each holder of
Subordinated Debt of its receipt of any Specified Nonpayment Default Notice
under this Section 7.5.
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7.6 TURNOVER OF PAYMENTS.
If:
(a) any payment or distribution shall be paid to or collected
or received by any holders of Subordinated Debt
(i) in contravention of any of the terms of this
Section 7, or
(ii) pursuant to the provisions of Section 1.4 at a
time when such payment would be prohibited by the Senior
Credit Agreement, as in effect on the date hereof; and
(b) the Senior Agent (or any holder of Senior Debt, as
applicable) or the Company shall have notified the holders of
Subordinated Debt, within ninety (90) days of the later of:
(i) its becoming aware of such payment; and
(ii) the facts by reason of which such payment or
collection or receipt so contravenes this Section 7 or the
Senior Credit Agreement;
then such holders of Subordinated Debt will deliver such payment or
distribution, to the extent necessary to pay all such Senior Debt in full, in
cash or cash equivalents, to the Senior Agent and, until so delivered, the same
shall be held in trust by such holders of Subordinated Debt as the property of
the holders of such Senior Debt. If any amount is delivered to the Senior Agent
pursuant to this Section 7.6, whether or not such amounts have been applied to
the payment of Senior Debt, and the outstanding Senior Debt shall thereafter be
paid in full, in cash or cash equivalents, by the Company or otherwise other
than pursuant to this Section 7.6, the Senior Agent shall return to such holders
of Subordinated Debt an amount equal to the amount delivered to the Senior Agent
pursuant to this Section 7.6, so long as after the return of such amounts the
Senior Debt shall remain paid in full, in cash or cash equivalents.
Notwithstanding the foregoing, in the event that the holders of the
Subordinated Debt reasonably believe that there is more than one holder of
Senior Debt and the holders of the Subordinated Debt shall not have received
reasonably satisfactory evidence that the Senior Agent is both entitled to
accept such payment on behalf of all holders of Senior Debt and required to
deliver payment to the other holders of the Senior Debt in the respective
amounts, if any, due such holders of Senior Debt, then the holders of the
Subordinated Debt may turn over such payment or distribution, rather than to the
Senior Agent, to a court of competent jurisdiction in an appropriate
interpleader proceeding pending determination by such court of the holders of
Senior Debt entitled to receive all or any portion of such payment or
distribution, and, from and after the date of such payment into court, the
holders of the Subordinated Debt shall have no further liability therefor.
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7.7 SUBORDINATION UNAFFECTED BY CERTAIN EVENTS.
Provided that, with respect to each of the following events or
circumstances, the Senior Debt shall remain "Senior Debt" (as defined herein)
outstanding under an Acceptable Credit Facility, the rights set forth in this
Section 7 of the holders of the Senior Debt as against each holder of
Subordinated Debt shall remain in full force and effect without regard to, and
shall not be impaired by:
(a) any act or failure to act on the part of the Company;
(b) any act or failure to act on the part of the Senior Agent
or any holder of Senior Debt (other than any action prohibited by this
Section 7 or any failure to take any action required by this Section
7);
(c) any extension or indulgence in respect of any payment or
prepayment of the Senior Debt or any part therefor in respect of any
other amount payable to any holder of Senior Debt;
(d) any amendment, modification, restatement, refinancing or
waiver of, or addition or supplement to, or deletion from, or
compromise, release, consent or other action in respect of, any of the
terms of any Senior Debt or any other agreement which may be relating
to any Senior Debt or any security or collateral therefor;
(e) any exercise or non-exercise by any holder of Senior Debt
of any right, power, privilege or remedy under or in respect of any
Senior Debt or Subordinated Debt or any waiver of any such right,
power, privilege or remedy or any default in respect of any Senior Debt
or any security or collateral therefor or the Subordinated Debt, or any
receipt by any holder of Senior Debt of any security or collateral, or
any failure by any holder of Senior Debt to perfect a security interest
in, or any release by any such holder of Senior Debt of, any security
or collateral for the payment of any Senior Debt; or
(f) any merger or consolidation of the Company or any of the
Subsidiaries into or with any of the Subsidiaries or into or with any
Person, or any Transfer of any or all of the assets of the Company or
any of the Subsidiaries to any other Person.
7.8 WAIVER AND CONSENT.
Each holder of Subordinated Debt waives any and all notices of the
acceptance of the provisions of this Section 7 or of the creation, renewal,
extension or accrual, now or at any time in the future, of any Senior Debt.
7.9 REINSTATEMENT OF SUBORDINATION.
The obligations of each holder of Subordinated Debt under the
provisions set forth in this Section 7 shall continue to be effective, or be
reinstated, as the case may be, as to any payment in respect of any Senior Debt
that is rescinded, avoided, set aside or must otherwise be returned by the
holder of such Senior Debt upon the occurrence of or as a result of or pursuant
to any bankruptcy or judicial proceeding, all as though such payment had not
been made.
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7.10 OBLIGATIONS NOT IMPAIRED.
Nothing contained in this Section 7 shall:
(a) impair, as between the Company and any holder of
Subordinated Debt, the obligation of the Company to pay to such holder
the principal thereof and Prepayment Compensation Amount, if any, and
interest thereon as and when the same shall become due and payable in
accordance with the terms thereof, and to comply with each and every
provision of the Notes and this Agreement; or
(b) prevent any holder of any Subordinated Debt from
exercising all rights, powers and remedies otherwise permitted by
applicable law or under this Agreement;
all subject to the rights of the holders of the Senior Debt to receive cash,
Securities or other Property otherwise payable or deliverable to the holders of
Subordinated Debt.
7.11 PAYMENT OF SENIOR DEBT; SUBROGATION.
Upon the payment in full in cash or cash equivalents of all Senior
Debt, the holders of Subordinated Debt shall be subrogated to all rights of any
holder of Senior Debt to receive any further payments or distributions
applicable to the Senior Debt until the Subordinated Debt shall have been paid
in full in cash or cash equivalents, and such payments or distributions received
by the holders of Subordinated Debt by reason of such subrogation, of cash,
Securities or other Property which otherwise would be paid or distributed to the
holders of Senior Debt, shall, as between the Company and its creditors other
than the holders of Senior Debt, on the one hand, and the holders of
Subordinated Debt, on the other hand, be deemed to be a payment by the Company
on account of Senior Debt and not on account of Subordinated Debt.
7.12 RELIANCE OF HOLDERS OF SENIOR DEBT.
Each holder of Subordinated Debt by its acceptance thereof shall be
deemed to acknowledge and agree that the foregoing subordination provisions are,
and are intended to be, an inducement to and a consideration of each holder of
any Senior Debt, whether such Senior Debt was created or acquired before or
after the creation of Subordinated Debt, to acquire and hold, or to continue to
hold, such Senior Debt, and such holder of Senior Debt shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
holding, or in continuing to hold, such Senior Debt. Each of the Company and
each holder of Subordinated Debt acknowledges and agrees that each holder of any
Senior Debt shall be deemed to be a third party beneficiary of the provisions of
this Section 7 and shall be entitled to enforce such provision in its own right.
Notwithstanding anything contained in this Agreement or any other Financing
Document to the contrary, no amendment, modification, supplement or waiver in
respect of the provisions of this Section 7 (including, without limitation, this
Section 7.12) shall be effective as to the Senior Agent or the Senior Lenders
without the prior written consent of the Senior Agent, on behalf of itself and
the Senior Lenders.
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7.13 IDENTITY OF HOLDERS OF SENIOR DEBT.
Upon the request of any holder of Subordinated Debt, the Company shall
deliver to such holder a list of all holders of Senior Debt outstanding at such
time, providing the name and address of each such holder of Senior Debt and the
principal amount of Senior Debt held by each such holder; provided, however,
that, if any holder of Senior Debt shall have appointed an agent or other
representative with respect to the Senior Debt held by it, the Company may
provide the name and address of such agent or representative in lieu of the name
and address of such holder of Senior Debt.
7.14 AMENDMENTS TO SENIOR CREDIT FACILITY.
Notwithstanding the other provisions of this Section 7, no amendment to
or refinancing, replacement or refunding of the Senior Credit Agreement or
another Acceptable Credit Facility or any other agreement or instrument related
thereto shall be effective as to the holders of the Subordinated Debt or be
entitled to the benefits of this Section 7 without the consent of each holder of
Notes to the extent that such amendment would impose conditions on the making of
any payment required to be made in respect of the Subordinated Debt or the
related intercompany notes which are more onerous than the conditions set forth
in the Senior Credit Agreement as in effect on the Closing Date.
8. TAX INDEMNIFICATION; CURRENCY OF PAYMENT; USURY SAVINGS.
8.1 TAX INDEMNIFICATION.
(a) PAYMENTS NOT SUBJECT TO TAXES. All payments (each a
"NOTE-RELATED PAYMENT") whatsoever due under or in respect of this
Agreement will be made by the Company free and clear of, and without
liability or withholding or deduction for or on account of, any present
or future taxes, levies, imposts, duties, charges, assessments or fees
of whatever nature (including interest, penalties and fees related
thereto) imposed or levied by or on behalf of The Netherlands or any
province or other jurisdiction thereof, the European Economic Community
or any other country or jurisdiction (other than the United States of
America and any state or other jurisdiction thereof) (collectively, a
"TAX") from or through which Note-Related Payments are made (the "TAX
JURISDICTION") unless the withholding or deduction of any such Tax is
required by law.
(b) TAXES AND INDEMNIFICATION.
(i) PAYMENT OF TAXES BY THE COMPANY. If any deduction
or withholding for Tax shall at any time be required by the
law of any Tax Jurisdiction in respect of any Note-Related
Payments to a holder of Notes who is subject to taxation of
its income by the United States of America, the Company will
promptly:
(A) pay over to the government or taxing
authority imposing such Tax the full amount (the "TAX
AMOUNT") required to be deducted or withheld in
respect thereof (including, without limitation, the
full amount of any Tax required to be deducted or
withheld from or otherwise paid in respect of any
related Tax Reimbursement Amount); and
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(B) except as expressly provided in Section
8.1(b)(iii), pay to each holder of Notes entitled to
receive the Note-Related Payment from which such Tax
Amount has been so deducted or withheld such
additional amount (the "TAX REIMBURSEMENT AMOUNT") as
is necessary in order that the amount received by
such holder of Notes after any required deduction or
withholding of such Tax (including, without
limitation, any required deduction, withholding or
other payment of Tax on or with respect to such Tax
Reimbursement Amount), shall equal the amount such
holder of Notes would have received had no such
deduction, withholding or other payment of such Tax
been required.
(ii) REIMBURSEMENT OF AMOUNTS PAID BY HOLDERS OF
NOTES. The Company shall indemnify each holder of Notes for
the full amount of Taxes (other than Excluded Taxes) paid or
required to be paid by such holder of Notes in respect of this
Agreement and any liability (including penalties, interest and
expenses) arising therefrom, together with such amounts as
will result in such holder of Notes receiving the amount that
would otherwise have been received by it in the absence of any
deduction or withholding for required Taxes and the
indemnification provided for herein. Each holder of Notes
shall promptly notify the Company of any Taxes in respect of
which such holder of Notes has received written notice from
any governmental authority and for which the Company is
required to indemnify such holder of Notes pursuant to this
Section 8.1 and of the amount payable to it by the Company
pursuant hereto. The Company shall pay such amounts to such
holder of Notes within ten (10) days of the receipt of such
notice. Such holder of Notes shall determine the amount
payable to it and shall provide the Company with a reasonably
detailed statement in support of such determination, which
determination shall, if reasonable, be conclusive, but such
holder of Notes shall not be required to disclose any
confidential or proprietary information as a result of such
determination.
(iii) EXCLUDED TAXES. No payment of a Tax
Reimbursement Amount to a holder of Notes shall be required to
be made with respect to any Note-Related Payment with respect
to which Taxes are due (such Taxes being referred to as
"EXCLUDED TAXES") as the result of either or both of the
following:
(A) any Tax imposed or withheld by reason of
any relationship with or activity within the country
of organization of the Company by such holder of
Notes (other than the transactions contemplated
hereby, and other than the purchase of other
securities by any holder of Notes from time to time,
under circumstances similar to those applicable to
the purchase of the Notes from the Company, from
Persons organized in such country), or the failure of
such holder of Notes to provide, at the reasonable
request of the Company, information, documentation or
other evidence, in all cases in the English language,
concerning the absence of any relationship with or
activity within such country, of such holder of
Notes, other than the mere receipt of the principal
of, or interest or Prepayment Compensation Amount on,
such Notes or other Securities or
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the holding of or ownership of an interest in such
Notes or other Securities; or
(B) any Tax imposed or withheld by reason of
the failure of such holder of Notes to make a good
faith effort to comply with any certification,
identification, information, reporting or similar
requirement required by applicable law concerning the
nationality, residence, identity or connection with
the country of organization of the Company of such
holder of Notes if:
(I) compliance is required by
statute or regulation of the country of
organization of the Company or of any
political subdivision or taxing authority
thereof or therein as a precondition to
exemption from such Tax and such compliance
does not involve the disclosure of any
confidential information of or relating to
such holder of Notes; and
(II) such failure to comply occurs
after notice of the applicable requirements
of such statute or regulation (including an
English language translation thereof) has
been given by the Company to such holder of
Notes at least sixty (60) days prior to the
date on which such certification,
identification, report or similar document
is required to be filed with any
governmental authority of such country of
organization; such notice to include in all
cases copies of any such certification,
identification, report or similar document,
and an English language translation thereof
if not otherwise printed in the English
language.
(c) NOTIFICATION OF TAX. The Company will promptly furnish
each holder of Notes receiving payments of Tax Reimbursement Amounts
under this Section 8.1 copies (including an English language
translation thereof, if not printed in the English language) of the
official notification of the Tax giving rise to such Tax Reimbursement
Amounts and the official receipt issued by the relevant taxation or
other authorities involved for all amounts deducted or withheld (and
paid over to such authorities) in respect of such Tax. If the Company
shall have determined, with respect to any holder of Notes that a
deduction or withholding of Tax from Note-Related Payments shall be
required to be made from such Note-Related Payments and that no Tax
Reimbursement Amount will be payable to such holder of Notes under this
Section 8.1 in respect of such Tax, the Company shall promptly inform
such holder of Notes, in writing, of the imposition or withholding of
such Tax and of the applicable exemption set forth in clause (A) or
clause (B) of paragraph 8.1(b)(iii) that releases the Company from the
obligation to pay a Tax Reimbursement Amount in respect thereof.
(d) REFUNDED TAXES. If:
(i) the Company has made a payment to a holder of
Notes in respect of a Tax Reimbursement Amount pursuant to
this Section 8.1;
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(ii) such holder subsequently receives a refund,
allowance or credit in respect of the Tax to which such Tax
Reimbursement Amount is attributable from any jurisdiction;
and
(iii) such refund, allowance or credit (the "REFUNDED
TAX") is readily identifiable and the amount thereof is
readily determinable by such holder, such amount to be no
greater than an amount that, if paid to the Company by such
holder, would leave such holder in no worse position than
would have existed had such Tax not been required by law to be
paid;
then such holder will, promptly after receiving such Refunded Tax, pay
the amount of such refund to the Company without interest. This Section
8.1(d) shall not require any holder of Notes:
(A) to account for any indirect taxation benefits
arising from the deducting or withholding of any Tax;
(B) to disclose any confidential or proprietary
information; or
(C) to arrange its tax affairs in any particular
manner.
Such holder's calculations of any amounts that may be due to the
Company pursuant to this Section 8.1(d) shall be, if reasonable,
conclusive.
(e) SURVIVAL. Without prejudice to the survival of any other
agreement of the Company hereunder, the agreements contained in this
Section 8.1 shall survive the payment in full of the Notes and all of
the obligations of the Company hereunder and the termination of all of
its other commitments hereunder.
8.2 CURRENCY OF PAYMENT.
(a) PAYMENTS IN US DOLLARS. All payments under this Agreement
and the Notes shall be made in United States of America dollars ("US
DOLLARS").
(b) CERTAIN EXPENSES. If any expense required to be reimbursed
pursuant to this Agreement is originally incurred in a currency other
than US Dollars, the Company shall nonetheless make reimbursement of
that expense in US Dollars, in an amount equal to the amount in US
Dollars that would have been required for the Person that incurred such
expense to have purchased, in accordance with normal banking
procedures, the sum paid in such other currency (after any premium and
costs of exchange) on the Business Day immediately following the day
that such expense was paid by such Person. Notwithstanding the
foregoing sentence, if any expense required to reimbursed pursuant to
this Agreement is originally invoiced by any holder of Notes in
Guilders, such invoice shall be paid in Guilders.
(c) PAYMENTS NOT IN US DOLLARS. To the fullest extent
permitted by applicable law, the obligations of the Company in respect
of any amount due under the Notes or
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otherwise under this Agreement, notwithstanding any payment in any
currency other than US Dollars, whether as a result of:
(i) any judgment or order or the enforcement thereof
(ii) the realization on any security;
(iii) the liquidation of the Company;
(iv) any voluntary payment by the Company; or
(v) any other reason;
shall be discharged only to the extent of the amount in US Dollars that
each holder of Notes entitled to receive such payment may, in
accordance with normal banking procedures, purchase with the sum paid
in such other currency (after any premium and costs of exchange) on the
Business Day immediately following the day on which such holder of
Notes receives such payment. If the amount in US Dollars that may be so
purchased for any reason is less than the amount originally due, the
Company shall indemnify and save harmless such holder of Notes from and
against all loss or damage arising out of or as a result of such
deficiency. This indemnity shall constitute an obligation separate and
independent from the other obligations contained in this Agreement,
shall give rise to a separate and independent cause of action, shall
apply irrespective of any indulgence granted by such holder of Notes
from time to time and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in respect
of an amount due under this Agreement or under any judgment or order.
8.3 GENERAL INTEREST PROVISIONS.
The Purchasers and the Company agree that the provisions of section
5-501(6) and section 5-521 of the General Obligations Law of the State of New
York apply to the transactions contemplated by the Financing Documents.
Notwithstanding the foregoing, it is the intention of the Company and the
Purchasers to conform strictly to the Applicable Interest Law, and the parties
agree that the aggregate of all interest, and any other charges or consideration
constituting interest under the Applicable Interest Law that is taken, reserved,
contracted for, charged or received pursuant to this Agreement or the Notes
shall under no circumstances exceed the maximum amount of interest allowed by
the Applicable Interest Law. Thus, if any such excess interest is ever charged,
received or collected on account of or relating to this Agreement and the Notes
(including any charge or amount which is not denominated as "interest" but is
legally deemed to be interest under Applicable Interest Law) for any reason,
then in such event:
(a) the provisions of this Section 8.3 shall govern and
control;
(b) the Company shall not be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum amount
of interest allowed by the Applicable Interest Law;
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<PAGE> 41
(c) any excess shall be deemed a mistake and cancelled
automatically and, if theretofore paid, shall be credited to the
principal amount of the Notes by the holders thereof, and if the
principal balance of the Notes is paid in full, any remaining excess
shall be forthwith paid to the Company; and
(d) the effective rate of interest shall be automatically
subject to reduction to the Maximum Legal Rate of Interest.
If at any time thereafter, the Maximum Legal Rate of Interest is increased,
then, to the extent that it shall be permissible under the Applicable Interest
Law, the Company shall forthwith pay to the holders of the Notes, on a pro rata
basis, all amounts of such excess interest that the holders of the Notes would
have been entitled to receive pursuant to the terms of this Agreement and the
Notes had such increased Maximum Legal Rate of Interest been in effect at all
times when such excess interest accrued. To the extent permitted by the
Applicable Interest Law, all sums paid or agreed to be paid to the holders of
the Notes for the use, forbearance or detention of the indebtedness evidenced
thereby shall be amortized, prorated, allocated and spread throughout the full
term of the Notes.
9. INTERPRETATION OF THIS AGREEMENT
9.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
ACCEPTABLE CREDIT FACILITY " means and includes the Senior Credit
Agreement and each successive loan or credit agreement replacing, refinancing or
refunding, in whole or in part, the Debt incurred under the Senior Credit
Agreement, but only so long as:
(a) the principal amount of Debt outstanding under the Senior
Credit Agreement and all such successive loan or credit agreements,
together with any additional amounts permitted to be incurred pursuant
to the Senior Credit Agreement and all such successive loan or credit
agreements, including, without limitation, any unused Revolving Credit
Commitment (as such term is defined in the Senior Credit Agreement) or
unused revolving credit commitment in respect of all such successive
loan or credit agreements, does not exceed, at the time of incurrence
or creation of the Senior Credit Agreement or such successive loan or
credit agreement, as the case may be, the Maximum Senior Debt Amount;
(b) such loan or credit agreement does not provide for an
overall final maturity or average life to maturity of the Debt incurred
thereunder which is shorter than that applicable to the Acceptable
Credit Facility being so replaced, refinanced or refunded; provided
that, subject to the foregoing limitation with respect to the average
life to maturity, the final maturity of individual facilities under
such loan or credit agreement may provide for final maturities which
are shorter than those applicable to the individual facilities under
the Acceptable Credit Facility being so replaced, refinanced or
refunded; and
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(c) such loan or credit agreement does not restrict payments
on the Subordinated Debt so as to create any default or event of
default in respect of such facility by virtue of no other fact except
the making by the Company of scheduled principal payments or interest
payments required to be made in cash; and shall not restrict the
payment of dividends or distributions from the Subsidiaries to the
Company in any manner which would have such effect.
AFFILIATE -- means and includes, at any time, each Person (other than a
Subsidiary):
(a) that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Company;
(b) that beneficially owns or holds five percent (5%) or more
of any class of the Voting Stock of the Company;
(c) five percent (5%) or more of the Voting Stock (or in the
case of a Person that is not a corporation, five percent (5%) or more
of the equity interest) of which is beneficially owned or held by the
Company; or
(d) that is an officer or director of the Company;
at such time; provided, however, that neither of the Purchasers nor any of their
affiliates shall be deemed to be an "Affiliate," and no Person holding any one
or more of the Notes shall be deemed to be an "Affiliate" solely by virtue of
the ownership of such securities. As used in this definition:
control -- means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
AGREEMENT, THIS -- and references thereto shall mean this Note
Agreement as it may from time to time be amended or supplemented.
APPLICABLE INTEREST LAW -- means any present or future law (including,
without limitation, the laws of the State of New York and the United States of
America) which has application to the interest and other charges pursuant to
this Agreement and the Notes.
BERKSHIRE -- means, collectively, Berkshire Partners Fund IV, Berkshire
Partners Fund V and Berkshire Investors, LLC.
BOARD OF DIRECTORS -- means, at any time, the board of directors of the
Company or any committee thereof that, in the instance, shall have the lawful
power to exercise the power and authority of such board of directors.
BUSINESS DAY -- means a day other than a Saturday, a Sunday or a day on
which banks in the State of New York are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
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CAPITAL LEASE -- means, at any time, a lease of any Property with
respect to which the lessee is required to recognize the acquisition of an asset
and the incurrence of a liability in accordance with GAAP.
CAPITAL STOCK -- means any class of preferred, common or other capital
stock, share capital or similar equity interest of a Person including, without
limitation, any partnership interest in any partnership or limited partnership
and any membership interest in any limited liability company.
CAPITALIZED INTEREST -- Section 1.1(b).
CAPITALIZED INTEREST PAYMENT DATE -- Section 1.1.
CHANGE IN CONTROL -- a "Change in Control" shall be deemed to have
occurred if:
(a) at any time prior to the Initial Public Offering (as
defined in the Senior Credit Agreement, as in effect on the Closing
Date), Berkshire and its affiliates shall cease to own directly or
indirectly, beneficially and of record, shares representing at least
forty percent (40%) of the Capital Stock (on a fully diluted basis) of
the Company;
(b) at any time after the Initial Public Offering, Berkshire
and its affiliates shall cease to own directly or indirectly,
beneficially and of record, shares representing at least thirty percent
(30%) of the Capital Stock (on a fully diluted basis) of the Company;
(c) at any time after the Initial Public Offering,
(i) any person or group (within the meaning of Rule
13d-5 of the Exchange Act) other than Berkshire and its
affiliates shall own directly or indirectly, beneficially or
of record, shares representing more than the percentage owned
at such time by Berkshire and its Affiliates of the Voting
Stock of the Company, or
(ii) a majority of the seats (other than vacant
seats) on the board of managing directors of the Company shall
at any time be occupied by Persons who were neither
(x) nominated by the board of managing
directors of the Company, nor
(y) appointed by directors so nominated;
(d) any change in control (or similar event, however
denominated) with respect to the Company, HoldCo-III or any other
Subsidiary shall occur under and as defined in any indenture or
agreement in respect of Debt to which the Company, HoldCo-III or any
other Subsidiary is a party; and
(e) the Company shall cease to own, directly or indirectly,
one hundred percent (100%) of the issued and outstanding Capital Stock
of HoldCo-III.
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CHANGE IN CONTROL NOTICE EVENT -- means
(a) the execution of any written agreement which, when fully
performed by the parties thereto, would result in a Change in Control;
or
(b) the making of any written offer by any person (as such
term is used in section 13(d) and section 14(d)(2) of the Exchange Act
as in effect on the Closing Date) or related persons constituting a
group (as such term is used in Rule 13d-5 under the Exchange Act as in
effect on the Closing Date) to the holders of the Common Stock which
offer, if accepted by the requisite number of such holders, would
result in a Change in Control.
CHANGE IN CONTROL PAYMENT DATE -- Section 1.5(b).
CLOSING DATE -- means the date any Notes are first sold.
COMMON STOCK -- means the common stock, par value NLG 1.00 per share,
of the Parent.
COMPANY -- the introductory paragraph.
CONTRACT RATE -- Section 1.1.
DEBT -- with respect to any Person, means, without duplication, the
liabilities of such Person with respect to:
(a) Borrowed Money -- borrowed money;
(b) Deferred Purchase Price of Property -- the deferred
purchase price of Property acquired by such Person (excluding accounts
payable arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such Property);
(c) Secured Liabilities -- borrowed money secured by any Lien
existing on Property owned by such Person (whether or not such
liabilities have been assumed);
(d) Capital Leases -- Capital Leases of such Person;
(e) Letters of Credit -- letters of credit, bankers
acceptances or similar instruments serving a similar function issued or
accepted by banks and other financial institutions for the account of
such Person (whether or not representing obligations for borrowed
money), other than undrawn trade letters of credit in the ordinary
course of business;
(f) Swaps -- Swaps of such Person; and
(g) Guarantees -- any Guaranty of such Person of any
obligation or liability of another Person of obligations of the type
listed in clause (a) through clause (f) of this definition of Debt.
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Unless the context otherwise requires, "Debt" means Debt of the Company or of a
Subsidiary.
DEBT SECURITIES PURCHASE AGREEMENTS -- means the separate Securities
Purchase Agreements each dated as of September 17, 1998, between the Company and
each of the respective Purchasers, relating to the offering and sale of the
Notes.
DEFAULT -- means any event which, with the giving of notice or the
passage of time, or both, would become an Event of Default.
DEFAULT RATE -- means a per annum rate of interest equal to the lesser
of:
(a) the highest rate allowed by the Applicable Interest Law;
and
(b) the greater of:
(i) seventeen percent (17%); and
(ii) two percent (2%) over the rate of interest
publicly announced from time to time by Morgan Guaranty Trust
Company of New York in New York, New York as its "base" or
"prime" rate.
DOLLAR and $ -- means US Dollars.
DOL -- means the United States Department of Labor and any successor
agency.
ENVIRONMENTAL PROTECTION LAW -- means any law, statute or regulation
enacted by any Governmental Authority in connection with or relating to the
protection or regulation of the environment, including, without limitation,
those laws, statutes and regulations regulating the disposal, removal,
production, storing, refining, handling, transferring, processing or
transporting of Hazardous Materials and any applicable orders, decrees or
judgments issued by any court of competent jurisdiction in connection with any
of the foregoing.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA AFFILIATE -- means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the IRC.
EVENT OF DEFAULT -- Section 6.1.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations of the SEC thereunder.
EXCLUDED TAXES -- Section 8.1(b)(iii).
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FAIR MARKET VALUE -- means, with respect to any Property, the sale
value of such Property that would be realized in an arm's-length sale at such
time between an informed and willing buyer, and an informed and willing seller,
under no compulsion to buy or sell, respectively.
FINANCING DOCUMENTS -- means and includes this Agreement, the Debt
Securities Purchase Agreements, the Notes, the Put Rights Agreement and the
other agreements, certificates and instruments to be executed pursuant to the
terms of each of the foregoing, as each may be amended, restated or otherwise
modified from time to time.
FIRST CATCH-UP DATE -- Section 1.2.
FOREIGN PENSION PLAN -- means any plan, fund or other similar program:
(a) established or maintained outside of the United States of
America by the Company primarily for the benefit of the employees
(substantially all of whom are aliens not residing in the United States
of America) of the Company, which plan, fund or other similar program
provides for retirement income for such employees or results in a
deferral of income for such employees in contemplation of retirement;
and
(b) not otherwise subject to ERISA.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
GOVERNMENTAL AUTHORITY -- means:
(a) the government of:
(i) the United States of America and any state or
other political subdivision thereof;
(i) The Netherlands and any political subdivision
thereof; or
(ii) any other jurisdiction in which the Parent, the
Company or any Subsidiary conducts all or any part of its
business, or that asserts any jurisdiction over the conduct of
the affairs of, or the Property of, the Parent, the Company or
any such Subsidiary; and
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
GUARANTY -- means with respect to any Person (for the purposes of this
definition, the "Guarantor") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "Primary
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Obligor") in any manner, whether directly or indirectly, including, without
limitation, obligations incurred through an agreement, contingent or otherwise,
by the Guarantor:
(a) to purchase such indebtedness or obligation or any
Property constituting security therefor;
(b) to advance or supply funds
(i) for the purchase or payment of such indebtedness,
dividend or obligation; or
(ii) to maintain working capital or other balance
sheet condition or any income statement condition of the
Primary Obligor or otherwise to advance or make available
funds for the purchase or payment of such indebtedness,
dividend or obligation;
(c) to lease Property or to purchase securities or other
Property or services primarily for the purpose of assuring the owner of
such indebtedness or obligation of the ability of the Primary Obligor
to make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability:
(i) in each case where the obligation that is the subject of
such Guaranty is in the nature of indebtedness for money borrowed it
shall be assumed that the amount of the Guaranty is the amount of the
direct obligation then outstanding; and
(ii) in each case where the obligation that is the subject of
such Guaranty is not in the nature of indebtedness for money borrowed
it shall be assumed that the amount of the Guaranty is the amount (if
any) of the direct obligation that is then due.
GUILDERS - means the lawful money of The Netherlands.
HAZARDOUS MATERIAL - means all or any of the following:
(a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable Environmental Protection Laws as
"hazardous substances", "hazardous materials", "hazardous wastes",
"toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity, "TLCP toxicity" or "EP toxicity";
(b) oil, petroleum or petroleum derived substances, natural
gas, natural gas liquids or synthetic gas and drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources;
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(c) any flammable substances or explosives or any radioactive
materials;
(d) asbestos or urea formaldehyde in any form; and
(e) dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million.
HOLDCO-III - means Miami Cruiseline Services Holdings III B.V., a
besloten vennootschap met beperkte aansprakelijkheid (private company with
limited liability) organized under the laws of The Netherlands, having its legal
seat in Amsterdam, together with its successors and assigns who become such in
accordance herewith.
IRC - means the Internal Revenue Code of 1986, together with all rules
and regulations promulgated pursuant thereto, as amended from time to time.
JUNIOR SUBORDINATED DEBT -- means any Debt of the Company or any
Subsidiary which is:
(a) expressly or in any other manner junior or subordinated to
the Debt evidenced by the Notes, whether in liquidation preference,
right to repayment or otherwise, including, without limitation, the
Viad Note; or
(b) owing to any Subsidiary or any Affiliate.
LIEN - means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property (for purposes of
this definition, the "Owner"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:
(a) the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes, and the filing of any
financing statement under the Uniform Commercial Code of any
jurisdiction, or an agreement to give any of the foregoing;
(b) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting real Property;
(c) stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements affecting the Owner's rights in
stock owned by the Owner; and
(d) any interest in any Property held by the Owner evidenced
by a conditional sale agreement, Capital Lease or other arrangement
pursuant to which title to such Property has been retained by or vested
in some other Person for security purposes.
The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements.
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MATERIAL ADVERSE EFFECT - means, with respect to any event or
circumstance (either individually or in the aggregate with all other events and
circumstances), an effect caused thereby or resulting therefrom that would be
materially adverse as to, or in respect of:
(a) the business, operations, profits, financial condition or
Properties of the Company and the Subsidiaries, taken as a whole;
(b) the ability of the Company and the Subsidiary Guarantors,
taken as a whole, to perform their respective obligations under any
Financing Document to which they are a party; or
(c) the validity or enforceability of any of the Financing
Documents.
MAXIMUM ACCRUAL -- Section 1.2(b).
MAXIMUM LEGAL RATE OF INTEREST -- means the maximum rate of interest
that a holder of Notes may from time to time legally charge the Company by
agreement and in regard to which the Company would be prevented successfully
from raising the claim or defense of usury under the Applicable Interest Law as
now or hereafter construed by courts having appropriate jurisdiction.
MAXIMUM SENIOR DEBT AMOUNT -- means the difference of:
(a) One Hundred Fifteen Million Dollars ($115,000,000); minus
(b) the sum of:
(i) the aggregate amount of all mandatory principal
payments made in respect of the Senior Debt from time to time,
other than any principal payment made in respect of Revolving
Loans (as such term is defined in the Senior Credit Agreement)
or any successor revolving credit facility under an Acceptable
Credit Facility; plus
(ii) the aggregate amount of all fees paid by the
Company to any Senior Lender (other than fees provided for in
the Senior Credit Agreement, as in effect on the date hereof,
or any similar fees in comparable amounts charged in the
ordinary course of lending under an Acceptable Credit
Facility) in excess of Five Hundred Thousand Dollars
($500,000), including, without limitation, any amendment or
restructuring fees;
provided, however, that the aggregate principal amount of Debt outstanding under
the Revolving Credit Commitment (as defined in the Senior Credit Agreement) or
any revolving credit facility under an Acceptable Credit Facility, which in
either case is in excess of Thirty-Five Million Dollars ($35,000,000), shall not
constitute Senior Debt for purposes of this Agreement.
MINIMUM NOTE DENOMINATION - means, at any time, the greater of:
(a) Five Hundred Thousand Dollars ($500,000); and
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<PAGE> 50
(b) the US Dollar equivalent, at such time, of One Hundred
Thousand Guilders (NLG 100,000).
MODIFIED PREPAYMENT COMPENSATION AMOUNT - means, with respect to
Prepaid Principal and the date the payment thereof is due, an amount equal to
the applicable percentage set out below of the Prepaid Principal:
<TABLE>
<CAPTION>
==================================================================================
If Prepayment Occurs During
the Period Specified Below: Percentage of Prepaid Principal:
==================================================================================
<S> <C>
From and including the Closing Date to and 14.00%
including September 14, 1999
- ----------------------------------------------------------------------------------
From and including September 15, 1999 to and 12.25%
including September 14, 2000
- ----------------------------------------------------------------------------------
From and including September 15, 2000 to and 10.50%
including September 14, 2001
- ----------------------------------------------------------------------------------
From and including September 15, 2001 to and 8.75%
including September 14, 2002
- ----------------------------------------------------------------------------------
From and including September 15, 2002 to and 7.00%
including September 14, 2003
- ----------------------------------------------------------------------------------
From and including September 15, 2003 to and 5.25%
including September 14, 2004
- ----------------------------------------------------------------------------------
From and including September 15, 2004 to and 3.50%
including September 14, 2005
- ----------------------------------------------------------------------------------
After September 15, 2005 1.75%
==================================================================================
</TABLE>
MULTIEMPLOYER PLAN - means any "multiemployer plan" (as defined in
section 3(37) of ERISA) in respect of which the Company or any ERISA Affiliate
is an "employer" (as such term is defined in section 3 of ERISA).
NOTE - means and includes each 15% Senior Subordinated Note due
September 15, 2006 issued pursuant to this Agreement.
NOTE RELATED PAYMENT - Section 8.1(a).
PARENT - means Miami Cruiseline Services Holdings I B.V., a besloten
vennootschap met beperkte aansprakelijkheid (private company with limited
liability) organized under the laws of The Netherlands, having its legal seat in
Amsterdam, together with its successors and assigns.
PAYMENT BLOCKAGE PERIOD - Section 7.5.
PAYMENT DEFAULT - Section 7.4.
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PBGC - means the Pension Benefit Guaranty Corporation, or any other
Person succeeding to the duties thereof.
PERSON - means an individual, partnership, corporation (including any
besloten vennootschap met beperkte aansprakelijkheid or naamloze vennootschap),
limited liability company, joint venture, trust, unincorporated organization, or
a government or agency or political subdivision thereof.
PLAN - means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
PREPAID PRINCIPAL - means any portion of the principal amount of any
Note being paid for any reason (including, without limitation, acceleration,
optional payment or mandatory payment required because of the occurrence of a
contingency) prior to its regularly scheduled maturity date.
PREPAYMENT COMPENSATION AMOUNT - with respect to any payment of the
principal amount of any Notes, means:
(a) if such payment is made at any time on or after the third
anniversary of the Closing Date pursuant to Section 1.4(a), the
Modified Prepayment Compensation Amount;
(b) if such payment is made at any time prior to the third
anniversary of the Closing Date and within thirty (30) days after the
consummation of a Qualified Exit pursuant to Section 1.4(b):
(i) if the principal amount of such payment is equal
to or not greater than fifty percent (50%) of the principal of
the Notes outstanding immediately prior to such payment, the
Modified Prepayment Compensation Amount; and
(ii) if the principal amount of such payment is
greater than fifty percent (50%) of the principal of the Notes
outstanding immediately prior to such payment, the sum of:
(A) the Modified Prepayment Compensation
Amount calculated with respect to fifty percent (50%)
of the principal amount of the Notes outstanding
immediately prior to such payment; plus
(B) the Standard Prepayment Compensation
Amount, calculated with respect to the difference of:
(I) the aggregate principal amount
of Notes so being paid; minus
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<PAGE> 52
(II) fifty percent (50%) of the
principal amount of the Notes outstanding
immediately prior to such payment; and
(c) if such payment is made pursuant to Section 6.2(a), the
greater of the Modified Prepayment Compensation Amount and the Standard
Prepayment Compensation Amount; provided, however, that in the event
that the Modified Prepayment Compensation Amount shall become so
payable and any court of competent jurisdiction shall fail to enforce
for any reason the payment of the Modified Prepayment Compensation
Amount with respect to such payment, then such payment shall be made
together with the Standard Prepayment Compensation Amount instead.
PROPERTY - means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
PRO RATA SHARE - with respect to any holder of Notes means, at any
time, a fraction the numerator of which is the principal amount of Notes held by
such holder, and the denominator of which is the aggregate principal amount of
Notes held by all holders, at such time.
PURCHASERS - the introductory paragraph.
PUT OBLIGATION - means the obligations of the Company under the Put
Rights Agreement.
PUT RIGHT - means the rights granted by the Company to each of the
Purchasers, under the Put Rights Agreement, to require the Company to purchase
the Specified Parent Stock held by such Purchaser in accordance with the terms
thereof.
PUT RIGHTS AGREEMENT - means, collectively, the separate Put Rights
Agreements, each dated as of September 17, 1998, between the Company and each of
the Purchasers, pursuant to which the Put Right has been granted.
QUALIFIED EXIT - means either:
(a) a distribution in a bona fide public offering of at least
twenty-five percent (25%) (by number of shares, assuming that all
Rights of the Parent have been exercised or converted into Common
Stock, whether or not such Rights are then currently exercisable or
convertible) of the Common Stock (or, in the case of a public offering
in the United States, of American Depositary Shares representing such
shares of Common Stock), resulting in gross proceeds to the Parent of
not less than Twenty-Five Million Dollars ($25,000,000) (or an
equivalent amount in Guilders) and, as a result of which offering and
any other related transactions, either:
(i) the Common Stock or such American Depositary
Shares become registered under section 12(b) or 12(g) of the
Exchange Act, or are exempt from registration under section
12(g) thereof solely as a result of the operation of Rule
12g3-2 under the Exchange Act; or
(ii) the Parent converts to, or otherwise becomes, a
naamloze vennootschap (public corporation with limited
liability) and the Common Stock
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<PAGE> 53
becomes listed on a designated offshore securities market (as
such term is defined in Rule 902(a) under the Securities Act);
or
(iii) a Change in Control shall occur;
(b) all of the Common Stock and any remaining Rights of the
Parent are sold to a third party which is not an Affiliate in an arm's
length transaction; or
(c) either the Parent transfers all or substantially all of
the Property of the Company and the Subsidiaries or shall merge with or
into or consolidate or amalgamate with any other Person, as a result of
which all holders of the Common Stock receive, in lieu of or in
exchange for such Common Stock, Securities of any Person other than the
Parent or an Affiliate, cash or other Property.
REFUNDED TAX - Section 8.1(d)(iii).
REMEDIES - means and includes, with respect to any Debt (including,
without limitation, the Senior Debt and the Subordinated Debt):
(a) the acceleration of the maturity of any of such Debt;
(b) the exercise of any put right or other similar right to
require the Company or any Subsidiary to repurchase any of such Debt
prior to the stated maturity thereof;
(c) the collection or commencement of proceedings against the
Company, any Subsidiary or any other Person obligated on such Debt or
any of their respective Property, to enforce or collect any of such
Debt;
(d) taking possession of or foreclosing upon (whether by
judicial proceedings or otherwise) any Liens or other collateral
security for such Debt; or causing a marshalling of any Property of the
Company or any Subsidiary;
(e) the making of a demand in respect of any Guaranty given by
the Parent, the Company or any Subsidiary of such Debt; or
(f) exercising any other remedies with respect to such Debt or
any claim with respect thereto.
REORGANIZATION SECURITIES - means Securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment or an
accoord:
(a) the payment of which is subordinated, at least to the
extent provided in Section 7 with respect to Subordinated Debt, to the
payment of all Senior Debt at the time outstanding and to any
Securities issued in respect thereof under any such plan of
reorganization or readjustment; or
(b) in connection with which the holders of Senior Debt have
acknowledged that the Senior Debt has been paid in full.
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<PAGE> 54
REQUIRED HOLDERS - means, at any time, the holders of more than fifty
percent (50%) in principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by any one or more of the Parent, the Company,
any Subsidiary or any Affiliate).
REQUIRED PRINCIPAL PAYMENT - Section 1.3.
RESTRICTED PAYMENT - means:
(a) any dividend or other distribution (whether in the form of
cash or any other Property), direct or indirect, on account of any
shares of Capital Stock or Rights of the Company or any Subsidiary
(other than Capital Stock of a Subsidiary owned legally and
beneficially by the Company or any of the Subsidiaries), now or
hereafter outstanding, except a dividend payable solely in shares of
Capital Stock of the Company or such Subsidiary, as the case may be;
(b) any optional or mandatory redemption, retirement, purchase
or other acquisition, direct or indirect, of any shares of Capital
Stock or Rights of the Company or any Subsidiary (other than Capital
Stock of a Subsidiary owned legally and beneficially by the Company or
any of the Subsidiaries), now or hereafter outstanding;
(c) any payment, repayment, defeasance, redemption,
retirement, repurchase or other acquisition, direct or indirect, of any
installment, whether of principal, interest or otherwise, of the Viad
Note;
(d) any repayment, defeasance, redemption, retirement,
repurchase or other acquisition, direct or indirect, of any other Debt
owing to any Affiliate (other than Debt in respect of loans or advances
extended to the Company or any of the Subsidiaries by any of their
officers or directors in the ordinary course of business); and
(e) any repayment, defeasance, redemption, retirement,
repurchase or other acquisition, direct or indirect, of any other Debt
which is expressly or in any other manner junior or subordinated to the
Debt evidenced by the Notes, whether in liquidation preference, right
to repayment or otherwise.
RIGHTS - means, with respect to any Person, any right, warrant, option
or other similar right to purchase or receive Capital Stock of such Person.
SEC - means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.
SECURITIES ACT - means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
SECURITY - means "security" as defined by section 2(1) of the
Securities Act.
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<PAGE> 55
SENIOR AGENT - means:
(a) for so long as the Senior Credit Agreement is outstanding,
Credit Suisse First Boston, in its capacity as administrative agent
under the Senior Credit Agreement, together with its successors and
assigns; and
(b) thereafter, any one (1) holder of Senior Debt under an
Acceptable Credit Facility designated to each holder of Notes in
writing by the Company and the predecessor Senior Agent.
SENIOR CREDIT AGREEMENT - means the Credit Agreement, dated as of
September 17, 1998, among HoldCo-III, the Company, the Senior Lenders and the
Senior Agent, as such agreement may be amended, modified or supplemented from
time to time in compliance with the terms of the Note Agreement, together with
the Parent Guarantee Agreement, dated as of September 17, 1998, made by the
Parent for the benefit of the Senior Lenders.
SENIOR DEBT - means and includes all obligations, liabilities and
indebtedness of the Company or any Subsidiary now or hereafter existing, whether
fixed or contingent, and whether directly as borrower or by way of Guaranty,
for:
(a) the principal portion of Debt, interest (including,
without limitation, interest accruing after the date of filing of any
bankruptcy petition, whether or not allowed in such bankruptcy
proceeding), fees, expenses or otherwise, under the Senior Credit
Agreement and the other Loan Documents (as defined in the Senior Credit
Agreement, as in effect on the date hereof) or any other Acceptable
Credit Facility; provided, however, that if the aggregate principal
amount of all such obligations, liabilities and indebtedness shall
exceed the Maximum Senior Debt Amount, such excess (together with any
interest, fees or expenses in respect of such excess) shall not
constitute Senior Debt for purposes of this Agreement; and provided,
further, that any such excess shall be first be applied to Acceptable
Credit Facilities other than the Senior Credit Agreement and then to
the Senior Credit Agreement; and
(b) all obligations of the Company or any Subsidiary arising
solely out of interest rate Swaps related solely to the interest
payment obligations in respect of the Debt referred to in clause (a) of
this definition.
Notwithstanding the foregoing, in no event shall "Senior Debt" include any
Junior Subordinated Debt.
SENIOR FINANCIAL OFFICER - means any one of the chief financial
officer, the treasurer and the principal accounting officer of the Company.
SENIOR LENDERS - means each of the "Lenders" under and as defined in,
and from time to time party to, the Senior Credit Agreement, together with their
respective successors and assigns (including, without limitation, lenders under
another Acceptable Credit Facility).
SENIOR OFFICER - means any one of the chairman of the board of
directors, the chief executive officer, the chief operating officer, and the
president, of the Company.
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SPECIFIED NONPAYMENT DEFAULT - means, with respect to the Senior Debt,
any "Event of Default" (as such term is defined in the Senior Credit Agreement)
specified in any one or more of the following provisions of the Senior Credit
Agreement: Article VII(d) (but solely with respect to a violation of any of
Sections 6.01, 6.06, 6.11, 6.12 or 6.13), Article VII(f), Article VII(g),
Article VII(h) or Article VII(l).
SPECIFIED NONPAYMENT DEFAULT NOTICE - Section 7.5(b).
SPECIFIED PARENT STOCK - means, collectively, the shares of Common
Stock of the Parent acquired by the Purchasers on the Closing Date, together
with any securities issued in respect of such Common Stock (whether by stock
split, stock dividend, reclassification or in connection with a corporate
reorganization or otherwise).
STANDARD PREPAYMENT COMPENSATION AMOUNT - means, with respect to
Prepaid Principal and the date the payment thereof is due (the "PAYMENT DATE")
an amount equal to the excess (if any) of the Present Value of the Prepaid Cash
Flows over the amount of such Prepaid Principal, determined in respect of such
Prepaid Principal as of such Payment Date. As used in this definition:
Present Value of the Prepaid Cash Flows - means the sum of the
present values of the then remaining scheduled payments of principal
and interest that would have been payable in respect of such Prepaid
Principal but that are no longer payable as a result of the early
payment of such Prepaid Principal. In determining such present values:
(i) the amount of interest accrued through and
including the day immediately preceding such Payment Date on
such Prepaid Principal since the scheduled interest payment
date immediately preceding such Payment Date shall be deducted
from the first of such payments of interest; and
(ii) a discount rate per annum equal to the
Make-Whole Discount Rate determined with respect to such
Prepaid Principal and such Payment Date divided by two (2),
and a discount period of six (6) months of thirty (30) days
each, shall be used.
Make-Whole Discount Rate - means the sum of:
(i) two percent (2.00%) per annum; plus
(ii) the per annum percentage rate (rounded to the
nearest three (3) decimal places) equal to the bond equivalent
yield to maturity derived from the Bloomberg Rate, or if the
Bloomberg Rate is not then available, the Applicable H.15
Rate, determined as of the date that is two (2) Business Days
prior to such Payment Date.
Applicable H.15 - means, at any time, the United States
Federal Reserve Statistical Release H.15(519) then most recently
published and available to the public, or if such publication is not
available, then any other source of current information in respect of
interest rates on securities of the United States of America that is
generally available and,
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<PAGE> 57
in the reasonable judgment of the Required Holders, provides
information reasonably comparable to the H.15(519) report.
Applicable H.15 Rate - means, at any time, the then most
current annual yield to maturity of the hypothetical United States
Treasury obligation listed in the Applicable H.15 with a Treasury
Constant Maturity (as such term is defined in such Applicable H.15)
equal to the Weighted Average Life to Maturity of such Prepaid
Principal. If no such United States Treasury obligation with a Treasury
Constant Maturity corresponding exactly to such Weighted Average Life
to Maturity is listed, then the yields for the two (2) then most
current hypothetical United States Treasury obligations with Treasury
Constant Maturities most closely corresponding to such Weighted Average
Life to Maturity (one (1) with a longer maturity and one (1) with a
shorter maturity, if available) shall be calculated pursuant to the
immediately preceding sentence and the Make-Whole Discount Rate shall
be interpolated or extrapolated from such yields on a straight-line
basis.
Bloomberg Rate - means the per annum yield reported on the
Bloomberg Financial Markets System at 10:00 a.m. (New York time) on the
second (2nd) Business Day preceding such Payment Date for United States
government securities having a maturity (rounded to the nearest month)
corresponding to the Weighted Average Life to Maturity of such Prepaid
Principal. Page USD shall be used as the source of such yields, or if
not then available, such other screen available on the Bloomberg
Financial Markets System as shall, in the opinion of the Required
Holders, provide equivalent information.
Treasury Constant Maturity - has the meaning specified in the
Applicable H.15.
Weighted Average Life to Maturity - means the number of years
(calculated to the nearest one-twelfth (1/12th)) obtained by dividing
the Remaining Dollar-Years of such Prepaid Principal by such Prepaid
Principal, determined as of such Payment Date.
Remaining Dollar-Years - means the result obtained by:
(a) multiplying, in the case of each then remaining
scheduled payment of principal that would have been payable in
respect of Prepaid Principal but is no longer payable as a
result of the payment of such Prepaid Principal;
(i) an amount equal to such scheduled
payment of principal; by
(ii) the number of years (calculated to the
nearest one-twelfth) that will elapse between such
Payment Date and the date such scheduled principal
payment would be due if such Prepaid Principal had
not been so prepaid; and
(b) calculating the sum of each of the products
obtained in the preceding subsection (a).
SUBORDINATED DEBT - means and includes all obligations, liabilities and
indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for the principal
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portion of Debt, interest, Prepayment Compensation Amount or otherwise (other
than expenses contemplated to be paid pursuant to Section 10.6, Tax
Reimbursement Amounts and similar indemnities), under or arising out of this
Agreement or the Notes.
SUBSIDIARY - means, at any time, each corporation, association, limited
liability company or other business entity which qualifies as a subsidiary of
the Company that is properly included in a consolidated financial statement of
the Company and its subsidiaries in accordance with GAAP at such time.
SURVIVING CORPORATION - Section 4.1(a).
SWAPS - means, with respect to any Person, obligations with respect to
interest rate swaps and currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency, except that if any agreement relating to such obligation provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligations shall be the net
amount thereof. The aggregate net obligation of Swaps at any time shall be the
aggregate amount of the obligations of such Person under all Swaps assuming all
such Swaps had been terminated by such Person as of the end of the then most
recently ended fiscal quarter of such Person. If such net aggregate obligation
shall be an amount owing to such Person, then the amount shall be deemed to be
Zero Dollars ($0).
TAX - Section 8.1(a).
TAX AMOUNT - Section 8.1(b)(i)(A).
TAX JURISDICTION - Section 8.1(a).
TAX REIMBURSEMENT AMOUNT - Section 8.1(b)(i)(B).
TRANSFER - means to sell, lease as lessor, transfer or otherwise
dispose of any Property.
US DOLLARS - Section 8.2(a).
VIAD NOTE - means junior subordinated pay-in-kind note or notes of the
Company, expressly subordinated to the Notes on terms acceptable to the
Purchasers, issued to Viad Corp., a Delaware corporation, in connection with the
acquisition by a Subsidiary of the Company of Greyhound Leisure Services Inc., a
Florida corporation, in an aggregate original principal amount not exceeding Ten
Million Dollars ($10,000,000), plus the amount of any notes issued as an
adjustment to the purchase price paid in such acquisition.
VOTING STOCK - means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time any stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency). Except as otherwise provided, references herein to "Voting Stock"
shall mean Voting Stock of the Company.
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<PAGE> 59
YEAR 2000 COMPLIANT - means all computer applications (including those
affected by information received from its suppliers and vendors) that are
material to the Company's and the Subsidiaries' business and operations will on
a timely basis be able to perform properly date-sensitive functions involving
dates on or after January 1, 2000.
9.2 ACCOUNTING PRINCIPLES.
(a) GENERALLY. Unless otherwise provided herein, all financial
statements delivered in connection herewith will be prepared in
accordance with GAAP. Where the character or amount of any asset or
liability or item of income or expense, or any consolidation or other
accounting computation is required to be made for any purpose
hereunder, it shall be done in accordance with GAAP; provided, however,
that if any term defined herein includes or excludes amounts, items or
concepts that would not be included in or excluded from such term if
such term were defined with reference solely to GAAP, such term will be
deemed to include or exclude such amounts, items or concepts as set
forth herein.
(b) CONSOLIDATION. Whenever accounting amounts of a group of
Persons are to be determined "on a consolidated basis" it shall mean
that, as to balance sheet amounts to be determined as of a specific
time, the amount that would appear on a consolidated balance sheet of
such Persons prepared as of such time, and as to income statement
amounts to be determined for a specific period, the amount that would
appear on a consolidated income statement of such Persons prepared in
respect of such period, in each case with all transactions among such
Persons eliminated, and prepared in accordance with GAAP except as
otherwise required hereby.
(c) CURRENCY. With respect to any determination, consolidation
or accounting computation required hereby, any amounts not denominated
in the currency in which this Agreement specifies shall be converted to
such currency in accordance with the requirements of GAAP (as such
requirements relate to such determination, consolidation or
computation) and, if no such requirements shall exist, converted to
such currency in accordance with normal banking procedures, at the
closing rate as reported in The Wall Street Journal published most
recently as of the date of such determination, consolidation or
computation or, if no such quotation shall then be available, as quoted
on such date by any bank or trust company reasonably acceptable to the
Required Holders.
9.3 DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
9.4 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of
the Sections of this Agreement and the Table of Contents of this
Agreement appear as a matter of convenience only, do not constitute a
part hereof and shall not affect the construction
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hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to
this Agreement as a whole and not to any particular Section or other
subdivision. References to Sections are, unless otherwise specified,
references to Sections of this Agreement. References to Annexes and
Exhibits are, unless otherwise specified, references to Annexes and
Exhibits attached to this Agreement.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
9.5 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO ANY CONFLICTS OF LAW RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAW OF
ANY OTHER JURISDICTION. IN ADDITION, THE PARTIES HERETO SELECT, TO THE EXTENT
THEY MAY LAWFULLY DO SO, THE INTERNAL LAWS OF THE STATE OF NEW YORK AS THE
APPLICABLE INTEREST LAW.
10. MISCELLANEOUS
10.1 COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder or under the
Notes shall be in writing and shall be delivered either by nationwide
overnight courier or by facsimile transmission (confirmed by delivery
by nationwide overnight courier sent on the day of the sending of such
facsimile transmission). Communications to the Company shall be
addressed as set forth on Annex 2, or at such other address of which
the Company shall have notified each holder of Notes. Communications to
the holders of the Notes shall be addressed as set forth on Annex 1 by
such holder, or at such other address of which such holder shall have
notified the Company (and the Company shall record such address in the
register for the registration and transfer of Notes maintained pursuant
to Section 2.1).
(b) WHEN GIVEN. Any communication addressed and delivered as
herein provided shall be deemed to be received when actually delivered
to the address of the addressee (whether or not delivery is accepted)
or received by the telecopy machine of the recipient. Any communication
not so addressed and delivered shall be ineffective.
(c) SERVICE OF PROCESS. Notwithstanding the foregoing
provisions of this Section 10.1, service of process in any suit, action
or proceeding arising out of or relating to this agreement or any
document, agreement or transaction contemplated hereby, or any action
or proceeding to execute or otherwise enforce any judgment in respect
of any breach hereunder or under any document or agreement contemplated
hereby, shall be delivered in the manner provided in Section 10.7(c).
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10.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by the Purchasers at the closing of their purchase of the
Notes (except the Notes themselves), and financial statements, certificates and
other information previously or hereafter furnished to any holder of Notes, may
be reproduced by the Company or any holder of Notes by means of any
photographic, photostatic, microfilm, micro-card, miniature photographic,
digital or other similar process and each holder of Notes may destroy any
original document so reproduced. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by the Company or such holder of Notes in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. Nothing in this
Section 10.2 shall prohibit the Company or any holder of Notes from contesting
the accuracy or validity of any such reproduction.
10.3 SURVIVAL; ENTIRE AGREEMENT.
All warranties, representations, certifications and covenants contained
herein, in the Debt Securities Purchase Agreements or in any certificate or
other instrument delivered hereunder shall be considered to have been relied
upon by the other parties hereto and shall survive the delivery to the
Purchasers of the Notes regardless of any investigation made by or on behalf of
any party hereto. All statements in any certificate or other instrument
delivered pursuant to the terms hereof or of the Debt Securities Purchase
Agreements shall constitute warranties and representations hereunder. All
obligations hereunder (other than payment of the Notes, but including, without
limitation, reimbursement obligations in respect of costs, expenses and fees)
shall survive the payment of the Notes and the termination hereof. Subject to
the preceding sentence, this Agreement, the Notes and the other Financing
Documents embody the entire agreement and understanding between the Company and
the Purchasers, and supersede all prior agreements and understandings, relating
to the subject matter hereof.
10.4 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder whether or not an express assignment to
such holder of rights hereunder shall have been made by the Purchasers or their
respective successors or assigns. Anything contained in this Section 10.4
notwithstanding, the Company may not assign any of its respective rights, duties
or obligations hereunder or under any of the other Financing Documents without
the prior written consent of all holders of Notes. For purposes of the avoidance
of doubt, any holder of a Note shall be permitted to pledge or otherwise grant a
Lien in and to such Note (including, without limitation, pledging such Note to a
trustee for the benefit of certain secured noteholders pursuant to documents
relating to the financing of such holder or to one or more banks or other
institutions providing financing in connection with the purchase by such holder
of such Note); provided, however, that any such pledgee or holder of a Lien
shall not be considered a holder hereunder until it shall have foreclosed upon
such Note in accordance with applicable law and informed the Company, in
writing, of the same.
57
<PAGE> 62
10.5 AMENDMENT AND WAIVER.
(a) REQUIREMENTS. This Agreement may be amended, and the
observance of any term hereof may be waived, with (and only with) the
written consent of the Company and the Required Holders; provided,
however, that no such amendment or waiver shall, without the written
consent of the holders of all Notes (exclusive of Notes held by the
Company, any Subsidiary or any Affiliate) at the time outstanding;
(i) change the amount or time of any prepayment or
payment of principal or Prepayment Compensation Amount or the
rate or time of payment of interest;
(ii) amend or waive the provisions of Section 6.1,
Section 6.2, Section 6.3 or Section 7, or amend or waive any
defined term to the extent used therein;
(iii) amend or waive the definition of "Required
Holders" or otherwise amend the percentage of Notes required
to be held by holders of Notes consenting to any action under
this Agreement; or
(iv) amend or waive this Section 10.5 or amend or
waive any defined term to the extent used herein.
The holder of any Note may specify that any such written consent
executed by it shall be effective only with respect to a portion of the
Notes held by it (in which case it shall specify, by dollar amount, the
aggregate principal amount of Notes with respect to which such consent
shall be effective) and in the event of any such specification such
holder shall be deemed to have executed such written consent only with
respect to the portion of the Notes so specified.
No amendment, supplement or modification of the provisions of
Section 7, or any defined term to the extent used therein, shall be
effective to any holder of Senior Debt who has not consented to such
amendment, supplement or modification.
(b) SOLICITATION OF NOTEHOLDERS.
(i) SOLICITATION. Each holder of the Notes
(irrespective of the amount of Notes then owned by it) shall
be provided by the Company with all material information
provided by the Company to any other holder of Notes with
respect to any proposed waiver or amendment of any of the
provisions hereof or the Notes. Executed or true and correct
copies of any amendment or waiver effected pursuant to the
provisions of this Section 10.5 shall be delivered by the
Company to each holder of outstanding Notes forthwith
following the date on which such amendment or waiver becomes
effective.
(ii) PAYMENT. The Company shall not, nor shall any
Subsidiary or Affiliate, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any
58
<PAGE> 63
security, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes of any
waiver or amendment of any of the provisions hereof or of the
Notes unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably
to the holders of all Notes then outstanding.
(iii) SCOPE OF CONSENT. Any amendment or waiver made
pursuant to this Section 10.5 by a holder of Notes that has
transferred or has agreed to transfer its Notes to the
Company, any Subsidiary or any Affiliate and has provided or
has agreed to provide such amendment or waiver as a condition
to such transfer shall be void and of no force and effect
except solely as to such holder, and any amendments effected
or waivers granted that would not have been or would not be so
effected or granted but for such amendment or waiver (and the
amendments or waivers of all other holders of Notes that were
acquired under the same or similar conditions) shall be void
and of no force and effect, retroactive to the date such
amendment or waiver initially took or takes effect, except
solely as to such holder.
(c) BINDING EFFECT. Except as provided in Section
10.5(b)(iii), any amendment or waiver consented to as provided in this
Section 10.5 shall apply equally to all holders of Notes and shall be
binding upon them and upon each future holder of any Note and upon the
Company whether or not such Note shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall extend to
or affect any obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or impair any right consequent
thereon.
10.6 EXPENSES.
(a) AMENDMENTS AND WAIVERS. The Company shall pay when billed
the reasonable costs and expenses (including reasonable attorneys'
fees) incurred by the holders of the Notes in connection with the
consideration, negotiation, preparation or execution of any amendments,
waivers, consents, standstill agreements and other similar agreements
with respect to this Agreement or any other Financing Document (whether
or not any such amendments, waivers, consents, standstill agreements or
other similar agreements are executed).
(b) RESTRUCTURING AND WORKOUT, INSPECTIONS. At any time when
the Company and the holders of Notes are conducting restructuring or
workout negotiations in respect hereof, or a Default or Event of
Default exists, the Company shall pay when billed the reasonable costs
and expenses (including reasonable attorneys' fees and the fees of
professional advisors) incurred by the holders of the Notes in
connection with the assessment, analysis or enforcement of any rights
or remedies that are or may be available to the holders of Notes,
including, without limitation, in connection with inspections made
pursuant to Section 5.4; provided, however, that at all other times
inspections will be at the expense of the inspecting holder of Notes.
(c) COLLECTION. If the Company shall fail to pay when due any
principal of, or Prepayment Compensation Amount or interest on, any
Note, the Company shall pay to
59
<PAGE> 64
each holder of Notes, to the extent permitted by law, such amounts as
shall be sufficient to cover the costs and expenses, including but not
limited to reasonable attorneys' fees, incurred by such holder in
collecting any sums due on such Note.
10.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(a) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY.
(b) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS,
AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR
PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
ANY BREACH UNDER THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY FEDERAL
DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR ANY NEW YORK
STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN ITS
SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO
THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND EACH
OF THE PARTIES HERETO IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN
ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM
JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY
BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES
THAT PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION
OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT
OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED
HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY
60
<PAGE> 65
RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL
DELIVERY SERVICE.
(d) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH
OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
(e) WAIVER OF IMMUNITY. TO THE EXTENT THAT THE COMPANY HAS OR
ACQUIRES ANY IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW.
10.8 INDEMNIFICATION OF EACH HOLDER OF THE NOTES.
From and at all times after the date of this Agreement, and in addition
to all of the other rights and remedies of the holders of the Notes against the
Company, the Company agrees to indemnify and hold harmless each of the holders
of Notes and each such holder's directors, officers, employees, agents,
investment advisors and affiliates against any and all claims (whether valid or
not), losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever (including, without limitation, reasonable attorneys' fees, costs and
expenses), incurred by or asserted against such holder or any such director,
officer, employee, agent, investment advisor or affiliate, from and after the
date hereof, whether direct, indirect or consequential, as a result of or
arising from or in any way relating to any suit, action or proceeding (including
any inquiry or investigation) by any Person, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any Person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or enforcement of this Agreement or the other Financing Documents or
any transactions contemplated herein or therein, or any of the transactions
contemplated hereunder, whether or not such holder or any such director,
officer, employee, agent, investment advisor or affiliate is a party to any such
action, proceeding, suit or the target of any such inquiry or investigation;
provided, however, that no indemnified party shall have the right to be
indemnified hereunder for any liability resulting from the willful misconduct or
gross negligence of such indemnified party or breach by such indemnified party
of its own obligations under this Agreement. All of each indemnified party's
foregoing losses, damages, costs and expenses shall be payable as and when
incurred upon the demand of the indemnified party. The obligations of the
Company and each holder's rights under this Section 10.8 shall survive the
termination of this Agreement.
61
<PAGE> 66
10.9 EXECUTION IN COUNTERPART.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
62
<PAGE> 67
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered by one of its duly authorized
officers or representatives.
MIAMI CRUISELINE SERVICES
HOLDINGS II B.V.
By: /s/ Bradley Bloom
---------------------------------------
Name: Bradley Bloom
Title: Authorized Person
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Adam G. Clemens
---------------------------------------
Name: Adam G. Clemens
Title: Managing Director
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ A. Kipp Koester
---------------------------------------
Name: A. Kipp Koester
Title: Its Authorized Representative
AMERICAN HOME ASSURANCE COMPANY
By: /s/ David B. Pinkerton
---------------------------------------
Name: David B. Pinkerton
Title: Vice President
[SIGNATURE PAGE to the NOTE AGREEMENT of
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.]
<PAGE> 68
ATTACHMENT A
[FORM OF NOTE]
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.
15% SENIOR SUBORDINATED NOTE DUE SEPTEMBER 15, 2006
No. R-__ PPN: N5933# AA 0
US$_______ __________ __, ____
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.(together with its
successors, the "Company"), a besloten vennootschap met beperkte
aansprakelijkheid(private company with limited liability) organized under the
laws of The Netherlands, having its legal seat in Amsterdam, for value received,
hereby promises to pay to ______or registered assigns the principal sum of
______ UNITED STATES DOLLARS (US$_________)on September 15, 2006, and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal balance hereof from the date of this Note at the rate of
fifteen percent (15%) per annum, in arrears, semiannually on the fifteenth day
of March and September in each year, commencing with the March 15 or September
15 next succeeding the date thereof, until the principal amount hereof shall
become due and payable. Under certain circumstances, as specified in the Note
Agreement (defined below), interest otherwise payable in cash hereunder may be
capitalized and added to the principal hereof in the manner provided in the Note
Agreement. The Company agrees to pay on demand interest on any overdue principal
(including any overdue partial payment of principal) and overdue Prepayment
Compensation Amount, if any, and (to the extent permitted by applicable law) on
any overdue installment of interest (the due date of such payments to be
determined without giving effect to any grace period), at the Default Rate.
Payments of principal, Prepayment Compensation Amount, if any, and
interest shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for the payment of public and private
debts to the registered holder hereof at the address shown in the register
maintained by the Company for such purpose, in the manner provided in the Note
Agreement (defined below).
This Note is one of an issue of Notes of the Company issued in an
aggregate principal amount limited to Twenty-Five Million One Hundred
Eighty-Eight Thousand Four Hundred Fifty-Two United States Dollars
(US$25,188,452) pursuant to the Note Agreement (as may be amended, restated or
otherwise modified from time to time, the "Note Agreement"), dated as of
September 17, 1998, among the Company and the purchasers listed on Annex 1
thereto. The holder of this Note is entitled to the benefits of the Note
Agreement. This Note is subject to the terms of the Note Agreement, and such
terms are incorporated herein by reference. Capitalized terms used herein and
not defined herein have the meanings specified in the Note Agreement.
As provided in the Note Agreement, this Note is subject to prepayment,
in whole or in part, in certain cases without a Prepayment Compensation Amount
and in other cases with a Prepayment Compensation Amount, on the terms and
subject to the conditions set forth in the
Attachment A-1
<PAGE> 69
Note Agreement. The holder of this Note, on the terms and subject to the
conditions set forth in the Note Agreement, may elect to have the Company prepay
the entire principal amount of this Note (at a purchase price equal to one
hundred one percent (101%) of the aggregate principal amount of this Note,
together with all interest accrued and unpaid on the principal amount of this
Note to the Change in Control Payment Date) in connection with a Change in
Control. All of the principal of this Note (together with any applicable
Prepayment Compensation Amount) may, under certain circumstances, be declared
due and payable in the manner and with the effect provided in the Note
Agreement.
The holder of this Note is hereby authorized by the Company to record
(in good faith) in its manual or data processing records the date and amount of
each addition of capitalized interest to principal, and the date and amount of
each repayment of such principal and each payment of interest on account of such
outstanding principal. In the absence of manifest error, such records shall be
conclusive as to the outstanding principal amount of this Note and the payment
of interest accrued hereunder; provided, that the failure to make any such
record entry with respect to any addition of capitalized interest to principal
or any payment of principal or interest shall not limit or otherwise affect the
obligations of the Company under this Note.
This Note is a registered Note and is transferable only by surrender at
the principal office of the Company as specified in the Note Agreement, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
THE OBLIGATIONS EVIDENCED BY THIS NOTE ARE SUBORDINATED TO THE SENIOR
DEBT ON THE TERMS PROVIDED IN THE NOTE AGREEMENT.
THIS NOTE AND THE NOTE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
MIAMI CRUISELINE SERVICES
HOLDINGS II B.V.
By:____________________________
Name:
Title:
Attachment A-2
<PAGE> 1
EXHIBIT 4.4
================================================================================
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.
-----------------------------
DEBT SECURITIES PURCHASE AGREEMENT
-----------------------------
DATED AS OF SEPTEMBER 17, 1998
US$25,188,452 15% SENIOR SUBORDINATED NOTES DUE SEPTEMBER 15, 2006
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. PURCHASE AND SALE OF SECURITIES................................................... 1
1.1 Issue of Notes by the Company............................................ 1
1.2 The Closing.............................................................. 1
1.3 Original Issue Discount.................................................. 2
2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY..................................... 2
2.1 Nature of Business....................................................... 3
2.2 Financial Statements; Debt; Material Adverse Change...................... 3
2.3 Subsidiaries and Affiliates.............................................. 4
2.4 Title to Properties...................................................... 4
2.5 Taxes.................................................................... 5
2.6 Pending Litigation....................................................... 5
2.7 Corporate Organization and Authority..................................... 5
2.8 Charter Instruments, Other Agreements.................................... 6
2.9 Restrictions on the Company and the Parent............................... 6
2.10 Compliance with Law...................................................... 7
2.11 Pension Plans............................................................ 7
2.12 Environmental Compliance................................................. 8
2.13 Sale of Notes is Legal and Authorized; Obligations are Enforceable....... 9
2.14 Governmental Consent to Sale of Notes.................................... 9
2.15 No Defaults under Notes.................................................. 10
2.16 Private Offering of Notes................................................ 10
2.17 Use of Proceeds of Notes................................................. 11
2.18 The Acquisitions......................................................... 11
2.19 Senior Credit Documents.................................................. 12
2.20 Capitalization........................................................... 12
2.21 Solvency................................................................. 13
2.22 Placement Fees........................................................... 13
2.23 Year 2000 Compliance..................................................... 13
2.24 Full Disclosure.......................................................... 14
3. WARRANTIES AND REPRESENTATIONS OF THE PURCHASER................................... 14
3.1 Purchase for Investment.................................................. 14
3.2 ERISA.................................................................... 14
4. CLOSING CONDITIONS................................................................ 16
4.1 Opinions of Counsel...................................................... 16
4.2 Warranties and Representations True; Compliance.......................... 16
4.3 Managing Directors' Certificate.......................................... 17
4.4 Legality................................................................. 17
4.5 Financing Documents...................................................... 17
4.6 Capital Structure; Equity Investment..................................... 18
4.7 Senior Credit Agreement.................................................. 18
4.8 Closing of Acquisition................................................... 19
4.9 Private Placement Numbers................................................ 19
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
PAGE
<S> <C>
4.10 Fees and Expenses........................................................ 19
4.11 Other Purchasers......................................................... 19
4.12 Proceedings Satisfactory................................................. 19
5. INTERPRETATION OF THIS AGREEMENT.................................................. 19
5.1 Terms Defined............................................................ 19
5.2 Other Definitions........................................................ 23
5.3 Directly or Indirectly................................................... 24
5.4 Section Headings and Table of Contents and Construction.................. 24
5.5 Governing Law............................................................ 24
6. MISCELLANEOUS..................................................................... 25
6.1 Communications........................................................... 25
6.2 Reproduction of Documents................................................ 25
6.3 Survival................................................................. 25
6.4 Successors and Assigns................................................... 26
6.5 Amendment and Waiver..................................................... 26
6.6 Expenses................................................................. 26
6.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc....................... 26
6.8 Indemnification of Each Purchaser........................................ 27
6.9 Entire Agreement......................................................... 28
6.10 Execution in Counterpart................................................. 28
</TABLE>
Annex 1 -- Information as to Purchaser
Annex 2 -- Payment Instructions at Closing; Address of Company for
Notices
Annex 3 -- Information as to Company
Exhibit 1.1 -- Form of Note Agreement
Exhibit 4.1(a) -- Form of Opinion of Company's Special Counsel
Exhibit 4.1(b) -- Form of Opinion of Company's Special Netherlands Counsel
Exhibit 4.1(c) -- Form of Opinion of Purchasers' Special Counsel
Exhibit 4.3 -- Form of Managing Directors' Certificate
ii
<PAGE> 4
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.
DEBT SECURITIES PURCHASE AGREEMENT
US$25,188,452 15% SENIOR SUBORDINATED NOTES DUE SEPTEMBER 15, 2006
Dated as of September 17, 1998
TO THE PURCHASER NAMED ON THE
SIGNATURE PAGE ATTACHED HERETO
Ladies and Gentlemen:
MIAMI CRUISELINE SERVICES HOLDINGS II B.V. (together with any
successors and assigns who become such in accordance herewith, the "COMPANY"), a
besloten vennootschap met beperkte aansprakelijkheid (private company with
limited liability) organized under the laws of The Netherlands, having its legal
seat in Amsterdam, hereby agrees with you as set forth below.
1. PURCHASE AND SALE OF SECURITIES.
1.1 ISSUE OF NOTES BY THE COMPANY.
The Company will authorize the issue of Twenty-Five Million One Hundred
Eighty-Eight Thousand Four Hundred Fifty-Two Dollars ($25,188,452) in aggregate
principal amount of its 15% Senior Subordinated Notes due September 15, 2006
(all such notes, whether initially issued, or issued in exchange or substitution
for, any such note, in each case in accordance with the Note Agreement,
collectively, the "NOTES"). The Notes shall be issued pursuant to a Note
Agreement (as may be amended, restated or otherwise modified from time to time,
the "NOTE AGREEMENT") in the form of Exhibit 1.1. The Notes shall be in the form
of Attachment A to the Note Agreement, and shall have the terms as provided in
the Note Agreement and in the Notes.
1.2 THE CLOSING.
(a) PURCHASE AND SALE OF NOTES. The Company hereby agrees to
sell to you and you hereby agree to purchase from the Company, in
accordance with the provisions hereof, the aggregate principal amount
of Notes set forth below your name on Annex 1, at an aggregate purchase
price for such Notes equal to one hundred percent (100%) of the
principal amount of Notes to be purchased.
1
<PAGE> 5
(b) THE CLOSING. The closing (the "CLOSING") of the sale of
the Notes will be held at 10:00 a.m., local time, on September 17, 1998
or such other time and date as the Other Purchasers, the Company and
you shall agree (the "CLOSING DATE"), at the office of Ropes & Gray,
885 Third Avenue, Suite 2740, New York, New York 10022. At the Closing
the Company will deliver to you one or more Notes (as set forth below
your name on Annex 1), in the denominations indicated on Annex 1, in
the aggregate principal amount of your purchase, dated the Closing Date
and registered in the name of the holder indicated on Annex 1, against
payment by federal funds wire transfer in immediately available funds
of the purchase price therefor, as directed by the Company on Annex 2,
which shall be an account at a bank located in the United States of
America.
(c) OTHER PURCHASERS. Contemporaneously with the execution and
delivery hereof, the Company is entering into a separate Debt
Securities Purchase Agreement identical (except for the name and
signature of the purchaser) to this Agreement (this Agreement and such
other separate Debt Securities Purchase Agreements, each as from time
to time amended or modified, being herein sometimes referred to as the
"DEBT SECURITIES PURCHASE AGREEMENTS") with each other purchaser
(individually, an "OTHER PURCHASER," and collectively, the "OTHER
PURCHASERS") listed on Annex 1, providing for the sale to each Other
Purchaser of the Notes set forth below its name on such Annex. The
sales of the Notes to you and to each Other Purchaser are separate
sales.
1.3 ORIGINAL ISSUE DISCOUNT.
You and the Company agree that, for all United States federal, state
and local income tax purposes and for purposes of determining compliance with
the Applicable Interest Law, the original issue discount attributable, as a
result of the Put Right, to all the Notes issued by the Company in accordance
with the terms and conditions of this Agreement is equal to an amount which is
less than the product of:
(a) one-quarter of one percent (0.25%) of the stated
redemption price at maturity (as such term is defined in Section
1273(a) of the IRC) of all of the Notes; multiplied by
(b) the number of complete years to maturity of the Notes.
You and the Company agree to use the foregoing for all United States
federal, state and local income tax purposes with respect to the transactions
contemplated by the Financing Documents. You and the Company acknowledge that
such original issue discount represents the Fair Market Value of the Put Right
as of the Closing Date.
2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
To induce you to enter into this Agreement and to purchase and pay for
the Notes to be delivered to you at the Closing, the Company warrants and
represents, as of the Closing Date, immediately after giving effect to the
consummation of the Acquisitions, as follows:
2
<PAGE> 6
2.1 NATURE OF BUSINESS.
The offering materials listed on PART 2.1 OF ANNEX 3, copies of which
have been delivered to you, as a whole describe correctly in all material
respects the general nature of the business and principal Properties and assets
of the Parent, the Company and the Acquired Businesses.
2.2 FINANCIAL STATEMENTS; DEBT; MATERIAL ADVERSE CHANGE.
(a) FINANCIAL STATEMENTS. The Company has provided you with
the financial statements of each of the Acquired Businesses described
on PART 2.2(A) OF ANNEX 3. Such financial statements present fairly in
all material respects the respective financial position of the Acquired
Businesses as of the respective dates specified in such Part and the
results of their respective operations and cash flows for the
respective periods so specified in conformity with GAAP applied on a
consistent basis throughout the periods involved.
(b) DEBT. PART 2.2(B) OF ANNEX 3 lists all Debt of the Parent,
the Company and the Subsidiaries as of the Closing Date, after giving
effect to the Acquisitions and the transactions contemplated by the
Acquisition Documents, the Financing Documents and the Senior Credit
Agreement, and provides the following information with respect to each
item of such Debt: the obligor, each guarantor thereof and each other
Person similarly liable in respect thereof, the holder thereof, the
outstanding amount, the current portion of the outstanding amount, the
final maturity, required sinking fund payments, and a description of
the collateral securing such Debt.
(c) NO PRIOR OBLIGATIONS. Except for obligations under the
Acquisition Documents, the Financing Documents and the Senior Credit
Documents, immediately prior to the Closing Date, neither the Parent,
the Company, HoldCo-III nor Cruise Line Holdings had any liabilities
(contingent or otherwise) or has, prior to the Closing Date, conducted
any business or operations of any kind.
(d) MATERIAL ADVERSE CHANGE. Since the respective dates of the
last audited financial statements of Greyhound referred to in Section
2.2(a), there has been no change in the business, operations, profits,
financial condition, Properties or business prospects of Greyhound
except changes that, in the aggregate, could not reasonably be expected
to have a Material Adverse Effect. Since the respective dates of the
last audited financial statements of the On Board Companies referred to
in Section 2.2(a), there has been no change in the business,
operations, profits, financial condition, Properties or business
prospects of the On Board Companies except changes that, in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(e) PROJECTIONS. The Company has delivered to you projected
financial statements of the Parent, the Company and the Subsidiaries
described on PART 2.2(E) OF ANNEX 3 (collectively, the "PROJECTIONS").
The assumptions used in preparation of the Projections were reasonable
when made and continue to be reasonable. Such Projections have been
prepared by the executive and financial personnel of the Company and
the Acquired Businesses in the light of the past business of the
Acquired Businesses. Such Projections have been prepared in good faith,
have a reasonable basis and
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represent the good faith opinion of the Company as to the projected
results of the operations of the Company and the Subsidiaries. No
material facts have occurred since the preparation of the Projections
that would cause the Projections, taken as a whole, not to be
reasonably attainable, and the Company and the Subsidiaries do not
have, on the Closing Date, any material obligations (whether accrued,
matured, absolute, actual, contingent or otherwise) that are not
reflected in the Projections.
2.3 SUBSIDIARIES AND AFFILIATES.
(a) OWNERSHIP OF SUBSIDIARIES. PART 2.3(A) OF ANNEX 3 sets
forth, for each Subsidiary:
(i) its full legal name;
(ii) its jurisdiction of incorporation; and
(iii) the percentage of the shares of each class of
Capital Stock or other similar equity interests outstanding
and owned by the Company or any Subsidiary.
(b) CERTAIN AFFILIATES. PART 2.3(B) OF ANNEX 3 sets forth the
name of each Person:
(i) that owns or holds five percent (5%) or more of
any class of the Capital Stock of the Company or the Parent
(directly or through Berkshire Cruise Holdings, L.L.C.); or
(ii) that is an officer or director of the Company
or the Parent;
and the nature of the affiliation of such Affiliate.
2.4 TITLE TO PROPERTIES.
(a) GENERAL. The Parent has good and valid title to all of the
Capital Stock of the Company; the Company has good and valid title to
all of the Capital Stock of HoldCo-III; HoldCo-III has good and valid
title to all of the Capital Stock of Cruise Line Holdings; and Cruise
Line Holdings has acquired good and sufficient title to all of the
Acquired Businesses.
(b) LEASES. Except as set forth on PART 2.4(B) OF ANNEX 3, all
leases necessary for the conduct of the business of the Parent, the
Company and the Subsidiaries are valid and subsisting and are in full
force and effect, except for such failures to be valid and subsisting
that, in the aggregate for all such failures, could not reasonably be
expected to have a Material Adverse Effect.
(c) INTELLECTUAL PROPERTY. The Parent, the Company and the
Subsidiaries own, possess or have the right to use all of the licenses,
permits, franchises, patents, copyrights, trademarks, service marks and
trade names necessary for the present and currently planned future
conduct of their business, without any known conflict with the
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rights of others, except for such failures to own, possess, or have the
right to use, that, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect.
2.5 TAXES.
(a) RETURNS FILED; TAXES PAID. No United States federal or
Netherlands income tax returns or income or franchise tax returns of
any other jurisdiction have, as of the Closing Date, been required to
be filed by the Parent, the Company, HoldCo-III or Cruise Line
Holdings. All taxes, assessments, fees and other governmental charges
upon the Parent, the Company and the Subsidiaries and any other Person
with whom any of them files or has filed a consolidated income tax
return and upon any of their respective Properties, income or
franchises, that are due and payable have been paid, except for such
failures to pay that, in the aggregate for all such Persons, could not
reasonably be expected to have a Material Adverse Effect. The Company
does not know of any proposed additional tax assessment against it, the
Parent, any Subsidiary or any such other Person that could reasonably
be expected to have a Material Adverse Effect.
(b) BOOK PROVISIONS ADEQUATE. The amount of the liability for
taxes reflected in each of the statements of financial condition
referred to in Section 2.2(a) is in each case an adequate provision for
taxes as of the dates of such statements of financial condition
(including, without limitation, any payment due pursuant to any tax
sharing agreement) as are or may become payable by any one or more of
the Parent, the Company, any of the Subsidiaries or the other Persons
consolidated with any of them in such financial statements in respect
of all tax periods ending on or prior to such dates.
2.6 PENDING LITIGATION.
(a) PENDING LITIGATION. There are no proceedings, actions or
investigations pending or, to the knowledge of the Company, threatened
against or affecting the Parent, the Company, any Subsidiary or any
Seller in any court or before any Governmental Authority or arbitration
board or tribunal that, in the aggregate for all such proceedings,
actions and investigations, could reasonably be expected to have a
Material Adverse Effect.
(b) NO VIOLATIONS. Neither the Parent, the Company nor any
Subsidiary is in violation of any judgment, order, writ, injunction or
decree of any court, Governmental Authority, arbitration board or
tribunal that, in the aggregate for all such violations, could
reasonably be expected to have a Material Adverse Effect.
2.7 CORPORATE ORGANIZATION AND AUTHORITY.
Each of the Parent, the Company and each Subsidiary:
(a) is a corporation duly incorporated, validly existing and
(to the extent such Person may be in good standing under the laws of
such jurisdiction) in good standing under the laws of its jurisdiction
of incorporation;
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(b) has all corporate power and authority necessary to own and
operate its Properties and to carry on its business as now conducted
and as presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises and
other governmental authorizations necessary to own and operate its
Properties and to carry on its business as now conducted and as
presently proposed to be conducted, except where the failure to have
such licenses, certificates, permits, franchises and other governmental
authorizations, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect; and
(d) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation, in each state in the United States of America and in each
other jurisdiction where it is required to do so, except where the
failure to be so qualified or licensed and authorized and in good
standing, in the aggregate for all such failures, could not reasonably
be expected to have a Material Adverse Effect.
2.8 CHARTER INSTRUMENTS, OTHER AGREEMENTS.
Neither the Parent, the Company nor any Subsidiary is in violation in
any respect of:
(a) any term of its Charter or any bylaw; or
(b) any term in any agreement or other instrument to which it
is a party or by which it or any of its Property may be bound;
except for such violations that, in the aggregate for all such violations, could
not reasonably be expected to have a Material Adverse Effect.
2.9 RESTRICTIONS ON THE COMPANY AND THE PARENT.
Neither the Parent, the Company nor any Subsidiary:
(a) is a party to any contract or agreement, or subject to any
charter or other corporate restriction that, in the aggregate for all
such contracts, agreements and charter and corporate restrictions, is
reasonably likely to have a Material Adverse Effect; or
(b) is a party to any contract or agreement that restricts its
right or ability to incur Debt or to issue Rights to purchase
Securities of the Company or the Parent, as the case may be, other than
the Financing Documents, the Senior Credit Agreement and the agreements
listed on PART 2.9(b) OF ANNEX 3, none of which restricts the issuance
and sale of the Notes or the execution and delivery of, or compliance
with the Note Agreement or the other Financing Documents by the
Company.
True, correct and complete copies of each of the agreements, if any, listed on
PART 2.9(b) OF ANNEX 3 have been provided to you.
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2.10 COMPLIANCE WITH LAW.
Neither the Parent, the Company nor any Subsidiary is in violation of
any law, ordinance, governmental rule or regulation to which it is subject,
except for such violations that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
2.11 PENSION PLANS.
(a) OPERATION OF PLANS; LIABILITIES. The Parent, the Company,
the Subsidiaries and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in a Material Adverse Effect.
Neither the Parent, the Company, any Subsidiary nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the IRC relating to employee
benefit plans (as defined in section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably
be expected to result in the incurrence of any such liability by the
Parent, the Company, any Subsidiary or any ERISA Affiliate, or in the
imposition of any Lien on any of the rights, Properties or assets of
the Parent, the Company, any Subsidiary or any ERISA Affiliate, in
either case pursuant to Title I or IV of ERISA or to such penalty or
excise tax provisions or to section 401(a)(29) or 412 of the IRC, other
than such liabilities or Liens as individually or in the aggregate
would not have a Material Adverse Effect.
(b) RELATIONSHIP OF BENEFIT LIABILITIES TO PLAN ASSETS. The
present value of the aggregate benefit liabilities under each of the
Plans, if any, as is subject to Title IV of ERISA (other than
Multiemployer Plans), determined as of the end of such Plan's most
recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities, except as
could not reasonably be expected to have a Material Adverse Effect or
result in the imposition of any fine, penalty or forfeiture or in any
Lien upon any Property of the Parent, the Company or any Subsidiary or
ERISA Affiliate. The term "BENEFIT LIABILITIES" has the meaning
specified in section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c) WITHDRAWAL LIABILITIES. The Parent, the Company, the
Subsidiaries and the ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities)
under section 4201 or 4204 of ERISA in respect of Multiemployer Plans,
other than such liabilities as individually or in the aggregate would
not have a Material Adverse Effect.
(d) POSTRETIREMENT BENEFIT OBLIGATIONS. The expected
postretirement benefit obligation (determined in accordance with
Financial Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage mandated by
section 4980B of the IRC) of the Parent, the Company and the
Subsidiaries will not have a Material Adverse Effect.
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(e) PROHIBITED TRANSACTIONS. The execution and delivery of the
Financing Documents and the issuance and sale of the Notes hereunder
will not involve any transaction that is a non-exempt prohibited
transaction under section 406 of ERISA or in connection with which a
tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the IRC.
The representation by the Company in the foregoing sentence is made in
reliance upon and subject to the accuracy of your representation in
Section 3.2 as to the Sources of the funds used to pay the purchase
price of the Notes to be purchased by you.
(f) FOREIGN PENSION PLANS. Neither the Parent, the Company nor
any Subsidiary has, maintains or is required to contribute to any
Foreign Pension Plan.
2.12 ENVIRONMENTAL COMPLIANCE.
(a) COMPLIANCE -- Each of the Parent, the Company and the
Subsidiaries is in compliance with all Environmental Protection Laws in
effect in each jurisdiction where it is presently doing business or is
located, other than any non-compliance which could not reasonably be
expected to have a Material Adverse Effect.
(b) LIABILITY -- Neither the Parent, the Company nor any
Subsidiary is subject to any liability under any Environmental
Protection Law that, in the aggregate, could be reasonably expected to
have a Material Adverse Effect.
(c) NOTICES -- Neither the Parent, the Company nor any
Subsidiary has received any:
(i) written notice from any Governmental Authority by
which any of its present or previously-owned or leased real
Properties has been designated, listed, or identified in any
manner by any Governmental Authority charged with
administering or enforcing any Environmental Protection Law as
a hazardous substance disposal or removal site, "Super Fund"
clean-up site, or candidate for removal or closure pursuant to
any Environmental Protection Law;
(ii) written notice of any Lien arising under or in
connection with any Environmental Protection Law that has
attached to any revenues of, or to, any of its owned or leased
real Properties; or
(iii) summons, citation, notice, directive, letter,
or other written communication from any Governmental Authority
concerning any intentional or unintentional action or omission
by the Parent, the Company or any Subsidiary in connection
with its ownership or leasing of any real Property resulting
in the releasing, spilling, leaking, pumping, pouring,
emitting, emptying, dumping, or otherwise disposing of any
hazardous substance into the environment resulting in any
material violation of any Environmental Protection Law;
which, in any such case, relates to or makes reference to an event or
condition which could reasonably be expected to have a Material Adverse
Effect.
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2.13 SALE OF NOTES IS LEGAL AND AUTHORIZED; OBLIGATIONS ARE
ENFORCEABLE.
(a) SALE OF NOTES IS LEGAL AND AUTHORIZED. Each of the
issuance, sale and delivery of the Notes by the Company, the
consummation of the Acquisitions, the execution and delivery by each of
the Parent, the Company and each Subsidiary of the Financing Documents
and Acquisition Documents to which it is a party, and compliance by
each of the Parent, the Company and each Subsidiary with all of the
provisions of the Financing Documents and Acquisition Documents to
which it is a party:
(i) is within the corporate powers of such Person;
and
(ii) is legal and does not conflict with, result in
any breach of any of the provisions of, constitute a default
under, the provisions of:
(A) any agreement, charter instrument, bylaw
or other instrument to which the Parent, the Company
or any Subsidiary is a party or by which the Parent,
the Company, any Subsidiary or any of their
respective Property may be bound;
(B) any order, judgment, decree, or ruling
of any court, arbitrator or Governmental Authority
applicable to the Parent, the Company, any Subsidiary
or any of their respective Property; or
(C) any statute or other rule or regulation
of any Governmental Authority applicable to the
Parent, the Company or any Subsidiary or any of their
respective Property.
(b) OBLIGATIONS ARE ENFORCEABLE. Each of the Parent, the
Company and each Subsidiary has duly authorized by all necessary action
on its part each of the Financing Documents and Acquisition Documents
to which it is a party. Each of the Financing Documents and Acquisition
Documents to which the Parent, the Company or any Subsidiary is a party
has been executed and delivered by one or more duly authorized officers
of such Person, and constitutes a legal, valid and binding obligation
of such Person, enforceable in accordance with its terms, except that,
in each case, the enforceability thereof may be:
(i) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium, or other similar laws
affecting the enforceability of creditors' rights generally;
and
(ii) subject to the availability of equitable
remedies.
2.14 GOVERNMENTAL CONSENT TO SALE OF NOTES.
(a) Neither the nature of the Parent, the Company or any
Subsidiary, or of any of their respective businesses or Properties, nor
any relationship between the Parent, the Company, any Subsidiary and
any other Person, nor any circumstance in connection with the offer,
issuance, sale or delivery of the Notes, the consummation of the
Acquisitions
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and the execution and delivery of any Financing Document or Acquisition
Document, nor the performance of the obligations of the Parent, the
Company or any Subsidiary thereunder, is such as to require a consent,
approval or authorization of, or pre-filing, registration or
qualification with, any Governmental Authority on the part of the
Parent, the Company or such Subsidiary as a condition thereto, except
for such consents, approvals, authorizations, pre-filings,
registrations and qualifications that (i) have been obtained on or
prior to the Closing Date or (ii) are described on PART 2.14(a) OF
ANNEX 3 and the failure of which to obtain will not have a Material
Adverse Effect.
(b) Each of the issuance and sale of the Notes, the incurrence
of the Debt and the other obligations represented thereby, the
execution and delivery of the Financing Documents and the performance
by the Company of its obligations hereunder and thereunder:
(i) is not subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Transportation Acts of
the United States of America (49 U.S.C.), as amended, or the
Federal Power Act, as amended; and
(ii) does not violate any provision of any statute or
other rule or regulation of any Governmental Authority
applicable to the Company.
2.15 NO DEFAULTS UNDER NOTES.
No event has occurred and no condition exists that, upon the execution
and delivery of the Financing Documents, the Acquisition Documents or the Senior
Credit Documents and the issuance and sale of the Notes, would constitute a
Default or an Event of Default.
2.16 PRIVATE OFFERING OF NOTES.
(a) NUMBER OF OFFEREES. Neither the Parent, the Company, any
Subsidiary nor any Person acting on behalf of any of them has offered
any of the Notes or any similar security of the Company or the Parent
for sale to, or solicited offers to buy any thereof from, or otherwise
approached or negotiated with respect thereto with, any prospective
purchaser, other than the Purchasers and one other prospective
purchaser (which is an "accredited investor" as defined in Regulation D
under the Securities Act), each of whom was offered all or a portion of
the Notes at private sale for investment.
(b) CONDUCT OF SALE. Neither the Parent, the Company, any
Subsidiary nor any Person acting on behalf of the Parent, the Company
or any Subsidiary as employee, agent, broker, dealer or otherwise in
connection with the transactions contemplated by this Agreement
(including, without limitation, the issuance of the Notes) has engaged
in any conduct or entered into any agreements or understandings so as
to subject the transactions contemplated by the Financing Documents to
the registration provisions of section 5 of the Securities Act, the
provisions of the Trust Indenture Act of 1939, as amended, or to the
registration, qualification or other similar provisions of any
securities or "blue sky" law of any applicable jurisdiction.
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2.17 USE OF PROCEEDS OF NOTES.
(a) USE OF PROCEEDS. The Company shall apply the proceeds from
the sale of Notes as specified on PART 2.17(a) OF ANNEX 3.
(b) MARGIN REGULATIONS. None of the transactions contemplated
in any of the Financing Documents (including, without limitation, the
use of the proceeds from the sale of the Notes) violates, will violate
or will result in a violation of section 7 of the Exchange Act, or any
regulation issued pursuant thereto, including, without limitation,
Regulation T, Regulation U or Regulation X of the Board of Governors of
the Federal Reserve System, 12 C.F.R., Chapter II.
(c) ABSENCE OF FOREIGN OR ENEMY STATUS. Neither the sale of
the Notes nor the use of proceeds from the sale thereof will result in
a violation of any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended), or any ruling issued thereunder or any enabling legislation
or Presidential Executive Order in connection therewith.
2.18 THE ACQUISITIONS.
(a) ALL DOCUMENTS PROVIDED; NO OTHER AGREEMENTS. The Company
has provided to you true, correct and complete copies of the
Acquisition Documents. There is no agreement or understanding between
any of the parties to the Acquisition Documents except as set forth in
the Acquisition Documents.
(b) CLOSING OF THE ACQUISITION. The Acquisitions have been
closed, or are closing contemporaneously with the sale of the Notes
hereunder, in accordance with the Acquisition Documents, and no closing
condition of any Acquisition Documents was waived by the Company or the
Parent, other than such conditions the waiver of which could not
reasonably be expected to result in a Material Adverse Effect. On the
Closing Date, each of the representations and warranties made by the
Parent, Cruise Line Holdings and, to the best knowledge of the Company,
the Sellers in the Acquisition Documents is true and correct in all
material respects. Cruise Line Holdings has acquired, or is acquiring
contemporaneously with the sale of the Notes hereunder, such title to
the Acquired Business as is purported to be acquired pursuant to the
Acquisition Documents.
(c) GOVERNMENTAL CONSENT. All consents, approvals and
authorizations of, and filings, registrations and qualifications
(including, without limitation, filings, registrations and
qualifications under the Hart-Scott-Rodino Act) with, any Governmental
Authority on the part of the Parent, the Company, each Subsidiary and
the Sellers required in connection with the consummation of the
Acquisition have been obtained or made and remain in full force and
effect and do not remain subject to any waiting periods.
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2.19 SENIOR CREDIT DOCUMENTS.
The Company has provided to you true, correct and complete copies of
the Senior Credit Agreement and each of the other agreements and instruments
executed in connection therewith (collectively, the "SENIOR CREDIT DOCUMENTS"),
and there is no agreement or understanding between or among the Parent, the
Company or any Subsidiary, on the one hand, and the Senior Agent or any of the
Senior Lenders, on the other hand, except as set forth in the Senior Credit
Documents.
2.20 CAPITALIZATION.
(a) CAPITALIZATION. PART 2.20(a) OF ANNEX 3 correctly sets
forth, after giving effect to the consummation of the Acquisition, the
issuance of the Notes and all other contemporaneous transactions
contemplated hereby on the Closing Date:
(i) the authorized and outstanding shares of the
Capital Stock and other Securities of the Company and the
Parent (specifying the type, class or series of all such
Capital Stock and other Securities and whether such Capital
Stock and other Securities are voting or non-voting);
(ii) for each legal holder of the Company's and the
Parent's Capital Stock, the identity of such holder, the
number of shares of each class of Capital Stock held by such
holder and the percentage of the shares of each class so held;
(iii) all Rights to purchase any Capital Stock of the
Company or the Parent, together with descriptions of the terms
thereof and, for each legal and beneficial holder thereof, the
identity of such holder, the number of Rights held by such
holder and the number of shares of Capital Stock into which
such Rights are exercisable and the percentage of the shares
of each class of shares of Capital Stock so held; and
(iv) all obligations (contingent or otherwise) of the
Company or the Parent (other than the Put Right) to repurchase
or otherwise acquire or retire any shares of Capital Stock (or
options to purchase the same) of the Company or the Parent.
All such outstanding shares of Capital Stock have been duly authorized
and validly issued and are fully paid and non-assessable. There are no
preemptive rights, subscription rights, or other contractual rights
similar in nature to preemptive rights with respect to any Capital
Stock of the Company or the Parent, other than as set forth in its
Charter and, in the case of the Parent, the Shareholders Agreement.
(b) RESERVATION OF COMMON STOCK. The Parent has authorized and
unissued, and has reserved for issuance, a sufficient number of shares
of Common Stock to permit the exercise of all of the Rights exercisable
or convertible into Common Stock. Each outstanding share of Common
Stock is fully paid and nonassessable, free and clear of
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any Lien and not subject to any preemptive rights (except as set forth
in the Charter and in the Shareholders Agreement).
(c) SHAREHOLDERS AGREEMENT. Other than the Shareholders
Agreement and the agreements described in PART 2.20(c) OF ANNEX 3, a
true and complete copy of each of which the Company has delivered to
each of the Purchasers and their special counsel, there is no other
agreement or understanding between or among the holders of the Capital
Stock of the Parent or the holders of Rights to acquire such Capital
Stock, regarding the Capital Stock of the Parent.
2.21 SOLVENCY.
(a) ASSETS GREATER THAN LIABILITIES. The fair value of the
business and assets of the Company exceeds, as of and after giving
effect to the transactions consummated on the Closing Date, the
liabilities of the Company (including, without limitation, the Notes
and the Guaranty of the Debt under the Senior Credit Agreement) as of
such time.
(b) MEETING LIABILITIES. After giving effect to the
transactions contemplated by the Financing Documents, the Acquisition
Documents and the Senior Credit Documents, the Company:
(i) will not be engaged in any business or
transaction, or about to engage in any business or
transaction, for which the Company has unreasonably small
assets or capital (within the meaning of the Uniform
Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act
and section 548 of the Federal Bankruptcy Code); or
(ii) will be able to pay its debts as they mature.
(c) INTENT. Neither the Parent, the Company or any Subsidiary
is entering into any Financing Document, Acquisition Document or Senior
Credit Document with any intent to hinder, delay, or defraud either
current creditors or future creditors of the Parent or any Subsidiary.
2.22 PLACEMENT FEES.
PART 2.22 OF ANNEX 3 accurately sets forth the names of each investment
banker, placement agent, broker or other intermediary employed by the Company or
the Parent with respect to the issuance of the Notes or the consummation of the
Acquisition, and the total fees and other consideration paid or payable to each
such Person in connection with such transaction.
2.23 YEAR 2000 COMPLIANCE.
The internal computer systems of the Parent, the Company and the
Subsidiaries are Year 2000 Compliant and the advent of the year 2000 and its
impact upon such computer systems is not expected to have a Material Adverse
Effect.
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2.24 FULL DISCLOSURE.
Neither the statements made in this Agreement, the financial statements
referred to in Section 2.2, nor any other information, report, financial
statement, annex, exhibit or schedule furnished by or on behalf of the Company
to you or any other Purchaser in connection with the negotiation or the closing
of the sale of the Notes, or included in any Financing Document or delivered
pursuant thereto, when taken as a whole, (i) contained, contains or will contain
any material misstatement of fact or (ii) omitted, omits or will omit to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were, are or will be made, not misleading;
provided that to the extent any such information, report, financial statement,
annex, exhibit or schedule was based upon or constitutes a forecast or
projection, the Company represents only that it acted in good faith and utilized
reasonable assumptions and due care in the preparation of such information,
report, financial statement, annex, exhibit or schedule.
3. WARRANTIES AND REPRESENTATIONS OF THE PURCHASER
3.1 PURCHASE FOR INVESTMENT.
You represent to the Company that you are a financially sophisticated
institutional investor that is experienced in financial matters and you are
purchasing the Notes listed on Annex 1 below your name for your own account, or
for the account of one or more separate accounts maintained by you, for
investment and with no present intention of, or view to, distributing such Notes
or any part thereof except in compliance with the Securities Act, but without
prejudice to your right at all times to:
(a) sell or otherwise dispose of all or any part of the Notes
under a registration statement filed under the Securities Act, or in a
transaction exempt from the registration requirements of such Act,
including a transaction pursuant to Rule 144A; and
(b) have control over the disposition of all of your assets to
the fullest extent required by any applicable law.
It is understood that, in making the representations set out in Section
2.13(a) and Section 2.14, the Company is relying, to the extent applicable, upon
your representation as aforesaid.
3.2 ERISA.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Notes:
(a) GENERAL ACCOUNT -- you are an insurance company and the
Source is an "insurance company general account," as such term is
defined in DOL Prohibited Transaction Class Exemption 95-60 (issued
July 12, 1995) ("PTCE 95-60"), and there is no "employee benefit plan"
(as defined in section 3(3) of ERISA and section 4975(e)(1) of the
IRC), treating as a single plan all plans maintained by the same
employer (and affiliates thereof as defined in section V(a)(1) of PTCE
95-60) or by the same employee organization, with respect to which the
amount of the general account reserves and
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liabilities for all contracts held by or on behalf of such plan,
exceeds ten percent (10%) of the total reserves and liabilities of such
general account as determined under PTCE 95-60 (exclusive of separate
account liabilities) plus surplus, as set forth in the National
Association of Insurance Commissioners Annual Statement filed with your
state of domicile and that such acquisition is eligible for and
satisfies the other requirements of such exemption; or
(b) SEPARATE ACCOUNT -- the Source is a separate account:
(i) 10% POOLED SEPARATE ACCOUNT -- that is an
insurance company pooled separate account, within the meaning
of DOL Prohibited Transaction Class Exemption 90-1 (issued
January 29, 1990) ("PTCE 90-1") and with respect to which the
requirements of PTCE 90-1 are otherwise met, and to the extent
that there are any plans whose assets in such separate account
exceed ten percent (10%) of the assets of such separate
account, you have disclosed the names of such plans to the
Company in writing; or
(ii) IDENTIFIED PLAN ASSETS -- that is comprised of
employee benefit plans identified by you in writing and with
respect to which the Company hereby warrants and represents
that, as of each Closing Date, neither the Parent, the Company
nor any ERISA Affiliate is a "party in interest" (as defined
in section 3 of ERISA) or a "disqualified person" (as defined
in section 4975 of the Code) with respect to any plan so
identified; or
(iii) GUARANTIED SEPARATE ACCOUNT -- that is
maintained solely in connection with fixed contractual
obligations of an insurance company, under which any amounts
payable, or credited, to any employee benefit plan having an
interest in such account and to any participant or beneficiary
of such plan (including an annuitant) are not affected in any
manner by the investment performance of the separate account
(as provided by 29 CFR Section 2510.3-101(h)(1)(iii)); or
(c) QPAM -- the Source constitutes assets of an "investment
fund" (within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption) (a "QPAM"), no employee benefit plan's
assets that are included in such investment fund, when combined with
the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning
of section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed twenty
percent (20%) of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in section V(e) of the QPAM
Exemption) owns a five percent (5%) or more interest in the Company
and:
(i) the identity of such QPAM; and
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(ii) the names of all employee benefit plans whose
assets are included in such investment fund
have been disclosed to the Company in writing; or
(d) EXEMPT PLANS -- the Source does not include assets of any
employee benefit plan, other than a plan exempt from the coverage of
ERISA and IRC Section 4975.
As used in this Section 3.2, the terms "EMPLOYEE BENEFIT PLAN" and "SEPARATE
ACCOUNT" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
It is understood that, in making the representations set out in Section
2.13(a), Section 2.14 and Section 2.11(e), the Company is relying, to the extent
applicable, upon your representation as aforesaid.
4. CLOSING CONDITIONS
Your obligations under this Agreement, including, without limitation,
the obligation to purchase and pay for the Notes to be delivered to you at the
Closing, are subject to the following conditions precedent, and the failure by
the Company to satisfy all such conditions shall relieve you, at your election,
of all such obligations.
4.1 OPINIONS OF COUNSEL.
You shall have received from:
(a) Ropes & Gray, special counsel for the Company;
(b) Stibbe Simont Monahan Duhot, special Netherlands counsel
to the Company; and
(c) Hebb & Gitlin, your special counsel;
closing opinions, each dated as of the Closing Date, and substantially in the
respective forms set forth in Exhibit 4.1(a), Exhibit 4.1(b) and Exhibit 4.1(c).
This Section 4.1 shall constitute direction by the Company to such counsel named
in Section 4.1(a) and Section 4.1(b) to deliver such closing opinions to you.
4.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE.
(a) WARRANTIES AND REPRESENTATIONS TRUE. The warranties and
representations contained in Section 2 shall be true on the Closing
Date with the same effect as though made on and as of that date.
(b) COMPLIANCE WITH THIS AGREEMENT AND FINANCING DOCUMENTS.
The Company shall have performed and complied with all agreements and
conditions contained herein and in the other Financing Documents that
are required to be performed
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or complied with by the Company on or prior to the Closing Date, and
such performance and compliance shall remain in effect on the Closing
Date.
4.3 MANAGING DIRECTORS' CERTIFICATE.
You shall have received a certificate dated the Closing Date and signed
by two (2) Managing Directors of the Company, substantially in the form of
Exhibit 4.3, certifying, among other things, that the conditions specified in
Section 4.2 have been fulfilled and attached to which shall be:
(a) COMPANY EXTRACT -- a copy of an extract from the Trade
Register of the Chamber of Commerce and Industry for Amsterdam with
respect to the Company showing the due registration of the Company as a
besloten vennootschap met beperkte aansprakelijkheid under the law of
The Netherlands, having its legal seat in Amsterdam;
(b) COMPANY CHARTER -- a copy of the deed of incorporation of
the Company (which shall have been duly filed with Trade Register and a
copy of the articles of association of the Company, each as amended to
date, certified as true, accurate and complete by one of the civil law
notaries of Stibbe Simont Monahan Duhot;
(c) RESOLUTIONS -- a copy of the circular resolutions of the
Managing Board of the Company (signed by all directors thereof); and
(d) SPECIMEN SIGNATURES -- the name, title and specimen
signature of each Managing Director of the Company executing documents
in connection with this Agreement.
4.4 LEGALITY.
The Notes shall on the Closing Date qualify as a legal investment for
you under applicable insurance law (without regard to any "basket" or "leeway"
provisions), and the acquisition thereof shall not subject you to any penalty or
other onerous condition pursuant to any such law or regulation, and you shall
have received such evidence as you may reasonably request to establish
compliance with this condition.
4.5 FINANCING DOCUMENTS.
The Company shall have executed and delivered to each Purchaser:
(a) the Note Agreement;
(b) the Put Rights Agreement; and
(c) the Equity Securities Purchase Agreement.
The Company shall have issued to each Purchaser Notes in the respective
principal amounts set forth below such Purchaser's name on Annex 1.
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4.6 CAPITAL STRUCTURE; EQUITY INVESTMENT.
(a) CORPORATE STRUCTURE. The Parent shall have acquired all of
the shares of Capital Stock of the Company outstanding on the Closing
Date. The Company shall have acquired all of the shares of Capital
Stock of HoldCo-III outstanding on the Closing Date. HoldCo-III shall
have acquired all the shares of Capital Stock of Cruise Line Holdings
outstanding on the Closing Date. Cruise Line Holdings shall have
acquired all of the Capital Stock of the Acquired Businesses
outstanding on the Closing Date. You shall have received copies of the
shareholders register showing the ownership of all such shares of
Capital Stock of the Parent, the Company, HoldCo-III, Cruise Line
Holdings and the Acquired Businesses, certified by a Senior Officer of
the Company to be true, accurate and complete.
(b) EQUITY INVESTMENT. The Parent shall have received not less
than Thirty Million Dollars ($30,000,000) in the aggregate pursuant to
sales of its Capital Stock to Berkshire Cruise Holdings, L.L.C.,
management of Greyhound and the On Board Sellers; and you shall have
received evidence satisfactory to you of such investment.
4.7 SENIOR CREDIT AGREEMENT.
(a) SENIOR CREDIT AGREEMENT. The Company, HoldCo-III, the
Senior Agent and the Senior Lenders shall have entered into the Senior
Credit Agreement, which agreement, and all other Senior Credit
Documents, shall be in form and substance satisfactory to you. The
Company shall deliver to you a copy of a fully executed counterpart of
the Senior Credit Agreement and each other Senior Credit Document,
certified as true, accurate and complete by a Senior Officer of the
Company. Pursuant to the Senior Credit Agreement, HoldCo-III shall:
(i) have received proceeds of not less than
Sixty-Three Million Dollars ($63,000,000) from borrowings in
respect of the Term Loan (as such term is defined in the
Senior Credit Agreement, as in effect on the Closing Date);
and
(ii) have a commitment of not less than Thirty-Five
Million Dollars ($35,000,000) in respect of Revolving Loans
(as such term is defined in the Senior Credit Agreement, as in
effect on the Closing Date), all or a part of the availability
under which may be drawn down on the Closing Date.
You shall have received evidence satisfactory to you of the receipt of
such proceeds by HoldCo-III.
(b) NO DEFAULTS; SATISFACTION OF CONDITIONS PRECEDENT. No
event shall have occurred and no condition shall exist that shall
prohibit HoldCo-III from borrowing under the Senior Credit Agreement
and all conditions precedent to closing specified in the Senior Credit
Agreement shall have been satisfied on or prior to the Closing Date and
you shall have received such evidence of the satisfaction of such
conditions precedent as you shall deem appropriate.
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<PAGE> 22
4.8 CLOSING OF ACQUISITION.
The Acquisition Documents shall be in form and substance satisfactory
to you and your special counsel. The Acquisitions shall have been consummated
substantially in accordance with the terms of the Acquisition Agreements,
without waiver of any closing condition set forth in the Acquisition Documents,
other than such conditions the waiver of which could not reasonably be expected
to result in a Material Adverse Effect. The Company shall have delivered to you
copies of the fully executed Acquisition Documents (including, without
limitation, copies of the opinions delivered in connection with the consummation
of each of the Acquisitions), certified as true, accurate and complete by a
Senior Officer of the Company.
4.9 PRIVATE PLACEMENT NUMBERS.
The Company shall have obtained or caused to be obtained a private
placement number for the Notes from the CUSIP Service Bureau of Standard &
Poor's, a division of McGraw-Hill, Inc. and you shall have been informed of such
private placement number.
4.10 FEES AND EXPENSES.
(a) All fees and disbursements required to be paid pursuant to
Section 6.6 shall have been paid in full; and
(b) each of the Purchasers shall have received its pro rata
portion of a transaction fee payable to the Purchasers in the aggregate
amount of Three Hundred Thousand Dollars ($300,000).
4.11 OTHER PURCHASERS.
None of the Other Purchasers shall have failed to execute and deliver
the Note Agreement or any other Financing Document to be executed and delivered
by it, or to accept delivery of or make payment for the Notes to be purchased by
it on the Closing Date.
4.12 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the issuance and sale of the
Notes and all documents and papers relating thereto shall be satisfactory to you
and your special counsel. You and your special counsel shall have received
copies of such documents and papers as you or they may reasonably request in
connection therewith or in connection with your special counsel's closing
opinion, all in form and substance satisfactory to you and your special counsel.
5. INTERPRETATION OF THIS AGREEMENT
5.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
ACQUIRED BUSINESSES -- means, collectively, Greyhound and the On Board
Companies.
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ACQUISITION AGREEMENTS -- means and includes the Greyhound Acquisition
Agreement and the On Board Acquisition Agreement.
ACQUISITION DOCUMENTS -- the Acquisition Agreements, together with all
agreements, exhibits, schedules, annexes and documents executed or delivered in
connection therewith, as any of the foregoing may be amended, modified or
supplemented from time to time.
ACQUISITIONS -- means and includes the Greyhound Acquisition and the On
Board Acquisition.
AGREEMENT, THIS -- means this Debt Securities Purchase Agreement, as it
may be amended, restated or otherwise modified from time to time.
ANTITRUST DIVISION -- means the Assistant Attorney General of the
United States in charge of the Antitrust Division of the United States
Department of Justice.
CHARTER -- with respect to any corporation which is a besloten
vennootschap met beperkte aansprakelijkheid or naamloze vennootschap, means,
collectively, the deed of incorporation of such corporation and the articles of
association of such corporation, each as amended.
CLOSING -- Section 1.2(b).
CLOSING DATE -- Section 1.2(b).
COMPANY -- has the meaning specified in the introductory sentence
hereof.
CRUISE LINE HOLDINGS -- means Cruise Line Holdings Corp., a Delaware
corporation and wholly-owned Subsidiary of HoldCo-III.
DEBT SECURITIES PURCHASE AGREEMENTS -- Section 1.2(c).
EQUITY SECURITIES PURCHASE AGREEMENT -- means, collectively, the
separate Equity Securities Purchase Agreements, each dated as of the date
hereof, between the Parent and each of the Purchasers, pursuant to which the
Parent will issue and sell, and each of the Purchasers will purchase, shares of
the Common Stock.
ERISA AFFILIATE -- means any trade or business (whether or not
incorporated) or other Person that is treated as a single employer together with
the Parent and/or the Company under section 414 of the IRC.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended
from time to time.
FAIR MARKET VALUE -- means, with respect to any Property, the sale
value of such Property that would be realized in an arm's-length sale at such
time between an informed and willing buyer, and an informed and willing seller,
under no compulsion to buy or sell, respectively.
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<PAGE> 24
FINANCING DOCUMENTS -- means and includes this Agreement, the other
Debt Securities Purchase Agreements, the Note Agreement, the Notes, the Put
Rights Agreement and the other agreements, certificates and instruments to be
executed pursuant to the terms of each of the foregoing, as each may be amended,
restated or otherwise modified from time to time.
FOREIGN PENSION PLAN -- means any plan, fund or other similar program:
(a) established or maintained outside of the United States of
America by the Parent, the Company, or any Subsidiary primarily for the
benefit of the employees (substantially all of whom are aliens not
residing in the United States of America) of the Parent, the Company or
such Subsidiary, which plan, fund or other similar program provides for
retirement income for such employees or results in a deferral of income
for such employees in contemplation of retirement; and
(b) not otherwise subject to ERISA.
GREYHOUND -- means Greyhound Leisure Services, Inc., a Florida
corporation.
GREYHOUND ACQUISITION -- means the acquisition by Cruise Line Holdings
of all of the Capital Stock of Greyhound, pursuant to the Greyhound Acquisition
Agreement.
GREYHOUND ACQUISITION AGREEMENT -- means the Share Purchase Agreement,
dated as of July 31, 1998, between the Greyhound Seller and Cruise Line
Holdings, as amended from time to time.
GREYHOUND SELLER -- means Viad Corp., a Delaware corporation.
HART-SCOTT-RODINO ACT -- means 18 U.S.C. "18a, together with each and
every related provision of the Clayton Act, as amended, and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations of the Federal Trade Commission promulgated thereunder
(including, without limitation, 16 C.F.R.
""801-803).
HOLDCO-III -- means Miami Cruiseline Services Holdings III B.V., a
besloten vennootschap met beperkte aansprakelijkheid (private company with
limited liability) organized under the laws of The Netherlands, having its legal
seat in Amsterdam, and wholly-owned Subsidiary of the Company.
IRC -- means the Internal Revenue Code of 1986, together with all rules
and regulations promulgated pursuant thereto, as amended from time to time.
MANAGEMENT -- means and includes Persons who are officers or directors
of the Parent, the Company or any Subsidiary.
MATERIAL ADVERSE EFFECT -- means, with respect to any event or
circumstance (either individually or in the aggregate with all other events and
circumstances), an effect caused thereby or resulting therefrom that would be
materially adverse as to, or in respect of:
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(a) the business, operations, profits, financial condition,
Properties or business prospects of the Parent and the Subsidiaries,
taken as a whole;
(b) the ability of the Company or the Parent to perform its
obligations under any Financing Document to which it is a party;
(c) the ability of the Parent and the Subsidiaries to
consummate the Acquisitions; or
(c) the validity or enforceability of any of the Financing
Documents.
MULTIEMPLOYER PLAN -- means any "multiemployer plan" (as defined in
section 3(37) of ERISA) in respect of which the Parent, the Company or any ERISA
Affiliate is an "employer" (as such term is defined in section 3 of ERISA).
NOTE AGREEMENT -- Section 1.1.
NOTES -- Section 1.1.
ON BOARD ACQUISITION -- means the acquisition by the Parent of all of
the Capital Stock of the On Board Companies, together with the subsequent
contribution by the Parent of all such Capital Stock to the Company, the
contribution of all such Capital Stock by the Company to HoldCo-III and the
contribution by HoldCo-III of all such Capital Stock to Cruise Line Holdings.
ON BOARD ACQUISITION AGREEMENT -- means the Stock Subscription and
Exchange Agreement, dated as of August 27, 1998, among the On Board Sellers and
Cruise Line Holdings, as amended from time to time.
ON BOARD COMPANIES -- means, collectively, On-Board Media, Inc., a
Florida corporation; Cruise Management International, Inc., a Florida
corporation; and Boxer Media, Inc., a Florida corporation.
ON BOARD SELLERS -- means, collectively, Philip Levine, Jerry Chafetz,
The Gerald Robins Revocable Trust 8/3/94, The Craig Robins Revocable Trust
8/3/94 and The Scott Robins Revocable Trust 8/3/94.
OTHER PURCHASERS -- Section 1.2(c).
PARENT -- means Miami Cruiseline Services Holdings I B.V., a besloten
vennootschap met beperkte aansprakelijkheid (private company with limited
liability) organized under the laws of The Netherlands, having its legal seat in
Amsterdam, together with its successors and assigns.
PBGC -- means the Pension Benefit Guaranty Corporation, and any Person
succeeding to the functions of the PBGC.
PLAN -- means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Parent,
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the Company or any ERISA Affiliate or with respect to which the Company or any
ERISA Affiliate may have any liability.
PROJECTIONS -- Section 2.2(e).
PTCE 90-1 -- Section 3.2(b)
PTCE 95-60 -- Section 3.2(a).
PURCHASERS -- means you and the Other Purchasers.
QPAM -- Section 3.2(c).
QPAM EXEMPTION -- means Prohibited Transaction Class Exemption 84-14
issued by the DOL.
RULE 144A -- means Rule 144A promulgated under the Securities Act, 17
C.F.R. "230.144A, as such rule may be amended from time to time.
SECURITY -- means "security" as defined by section 2(1) of the
Securities Act.
SELLERS -- means, collectively, the Greyhound Seller and the On Board
Sellers.
SENIOR CREDIT DOCUMENTS -- Section 2.19.
SENIOR FINANCIAL OFFICER -- means any one of the chief financial
officer and the principal accounting officer of the Company.
SHAREHOLDERS AGREEMENT -- means the Shareholders Agreement, dated as of
September 17, 1998, among the Parent, the stockholders of the Parent named
therein, and each of the Purchasers.
SOURCE -- Section 3.2.
SUBSIDIARY -- means, at any time, a corporation, an association, a
limited liability company or another business entity which qualifies as a
subsidiary of the Company that is properly included in a consolidated financial
statement of the Company and its subsidiaries in accordance with GAAP at such
time and includes in any event, without limitation, HoldCo-III, Cruise Line
Holdings and the Acquired Businesses.
5.2 OTHER DEFINITIONS.
The following terms shall have the respective meanings ascribed to such
terms in the Note Agreement:
Affiliate IRC
Acceptable Credit Facility Lien
Applicable Interest Law Person
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Capital Lease Put Right
Capital Stock Put Rights Agreement
Common Stock Property
Debt Rights
Default Securities Act
DOL Security
Environmental Protection Law Senior Agent
ERISA Senior Credit Agreement
Event of Default Senior Officer
GAAP Senior Lenders
Governmental Authority Voting Stock
Hazardous Materials Year 2000 Compliant
5.3 DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
5.4 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of
the Sections of this Agreement and the Table of Contents of this
Agreement appear as a matter of convenience only, do not constitute a
part hereof and shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to this Agreement as
a whole and not to any particular Section or other subdivision.
References to Sections are, unless otherwise specified, references to
Sections of this Agreement. References to Annexes and Exhibits are,
unless otherwise specified, references to Annexes and Exhibits attached
to this Agreement.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
5.5 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
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6. MISCELLANEOUS
6.1 COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder shall be in
writing and shall be delivered either by nationwide overnight courier
or by facsimile transmission (confirmed by delivery by nationwide
overnight courier sent on the day of the sending of such facsimile
transmission). Communications to the Company shall be addressed as set
forth on Annex 2, or at such other address of which the Company shall
have notified each Purchaser. Communications to the Purchasers shall be
addressed as set forth on Annex 1 by such Purchaser, or at such other
address of which such Purchaser shall have notified the Company.
(b) WHEN GIVEN. Any communication addressed and delivered as
herein provided shall be deemed to be received when actually delivered
to the address of the addressee (whether or not delivery is accepted)
or received by the telecopy machine of the recipient. Any communication
not so addressed and delivered shall be ineffective.
(c) SERVICE OF PROCESS. Notwithstanding the foregoing
provisions of this Section 6.1, service of process in any suit, action
or proceeding arising out of or relating to this agreement or any
document, agreement or transaction contemplated hereby, or any action
or proceeding to execute or otherwise enforce any judgment in respect
of any breach hereunder or under any document or agreement contemplated
hereby, shall be delivered in the manner provided in Section 6.7(c).
6.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by you at the closing of your purchase of the Notes (except
the Notes themselves) and financial statements, certificates and other
information previously or hereafter furnished to any holder of Notes, may be
reproduced by the Company or any Purchaser by any photographic, photostatic,
microfilm, micro-card, miniature photographic, digital or other similar process
and each Purchaser may destroy any original document so reproduced. Any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Company or such
Purchaser in the regular course of business) and any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence. Nothing in this Section 6.2 shall prohibit the Company or any
Purchaser from contesting the accuracy or validity of any such reproduction.
6.3 SURVIVAL.
All warranties, representations, certifications and covenants made by
the Company herein or in any certificate or other instrument delivered by the
Company or on behalf of the Company hereunder shall be considered to have been
relied upon by you and shall survive the delivery to you of the Notes regardless
of any investigation made by you or on your behalf. All statements
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<PAGE> 29
in any certificate or other instrument delivered by or on behalf of the Company
pursuant to the terms hereof shall constitute warranties and representations by
the Company hereunder.
6.4 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of the Purchasers and their successors and
assigns, and shall be enforceable by any such Purchaser, successor or assignee
whether or not an express assignment of rights hereunder shall have been made by
you or your successor or assign. Anything contained in this Section 6.4
notwithstanding, the Company may not assign any of its rights, duties or
obligations hereunder without the prior written consent of all Purchasers.
6.5 AMENDMENT AND WAIVER.
This Agreement may be amended, and the observance of any term hereof
may be waived, with (and only with) the written consent of the Company and you.
6.6 EXPENSES.
Whether or not the Notes are sold, the Company shall pay, at the
Closing (if the Notes are sold, and otherwise upon receipt of any statement or
invoice therefor), all reasonable out-of-pocket fees, expenses and costs
attributable to legal and accounting services incurred by you relating hereto,
including, without limitation, the statement presented at the Closing by your
special counsel for reasonable fees and disbursements incurred in connection
herewith, each additional statement for reasonable fees and disbursements
(promptly upon receipt thereof) of your special counsel rendered after the
Closing in connection with the issuance of the Notes and all expenses incurred
by you or on your behalf or the behalf of the Company in complying with each of
the conditions to the Closing set forth in Section 4.
6.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(a) WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY.
(b) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS,
AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR
PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF
ANY BREACH UNDER THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY FEDERAL
DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR ANY NEW YORK
STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN ITS
SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE PARTIES HERETO
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IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM
JURISDICTION OF EACH SUCH COURT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE
ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM
THAT IT IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH
COURT. IN ADDITION, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT
OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN ANY SUCH COURT, AND
HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY AGREES
THAT PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION
OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT
OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED
HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL
SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
(d) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO
LIMIT THE ABILITY OF ANY PURCHASER TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH
OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
(e) WAIVER OF IMMUNITY. TO THE EXTENT THAT THE COMPANY HAS OR
ACQUIRES ANY IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY HEREBY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW.
6.8 INDEMNIFICATION OF EACH PURCHASER.
From and at all times after the date of this Agreement, and in addition
to all of your other rights and remedies against the Company, the Company agrees
to indemnify and hold harmless, to the fullest extent permitted by law, you and
each of your directors, officers, employees, agents, investment advisors and
affiliates against any and all claims (whether valid or not), losses, damages,
liabilities, costs and expenses of any kind or nature whatsoever (including,
without limitation, reasonable attorneys' fees, costs and expenses), incurred by
or
27
<PAGE> 31
asserted against you or any such director, officer, employee, agent, investment
advisor or affiliate, from and after the date hereof, whether direct, indirect
or consequential, as a result of or arising from or in any way relating to any
suit, action or proceeding (including any inquiry or investigation) by any
Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or enforcement of this
Agreement or the other Financing Documents or any transactions contemplated
herein or therein, or any of the transactions contemplated hereunder, whether or
not you or any such director, officer, employee, agent, investment advisor or
affiliate is a party to any such action, proceeding, suit or the target of any
such inquiry or investigation; provided, however, that no indemnified party
shall have the right to be indemnified hereunder for any liability resulting
from the willful misconduct or gross negligence of any indemnified party or
breach by any indemnified party of its own obligations under this Agreement. All
of your foregoing losses, damages, costs and expenses shall be payable as and
when incurred upon the demand of the indemnified party. The obligations of the
Company and your rights under this Section 6.8 shall survive the termination of
this Agreement.
6.9 ENTIRE AGREEMENT.
This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms.
6.10 EXECUTION IN COUNTERPART.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
28
<PAGE> 32
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
MIAMI CRUISELINE SERVICES
HOLDINGS II B.V.
By
---------------------------------
Name:
Title:
Accepted:
[SEPARATELY EXECUTED BY EACH
OF THE FOLLOWING PURCHASERS]
NEW YORK LIFE INSURANCE COMPANY
AMERICAN HOME ASSURANCE COMPANY
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
[SIGNATURE PAGE to the DEBT SECURITIES PURCHASE AGREEMENT of
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.]
<PAGE> 33
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
MIAMI CRUISELINE SERVICES
HOLDINGS II B.V.
By /s/ Brad Bloom
---------------------------------
Name: Brad Bloom
Title: Authorized Person
Accepted:
NEW YORK LIFE INSURANCE COMPANY
By
-----------------------------
Name:
Title:
[SIGNATURE PAGE to the DEBT SECURITIES PURCHASE AGREEMENT of
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.]
<PAGE> 34
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
MIAMI CRUISELINE SERVICES
HOLDINGS II B.V.
By
---------------------------------
Name:
Title:
Accepted:
NEW YORK LIFE INSURANCE COMPANY
By /s/ Adam G. Clemens
-----------------------------
Name: Adam G. Clemens
Title: Managing Director
[SIGNATURE PAGE to the DEBT SECURITIES PURCHASE AGREEMENT of
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.]
<PAGE> 35
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
MIAMI CRUISELINE SERVICES
HOLDINGS II B.V.
By
---------------------------------
Name:
Title:
Accepted:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By /s/ A. Kipp Koester
-----------------------------
Name: A. Kipp Koester
Title: Its Authorized Representative
[SIGNATURE PAGE to the DEBT SECURITIES PURCHASE AGREEMENT of
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.]
<PAGE> 36
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
MIAMI CRUISELINE SERVICES
HOLDINGS II B.V.
By
---------------------------------
Name:
Title:
Accepted:
AMERICAN HOME ASSURANCE COMPANY
By /s/ David B. Pinkerton
-----------------------------
Name: David B. Pinkerton
Title: Vice President
[SIGNATURE PAGE to the DEBT SECURITIES PURCHASE AGREEMENT of
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.]
<PAGE> 1
EXHIBIT 10.1
07/31/98
SHARE PURCHASE AGREEMENT
BETWEEN
VIAD CORP,
a Delaware Corporation
("Viad")
as "Seller"
AND
CRUISE LINE HOLDINGS CO.,
a Delaware Corporation
as "Buyer"
Dated as of July 31, 1998
<PAGE> 2
TABLE OF CONTENTS
1. PURPOSES................................................................. 1
1.1. BUSINESS........................................................... 1
1.2. AGREEMENT.......................................................... 1
2. DEFINITIONS.............................................................. 1
2.1. CERTAIN DEFINED TERMS.............................................. 1
2.2. ACCOUNTING TERMS................................................... 1
3. PURCHASE AND SALE OF COMPANIES' SHARES................................... 2
3.1. PURCHASE AND SALE.................................................. 2
3.2. PURCHASE PRICE..................................................... 2
3.3. INTENDED NET ASSETS................................................ 2
3.4. SHARE TRANSFERS.................................................... 3
3.5. INTERCOMPANY ACCOUNTS.............................................. 3
3.6. CLOSING............................................................ 3
4. PURCHASE PRICE ADJUSTMENT................................................ 4
4.1. ADJUSTMENT......................................................... 4
4.2. ADJUSTMENT PROCEDURES.............................................. 4
(a) NET BUSINESS ASSETS REPORT.................................... 4
(b) OBJECTIONS.................................................... 5
(c) FAILURE TO AGREE.............................................. 5
4.3. SETTLEMENT......................................................... 6
(a) NET ASSETS DEFICIENCY......................................... 6
(b) NET ASSETS EXCESS............................................. 6
5. SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING SELLER................ 7
5.1. CORPORATE ORGANIZATION............................................. 7
5.2. AUTHORITY.......................................................... 7
5.3. NO VIOLATION....................................................... 8
5.4. CONSENTS AND APPROVALS............................................. 9
6. SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING COMPANY
AND THE BUSINESS......................................................... 9
6.1. CORPORATE ORGANIZATION, ETC........................................ 9
6.2. CAPITALIZATION..................................................... 10
6.3. NO VIOLATION-COMPANY............................................... 11
6.4. EQUITY AND OTHER INTERESTS......................................... 12
6.5. FINANCIAL STATEMENT................................................ 12
6.6. TAXES.............................................................. 13
(a) FILING OF RETURNS............................................. 13
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<PAGE> 3
(b) EXAMINATION OF RETURNS........................................ 14
(c) AGREEMENTS/WAIVERS............................................ 15
(d) TAX SHARING AGREEMENTS........................................ 15
(e) AUDITS........................................................ 15
(f) WITHHOLDING................................................... 15
(g) REAL PROPERTY HOLDING COMPANY................................. 16
(h) DEDUCTIBLE PAYMENTS........................................... 16
6.7. ASSETS OF COMPANY/BUSINESS..........................................16
(a) TITLE......................................................... 16
(b) ADEQUACY OF ASSETS............................................ 16
6.8. REAL PROPERTY...................................................... 17
(a) OWNED REAL PROPERTY........................................... 17
(b) LEASED REAL PROPERTY.......................................... 17
(c) RIGHT OF OCCUPANCY/USE........................................ 17
(d) DEFAULTS...................................................... 18
(e) LAWFUL USE.................................................... 18
(f) CONDEMNATION.................................................. 18
6.9. INTELLECTUAL PROPERTY...............................................18
(a) LIST OF RIGHTS................................................ 18
(b) TITLE......................................................... 19
(c) CONFLICTS..................................................... 20
6.10. CONTRACTS.......................................................... 20
(a) LIST OF CONTRACTS............................................. 20
(b) BINDING CONTRACTS............................................. 22
(c) CONSENTS...................................................... 23
6.11. LITIGATION......................................................... 23
6.12. EMPLOYEE AND RELATED MATTERS....................................... 24
(a) BENEFITS PLANS................................................ 24
(b) COPIES OF PLANS............................................... 24
(c) CLAIMS, ETC................................................... 25
(d) CONTRIBUTIONS................................................. 25
(e) GROUP HEALTH PLANS............................................ 26
(f) FUNDING....................................................... 26
(g) SEVERANCE LIABILITIES......................................... 26
6.13. ABSENCE OF CHANGES OR EVENTS....................................... 27
(a) NO CHANGES.................................................... 27
(b) INCREASES IN PAYMENTS/EXPENSES................................ 28
(c) SHARES IN THE BUSINESS........................................ 28
(d) TRANSFER OF ASSETS............................................ 29
(e) ACQUISITIONS.................................................. 29
(f) FAILURE TO OPERATE IN ORDINARY COURSE......................... 30
(g) CHANGE IN INSURANCES.......................................... 30
(h) CHANGE IN ACCOUNTING.......................................... 30
(i) MAINTENANCE OF BOOKS.......................................... 30
ii
<PAGE> 4
(j) CAPITAL EXPENDITURES.......................................... 30
(k) ENCUMBRANCES.................................................. 31
(l) DEBT.......................................................... 31
(m) PROPERTY DAMAGE/LOSS.......................................... 31
(n) DISTRIBUTIONS................................................. 31
(o) CONTRACTS..................................................... 31
(p) CHANGE IN STATUS OF CONTRACTS................................. 32
(q) EMPLOYEE BENEFIT PLANS........................................ 32
(r) OTHER EVENTS.................................................. 32
6.14. COMPLIANCE WITH APPLICABLE LAWS.................................... 32
6.15. EMPLOYEE AND LABOR RELATIONS....................................... 33
(a) KEY EMPLOYEES................................................. 33
(b) STRIKES....................................................... 33
(c) UNION ORGANIZATION............................................ 33
(d) UNFAIR PRACTICES.............................................. 33
(e) EEOC MATTERS.................................................. 33
6.16. ABSENCE OF UNDISCLOSED LIABILITIES................................. 34
6.17. BROKERS AND FINDERS................................................ 34
6.18. BOOKS OF ACCOUNTS; RECORDS......................................... 34
6.19. INVENTORIES........................................................ 35
6.20. INDEBTEDNESS; GUARANTIES........................................... 35
6.21. ENVIRONMENTAL...................................................... 35
6.22. AFFILIATED TRANSACTIONS............................................ 36
6.23. GOVERNMENT CONTRACTS............................................... 37
6.24. NO ILLEGAL PAYMENTS, ETC........................................... 37
6.25. INSURANCE.......................................................... 37
6.26. ANA................................................................ 38
6.27. MINORITY PARTNERS.................................................. 39
7. REPRESENTATIONS AND WARRANTIES OF BUYER.................................. 39
7.1. CORPORATE ORGANIZATION AND QUALIFICATION........................... 39
7.2. AUTHORITY.......................................................... 40
7.3. NO VIOLATION....................................................... 40
(a) NO CONFLICTS.................................................. 40
(b) NO DEFAULTS................................................... 40
7.4. CONSENTS AND APPROVALS............................................. 41
7.5. NOTES.............................................................. 41
7.6. INVESTMENT......................................................... 42
7.7. FUNDING OF PURCHASE PRICE.......................................... 42
8. ADDITIONAL COVENANTS AND AGREEMENTS; ACKNOWLEDGMENTS..................... 43
8.1. CONDUCT OF THE BUSINESS............................................ 43
8.2. REASONABLE EFFORTS................................................. 44
8.3. ACCESS TO INFORMATION.............................................. 44
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<PAGE> 5
8.4. PUBLICITY.......................................................... 44
8.5. TAXES.............................................................. 45
(a) MUTUAL ASSISTANCE............................................. 45
(b) ALLOCATION OF TAX LIABILITY................................... 45
(c) TAX AUDIT ADJUSTMENTS......................................... 47
(d) TAX RETURNS................................................... 48
(e) SECTION 338(H)(10) ELECTION................................... 49
(f) FIRPTA CERTIFICATE............................................ 50
(g) TAX SHARING AGREEMENTS........................................ 50
(h) Applicable Period............................................. 51
8.6. INSURANCE AND FINANCIAL ACCOMMODATIONS............................. 51
(a) PRECLOSING.................................................... 51
(b) POST CLOSING.................................................. 51
(c) BUYER'S INSURANCE INDEMNITY................................... 52
(d) SELLER'S INSURANCE INDEMNITY.................................. 52
(e) AGREEMENT REGARDING CONCESSION GUARANTIES..................... 53
8.7. RESIGNATIONS....................................................... 53
8.8. THIRD-PARTY CONSENTS............................................... 54
8.9. V-RIP PENSION PLAN................................................. 54
(a) POST-CLOSING CONTRIBUTIONS.................................... 54
(b) NO TRANSFER OF FUND ASSETS.................................... 55
(c) BUYER COOPERATION............................................. 55
(d) SAVINGS PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN................ 56
(e) RETIREE WELFARE BENEFITS...................................... 56
(f) TRANSFER OF ASSETS............................................ 57
8.10. CONFIDENTIAL INFORMATION; SOLICITATION OF PERSONNEL................ 57
(a) SELLER OBLIGATION............................................. 58
(b) BUYER OBLIGATION.............................................. 58
8.11. OBLIGATIONS UNDER FINANCIAL ACCOMMODATIONS......................... 59
8.12. LIABILITIES UNDER CERTAIN PLANS.................................... 59
8.13. ASSUMPTION/REPLACEMENT OF OBLIGATIONS/FINANCIAL ACCOMMODATIONS..... 59
8.14. CERTAIN LEASEHOLDS................................................. 60
8.15. OTHER DOCUMENTS/ACTIONS............................................ 60
8.16. NOTICE OF DEVELOPMENTS............................................. 60
8.17. POST CLOSING AFFILIATION........................................... 61
8.19. BOARD ACTION....................................................... 62
8.20. ADDITIONAL AUDITS.................................................. 62
9. CONDITIONS............................................................... 62
9.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS............................. 62
(a) GOVERNMENTAL AND REGULATORY CONSENTS.......................... 63
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<PAGE> 6
(b) PROHIBITIONS.................................................. 63
(c) BOARD APPROVAL................................................ 63
9.2. CONDITIONS TO OBLIGATIONS OF BUYER................................. 64
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENT...... 64
(b) THIRD-PARTY CONSENTS.......................................... 65
(c) OPINION....................................................... 65
(d) FINANCING..................................................... 65
(e) NO MATERIAL ADVERSE CHANGE.................................... 65
(f) ALL NECESSARY ACTIONS......................................... 66
(g) CARNIVAL CRUISE LINES, INC. AND DADE COUNTY................... 66
9.3. CONDITIONS TO OBLIGATIONS OF SELLER................................ 66
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENT...... 66
(b) ASSUMPTIONS OF OBLIGATIONS.................................... 67
(c) OPINIONS...................................................... 67
(d) ALL NECESSARY ACTIONS......................................... 68
10. CLOSING DELIVERIES....................................................... 68
10.1. DELIVERIES BY SELLER............................................... 68
(a) CORPORATE RESOLUTION.......................................... 68
(b) SHARE CERTIFICATES............................................ 68
(c) OFFICER'S CERTIFICATE......................................... 68
(d) ARTICLES AND BYLAWS........................................... 68
(e) CORPORATE RECORDS............................................. 69
(f) LEGAL OPINION................................................. 69
(g) CERTIFICATE OF INCUMBENCY..................................... 69
(h) OTHER DOCUMENTS............................................... 69
10.2. DELIVERIES BY BUYER................................................ 69
(a) CORPORATE RESOLUTION.......................................... 69
(b) CASH PURCHASE PRICE........................................... 70
(c) NOTES......................................................... 70
(d) OFFICER'S CERTIFICATE......................................... 70
(e) LEGAL OPINION................................................. 70
(f) ASSUMPTION OF OBLIGATIONS..................................... 70
(g) RELEASES...................................................... 70
(h) CERTIFICATE OF INCUMBENCY..................................... 70
(i) OTHER DOCUMENTS............................................... 70
11. TERMINATION.............................................................. 71
11.1. TERMINATION BY MUTUAL CONSENT...................................... 71
11.2. TERMINATION BY BUYER OR SELLER..................................... 71
11.3. TERMINATION BY BUYER............................................... 71
11.4. TERMINATION BY SELLER.............................................. 72
v
<PAGE> 7
11.5. EFFECT OF TERMINATION AND ABANDONMENT.............................. 72
12. INDEMNIFICATION.......................................................... 73
12.1. SURVIVAL OF REPRESENTATIONS........................................ 73
12.2. INDEMNIFICATION BY THE SELLER...................................... 73
(a) INDEMNITY..................................................... 73
(b) LIMITATIONS................................................... 74
12.3. INDEMNIFICATION BY BUYER........................................... 76
12.4. TERMINATION OF INDEMNIFICATION..................................... 77
12.5. PROCEDURES RELATING TO INDEMNIFICATION............................. 77
(a) NOTICE........................................................ 77
(b) PARTICIPATION................................................. 78
(c) ACCEPTANCE OR DISPUTE......................................... 80
12.6. PAYMENT OF INDEMNITY PAYMENTS...................................... 81
12.7. FRAUD.............................................................. 81
13. MISCELLANEOUS AND GENERAL................................................ 81
13.1. PAYMENT OF EXPENSES................................................ 81
13.2. MODIFICATION OR AMENDMENT.......................................... 81
13.3. WAIVER OF CONDITIONS............................................... 82
13.4. COUNTERPARTS....................................................... 82
13.5. GOVERNING LAW...................................................... 82
13.6. NOTICES............................................................ 82
13.7. ENTIRE AGREEMENT; ASSIGNMENT....................................... 83
13.8. PARTIES IN INTEREST................................................ 84
(a) SUCCESSORS.................................................... 84
(b) COMPANY'S ASSUMPTION.......................................... 84
13.9. OBLIGATION OF COMPANY.............................................. 84
(a) SELLER RESPONSIBILITY......................................... 84
(b) BUYER RESPONSIBILITY.......................................... 84
13.10. REMEDIES FOR BREACH........................................... 85
13.11. CAPTIONS...................................................... 85
13.12. FURTHER ASSURANCES............................................ 85
13.13. DISPUTE RESOLUTION............................................ 85
13.14. SEVERABILITY.................................................. 86
vi
<PAGE> 8
SCHEDULES
---------
Schedule 2.1 Defined Terms
Schedule 3.2 Junior Subordinated Notes-Rights & Preferences
Schedule 3.3 Intended Net Assets Balance
Schedule 5.3 No Violation -- Seller
Schedule 5.4 Consents and Approvals
Schedule 6.1(a) Company Qualification
Schedule 6.1(b) Subsidiary Information
Schedule 6.2 Capitalization
Schedule 6.3 No Violation - Company
Schedule 6.4 Equity Interests
Schedule 6.5 Financial Statements
Schedule 6.6 Taxes
Schedule 6.8 Leased Real Property
Schedule 6.9 Intellectual Property
Schedule 6.10 Contracts
Schedule 6.11 Litigation
Schedule 6.12 Employee and Related Matters
Schedule 6.13 Changes or Events Since the Signing
Schedule 6.14 Compliance with Applicable Laws
Schedule 6.15 Employee and Labor Relations
Schedule 6.16 Undisclosed Liabilities
Schedule 6.19 Inventories
Schedule 6.20 Guarantees of Company
Schedule 6.22 Affiliated Transactions
Schedule 6.23 Government Contracts
Schedule 6.25 Insurance
Schedule 6.26 ANA Information
vii
<PAGE> 9
Schedule 6.27 Minority Partners
Schedule 7.4 Consents and Approvals
Schedule 7.6 Accredited Investor Status
Schedule 7.7 Commitment Letter
Schedule 8.6 Insurance and Financial Accommodations
Schedule 8.6(e) Concession Guaranties
Schedule 8.7 Resignations
Schedule 8.12 Participants in SERP, Supplemental 401(k) MIP and PUP
Schedule 9.2(b) Third Party Consent Exceptions
Schedule 9.2(c) Opinions of Seller's Counsel
Schedule 9.3(b) Assumption of Financial Accommodations
Schedule 9.3(c) Opinion of Buyer's Counsel
Schedule 13.13 Dispute Resolution
viii
<PAGE> 10
07/31/98
SHARE PURCHASE AGREEMENT
This SHARE PURCHASE AGREEMENT ("Agreement"), dated as of July 31, 1998,
is between Viad Corp, a Delaware corporation, ("Seller"), and Cruise Line
Holdings Co., a Delaware corporation ("Buyer").
RECITALS
1. PURPOSES.
1.1. BUSINESS. Seller is the owner of all of the outstanding shares of
capital of Greyhound Leisure Services, Inc., a Florida corporation ("Company").
Buyer intends to acquire the business conducted by Company or its Subsidiaries
by purchase of all the Shares.
1.2. AGREEMENT. In consideration of the mutual representations,
warranties, covenants and agreements, and subject to all of the terms and
conditions specified herein, Seller and Buyer hereby agree as set forth herein.
2. DEFINITIONS.
2.1. CERTAIN DEFINED TERMS. Capitalized terms herein are defined terms
having the meanings stated on SCHEDULE 2.1 hereto (such meanings to be equally
applicable to both the singular and plural forms of such terms).
2.2. ACCOUNTING TERMS. All accounting terms not
1
<PAGE> 11
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States, or the equivalent
accounting principles in the jurisdiction of incorporation, or the jurisdiction
governing the conduct of a portion of the Business conducted by any foreign
Subsidiary, as applicable, in each case applied consistent with prior practice
("GAAP").
3. PURCHASE AND SALE OF COMPANIES' SHARES.
3.1. PURCHASE AND SALE. On the terms and subject to the conditions set
forth herein, at the Closing, Seller shall sell and Buyer shall purchase the
Shares and all other assets necessary to conduct the Business as currently
conducted.
3.2. PURCHASE PRICE. Subject to the adjustment provisions hereof, the
consideration to be paid or provided to Seller by Buyer hereunder ("Purchase
Price") shall be Ninety Million Dollars (US$90,000,000), Eighty Million Dollars
(US$80,000,000) of which Buyer shall pay Seller at Closing by wire transfer to
an account specified by Seller and the remainder of which shall be in the form
of Issuer's Junior Subordinated Notes in an original principal amount of ten
million dollars (US$10,000,000) issued to Seller at Closing ("the Notes") having
the terms substantially as described in SCHEDULE 3.2 hereof.
3.3. INTENDED NET ASSETS. The Purchase Price is based on the assumption
that the difference between all of the combined assets of the Company and all of
the combined liabilities of the Company, ("Net Assets") shall be (US$31,782,000)
thirty-one million, seven hundred eighty-two thousand dollars as of the
2
<PAGE> 12
Closing ("Intended Net Asset Balance") which is a calculation in accordance with
GAAP of those Net Assets in the December 31, 1997 balance sheet of Company
adjusted as shown on SCHEDULE 3.3 hereof and reflecting the provisions of
Section 3.5 hereof.
3.4. SHARE TRANSFERS. Seller shall deliver to Buyer at Closing
certificates or other documentation representing the Shares, duly endorsed in
blank or accompanied by transfer powers duly endorsed in blank, in proper form
for transfer of all of Seller's interest in the Shares.
3.5. INTERCOMPANY ACCOUNTS. All indebtedness of Company and its
Subsidiaries to Seller and Seller to Company and any Subsidiary as of the
Closing Date ("Intercompany Accounts") shall be contributed by Seller to the
capital of Company or the Subsidiaries as appropriate, and by Company and
Subsidiaries to Seller as appropriate.
3.6. CLOSING. The closing of the transactions ("Transactions")
contemplated by this Agreement ("Closing") shall take place at 10:00 a.m. on or
before August 31, 1998 ("Closing Date") at the offices of Viad at 1850 North
Central Avenue, Phoenix, Arizona 85077-2212, unless otherwise agreed by the
parties hereto. Notwithstanding any other provisions hereof, if the Closing has
not occurred by the close of business on September 15, 1998, either party shall
be entitled to terminate this Agreement pursuant to the provisions of Sections
11.3 hereof (Termination by Buyer) and 11.4 hereof (Termination by Seller) so
long as such terminating party is not in material breach of its obligations
hereunder.
3
<PAGE> 13
4. PURCHASE PRICE ADJUSTMENT.
4.1. ADJUSTMENT. The Purchase Price shall be adjusted by adding thereto
any increase, or subtracting therefrom any decrease, as the case may be, in the
Net Assets as stated in the Net Assets Report as of the Closing Date as compared
with the Intended Net Assets Balance. The parties agree that at the time of
preparation of the Net Assets Report, an adjustment shall be made such that the
liabilities shown on the Net Assets Report shall be reduced by the income and
franchise tax liabilities (of the Company and Subsidiaries) retained by Seller.
4.2. ADJUSTMENT PROCEDURES.
(a) NET BUSINESS ASSETS REPORT. Not later than 90 days
following the Closing Date, Buyer shall deliver to Seller a draft
report stating the Net Assets as of the Closing Date ("Net Assets
Report"), and at such time shall also provide Seller, its accountants
and independent auditors, access to the books and records of Company
for the purpose of reviewing and auditing (as necessary, upon
reasonable notice and at the place or places designated by Seller in
its reasonable judgment) the draft Net Assets Report. No later than 30
days following receipt of the draft Net Assets Report, Seller shall
advise Buyer, in writing, that Seller either (i) agrees with the draft
Net Assets Report, or (ii) has proposed modifications to the draft Net
Assets Report. If Seller has proposed modifications to the draft Net
Assets Report, Seller shall submit to Buyer, in writing, a reasonably
specific description of its objections and the adjustments which Seller
believes should be made. If Seller agrees or
4
<PAGE> 14
provides no response to the draft Net Assets Report, such report shall
be deemed to be the Net Assets Report for purposes of this Agreement.
If Seller has proposed modifications to the draft Net Assets Report,
Seller, for a period of 15 days following delivery of such proposed
modifications, shall provide to Buyer, its accountants and independent
auditors, upon reasonable notice, access to the related work papers of
Seller.
(b) OBJECTIONS. If, by the close of business on the last day
of such 15-day period, Buyer has notified Seller in writing that it has
no objections to the proposed modifications to the draft Net Assets
Report, or if it has notified Seller in writing it has objections and
Seller agrees with the objections, then the draft Net Assets Report
shall be deemed to be the Net Assets Report with agreed objections, if
any, for the purposes of this Agreement.
(c) FAILURE TO AGREE. If, by the end of such 15-day period,
the parties are unable to agree on the contents of the draft Net Assets
Report, then KPMG Peat Marwick, certified public accountants or, if
unavailable, such firm which is one of the six largest independent
firms of certified public accountants mutually acceptable to the
parties hereto, shall review the disputed matters and, as soon as
practicable deliver to Seller and Buyer a statement setting forth its
determination as to the proper treatment of the modifications as to
which there was disagreement and such statement shall be the Net Assets
Report with the determination of Net Assets for the purposes of this
5
<PAGE> 15
Agreement. Such determination shall be final and binding upon the
parties hereto without any further right of appeal; provided, however,
that the acceptance of Buyer and Seller of such determination shall not
constitute or be deemed to constitute a waiver of the rights of such
party in respect of any other provisions of this Agreement. All charges
of such independent accounting firm incurred in making such
determination shall be borne equally by Buyer and Seller.
4.3. SETTLEMENT. Upon final determination of the Net Assets as of the
Closing Date the following settlement shall occur:
(a) NET ASSETS DEFICIENCY. If Net Assets as of the Closing
Date are less than the Intended Net Assets Balance, Seller promptly
shall pay Buyer the difference in cash by wire transfer of immediately
available funds; or
(b) NET ASSETS EXCESS. If Net Assets as of the Closing Date
exceed the Intended Net Assets Balance, then
(i) if the Seller has not been released from its
Concession Guaranties pursuant to Section 8.6(e) hereto, then
Buyer promptly shall pay Seller the amount of the difference
in cash by wire transfer of immediately available funds; or
(ii) if Seller has been released from its Concession
Guaranties pursuant to Section 8.6(e) hereto, then Buyer shall
pay Seller the amount of the difference by promptly issuing to
Seller an additional
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Note in an original principal amount equal to such difference.
5. SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING SELLER.
Subject to disclosures contained on the Schedules, Seller makes the following
representations and warranties to Buyer:
5.1. CORPORATE ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware,
has full corporate power and authority to carry on its business as it is now
being and as heretofore conducted and to own the properties and assets it now
owns, is duly qualified or licensed to do business as a foreign corporation, and
is in good standing in each state and territory of the U.S. and foreign
jurisdiction in which its ownership of property or the conduct of its business
requires such qualification, other than jurisdictions in which the failure to so
qualify would not have a Material Adverse Effect on the business, operations,
condition (financial or otherwise) or prospects of Seller, and has full
corporate power to execute and deliver this Agreement and to carry out the
Transactions.
5.2. AUTHORITY. Except as provided in Section 5.4 hereof, Seller has
taken all actions required by Law, its Articles, Bylaws or otherwise, to
authorize the execution and delivery of this Agreement, the performance of its
obligations hereunder and the consummation of the Transactions, and, except for
approval of Seller's Board which will have been obtained not more than 7
business days after the final date of execution hereof, no other corporate
proceeding on the part of Seller is necessary to
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authorize the execution, delivery and performance by Seller of this Agreement.
This Agreement has been duly and validly executed and delivered by Seller and is
a valid and legally binding agreement enforceable against Seller in accordance
with its terms, except (a) as it may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar Laws now or hereafter in effect relating
to or affecting creditors' rights generally, (b) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, and, (c) subject to approval of Seller's
Board as herein contemplated.
5.3. NO VIOLATION. Neither the execution and delivery of this Agreement
nor the consummation of the Transactions will violate any provisions of the
Articles or Bylaws of Seller. Except as disclosed on SCHEDULES 5.3 AND 5.4
hereto, neither the execution and delivery of this Agreement nor the
consummation of the Transactions will result in the breach of, or constitute a
default (with or without notice or lapse of time, or both) under, or result in
the modification, limitation or revocation of, or result in the loss,
suspension, impairment or forfeiture of any right, privilege or benefit under,
or require any payment under, or give rise to a right of termination,
cancellation or acceleration of any obligation under, any provision of (a) any
note, bond, debt instrument, mortgage, indenture, deed of trust, item of
intellectual property, permit, license, lease, lien, contract, commitment,
agreement or other instrument or arrangement to which Seller or any of its
subsidiaries is a party or by which any of their respective properties, assets
or
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businesses are bound or (b) any Law or Order applicable to Seller or by which
Seller or any of its subsidiaries is bound or by which any of their respective
properties or assets or businesses is bound or affected.
5.4. CONSENTS AND APPROVALS. Except as disclosed on SCHEDULE 5.4
hereto, and for the requirements of Title II of the HSR Act and the Exon-Florio
Amendment, if applicable, no consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority or any
other Person not a party to this Agreement is required to be made or obtained by
Seller in connection with the execution, delivery and performance of this
Agreement or the consummation of the Transactions.
6. SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING COMPANY AND THE
BUSINESS. Except as otherwise stated or disclosed on the Schedules, Seller makes
the following representations and warranties to Buyer:
6.1. CORPORATE ORGANIZATION, ETC. Company is duly organized, validly
existing and in good standing under the Laws of Florida. Company has full
corporate power and authority to carry on the Business as now being conducted
and heretofore conducted and to own the properties and assets it now owns, and
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each state and territory of the United States and foreign
jurisdiction listed on SCHEDULE 6.1(a), which jurisdictions are the only
jurisdictions in which its ownership of property or the conduct of its business
requires
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such qualification, other than jurisdictions in which the failure to so qualify
would not have a Material Adverse Effect on the Business, operations, condition
(financial or otherwise) of Company. SCHEDULE 6.1(b) sets forth for each of
Company's Subsidiaries: (i) its name and jurisdiction of incorporation, (ii) the
number of shares of authorized capital stock of each class of its capital stock,
(iii) the number of issued and outstanding shares of each class of its capital
stock, the names of the record holders thereof, and the number of shares held by
each such holder, (iv) the number of shares of its capital stock held in
treasury, and (v) its directors and officers. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Each Subsidiary has full corporate power and authority to carry
on the Business as now being conducted and heretofore conducted and to own the
properties and assets it now owns, and is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each state and
territory of the United States and foreign jurisdiction listed on SCHEDULE
6.1(b), which jurisdictions are the only jurisdictions in which its ownership of
property or the conduct of its business requires such qualification, other than
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect on the business, operations, condition (financial or otherwise)
or prospects of Company.
6.2. CAPITALIZATION. All outstanding Shares are owned by the Seller,
and all outstanding Subsidiary Shares held in the name of the Company are owned
by the Company, in each case, free and clear of any Encumbrances, and all of the
Shares and Subsidiary
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Shares are validly issued, fully paid and nonassessable. There are not as of the
date hereof and there will not be at the Closing Date any outstanding stock
appreciation rights, preemptive rights or any other outstanding or authorized
options, warrants, calls, rights, agreements or commitments, to which Company is
a party, or may be bound, requiring Company to issue, transfer, sell, purchase,
redeem or acquire, or register under any Securities Law, any shares of capital
or any debt securities or any other securities or rights convertible into,
exchangeable or, or evidencing the right to subscribe for or acquire, any shares
of capital of Company or any Subsidiary. Except as shown on SCHEDULE 6.2 hereof,
there are not, as of the date hereof, nor will there be on the Closing Date, any
shareholder agreement, voting trust restrictions or limitations on transfer or
other agreements or understandings to which Seller is a party relating directly
to any Shares or Subsidiary Shares excepting those restrictions and limitations
under the Securities Laws.
6.3. NO VIOLATION-COMPANY. Except as disclosed on SCHEDULE 6.3 hereto,
neither the execution and delivery of this Agreement nor the consummation by
Seller of the Transactions, will (a) conflict with, or result in any violation
of, the Articles or Bylaws of Company or any Subsidiary; (b) result in the
breach of, or constitute a default (with or without notice or lapse of time, or
both) under, or result in the modification, limitation or revocation of, or
result in the loss, suspension, impairment or forfeiture of any right, benefit,
or privilege under, or require any payment under, or give rise to a right of
termination, cancellation or acceleration of any obligation under, any provision
of (i) any note, bond, debt instrument, lien, mortgage,
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<PAGE> 21
indenture, deed of trust, item of intellectual property, permit, license, lease,
contract, commitment, agreement or other instrument or arrangement to which
either Company or any Subsidiary is a party or by which any of their respective
properties or assets are bound or (ii) any Law or Order applicable to Company or
any of the Subsidiaries, or by which they are bound or by which any of their
respective properties or assets are bound or affected, or (c) result in the
creation of any Encumbrances upon any of the properties or assets of Company or
the Subsidiaries.
6.4. EQUITY AND OTHER INTERESTS. Except for interests disclosed on
SCHEDULE 6.4 hereto, neither the Company nor any Subsidiary owns, directly or
indirectly, any capital stock of or other interests in any corporation, joint
venture, limited liability company, partnership or other entity.
6.5. FINANCIAL STATEMENT. SCHEDULE 6.5 hereto sets forth the following
financial statements (collectively the "Financial Statements"): (i) audited
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal year ended December 31, 1997 for
Company and the Subsidiaries and (ii) consolidated balance sheets and statements
of income, changes in stockholders' equity and cash flows for the 3 months ended
March 31, 1998 which have been reviewed by Seller's public accounting firm, and
March 31, 1997 for Company and the Subsidiaries. The Financial Statements
(including, with respect to the audited financial statements only, the notes
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered
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thereby, are correct and complete and present fairly the financial condition of
Company and the Subsidiaries as of such dates and the results of operations of
Company and the Subsidiaries for such periods and are consistent with the books
and records of Company and the Subsidiaries, subject to normal and recurring
year end adjustments and in the case of the unaudited financial statements, the
absence of notes. There is no liability of any kind required to be disclosed
under GAAP, whether accrued, absolute, fixed or contingent, of Company and the
Subsidiaries that is not disclosed, reflected or reserved against in the audited
financial statements, except such liabilities or obligations incurred in the
ordinary course of business since December 31, 1997.
6.6. TAXES.
(a) FILING OF RETURNS.
(i) Each of Company and its Subsidiaries has filed or
caused to be filed in a timely manner (within any applicable
extension periods) with the appropriate Governmental Authority
all Returns required to be filed by the Code or by applicable
foreign, state or local Laws or orders relating to Taxes and
Returns in effect from time to time through the Closing Date
and all such Returns were complete and accurate in all
material respects;
(ii) All Taxes (whether or not shown to be due on
such Returns) have been paid, or will be timely paid in full
by the due date thereof; and
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(iii) Except as stated on SCHEDULE 6.6 hereto, no Tax
liens have been filed by any Governmental Authority against
any property or assets of Company.
(iv) The unpaid Taxes of Company and its Subsidiaries
(A) did not exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face
of the most recent Balance Sheet in the Financial Statements
of Section 6.5 (rather than in any notes thereto) and (B) do
not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom
and practice of Company and its Subsidiaries in filing their
Tax Returns.
(v) No claim has ever been received by the Company or
any of its Subsidiaries during the preceding 5 years from a
Governmental Authority in a jurisdiction where Company or any
of its Subsidiaries does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of any of Company and
its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) EXAMINATION OF RETURNS. To Seller's Knowledge, the U.S.
federal, state, local or foreign Returns (whether filed on a separate
or consolidated basis) in which Company, or any of its Subsidiaries has
filed or has joined
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in filing have been examined by the IRS or the equivalent state, local
or foreign Governmental Authority (if applicable) for all the taxable
years through the years ended as shown or explained on SCHEDULE 6.6.
All deficiencies resulting from such examinations have either been paid
or adequately provided for in the Financial Statements or are the
subject of a good faith and timely contest.
(c) AGREEMENTS/WAIVERS. Except as disclosed on SCHEDULE 6.6,
there are no outstanding agreements or waivers extending the statutory
period of limitation applicable to (i) any Returns required to be filed
with respect to, or (ii) any powers of attorney in respect of, Company
or any of its Subsidiaries.
(d) TAX SHARING AGREEMENTS. Except as disclosed on SCHEDULE
6.6, Company is not a party to any Tax allocation or sharing agreement.
(e) AUDITS. Except as disclosed on SCHEDULE 6.6, during the
last 3 years there have been no, and there are no, ongoing audits or
notification of audits of, nor was there any dispute or claim pending
during any such period relating to, any Returns or reports of any Tax
filed by or any Business activity engaged in by Company or any of its
Subsidiaries.
(f) WITHHOLDING. Each of Company and its Subsidiaries has
withheld all material Taxes and paid when
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due all such Taxes required to have been withheld in connection with
amounts paid or owing to any employee, creditor, stockholder or other
third party.
(g) REAL PROPERTY HOLDING COMPANY. None of Company and its
Subsidiaries has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii).
(h) DEDUCTIBLE PAYMENTS. None of the Company and its
Subsidiaries has made any payments or is a party to any agreement that
under certain circumstances would obligate it to make any payments that
would not be deductible under Code Sections 162(m) or 28OG or, to the
best knowledge of the Seller under Code Section 162(a)(1), that are
not, otherwise required to be capitalized under Code Section 263.
6.7. ASSETS OF COMPANY/BUSINESS.
(a) TITLE. Company has good title to, or a valid and
subsisting leasehold title and the interest purported to be granted in
the lease in respect of such property to, all assets used in the
conduct of the Business, whether or not reflected on current Financial
Statements or thereafter acquired, free and clear of all Encumbrances,
except for receivables collected or assets sold or otherwise disposed
of since December 31, 1997, in the ordinary course of business
consistent with past practice.
(b) ADEQUACY OF ASSETS. The assets of Company,
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reflected in the Financial Statements, (i) constitute all the assets,
properties and rights used by the Company in, and necessary to conduct,
the Business, (ii) constitute assets currently owned, held, leased,
licensed or otherwise available to Company and which directly or
indirectly are or may be used in, or otherwise relate to, the Business.
6.8. REAL PROPERTY.
(a) OWNED REAL PROPERTY. Company and Subsidiaries do not own
an interest in Real Property excepting interests as Lessees thereof.
(b) LEASED REAL PROPERTY. SCHEDULE 6.8 contains a description
of Leased Real Property under which either Company or any Subsidiary is
a lessee, sublessor, licensee, sublicensee or sublicensor or occupies
such Real Property as a joint venturer or concessionaire under a
Concession.
(c) RIGHT OF OCCUPANCY/USE. Excepting for the leasehold
interest of Company in respect of premises at 400 Challenger Road, Port
Canaveral, Florida, which has been sublet by Company to Premier Cruise
Lines, Ltd. under sublease dated July 13, 1990 ("PCL Lease") and the
Leases at Coconut Grove and Lake Buena Vista ("Hotel Leases"), as more
fully described in SCHEDULE 6.8 hereto, Company has the right to occupy
each parcel of Leased Real Property, which occupancy right is pursuant
to a Lease, each of which is a legal, valid, binding and enforceable
obligation of Company as applicable, and, to the Knowledge of Seller,
each of the other parties thereto and is in full force and effect.
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Following the consummation of the Transactions, each Lease will
continue to be a legal, valid, binding and enforceable obligation of
the Company and to the Knowledge of Seller, each of the other parties
thereto, and will be in full force and effect.
(d) DEFAULTS. Except as disclosed in SCHEDULE 6.8, none of
Company or any Subsidiary or, to Seller's Knowledge, any other party
thereto is in breach or default with respect to any term or condition
of any Lease of Leased Real Property, no event has occurred which, with
notice or the lapse of time would constitute a breach or default or
permit termination, modification or acceleration thereunder, and no
party has repudiated any provision thereof.
(e) LAWFUL USE. The operation of the buildings, fixtures and
other improvements located on the Real Property by Company and the
Subsidiaries is not in violation of any applicable building Law or
code, zoning Law or other Law or Orders thereunder.
(f) CONDEMNATION. Neither Company nor any of the Subsidiaries
has received notice of any proposed condemnation, special assessment,
or any proposed material change in property Tax or land use laws
affecting all or any portion of the Real Property.
6.9. INTELLECTUAL PROPERTY.
(a) LIST OF RIGHTS. SCHEDULE 6.9 hereto describes the
Intellectual Property Rights necessary or
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desirable for use in the Business, including those which are the
subject of Trademark, Patent or Copyright registrations or grants, or
the subject of pending applications for Trademark, Patent or Copyright
registrations or grants to which, to Seller's Knowledge, the ownership
or right of use is claimed by Company and all agreements which include
any assignment of, or license which affects such Intellectual Property
Rights ("Rights Agreements").
(b) TITLE. Except as disclosed in SCHEDULE 6.9, all such
listed Rights Agreements are in effect, and Company claims ownership or
right of use of the Intellectual Property Rights identified as owned or
licensed in SCHEDULE 6.9 (indicating thereon the owner or licensor
thereof) free and clear of all Encumbrances. Except as disclosed in
SCHEDULE 6.9, Company is using the Intellectual Property Rights that
are claimed by it under color of title or license, whether by written
Contract or otherwise. Except as disclosed in SCHEDULE 6.9, Company
claims the right to transfer or assign all material Intellectual
Property Rights that are licensed, without the consent of any other
party, and, no person has any rights or has been granted any license
under the licensed Intellectual Property Rights. Except as disclosed in
SCHEDULE 6.9, all of the Intellectual Property Rights and all grants or
registrations thereof are in full force and effect and all
registrations and grants of such Intellectual Property Rights which are
subject to and have become due for renewal or maintenance, have been
renewed or maintained or are the subject of pending renewal
applications or payment of maintenance. Except as disclosed
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in SCHEDULE 6.9, the use of the Intellectual Property Rights in the
Business and the conduct of the Business as presently conducted do not
infringe or violate the rights (statutory, contractual or otherwise) of
any other person, and all Trademark, Patent and Copyright registrations
and grants included in the Intellectual Property Rights which are
indicated as being owned by Company are owned by Company as disclosed.
Each of the Intellectual Property Rights on SCHEDULE 6.9 will be owned
or available for use by Buyer immediately subsequent to Closing
hereunder on identical terms and conditions as available to Company and
the Subsidiaries prior to Closing. Company and the Subsidiaries have
taken all necessary and desirable action to maintain and protect each
Intellectual Property Right.
(c) CONFLICTS. Except as disclosed in SCHEDULE 6.9, no
Intellectual Property Rights are involved in an interference, conflict,
cancellation, opposition or reexamination proceeding. Except as
disclosed in SCHEDULE 6.9, Seller has no Knowledge that any of the
Intellectual Property Rights have been, are being, or will be infringed
by others or that any Information has been or is being misappropriated
by others; nor does Seller have any Knowledge that any Person has
obtained, sought, is seeking, or will seek to obtain patent coverage on
any invention or development used in the conduct of the Business or
which is the subject of any of the Patents or Information.
6.10. CONTRACTS.
(a) LIST OF CONTRACTS. SCHEDULE 6.10 hereto sets
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forth, a list of each of the following types of agreements
("Contracts") to which Company or any Subsidiary is a party or by or to
which the Business may be affected materially or its properties may be
bound or subject:
(i) All written and Known oral Contracts and
Concessions for the conduct of the Business involving payments
in excess of US$100,000 per year (or its equivalent in foreign
currency);
(ii) Any written or Known oral Contract under which
Company has loaned any money or guaranteed indebtedness of
others or which obligates Company to do any of the foregoing
(other than endorsements for the purpose of collection in the
ordinary course of business);
(iii) Any unexpired written or Known oral Contract
(other than as listed in Section 6.10(a)(i) hereof) involving
more than US$100,000 each (or its equivalent in foreign
currency) or extending more than 6 months from the date hereof
for the purchase of materials, goods, supplies or services;
(iv) Any Contract concerning confidentiality or
noncompetition;
(v) Any Contract relating to Company or its
Subsidiaries, their assets, liabilities and businesses between
or among Company or any of the
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Subsidiaries and any of their affiliates;
(vi) Any collective bargaining agreement;
(vii) Any Contract providing for the employment or
consultancy with any individual on a full-time, part-time,
consulting or other basis in excess of $75,000 or providing
severance or retirement benefits;
(viii) Any Contract under which the Company or its
Subsidiaries has advanced or loaned any amount to any of its
stockholders, affiliates, directors, officers, or employees
other than in the ordinary course of business; and
(ix) Any Contract under which the consequences of a
default or termination is reasonably likely to have a Material
Adverse Effect on the Business, financial condition,
operations, results of operations, or future prospects of
Company.
(b) BINDING CONTRACTS. Each Contract (excepting oral Contracts
not enforceable pursuant to the statute of frauds or a similar Law) is
legal, valid, and binding, in full force and effect and enforceable in
accordance with its terms, except to the extent such enforceability may
be limited by or subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium or other similar laws
22
<PAGE> 32
now or hereafter in effect relating to or limiting creditors' rights
generally or by general principles of equity (assuming proper
authorization by all requisite action by the other party thereto,
which, to Seller's Knowledge, has occurred), except as disclosed on
SCHEDULE 6.10 or the other Schedules attached hereto. Company has
performed all material obligations required to be performed by it under
the Contracts and is not (and with the passage of time or the giving of
notice, or both, will not be) in breach or default in any material
respect thereunder and, to Seller's Knowledge, no other party to any of
such Contracts is (or with the lapse of time or the giving of notice,
or both, will be) in breach or default in any material respect
thereunder.
(c) CONSENTS. Except as disclosed on SCHEDULE 6.10, no consent
of any party to a Contract is required in connection with consummation
of the Transactions.
6.11. LITIGATION. SCHEDULE 6.11 hereto sets forth a list, of all
pending or to the Knowledge of Seller, threatened Actions by or against Company,
the Subsidiaries or any of their respective properties, assets, operations or
the Business, other than Actions that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect. Company is not in
default under any Order and there are no Actions pending or to the Knowledge of
Seller threatened against, and no Orders entered against, Company or any
Subsidiary that, individually or in the aggregate, reasonably could be expected
to have a Material Adverse Effect.
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<PAGE> 33
6.12. EMPLOYEE AND RELATED MATTERS.
(a) BENEFITS PLANS. SCHEDULE 6.12 hereto sets forth each
employee benefit plan (except those plans set forth in Sections 8.9 and
8.12 hereof), whether written or, to Seller's knowledge, oral,
including without limitation, each profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or
other plan or arrangement for the benefit of its current or former
directors, officers, and employees; defined benefit pension plan
defined contribution plan, medical, dental, vision, life insurance,
sick pay, disability, severance or other written plan, or, to Seller's
knowledge oral, practice, program or policy, established administered,
maintained or to which the Seller or Company has contributed, in which
any Employee former Employee or beneficiary of any Employee or former
Employee currently participates, or under which any Employee has
participated or is or will be entitled to any benefits or on behalf of
which Company is or has acted as a fiduciary, sponsor or administrator
since December 31, 1992 (all of the foregoing individually, a "Plan"
and collectively, the "Plans").
(b) COPIES OF PLANS. Seller has made available to Buyer copies
of (i) the most recent annual reports on Form 5500 filed with the IRS
with respect to each Plan (if any such report was required), (ii)
copies of the Plans and/or Summary Plan Descriptions and the most
recent actuarial valuations related to the Plans, and (iii) a copy of
the most recent IRS determination letter for each Plan for which such a
letter was obtained. All reports or other
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<PAGE> 34
documents required by law or contract to be filed with any governmental
agency or distributed to Plan participants or beneficiaries have been
timely filed or distributed. Each employee benefit plan which is
intended to be "qualified" has been determined to be so qualified and
such determination has not been modified, revoked or limited and
nothing has occurred (or failed to occur) since the receipt of such
determination letters that would adversely affect such Plan's
qualification.
(c) CLAIMS, ETC. Except as described in SCHEDULE 6.12, to
Seller's Knowledge, each of the Plans and any trust created thereunder
has been operated and administered in all material respects in
accordance with its terms and in compliance with applicable Laws and
Orders. No prohibited transaction within the meaning of Section 406 or
407 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Code with respect to any Plan has
occurred during the five-year period preceding the date of this
Agreement for which a class exemption is not available. There are no
pending or threatened claims or suits, grievance, arbitration or other
manner of litigation involving any of the Plans or assets thereof other
than routine claims for benefits in the ordinary course.
(d) CONTRIBUTIONS. All contributions required to be made to
each Plan have been timely made or accrued for on the Financial
Statements, and none of the Plans has incurred an "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not
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<PAGE> 35
waived, as of the last day of the most recent fiscal year of the Plan
and Company has not incurred any resulting liability for excise tax.
There has been no termination, partial termination, discontinuance to
any Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the IRS and PBGC; Company, or any other
entity with whom Company is under "common control" (as such term is
defined in Section 4062 of ERISA) has not incurred and does not expect
to incur any liability under Section 4062 of ERISA or with respect to
any "multi-employer plan" (as such term is defined in Section
4001(a)(3)of ERISA). To Seller's Knowledge, the Company has no
Liabilities with respect to any employee benefit plans other than with
respect to the Plans.
(e) GROUP HEALTH PLANS. To Seller's Knowledge, with respect to
any "group health plan" under Section 4980B of the Code and related
regulations (relating to the benefit continuation rights imposed by
COBRA), there is no material Liability with respect to the reporting,
disclosure, notice, election and other benefit requirements imposed
under COBRA.
(f) FUNDING. To Seller's Knowledge, with respect to each Plan,
there will be no Liability of Company as of the Closing Date that has
not been either paid or reasonably estimated and reserved for in
accordance with GAAP applied consistently with past practice of the
Company.
(g) SEVERANCE LIABILITIES. Except as otherwise disclosed in
SCHEDULE 6.12 or as may result from actions of
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<PAGE> 36
Buyer or Company on or after the Closing Date, neither the signing and
delivery of this Agreement nor the consummation of the Transactions
will (i) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute or otherwise)
becoming due from Company under any Severance Pay Policy, (ii) increase
any benefits otherwise payable under any Severance Pay Policy, or (iii)
result in the acceleration of the time of payment or vesting of any
such benefits under any such Severance Pay Policy.
(h) Except as set forth on SCHEDULE 6.12, Company does not
maintain, and is not obligated to provide benefits under, any life,
medical or health plan which provides benefits to retirees or other
terminated employees other than health care continuation benefits
pursuant to COBRA.
(i) There is no provision of any Plan, or any action by the
Seller on or before the date of Closing that would preclude Company
from modifying, amending or terminating any Plan.
6.13. ABSENCE OF CHANGES OR EVENTS. Since December 31, 1997, except as
disclosed on SCHEDULE 6.13 hereto, there has not been any:
(a) NO CHANGES. Change in the Business, financial condition,
assets, Liabilities, or results of operations of Company, except for
changes which have not had or could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
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(b) INCREASES IN PAYMENTS/EXPENSES. Except for actions taken
by Company in the ordinary course of business consistent with past
practice, (i) increases in the base compensation payable or to become
payable by Company to any of the Employees, (ii) except for amounts
awarded pursuant to Plans in existence as of December 31, 1997 and
listed on SCHEDULE 6.12, any bonus, incentive compensation, or service
award granted, made or accrued, contingently or otherwise, for or to
the credit of any of the Employees, or directors or officers of Company
or any Subsidiary (iii) employee welfare, pension, or retirement, made
or agreed to by Company for any Employee whether past or present,
except pursuant to Plans in existence as of December 31, 1997, and
listed on SCHEDULE 6.12, (iv) amendment of or new employment, Severance
Pay Policy or other compensation or severance pay agreement involving
annual compensation in excess of $25,000, or management or consulting
agreement involving annual payments in excess of $25,000 to which
Company or any Subsidiary is a party and pursuant to which any third
party will perform services for Company, (v) except for amounts granted
in the ordinary course off business, consistent with past practice
under existing Contracts or policies described in SCHEDULE 6.13, grant
or award of any termination or severance payment for any Employees or
(vi) modification or change in the employment terms for any director,
officer or Employee of the Company or any Subsidiary;
(c) SHARES IN THE BUSINESS. Issuance, sale or written or oral
Contract to issue or sell (i) any shares of
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capital, or (ii) any securities convertible into, or options with
respect to, or warrants to purchase or rights to subscribe for, any
shares of capital or any other participation in Company or any
Subsidiary or the Business;
(d) TRANSFER OF ASSETS. Except for settlement of Intercompany
Accounts as provided for in Section 3.5 hereof or the payment of
dividends in accordance with its past practices, sale, assignment or
transfer of any of the assets of Company which are material
individually or in the aggregate to Company other than in the ordinary
course of business and consistent with past practice;
(e) ACQUISITIONS.
(i) Acquisition by Company or any Subsidiary, by
merger or consolidation with, or purchase of substantially all
of the assets or capital, or any other acquisition of any
material assets or business of, any corporation, partnership,
limited liability Company, association or other business
organization or division thereof;
(ii) Written or oral Contract by Company to enter
into or formation of any joint venture, partnership or other
similar arrangement or form any other new material arrangement
involving the Business; or
(iii) Amendment to the Articles or Bylaws of Company
or any Subsidiary;
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(f) FAILURE TO OPERATE IN ORDINARY COURSE. Failure to operate
Company in the ordinary course consistent with past practice, and
failure to preserve for Company its customers and others having
material Business relations with it (including suppliers, licensors,
licensees and distributors), except to the extent that such failure to
preserve would not have, individually or in the aggregate, a Material
Adverse Effect;
(g) CHANGE IN INSURANCES. Change in or discontinuance of any
existing policies of Insurance with coverages for Company and
Subsidiaries in full force and effect at least at such levels as were
in effect on December 31, 1997;
(h) CHANGE IN ACCOUNTING. Change in accounting methods or
practices by Company, or reversal of previously established accounting
provisions or treatments, or any change in the method of applying GAAP,
or the realization of any extraordinary or nonrecurring gain;
(i) MAINTENANCE OF BOOKS. Failure to maintain Company's books
and records in the usual, regular and ordinary manner on a basis
consistently applied;
(j) CAPITAL EXPENDITURES. Capital expenditures in excess of
US$100,000 in the aggregate or the execution of any Lease or any
incurring of any commitment or Liability therefor by Company which is
not in the ordinary course of
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business, or the cost of which is in excess of US$100,000 each (or its
equivalent in foreign currency);
(k) ENCUMBRANCES. Mortgage, pledge or other Encumbrance of any
asset of Company, other than in the ordinary course of business
consistent with past practice;
(l) DEBT. Incurrence of or commitment to incur any
indebtedness for borrowed money or any assumption, guarantee,
endorsement or other creation of responsibility for obligations of any
other Person or any loan or advance to any Person by Company or any
Subsidiary, except in the ordinary course of business and consistent
with past practice;
(m) PROPERTY DAMAGE/LOSS. Damage, destruction or loss with
respect to any assets of Company or any Subsidiary (whether or not
covered by insurance) individually or in the aggregate having a
Material Adverse Effect;
(n) DISTRIBUTIONS. Except for settlement of Intercompany
Accounts as provided for in Section 3.5 hereof, and the payment of
dividends in accordance with its past practices, declaration, setting
aside or payment of dividends or distributions (whether in cash,
capital shares, or property) in respect of any capital of Company or
any Subsidiary or any redemption, purchase or other acquisition of any
capital of Company or any Subsidiary;
(o) CONTRACTS. Contracts, lease, or license (or
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series of related Contracts, leases, and licenses) entered into other
than in the ordinary course of business;
(p) CHANGE IN STATUS OF CONTRACTS. Acceleration, termination,
modification, or cancellation of any Contract, lease, or license (or
series of related Contracts, leases, and licenses) to which Company or
its Subsidiaries is a party or by which any of them is bound;
(q) EMPLOYEE BENEFIT PLANS. Except as provided SCHEDULE 6.13,
in Sections 8.9 and 8.12 hereof, and except as may be necessary to
maintain compliance with applicable Laws, adoption, amendment,
modification or termination of any Plan or other plan, contract, or
commitment for the benefit of any director, officer, or Employee (or
taken any such action with respect to any other Plan);
(r) OTHER EVENTS. Other occurrence, event, incident, action,
failure to act, or transaction outside the ordinary course of business
involving Company or any Subsidiary.
None of Company, the Subsidiaries or Seller has committed to any of the
foregoing. Since December 31, 1997, there has not been any change which has
resulted in a Material Adverse Effect.
6.14. COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed on SCHEDULE
6.14 hereto, Company has complied and is in compliance with all Laws and all
Orders, except where noncompliance, individually or in the aggregate, reasonably
could
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not be expected to have a Material Adverse Effect.
6.15. EMPLOYEE AND LABOR RELATIONS. Except as set forth on SCHEDULE
6.15 hereto:
(a) KEY EMPLOYEES. To the Knowledge of Seller, except as set
forth on SCHEDULE 6.15, no executive, key Employee, or group of
Employees has any plans to terminate employment with Company or any
Subsidiary;
(b) STRIKES. There is no labor strike, dispute, or work
stoppage or lockout pending or, to Seller's Knowledge, threatened
against or affecting Company or any Subsidiary nor is there any labor
organization representing any Employee in any of the foregoing in any
such action;
(c) UNION ORGANIZATION. To Seller's Knowledge, no union
organization campaign is in progress with respect to Employees and no
question concerning representation exists respecting such Employees;
(d) UNFAIR PRACTICES. There is no unfair labor practice charge
or complaint pending or, to Seller's Knowledge, threatened before the
National Labor Relations Board or any equivalent or similar body of any
state, local or foreign Governmental Authority having jurisdiction
under any foreign labor Law against Company or any Subsidiary; and
(e) EEOC MATTERS. No charges with respect to or relating to
Company or any Subsidiary are pending or to
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Seller's Knowledge, threatened before the Equal Employment Opportunity
Commission or any similar body of any state, local or foreign
Governmental Authority having jurisdiction over the Company or any
Subsidiary.
6.16. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
SCHEDULE 6.16 hereto, to Seller's Knowledge, neither Company nor any Subsidiary
has any Liabilities except Liabilities (and, to Seller's Knowledge, there is no
basis for any Liability) or obligations which (a) are adequately reflected or
reserved against in the Financial Statements; (b) were incurred after December
31, 1997 in the ordinary course of business consistent with past practice; or
(c) are incurred or to be incurred in the performance of Contracts in effect as
of the Closing.
6.17. BROKERS AND FINDERS. None of the Company or the Subsidiaries has
employed, contracted with, or has any obligation to, any investment banker,
broker, finder, consultant or intermediary in connection with the Transactions
which would be entitled to any investment banking, brokerage, finder's or
similar fee or commission in connection with this Agreement or the Transactions.
6.18. BOOKS OF ACCOUNTS; RECORDS. Company's general ledgers, stock
record books, minute books and other material records relating to its respective
assets, properties, Contracts and outstanding legal obligations are, complete
and correct, and have been maintained in accordance with sound business
practices, Laws and other requirements except
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where any failure would not have a Material Adverse Effect.
6.19. INVENTORIES. Except as disclosed in SCHEDULE 6.19, all of the
inventories of goods, wares and merchandise of the Company and its Subsidiaries
are in good and merchantable condition and salable in the ordinary course of
business of Company, and none of such inventories are, defective, damaged,
broken, shopworn or obsolete, subject only to the reserve for inventory
writedown set forth on the face of the December 31, 1997 Balance Sheet (rather
than any notes thereto) as adjusted for the passage of time through the Closing
in accordance with GAAP and past practice and custom of Company and its
Subsidiaries.
6.20. INDEBTEDNESS; GUARANTIES. Except as set forth in the Financial
Statements, none of Company or its Subsidiaries has indebtedness for borrowed
money or for the deferred purchase price of property or services (other than
trade payables and other accrued current liabilities incurred in the ordinary
course of business), or capital lease obligations, conditional sale or other
title retention agreements. Except as set forth in SCHEDULE 6.20 hereto, Company
is not a guarantor or otherwise liable for any Liability or obligation of any
other Person.
6.21. ENVIRONMENTAL. Each of Company and its Subsidiaries is and has at
all times been in compliance in all respects with all applicable Laws relating
to environmental, natural resource, health or safety matters, except such
non-compliance as has not had and could not
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reasonably be expected to have within 36 months following the Closing Date a
Material Adverse Effect. Except such matters as have not had and could not
reasonably be expected have within 36 months following the Closing Date a
Material Adverse Effect, there is no Action pending or, to Seller's Knowledge,
threatened against Company or any Subsidiary in respect of (i) noncompliance
with any such Law, (ii) personal injury, wrongful death, other tortious conduct,
or the existence of any nuisance relating to materials, commodities or products
held, used, sold, transferred, manufactured or disposed of by or on behalf of
Company or any Subsidiary or any predecessor entity made of, containing or
incorporating any hazardous, noxious or toxic materials, commodities or
substances, or (iii) the presence or release or threatened release into the
environment of any pollutant, contaminant or toxic, hazardous or noxious
material, substance or waste, whether solid, liquid or gas and whether generated
by Company or any Subsidiary or any predecessor entity or located at or about a
site included in the Real Property or heretofore owned by Company or any
Subsidiary or any predecessor entity or currently leased or otherwise used by
Company or any Subsidiary.
6.22. AFFILIATED TRANSACTIONS. Except as set forth on SCHEDULE 6.22
hereto none of Company or any Subsidiary is a party to or bound by any contract,
commitment or understanding with Seller or its affiliates and none of the
stockholders, directors or officers of Company or any Subsidiary or any of their
affiliates or members of their family owns or otherwise has any rights to or
interests in
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any asset, tangible or intangible, which is used in the Business.
6.23. GOVERNMENT CONTRACTS. Except as set forth on SCHEDULE 6.23 hereto
none of Company and any Subsidiary has been and none is a party to any contract
or arrangement with any Governmental Authority.
6.24. NO ILLEGAL PAYMENTS, ETC. None of Seller, Company or any
Subsidiary, nor any of their directors, officers, employees or agents, has (a)
directly or indirectly given or agreed to give any illegal gift, contribution,
payment or similar benefit to any supplier, customer, governmental official or
employee or other person who was, is or may be in a position to help or hinder
Company or any of its Subsidiaries (or assist in connection with any actual or
proposed transaction) or made or agreed to make any illegal contribution or
reimbursed any illegal political gift or contribution made by any other person,
to any candidate for federal, state, local or foreign public office (i) which
might subject any of Company and its Subsidiaries to any damage or penalty in
any civil, criminal or governmental litigation or proceeding or (ii) the
noncontinuation of which has had or might have, individually or in the
aggregate, a Material Adverse Effect or (b) established or maintained any
unrecorded fund or asset or made any false entries on any books or records for
any purpose.
6.25. INSURANCE. SCHEDULE 6.25 hereto, sets forth
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a description of each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) ("Insurance") maintained by Seller or Company pursuant to which
Company or any Subsidiary is an insured. Other than as set forth on SCHEDULE
6.25, with respect to each such Insurance policy: (a) the policy is legal,
valid, binding, enforceable, and in full force and effect; (b) subject to
Section 8.6 hereof, the transactions contemplated hereby will not result in the
cancellation or modification of such policies prior to Closing; (c) neither
Company, nor any of its Subsidiaries nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (d) no party to the policy
has repudiated any provision thereof. SCHEDULE 6.25 describes any self-insurance
arrangements affecting any of Company and its Subsidiaries.
6.26. ANA TRADING DUTY FEE CO., LTD. ("ANA"). Except as set forth on
SCHEDULE 6.26 hereto, to Seller's Knowledge, (i) there has not been any
amendment to, modification to or termination under the ANA Shareholders
Agreement attached hereto as part of SCHEDULE 6.26, (ii) the Company owns a 20%
equity interest in ANA, (iii) Company and the Subsidiaries have no Liabilities
with respect to any obligations of ANA, its properties and its business, and
(iv) there is no encumbrance on the Company's interest in
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ANA or on any of the assets or properties of the business of ANA, except as may
exist in favor of other shareholders of ANA under such law governing rights of
shareholders of ANA or under such ANA shareholders Agreement.
6.27. MINORITY PARTNERS. SCHEDULE 6.27 hereto sets forth the holders of
the minority interests (the "Minority Partners") in each of the Subsidiaries. To
Seller's Knowledge, no Minority Partner that qualifies or in the past has
qualified, pursuant to the terms of any Contract of the Company or of any
Subsidiary, as a "Disadvantaged Business Enterprise" (as defined in 49 Code of
Federal Regulations Part 23) or similar entity fails to meet such requirements.
7. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller that:
7.1. CORPORATE ORGANIZATION AND QUALIFICATION. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified or licensed to do business
as a foreign corporation and is in good standing as a foreign corporation in
each jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification, except where the failure
to so qualify or be in such good standing would not have a Material Adverse
Effect. Buyer has all requisite power and authority (corporate or otherwise) and
possesses all permits necessary to own its properties and to carry on its
business as it is now being conducted.
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7.2. AUTHORITY. Buyer has the requisite power and authority to approve,
authorize, execute and deliver this Agreement and to consummate the
Transactions, including issuance of the Notes. This Agreement and the
consummation by Buyer of the Transactions have been duly and validly authorized
and approved by the Board of Buyer and no other corporate proceedings on the
part of Buyer are necessary to authorize this Agreement or to consummate the
Transactions. This Agreement has been duly and validly executed and delivered by
Buyer and constitutes the valid and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms, except (a) as it may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws of general
applicability now or hereafter in effect relating to or affecting creditors'
rights and to general principles of equity, and (b) that the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
7.3. NO VIOLATION. Neither the execution, delivery and performance of
this Agreement nor the consummation by Buyer of the Transactions contemplated
hereby nor issuance of the Notes, will:
(a) NO CONFLICTS. Conflict with or result in any violation of
the Articles or Bylaws of Buyer; or
(b) NO DEFAULTS. Result in the breach of, or constitute a
default (with or without notice or lapse of time, or both) under, or
result in the modification,
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limitation or revocation of, or result in the loss, suspension,
impairment or forfeiture of any right, privilege or benefit under, or
require any payment under, or give rise to a right of termination,
cancellation or acceleration of any obligation under, any provision of
(i) any note, bond, debt instrument, mortgage, indenture, deed of
trust, item of intellectual property, permit, license, lease, lien,
contract, commitment, agreement or other instrument or arrangement to
which Buyer or any of its subsidiaries is a party or by which any of
their respective properties, assets or businesses are bound or (ii) any
Law or Order applicable to Buyer or by which Buyer or any of its
subsidiaries is bound or by which any of their respective properties or
assets or businesses is bound or affected.
7.4. CONSENTS AND APPROVALS. Except for the requirements of Title II of
the HSR Act and the Exon-Florio Amendment, if applicable, and (i) as may be
required by applicable state corporate and Securities Laws, and (ii) as
disclosed on SCHEDULE 7.4 hereto, no consent of, or registration, declaration or
filing with, any Governmental Authority, or any other Person not a party to this
Agreement, is required for the validity of the execution and delivery, or for
the performance by Buyer in connection with the execution and delivery of this
Agreement or the consummation of the Transactions, including issuance of the
Notes.
7.5. NOTES. The issuance of the Notes, as described in SCHEDULE 3.2,
has been duly authorized by all necessary corporate action and, when issued
pursuant to the terms of this Agreement, will be valid and binding obligations
of Buyer, enforceable
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against Buyer in accordance with their terms, except as it may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties
and (ii) general principles of equity regardless of whether applied in a
proceeding in equity or at law.
7.6. INVESTMENT. Buyer (a) understands that the Shares have not been,
and will not be, registered under the Securities Laws, and are being offered and
sold in reliance upon U.S. federal and state exemptions for transactions not
involving any public offering, (b) is acquiring the Shares solely for its own
account for investment purposes, and not with a view to the distribution
thereof, (c) is a sophisticated investor with knowledge and experience in
business and financial matters, (d) has received certain information concerning
Seller and has had the opportunity to obtain additional information as desired
in order to evaluate the merits and the risks inherent in holding the Shares,
(e) is able to bear the economic risk and lack of liquidity inherent in holding
the Shares, and (f) is an accredited investor for the reasons set forth on
SCHEDULE 7.6 hereto.
7.7. FUNDING OF PURCHASE PRICE. Buyer has furnished to Seller true and
complete copies of the debt and equity commitment letters attached as SCHEDULE
7.7 ("Commitment Letters") by which funding for the cash portion of the Purchase
Price will be available for consummation of the Transactions. Such Commitment
Letters shall not be terminated, amended, modified or superceded in a manner
that is, or is reasonably likely to be, adverse to
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Seller without the written consent of Seller and, promptly upon any termination,
amendment, modification or superceding of the commitment Letters, Buyer will
notify Seller and provide complete copies thereof. As of the date of this
Agreement, Buyer is not aware of any facts or circumstances that create a
reasonable basis for Buyer to believe that Buyer will not be able to obtain
financing in accordance with the terms of the Commitment Letters.
8. ADDITIONAL COVENANTS AND AGREEMENTS; ACKNOWLEDGMENTS.
8.1. CONDUCT OF THE BUSINESS. From the date hereof through the Closing
Date, Seller shall cause Company and the Subsidiaries to operate the Business in
the ordinary and usual course consistent with past practices. Without limiting
the generality of the foregoing, Company (a) will not (and will not cause or
permit any of its Subsidiaries to) other than in the ordinary and usual course
of business consistent with past practices, (i) declare, set aside, or pay any
dividend or make any distribution with respect to its capital stock or redeem,
purchase, or otherwise acquire any of its capital stock, (ii) pay any amount to
any third party with respect to any Liability or obligation without Buyer's
consent, or (iii) otherwise engage in any practice, take any action, or enter
into any transaction of the sort described in Section 6.13 hereof, and (b) will
assert good faith efforts to (i) keep available to Buyer the services of
Company's present officer's, employees, agents and independent contractors, (ii)
preserve for the benefit of Buyer the goodwill of Seller's customers, suppliers,
landlords and others having business relations with it, and (iii) cooperate with
Buyer (without incurring any Liability or expenditure) in assisting
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Buyer to complete the financing of the Purchase Price.
8.2. REASONABLE EFFORTS. Seller and Buyer promptly shall (a) make their
respective filings and thereafter make any other required submissions under all
applicable laws, including filings under the HSR Act and the Exon-Florio
Amendment, if applicable, with respect to the Transactions; and (b) use all
commercially reasonable efforts to take, or cause to be taken, all other actions
and do, or cause to be done, all other things necessary, proper or appropriate
to consummate and make effective the Transactions as soon as practicable,
including execution of all covenants herein.
8.3. ACCESS TO INFORMATION. From the date hereof and through the
Closing, upon reasonable notice, Seller and Company shall permit representatives
of Buyer and its lenders to have reasonable access to all premises, properties,
personnel, books, records, contracts and documents of or pertaining to Company
and all Subsidiaries.
8.4. PUBLICITY. Except for disclosures specifically required by Law or
any Order, no public announcement relating to the Transactions shall be released
prior to Closing by Buyer, Seller, or Company, without the prior written consent
of the other Parties. If disclosure specifically is required by Law or any
Order, Buyer, Seller or, as applicable, Company shall give the other parties
prior written notice of the disclosure to be made and a reasonable opportunity
for them to consult with the disclosing party prior to making any such
disclosure.
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8.5. TAXES.
(a) MUTUAL ASSISTANCE. Buyer and Seller shall provide each
other such records and assistance (including execution of documents) as
reasonably may be requested by either of them in connection with the
preparation of any Return, any audit or other examination by any
Governmental Authority, and any judicial or administrative proceedings
relating to liability for Taxes (including refunds thereof) as provided
pursuant to Section 8.5(b) hereof. From and after the Closing Date,
Buyer agrees to retain and cause Company and its Subsidiaries to retain
Tax records relating to tax periods relating to pre-Closing periods
which are open for audit until the expiration of the statute of
limitations and any extensions thereof. Any such records or other
information disclosed pursuant hereto shall be held in confidence and
shall not be disclosed to others for any reason whatsoever, except to
the extent that such disclosure is required in order to effect the
intent of this Agreement or such disclosure is required by law.
(b) ALLOCATION OF TAX LIABILITY. Seller shall be responsible
for, shall indemnify and hold Buyer harmless against and from all Taxes
shown on the final Net Assets Report for periods ending on or prior to
Closing of Company and its Subsidiaries and any Person for which
Company or any of its Subsidiaries has any liability under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor, by contract or otherwise
for all taxable periods (or portions thereof) ending on or before the
Closing Date to
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the extent that such Taxes exceed the aggregate accruals for Taxes
reflected on the Net Assets Report. Buyer and Company jointly and
severally shall be responsible for and shall indemnify and hold Seller
harmless against all Taxes relating to the ownership and operations of
Company for all taxable periods (or portions thereof) beginning on the
date immediately following the Closing Date or thereafter. Seller shall
be responsible for and shall indemnify and hold Buyer harmless for,
from and against any Transaction Tax. In order to apportion
appropriately any income Taxes relating to any taxable year or period
that begins before or on and ends after the Closing Date, the parties
hereto shall, to the extent permitted or not prohibited by applicable
law, elect with the relevant taxing authority if required or necessary,
to terminate the taxable year as of the Closing Date. In any case where
applicable law does not permit Company or any of its Subsidiaries to
treat such date as the end of a taxable year of such Company or
Subsidiary, then whenever it is necessary to determine the liability
for income Taxes of such Company or Subsidiary, for a portion of a
taxable year, such determination shall (unless otherwise agreed to in
writing by Buyer and Seller) be determined by a closing of such
Company's or Subsidiary's books, except that exemptions, allowances or
deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis. In
order to apportion appropriately any Taxes, other than income Taxes,
relating to any taxable year or period that begins before or on and
ends after the Closing Date, (a) ad valorem Taxes (including, without
limitation, real and personal property
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Taxes) shall be accrued on a daily basis over the period for which the
Taxes are levied, or if it cannot be determined over what period the
Taxes are being levied, over the fiscal period of the relevant taxing
authority, in each case irrespective of the lien or assessment date of
such Taxes, and (b) franchise and other privilege Taxes not measured by
income shall be accrued on a daily basis over the period to which the
privilege relates.
(c) TAX AUDIT ADJUSTMENTS. Buyer shall be responsible for the
good faith representation of Company in regard to all present and
future U.S. federal, state, local, and foreign Tax audits, protests and
appeals for all years or periods open for the assessment of Tax
deficiencies with respect to the Business and any additions thereto or
extensions thereof through and including any Tax period ending on or
before the Closing Date and all succeeding periods. Buyer promptly
shall inform the Seller of (i) the commencement of any audit or
examination, (ii) proposals of deficiencies or refunds, and (iii) the
assessment of deficiencies or the agreement to refund an overpayment of
Taxes, with respect to Company for any Tax period for which Seller has
indemnified Buyer pursuant to Section 8.5(b) hereof. Seller shall be
entitled to participate in such audits and any subsequent protests and
appeals, and to review any workpapers relating thereto with respect to
such Tax periods. Neither Buyer nor Company shall settle, compromise,
accept, reject, protest or appeal any adjustment or proposed adjustment
in connection with any Tax audit or examination unless Buyer and
Company have first obtained the
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Seller's written approval, which approval shall not unreasonably be
withheld or delayed, with respect to such adjustment if such actions
would materially and adversely affect the Tax Liability of Company or
Seller giving effect to this Agreement.
(d) TAX RETURNS. Prior to the Closing Date, Company, or Seller
on behalf of Company, duly and timely shall file all Returns with
respect to the ownership and operations of the Business required to be
filed by it by such time (giving effect to any extensions available
therefor) and shall pay all Taxes due and payable with respect to such
Returns, provided that Seller or Company may contest in appropriate
proceedings any Tax, governmental charge, duty, or assessment in
accordance with the provisions of Section 8.5(c) hereof; and Company
will withhold from each payment made to each of its Employees, if any,
the amount of all Taxes (including, but not limited to, federal income
taxes and the U.S. Federal Insurance Contribution Act Taxes and state
and local income, wage, disability, unemployment, and similar Taxes)
required to be withheld therefrom and will pay them, before they become
delinquent, to the proper Governmental Authority. Seller duly and
timely shall file all Returns and reports for Company for all taxable
periods ending on or prior to the Closing Date, and Buyer duly and
timely shall file all Returns and reports for Company and the Business
or any additions thereto or extensions thereof for all taxable periods
ending after the Closing Date. Buyer agrees to prepare or cause Company
to prepare pro forma 1997 and short
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period 1998 (through the Closing Date) Returns (including state and
local apportionment data) in a manner consistent with prior practice.
Buyer and Company shall mutually cooperate with Seller to provide such
1997 Returns within a reasonable time after the Closing Date sufficient
to enable Seller to review and timely file Seller's 1997 federal
consolidated, and state and local Income and Franchise Tax Returns and
to provide such 1998 Returns by 2 1/2 months following the Closing
Date.
(e) SECTION 338(h)(10) ELECTION.
(i) Seller and Buyer will cooperate in making an
election under Code Section 338(h)(10) with respect to the
sale of the Shares pursuant to this Agreement and a Code
Section 338(g) election with respect to the deemed sale of the
stock of Company's Subsidiaries. The allocation of the
Purchase Price shall be agreed by the Parties prior to
Closing.
(ii) Seller will pay any Tax, including any federal,
foreign, state and local Taxes, whether determined on a
consolidated, combined, unitary, separate or other return
basis, attributable to, arising out of or resulting from the
making of the Section 338(h)(10) Election and will indemnify
the Buyer against any Taxes arising out of any failure to pay
such Tax. Seller will also pay any state, local, or foreign
Tax (and indemnify the Buyer
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against any Taxes arising out of any failure to pay such Tax)
attributable to an election under state, local or foreign law
similar to the election available under Code Section 338(g)
(or which result from the actual or deemed making of an
election under Code Section 338(g)) with respect to the actual
or deemed purchase and sale of the stock of Company and its
Subsidiary hereunder where the state, local or foreign tax
jurisdiction does not provide or recognize a Section
338(h)(10) Election, provided that Seller has a full
opportunity to review and approve, which approval will not be
withheld unreasonably, all actions necessary to execute such
Section 338(g) or similar state, local or foreign law. Seller
will comply fully with all filing and other requirements
necessary to effect the Section 338(h)(10) Election.
(f) FIRPTA CERTIFICATE. Seller agrees to deliver to Buyer a
FIRPTA certificate as provided in Treasury Regulation
Section .1.1445-2(b)(2).
(g) TAX SHARING AGREEMENTS. Other than the agreements
contemplated herein, all Tax sharing agreements, policies, arrangements
and practices with respect to or involving Company and its Subsidiaries
will terminate as of the Closing Date and will have no further effect
for any taxable year (whether a current year, a past year or a future
year).
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(h) APPLICABLE PERIOD. The obligations of the parties set
forth in this Article 8 relating to Taxes will, except as otherwise
agreed in writing, be unconditional and absolute and will remain in
effect without limitation as to time or amount of recovery by any party
hereto until thirty (30) days after the expiration of the applicable
statute of limitations governing the Tax to which such obligations
relate (after giving effect to any agreement extending or tolling such
statute of limitations).
8.6. INSURANCE AND FINANCIAL ACCOMMODATIONS.
(a) PRECLOSING. Seller shall cause all Insurance shown on
SCHEDULE 6.25 and other Financial Accommodations shown on SCHEDULE 8.6
hereto to remain in effect until the Closing Date. Upon the signing of
this Agreement Seller and Buyer shall cooperate to arrange for the
replacement of such Insurance and other Financial Accommodations as of
the Closing Date without Seller being a party responsible thereunder;
and, subject to the provisions of Section 8.6(e) hereof, upon Closing
Buyer shall have assumed all Liability under Financial Accommodations
and shall have caused Seller to be released from all such Financial
Accommodations except for the Concession Guaranties subject to the
terms of Section 8.6(e).
(b) POST CLOSING. After the Closing, Buyer and Company shall
be responsible for providing such Insurance policies or the coverages
thereof as shown on SCHEDULE 6.25 and, subject to the provisions of
Section 8.6(e) hereof, other Financial Accommodations as shown on
SCHEDULE 8.6 for
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their own account without any participation, responsibility or
liability of Seller whatsoever under such Insurance or other Financial
Accommodations and, specifically, with no liability after the Closing
to make payment of or contributions toward release calls and settlement
payments assessed or claimed after Closing against the Seller as an
insured or co-insured pursuant to the Steamship Mutual Underwriting
Association or other maritime insurance club, policy or plan under
which Company or any Subsidiary may be named additional insured or
co-insured.
(c) BUYER'S INSURANCE INDEMNITY. Buyer hereby indemnifies and
agrees to hold Seller harmless against and from any Liability or Loss
resulting from (i) an occurrence after the Closing that is of the type
covered by the insurance program described on SCHEDULE 6.25 and (ii)
resulting from the Financial Accommodations (other than those pursuant
to the Insurance program maintained by Seller or the Company identified
on SCHEDULE 6.25). Buyer shall cause Company or any successor of
Company to indemnify and hold Seller harmless against and from any such
liability, jointly and severally with Buyer, by a document delivered to
Seller at Closing in form and substance satisfactory to Seller.
(d) SELLER'S INSURANCE INDEMNITY. Subject to Section 8.6(b)
hereof, Seller hereby indemnifies and agrees to hold Buyer harmless
against and from any Liability or Loss resulting from an occurrence
before the Closing that is of the type covered by any Insurance program
maintained by
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Seller or Company identified on SCHEDULE 6.25.
(e) AGREEMENT REGARDING CONCESSION GUARANTIES. Buyer shall
assert its best efforts to procure as of the Closing releases of
Seller's obligations pursuant to the Concession Guaranties described in
SCHEDULE 8.6(e) hereto. If such releases are not procured as of
Closing, the failure to do so shall not be grounds for termination of
this Agreement by Seller and such Concession Guaranties may remain in
force in accordance with their terms until the earlier of (i)
expiration of the current terms of the Concessions to which such
Concession Guaranties relate; or (ii) amendment or extension of such
Concessions having the effect of changing the terms, conditions or
periods of application hereof. Upon the occurrence of the earlier of
(i) or (ii) hereof, Buyer agrees that Seller may promptly take such
action as Seller deems necessary to revoke or otherwise cease to be
liable under such Concession Guaranties and Seller shall have no
liability to Buyer in respect thereof. If such releases are not
obtained at Closing, settlement of the Purchase Price Adjustment
pursuant to Section 4 hereof shall be as provided in Section 4.3(b)(i)
hereof and Buyer shall indemnify and hold harmless Seller for any Loss
arising from the absence of such releases.
8.7. RESIGNATIONS. Except to the extent Buyer directs otherwise, Seller
shall cause the resignation of Company's present directors and officers, as set
forth on SCHEDULE 8.7 hereto, effective as of the date Buyer causes them to be
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accepted.
8.8. THIRD-PARTY CONSENTS. To the extent that (i) the change of
ownership of the Shares or Subsidiary Shares or (ii) the consummation of the
Transactions otherwise requires the consent, release or waiver of any third
party, Seller shall use its best efforts to obtain such consent, release or
waiver. Buyer agrees to use best efforts to cooperate with Seller to obtain such
consents, including without limitation, the release of such financial
information as may be required by the Third Party. If, within a reasonable time
after Closing, Seller shall not be able to obtain the consent of Broward County
with respect to the Ft. Lauderdale Hollywood International Airport ("FLHIA")
concession operated by Company and Company's operations at FLHIA cease as a
result, the Purchase Price shall be reduced by $319,280.00 and Seller shall be
deemed in compliance with this Section 8.8 with respect to such consent. With
respect to that certain lease between MICC Venture, a Florida general
partnership and Company, although Seller does not believe that a consent is
required, Seller agrees to indemnify and hold harmless Buyer for up to
ninety-five percent (95%) of a Loss arising from the absence of such consent.
8.9. V-RIP PENSION PLAN. As of the Closing Date, Seller shall terminate
the eligibility of Employees to participate in V-RIP after the Closing Date, so
that:
(a) POST-CLOSING CONTRIBUTIONS. Seller shall have no
obligation for contributions to or funding of the V-RIP with respect to
participating Employees after the
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Closing Date, except for the vesting of benefits relating to Employees
participating in the V-RIP as of the Closing Date, and Seller shall
retain all liability for such V-RIP pension benefits to participating
Employees; and
(b) NO TRANSFER OF FUND ASSETS. Assets and Liabilities held by
Seller or any trustee under the V-RIP with respect to fund benefits
accrued for participating Employees and former Employees as of the
Closing Date shall be retained by Seller or the trustee under V-RIP for
funding V-RIP benefits vested as of the Closing Date. From and after
the Closing Company and its Personnel (such Personnel acting in good
faith in the performance of their duties) shall have no Liability with
respect to V-RIP benefits or with respect to the V-RIP other than the
obligations to cooperate with Seller set forth herein.
(c) BUYER COOPERATION. Buyer and Company shall cooperate with
Seller in providing after the Closing Date information regarding
continued service of Employees who were participants in V-RIP so that
Seller may give proper credit for vesting service to such Employees
under the V-RIP. Buyer also shall and shall cause Company to provide
such all reasonable assistance and information to Seller with respect
to Employees and former Employees participating or formerly
participating in the Viad Capital Accumulation 401(k) Plan and the Viad
Employee Stock Ownership Plan in order for Seller to perform such
testing and calculations as required to maintain qualified status, make
all reasonably necessary communications and all such other actions as
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appropriate.
(d) SAVINGS PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN. With
respect to the Viad Capital Accumulation 401(k) Plan (the "Savings
Plan") and the Viad Corporation Employee Stock Ownership Plan (the
"ESOP") (collectively the "Savings Plan and ESOP"), Company shall cease
participation in such the Savings Plan and ESOP prior to or coincident
with the Closing. All assets and liabilities held by Seller or any
trustee under the Savings Plan and ESOP with respect to Employees and
Former Employees shall be retained by Seller, and Seller shall take all
actions reasonably necessary and consistent with the terms of the
Savings Plan and ESOP to cause all accrued benefits allocable to
Employees and Former Employees in the Savings Plan and the ESOP to be
either distributed or handled pursuant to such other election available
pursuant to the terms of the Savings Plan and ESOP to such Employees
and Former Employees as soon as reasonably practicable following the
Closing. All Employees shall be fully and immediately vested in their
entire account balances under the Savings Plan and the ESOP prior to
distribution. From and after the Closing, Company and its Personnel
(such Personnel acting in good faith in the performance of their
duties) shall have no Liability with respect to the Savings Plan and
ESOP other than the obligations to cooperate with Seller set forth
herein.
(e) RETIREE WELFARE BENEFITS. All Employees who are eligible
to receive post-retirement medical benefits under a Plan sponsored by
Viad or any of its affiliates (the
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"Retiree Plan") if they retired under the Retiree Plan as of the
Closing Date shall receive and continue to receive benefits under the
Retiree Plan if they retire as of or prior to the Closing with the
Company, under the same terms and conditions as applicable to Seller's
or any of its affiliates' retirees. Seller intends to terminate the
eligibility of Employees with respect to the Retiree Plan as of the
Closing and satisfy all obligations with respect to the Retiree Plan,
if any, prior to the Closing Date. Seller shall remain responsible for,
and shall retain all reserves and obligations with respect to, any
person receiving, or who would receive if they retired, post-retirement
medical benefits as of the Closing Date. From and after the Closing,
Company and its Personnel (such Personnel acting in good faith in the
performance of their duties) shall have no liability with respect to
the Retiree Plan other than the obligations to cooperate with Seller
set forth herein. Notwithstanding the foregoing, nothing shall limit
Seller's ability to terminate, amend or modify the Retiree Plan at any
time.
(f) TRANSFER OF ASSETS. Any and all V-RIP or Retiree Plan
assets and Liabilities reflected on the books of the Company shall be
transferred to Seller as of the Closing Date. Buyer shall provide
Seller with copies of the pension and related retiree files of all
Employees for whom Seller retains liability under the V-RIP or retiree
medical plan.
8.10. CONFIDENTIAL INFORMATION; SOLICITATION OF PERSONNEL.
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Seller and Buyer each covenant and agree as follows:
(a) SELLER OBLIGATION. Except as required by any Law or Order,
Seller shall not, for a period of 3 years after the Closing Date (i)
disclose to any Person other than Buyer or Company, in any manner,
directly or indirectly, any Information pertaining to the Business,
which is licensed to or owned in whole or in part by Company or the
Subsidiaries or which has been created or developed for, used in or
necessary for the conduct of the Business; and (ii) solicit, either
directly or indirectly for employment by Seller or its subsidiaries,
persons who are directors, officers, agents, employees or contractors
of Buyer or of Company or any Subsidiary after the Closing Date,
provided that this restriction shall not prohibit Seller from placing
general recruitment advertisements in newspapers or other publications
of general circulation or responding to unsolicited inquiries.
(b) BUYER OBLIGATION. Buyer shall not, and shall not permit
Company or any Subsidiary or any successor thereof to, for a period of
3 years, disclose to any Person other than Seller or its subsidiaries
(other than Company and Subsidiaries), in any manner, directly or
indirectly, any Information pertaining to the businesses of Seller or
its subsidiaries, which is licensed or owned in whole or in part by
Seller or any of its subsidiaries or which has been created or
developed for, used in or necessary for the conduct of such businesses.
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8.11. OBLIGATIONS UNDER FINANCIAL ACCOMMODATIONS. Subject to the terms
of Section 8.6(e) hereof, as a condition to Closing, Buyer shall cause Company
or any of its successors in the operation of the Business to assume, and Buyer
itself shall assume, all of the obligations of Seller pursuant to all of the
Financial Accommodations and shall obtain for Seller a full release of Seller
from all obligations under the Financial Accommodations.
8.12. LIABILITIES UNDER CERTAIN PLANS. Seller shall terminate the
eligibility of Employees under the Supplemental Retirement Income Plan ("SERP"),
Supplemental 401(k), and the deferred compensation plan for such Employees under
the Performance Unit Plan ("PUP") and the Management Incentive Plan ("MIP") as
of the Closing Date, shall retain all liability to participating Employees of
Company thereunder and shall retain, or transfer from Company any of the assets
or amounts, if any, funding, SERP, Supplemental 401(k), MIP or PUP and related
deferred compensation. Employees participating in SERP, Supplemental 401(k), the
MIP and the PUP as of the Closing Date are identified on SCHEDULE 8.12 hereto.
Buyer shall cause Company to provide Seller with all relevant records related to
the Employees identified on SCHEDULE 8.12.
8.13. ASSUMPTION/REPLACEMENT OF OBLIGATIONS/FINANCIAL ACCOMMODATIONS.
Buyer shall replace all of the duties and obligations of Seller pursuant to
guarantees or other Financial Accommodations provided by Seller to Company
hereto arising or accruing from and after the Closing Date, and shall execute
and deliver such Assumption Agreements in form and substance as
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required by the issuing bank or other entity or such other documents evidencing
replacement of Seller as a provider, guarantor, indemnitor, or primary obligor
thereunder.
8.14. CERTAIN LEASEHOLDS. Provided Company shall (a) assert
commercially reasonable efforts to perform its obligations and enforce its
rights under the PCL Lease and the Hotel Leases in accordance with their terms
and take all steps necessary to mitigate its damages resulting from breach by
Premier Cruise Lines, Ltd. under the PCL Lease or from breach by any landlord,
sublessee or assignee under the Hotel Leases, and (b) not waive or release any
of its rights as Sublessor, assignor or Lessee thereunder against Sublessee,
assignee or Lessor thereunder by forbearance or otherwise, or (c) permit
amendment of the material terms and conditions of the PCL Lease or Hotel Leases,
Seller shall indemnify and save harmless Company against loss due to failure of
Sublessee under the PCL Lease to pay rents, or loss due to failure of any
landlord, sublessee or assignee to pay rents under the Hotel Leases. This
indemnity shall be operable only if Company gives Seller notice of such failure
to pay rent by the Sublessee under the PCL Lease or breaches of any landlord,
sublessee or assignee under the Hotel Leases within 30 days after such failure
to pay rent or breaches of such landlord.
8.15. OTHER DOCUMENTS/ACTIONS. In addition to the foregoing, Buyer and
Seller each shall execute such documents and take such other actions as may be
required for it to assure performance of its other obligations stated herein.
8.16. NOTICE OF DEVELOPMENTS. Each party will give prompt
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written notice to the other party of any development causing a breach of any of
its own representations and warranties in Section 5, 6 or 7 hereof. Seller,
acting reasonably and in good faith, promptly shall supplement or amend any
Schedule hereto to reflect facts occurring or discovered after the date hereof,
which, if existing on the date hereof, would have been required to be described
in any Schedule hereto; provided, however, that if the facts shown in such
supplement or amendment could reasonably be expected to have a Material Adverse
Effect, Buyer shall have the right to elect to terminate this Agreement, such
election to be made within 4 days after Buyer's receipt of such supplement or
amendment. Nothing herein shall serve to extend the dates stated in Sections
11.3 and 11.4 hereof.
8.17. POST CLOSING AFFILIATION. As soon as reasonably practicable after
Closing, Buyer shall cease to, and shall cause Company to cease to use any of
the trademarks of Seller or to claim any affiliation with Seller in
correspondence, communications or advertising of Company or its Subsidiaries.
Until such time as Buyer fully complies with its obligations in this Section
8.17, Buyer agrees to refrain from any action referred to herein which would be
reasonably likely to be adverse to Seller.
8.18. EXCLUSIVITY. Seller will not permit any of its subsidiaries
(including Company and its Subsidiaries), officers, directors, agents or
affiliates to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person or enter into a consummate any transaction
relating to the acquisition of any capital stock or other voting securities, or
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any portion of the Business (other than sales of inventory in the ordinary
course of business), (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Seller shall notify Buyer promptly if
any Person makes any proposal or offer with respect to any of the foregoing.
8.19. BOARD ACTION. The Chief Executive Officer of Seller and Seller's
executive signing this Agreement promptly shall present this Agreement to
Seller's Board with their respective recommendations for approval by the Board.
8.20. ADDITIONAL AUDITS. Seller shall assert its best efforts to cause
to be completed prior to Closing audited financial statements of Company in the
fiscal years ended December 31, 1996 and 1995 comparable to the Financial
Statements referred to in Section 6.5 hereto, provided that completion hereof
shall not be a condition to Closing; and provided further that if any such
audited financial statements shall not be completed prior to Closing, Seller
shall deliver to Buyer such statements not more than one (1) month after the
Closing.
9. CONDITIONS.
9.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations
of each party to consummate the Transactions are subject to the fulfillment at
or prior to the Closing Date of each of the following conditions, any or all of
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which may be waived, in writing, in whole or in part, to the extent permitted by
applicable Law:
(a) GOVERNMENTAL AND REGULATORY CONSENTS. All filings,
including filings required by the HSR Act and the Exon-Florio
Amendment, required to be made prior to or on the Closing Date with,
and all Permits required to be obtained prior to or on the Closing Date
from, any Governmental Authority in connection with the execution and
delivery of this Agreement and the consummation of the Transactions
shall have been made or obtained (as the case may be) without
restrictions having a Material Adverse Effect. In addition, no threat
or challenge by any Governmental Authority to the consummation of the
Transactions shall have been made or, if made, such threat or challenge
shall have been resolved in favor of permitting such Transactions.
(b) PROHIBITIONS. No Governmental Authority having
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law or Order or taken any action which prohibits or has a
Material Adverse Effect on the consummation of the Transactions or
Buyer's right or ability to own and operate the Business as it is
currently conducted; provided, however, that the parties invoking this
condition shall use commercially reasonable efforts to have any Order
vacated or action terminated or dismissed.
(c) BOARD APPROVAL. The Board of Seller shall have approved
the execution, delivery and performance of
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this Agreement within 7 business days after the final date of signing
hereof.
9.2. CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate the Transactions are subject to the fulfillment on or prior to the
Closing Date of each of the following conditions, any or all of which may be
waived, in writing, in whole or part by Buyer to the extent permitted by Law or
any order:
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENT.
(i) Each of the representations and warranties of Seller herein that is
qualified by reference to Material Adverse Effect shall have been true
and correct when made and shall be true and correct at and as of the
Closing Date as if made at and as of the Closing Date (except to the
extent they relate to a particular date) and (ii) all other
representations and warranties of Seller herein shall have been true
and correct when made and shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of the
Closing Date (except to the extent they relate to a particular date)
except for such inaccuracies as are not reasonably likely to have a
Material Adverse Effect; Seller shall have substantially or materially
performed or complied with all agreements and covenants required by
this Agreement to be performed or complied with by Seller on or prior
to the Closing Date; and Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date, on behalf of Seller signed
by a duly authorized officer of Seller, in
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form and substance reasonably satisfactory to Buyer, to such effect.
(b) THIRD-PARTY CONSENTS. Except as provided in Section 8.8,
hereof, all required, authorizations, consents or approvals of any
third party under the Contracts or otherwise, and all required consents
or approvals of any third party, shall have been procured by Seller
other than any such consent, approval, or authorization which, (i) if
not obtained or made would not have a Material Adverse Effect on Buyer
or Company as the case may be, or materially impair or delay the
ability of Seller or Buyer, as the case may be, to effect the Closing
and (ii) which are set forth on SCHEDULE 9.2(b) hereto.
(c) OPINION. Buyer shall have been furnished at the Closing
with the opinion of Peter J. Novak, Vice President and General Counsel
of Viad, dated as of the Closing Date with respect to the matters set
forth on SCHEDULE 9.2(c) hereto.
(d) FINANCING. Buyer shall have been advanced the debt
financing as contemplated by the Commitment Letters.
(e) NO MATERIAL ADVERSE CHANGE. There shall not have been any
change which has resulted in a Material Adverse Effect and no event has
occurred or circumstance exists that may result in such a Material
Adverse Effect;
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(f) ALL NECESSARY ACTIONS. All actions to be taken by Seller,
Company and its Subsidiaries in connection with the consummation of the
Transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the Transactions
contemplated hereby will be reasonably satisfactory in form and
substance to Buyer.
(g) CARNIVAL CRUISE LINES, INC. AND DADE COUNTY. Seller shall
have received statements and delivered to Buyer, in a form reasonably
satisfactory to Buyer, from Carnival Cruise Lines, Inc. ("CCL") and
Dade County indicating that CCL and Dade County will not consider the
Transaction to be a violation of the respective concession agreements.
9.3. CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller to
consummate the Transactions are subject to the fulfillment on or prior to the
Closing Date of each of the following conditions, any or all of which may be
waived, in writing, in whole or in part by Seller to the extent permitted by
applicable Law or Order:
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENT.
(i) Each of the representations and warranties of Buyer herein that is
qualified by reference to Material Adverse Effect shall have been true
and correct when made and shall be true and correct at and as of the
Closing Date as if made at and as of the Closing Date, (except to the
extent they relate to a particular date) and
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(ii) all other representations and warranties of Buyer herein shall be
true and correct when made and shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of
the Closing Date (except to the extent they relate to a particular
date) except for such inaccuracies as are not reasonably likely to have
a Material Adverse Effect; (iii) Buyer shall have performed or complied
substantially or materially with all agreements and covenants required
by this Agreement to be performed or complied with by Buyer on or prior
to the Closing Date; and (iv) Buyer shall have delivered to Seller a
certificate, dated as of the Closing Date, on behalf of Buyer signed by
a duly authorized officer of Buyer, in form and substance reasonably
satisfactory to Seller, to such effect.
(b) ASSUMPTIONS OF OBLIGATIONS. Seller shall have received
from Buyer at Closing (i) the assumption by Company of those
obligations of Seller as stated in Sections 8, 12 and 13.8, hereof in
substantially in the form shown as SCHEDULE 9.3(b) hereto, and (ii)
subject to the provisions of Section 8.6(e) hereto with respect to
Concession Guaranties, a release of Seller from all of its Financial
Accommodations except as provided in Section 8.6(e) as of the Closing
Date.
(c) OPINIONS. Seller shall have been furnished at the Closing
with an opinion of Ropes & Gray (Buyer's Counsel), dated as of the
Closing Date with respect to the matters set forth on SCHEDULE 9.3(c)
hereto.
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(d) ALL NECESSARY ACTIONS. All actions to be taken by Buyer in
connection with the consummation of the Transactions contemplated
hereby and all certificates, opinions, instruments and other documents
required to effect the Transactions contemplated hereby will be
reasonably satisfactory in form and substance to Seller.
10. CLOSING DELIVERIES.
10.1. DELIVERIES BY SELLER. On the Closing Date, Seller shall deliver
or cause to be delivered to Buyer (unless previously delivered) the following:
(a) CORPORATE RESOLUTION. Enabling resolution of the Board of
Seller authorizing the Transactions;
(b) SHARE CERTIFICATES. One or more stock certificates or
other evidence satisfactory to Buyer representing the Shares;
(c) OFFICER'S CERTIFICATE. The Seller's certificate referred
to in Section 9.2(a) hereof;
(d) ARTICLES AND BYLAWS. Copies of the Articles, and all
amendments thereto, and the Bylaws, and all amendments thereto, of
Company and the Subsidiaries, certified, in the case of the Articles as
of the most recent practicable date by an official of the appropriate
Governmental Authority, and in the case of the Bylaws, as of the
Closing Date by the corporate secretary or other
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authorized officer of Company;
(e) CORPORATE RECORDS. All minute books, stock transfer books,
stock certificate books, and corporate certificates, and all corporate
seals and financial and accounting books and records of Company and the
Subsidiaries;
(f) LEGAL OPINION. The opinion of counsel to Seller referred
to in Section 9.2(c) hereof;
(g) CERTIFICATE OF INCUMBENCY. A certificate of incumbency of
Seller certified by its secretary or assistant secretary, which shall
identify by name, title and signature the officer(s) of Seller
authorized to execute this Agreement and all related documents;
(h) OTHER DOCUMENTS. All other documents, instruments or
writings reasonably required to be delivered by Seller at or prior to
the Closing pursuant to this Agreement or otherwise required in
connection herewith, including, without limitation, the resignations
referred to in Section 8.7 hereof.
10.2. DELIVERIES BY BUYER. At the Closing, Buyer will deliver or cause
to be delivered to Seller (unless previously delivered) the following:
(a) CORPORATE RESOLUTION. Enabling resolution by the Board of
Buyer authorizing the Transactions;
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(b) CASH PURCHASE PRICE. The Cash portion of the Purchase
Price to be wire transferred to the account or accounts designated by
Seller;
(c) NOTES. The Notes executed by Issuer.
(d) OFFICER'S CERTIFICATE. The officer's Certificate referred
to in Section 9.3(a) hereof;
(e) LEGAL OPINION. The opinion of counsel of Buyer's counsel
referred to in Section 9.3(c) hereof;
(f) ASSUMPTION OF OBLIGATIONS. The documents described in
SCHEDULE 9.3(b) hereto;
(g) RELEASES. Releases or replacement of those Financial
Accommodations other than as provided in Section 8.6(e) hereof with
respect to Concession Guaranties;
(h) CERTIFICATE OF INCUMBENCY. A certificate of incumbency of
Buyer certified by its secretary or assistant secretary, which shall
identify by name, title and signature the officer(s) of Buyer
authorized to execute this Agreement and all related documents; and
(i) OTHER DOCUMENTS. All other documents, instruments or
writings reasonably required to be delivered by Buyer at or prior to
the Closing pursuant to this Agreement or otherwise required in
connection herewith.
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11. TERMINATION.
11.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
and the Transactions may be abandoned at any time prior to the Closing Date, by
the mutual written consent of Buyer and Seller.
11.2. TERMINATION BY BUYER OR SELLER. This Agreement may be terminated
by action of either Buyer or Seller if any court of competent jurisdiction or
some other Governmental Authority shall have issued an Order or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
Transactions.
11.3. TERMINATION BY BUYER. This Agreement may be terminated at any
time prior to the Closing Date by action of the Board (or a duly authorized
committee thereof) of Buyer, if (a) a condition to the performance of Buyer
under Section 9.1 or Section 9.2 hereof shall not be fulfilled on or before the
time specified for the fulfillment thereof, and such failure is not the result
of action or nonaction of Buyer; (b) a failure, breach or default of any
representation, warranty or covenant qualified by reference to a Material
Adverse Effect or a failure, breach or default reasonably likely to have, a
Material Adverse Effect of any other representation, warranty or covenant, of
Seller shall occur hereunder, which failure, breach or default has not been
cured within 5 business days following receipt by Seller of notice of such
failure; or (c) at any time after September 15, 1998, if all of the conditions
precedent to its obligation to effect the Transactions shall not have been
fulfilled by reason other than Buyer's failure to comply with its obligations
hereunder.
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11.4. TERMINATION BY SELLER. This Agreement may be terminated at any
time prior to the Closing Date by action of Seller, if (a) a condition to the
performance of Seller under Sections 9.1 or 9.3 hereof shall not be fulfilled on
or before the time specified for the fulfillment thereof and such failure is not
the result of action or nonaction of Seller; (b) a failure, breach or default,
of any representation, warranty or covenant qualified by reference to a Material
Adverse Effect or a failure, breach or default reasonably likely to have a
Material Adverse Effect of any other representation, warranty or covenant, of
Buyer shall occur hereunder, which failure, breach or default has not been cured
within 5 business days following receipt by Buyer of notice of such failure; or
(c) at any time after September 15, 1998, if all of the conditions precedent to
its obligation to effect the Transactions shall not have been fulfilled by
reason other than Seller's failure to comply with its obligations hereunder.
11.5. EFFECT OF TERMINATION AND ABANDONMENT. If this Agreement is
terminated pursuant to this Section 11, this Agreement shall no longer be of any
force or effect and there shall be no liability on the part of any party or its
respective directors, officers or shareholders, except that in the case of
termination pursuant to Section 11.3 or Section 11.4 hereof because of a
failure, default or breach of the other party, in which event the aggrieved
party or parties, in addition to any and all other rights, remedies and damages
available at law or equity, may recover from the defaulting party the amount of
Loss or Losses incurred by such aggrieved party or parties in connection with
this Agreement and the Transactions hereby which
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the aggrieved party or parties would otherwise have to bear pursuant to Section
13.1 of this Agreement. Upon any termination hereof, all documents or other
writings containing any Confidential Information given by Seller to Buyer
pursuant to this Agreement, and any reports prepared by Buyer containing
reference to such Confidential Information shall be returned to Seller and the
terms and conditions of the Confidentiality Agreement shall remain in effect.
12. INDEMNIFICATION.
12.1. SURVIVAL OF REPRESENTATIONS. Except as stated in this Section 12,
the representations and warranties in this Agreement or any document,
certificate or other instrument required to be delivered hereunder shall survive
the Closing, and except for those contained in Sections 6.6 (Taxes), and Section
6.12 (Employee and Related Matters) shall remain effective for a period of 1
year after the Closing Date regardless of any investigation or inquiry by Buyer
or Seller at any time. The representations and warranties contained in Sections
6.6 and Section 6.12 shall survive the Closing and shall continue in full force
and effect without limit as to time (subject to any applicable statutes of
limitations and any extensions or waivers thereof). All covenants and
indemnities of any party in this Agreement or in any document or certificate
delivered hereunder shall, unless otherwise specifically provided therein,
remain in full force and effect in accordance with their respective terms.
12.2. INDEMNIFICATION BY THE SELLER.
(a) INDEMNITY. Subject to the limitations set forth in Section
6 hereof (representations and warranties
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concerning Company), and this Section 12 and Section 13.13 hereof,
(concerning dispute resolution) Seller, as Indemnifying Party, shall
indemnify and hold harmless Buyer and its Personnel each as an
Indemnified Party, for, against and from any Loss or Losses, suffered
or incurred by Indemnified Party (for purposes of this Section 12.2 a
Loss incurred by Company shall be deemed a Loss incurred by Buyer) to
the extent arising from (i) any breach by Seller of any representation
or warranty of Seller contained herein or in any document, certificate
or other instrument required to be delivered hereunder which and to the
extent it survives the Closing pursuant to Section 12.1 hereof (it
being agreed that solely for the purposes of establishing whether any
matter is indemnifiable pursuant to this clause (i), the accuracy of
the representations and warranties made by Seller shall be determined
without giving effect to the qualifications (if any) to such
representations and warranties concerning "materiality" or Material
Adverse Effect" for the period such representation and warranty
survives; (ii) any breach of any covenant of Indemnifying Party
contained in this Agreement or in any document, certificate or other
instrument required to be delivered hereunder requiring performance
responsibility or assumption of liabilities on or after the Closing
Date, or (iii) any misrepresentation in or omission from any schedule,
document, certificate or other instrument required to be furnished by
Seller hereunder.
(b) LIMITATIONS.
(i) Except as otherwise set forth in this
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Agreement, Seller's obligation to indemnify, and hold harmless
Indemnified Party under clause (i) of Section 12.2(a)
(including any Schedule provided pursuant to Sections 5 and 6
hereof) other than with respect to any Loss or Losses arising
from any breach by Seller of any representation or warranty of
Seller contained in (or, on any Schedule provided pursuant to)
Section 6.6 (Taxes) (which amounts shall not be counted with
respect to the calculation of Losses for purposes of the U.S.
$2,000,000 "limitation" referenced herein) or Section 6.12
(Employee and Related Matters) shall be applicable only to the
extent that the aggregate amount of all such Losses exceeds
US$2,000,000 (or its equivalent in foreign currency) (the
"limitation") and in that event, Seller's obligation to
indemnify Buyer shall be with respect to the first dollar of
Buyer's Losses;
(ii) In no event shall Seller's aggregate obligation
hereunder to indemnify, defend and hold harmless Indemnified
Party under clause (i) of Section 12.2(a)(other than with
respect to any Loss or Losses arising from any breach by
Seller of any representation or warranty of Seller contained
in Section 6.6 (Taxes) or Section 6.12 hereof (Employee and
Related Matters) exceed an amount equal to 20% of the Purchase
Price, as adjusted, actually received by Seller; and
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(iii) Except as specifically stated herein, Seller
shall not be responsible for, accept any Liability for, or
indemnify Buyer or Company or their respective Personnel
against any obligation or Loss or Losses of Company, whether
based on operation of law, governmental mandate or contract.
Seller does not intend that its representations, warranties,
covenants or agreements herein inure to the benefit of any
third party beneficiary (other than CS First Boston, lender to
Buyer under this Agreement), including without limitation any
Personnel of Company.
12.3. INDEMNIFICATION BY BUYER. Subject to the limitations set forth in
this Section 12, Buyer, as Indemnifying Party, shall indemnify and hold harmless
Seller and its Personnel, as Indemnified Parties, for, against and from any Loss
or Losses suffered or incurred by Indemnified Party to the extent arising from
(a) any breach by Buyer of any representation or warranty of Indemnifying Party
contained herein or in any document, certificate or other instrument required to
be delivered hereunder which and to the extent it survives the Closing (pursuant
to Section 12.1 hereof), (b) any breach of any covenant of Indemnifying Party
contained in this Agreement or in any document, certificate or other instrument
required to be delivered hereunder requiring performance responsibility or
assumption of Liabilities on or after the Closing Date; (c) any claim arising
directly or indirectly from any Business or activities of Company, its
Subsidiaries or their respective successors in the Business or any additions
thereto or extensions
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thereof conducted after the Closing; or (d) the failure of Company, its
Subsidiaries or their respective successors in the Business or any additions
thereto or extensions thereof conducted after the Closing to discharge any
Liabilities of Company which were the subject of Seller's Financial
Accommodations in effect prior to Closing.
12.4. TERMINATION OF INDEMNIFICATION. The obligations of Indemnifying
Party hereto to indemnify and hold harmless an Indemnified Party hereto shall
not terminate with respect to any item as to which the Indemnified Party hereto
shall have, before the expiration of the applicable period in which a claim for
indemnification under this Agreement can be made, previously made a claim by
delivering a notice (stating in reasonable detail the basis of such claim) to
the Indemnifying Party.
12.5. PROCEDURES RELATING TO INDEMNIFICATION.
(a) NOTICE. In order for an Indemnified Party to be entitled
to any indemnification, defense or hold harmless provided for in this
Section 12 in respect of any Third Party Claim, such Indemnified Party
must notify the Indemnifying Party in writing, and in reasonable
detail, of the Third Party Claim within 30 business days after receipt
by such Indemnified Party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party actually shall have been prejudiced as a result of
such failure (except that the Indemnifying Party shall not be liable
for any Loss or Losses incurred during the period in
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which the Indemnified Party failed to give such notice). Thereafter,
the Indemnified Party shall deliver to the Indemnifying Party, within 5
business days after the Indemnified Party's receipt thereof, copies of
all notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim.
(b) PARTICIPATION. If a Third Party Claim is made against an
Indemnified Party, the Indemnifying Party will be entitled to
participate in the defense thereof and, if it so chooses, to assume the
defense thereof with counsel selected by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 15
days after the Indemnified Party has given notice of the Third Party
claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Losses the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence acceptable to the
Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other
equitable relief, (iv) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom or
practice
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adverse to the continuing business interests of the Indemnified Party,
and (v) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently. Should the Indemnifying Party be
entitled to, and so elect to, assume the defense of a Third Party
Claim, the Indemnifying Party will not be liable to the Indemnified
Party for legal expenses subsequently incurred by the Indemnified Party
in connection with the defense thereof. If the Indemnifying Party is
entitled to assume and does assume such defense, the Indemnified Party
shall have the right to participate in the defense thereof and to
employ counsel, separate from the counsel employed by the Indemnifying
Party, it being understood that the Indemnifying Party shall control
such defense and the fees and expenses of such separate counsel shall
be the expense of such Indemnified Party. If the Indemnifying Party is
entitled to, and chooses to, defend or prosecute any Third Party Claim,
all the parties hereto shall cooperate in the defense or prosecution
thereof. Such cooperation shall include the retention and, upon the
Indemnifying Party's request, the provision to the Indemnifying Party
of records and information which are reasonably relevant to such Third
Party Claim, and making Personnel available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. If the Indemnifying Party shall have assumed the
defense of a Third Party Claim, the Indemnified Party shall not admit
any Liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the Indemnifying Party's prior written
consent (which consent shall not be
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unreasonably withheld or delayed). The Indemnifying Party, without the
written consent of the Indemnified Party, shall not settle or
compromise or consent to the entry of any judgment with respect to any
action or Third Party Claim unless written agreement is obtained
releasing the Indemnified Party for all liability thereunder. If any of
the conditions in this Section 12.5(b) is or becomes unsatisfied,
however, (i) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith), (ii) the Indemnifying
Party will reimburse the Indemnified Party promptly and periodically
for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses), and (iii) the Indemnifying Party will
remain responsible for any Losses the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extend provided in this
Section 12.
(c) ACCEPTANCE OR DISPUTE. Upon receipt of notice of any claim
of indemnity hereunder, the Indemnifying Party, within 30 days after
such receipt, shall notify the Indemnified Party that such Indemnifying
Party either (i) acknowledges and accepts its obligation and agrees to
accept liability for any losses resulting from such claim or (ii)
disputes such claim. Failure to give such notice will be deemed to
constitute acknowledgment and acceptance by the
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Indemnifying Party.
12.6. PAYMENT OF INDEMNITY PAYMENTS. If any payment is due to an
Indemnified Party, such payment shall be made to such Indemnified Party within
10 days of such payment becoming due, and any payment that is made after such
10th day shall bear interest from and including the date due to but excluding
the date of payment, at a rate equal to the base or prime rate published by
Citibank N.A. from time to time in effect on the date such payment became due,
provided, that no payment shall be due so long as it is the subject of any
reasonable contest by the Indemnifying Party.
12.7. FRAUD. None of the limitations in this Section 12 shall apply to
any matter giving rise to a claim which, or the delay in discovery of which, is
the consequence of fraud or intentional concealment by Seller or Buyer.
13. MISCELLANEOUS AND GENERAL.
13.1. PAYMENT OF EXPENSES. Except as otherwise provided herein, whether
or not the transaction shall be consummated, each party hereto shall pay their
own expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the Transactions.
13.2. MODIFICATION OR AMENDMENT. At any time prior to the Closing Date,
the parties hereto may modify or amend this Agreement, by written agreement
executed and delivered by duly authorized officers of the respective parties.
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13.3. WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the transaction are for the sole benefit of such party
and may be waived, in writing, by such party in whole or in part to the extent
permitted by applicable law.
13.4. COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
13.5. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
13.6. NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile transmission (with a confirming copy sent by overnight courier), as
follows:
If to Seller:
Viad Corp
1850 North Central Avenue
Phoenix, Arizona 85077-2212
Attn: Vice President and General Counsel
Facsimile: (602) 207-5480
With copies to:
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Vice President-Corporate Development
Viad Corp
1850 N. Central Avenue
Phoenix, AZ 85077-2411
Facsimile: (602) 207-2832
If to Buyer or Company:
Cruise Line Holdings Co.
c/o Berkshire Partners LLC
One Boston Place - 33rd Floor
Boston, MA 02108
Attn: Bradley Bloom
Facsimile: (617) 227-6105
With copies to:
Ropes & Gray
One International Place
Boston, MA 02110-2624
Attn: David Chapin
Facsimile: (617) 951-7050
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
13.7. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and the
Confidentiality Letter dated February 24, 1998 ("Confidentiality Agreement"),
previously executed by Buyer, the documents described herein and in the
Schedules hereto, and the Schedules hereto (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
other prior agreements and understandings, both written and oral, among the
parties or any of them with respect to the subject matter hereof, and (b) shall
not be assigned by operation of law or otherwise, provided that Buyer may assign
its rights and obligations to any wholly owned subsidiary of Buyer and to CS
First Boston as collateral assignee of Buyer, but no such
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assignment shall relieve Buyer of its obligations or liability hereunder if such
assignee does not perform such obligations or discharge such liability.
13.8. PARTIES IN INTEREST.
(a) SUCCESSORS. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective
successors and permitted assigns including without limitation CS First
Boston as collateral assignee of Buyer, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever,
including rights as a third-party beneficiary, under or by reason of
this Agreement.
(b) COMPANY'S ASSUMPTION. In consideration of the terms and
conditions herein and of the benefits each shall receive as a
consequence of this Agreement, Buyer, at Closing, shall cause Company
to execute and deliver to Seller the Assumption Agreement described in
Section 9.3(b).
13.9. OBLIGATION OF COMPANY.
(a) SELLER RESPONSIBILITY. Whenever this Agreement requires
Company to take or refrain from taking any action prior to the Closing,
such requirement shall be deemed to include an undertaking on the part
of Seller to cause Company to take such action.
(b) BUYER RESPONSIBILITY. Whenever this Agreement requires
Company to take or refrain from taking any action on or after the
Closing, such requirement shall be deemed to include an undertaking on
the part of the Buyer
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to cause Company or its successors in the ownership or operation of the
Business (including additions thereto or extensions thereof after
Closing) to take or refrain from taking such action.
13.10. REMEDIES FOR BREACH. The parties hereto agree that irreparable
damage would occur if any of the provisions of this Agreement were not performed
in accordance with their terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions or any
other equitable relief from a court of competent jurisdiction to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which they are entitled at
law, or in equity or under Section 13.13 hereof.
13.11. CAPTIONS. The section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
13.12. FURTHER ASSURANCES. From time-to-time, at the request of either
party hereto and without further consideration, the other party or parties will
execute and deliver to such requesting party such documents and take such other
action (but without incurring any material financial obligation) as such
requesting party may reasonably request in order to consummate more effectively
the transactions contemplated hereby, including without limitation, vesting in
Buyer good and valid title to the Shares being transferred hereunder.
13.13. DISPUTE RESOLUTION. Subject to the provisions of
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Section 13.10 hereof with respect to injunction, specific performance and other
equitable relief, any dispute arising under or relating to this Agreement,
including, without limitation, any dispute with respect to any indemnification
claim or purchase price adjustment, will be settled in accordance with the
dispute resolution procedures set forth on SCHEDULE 13.13 hereto.
13.14. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto and shall be effective as
of the date first hereinabove written.
VIAD CORP CRUISE LINE HOLDINGS CO.
By: /s/ Wayne A. Wight By: /s/ Bradley M. Bloom
----------------------------- -------------------------------
Name: Wayne A. Wight Name: Bradley M. Bloom
--------------------------- ------------------------------
Title: Vice President Title: President
-------------------------- ----------------------------
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EXHIBIT 10.2
EXECUTION COPY
================================================================================
STOCK SUBSCRIPTION AND EXCHANGE AGREEMENT
AMONG
CRUISE LINE HOLDINGS CO.
PHILIP LEVINE
JERRY CHAFETZ
THE GERALD ROBINS REVOCABLE TRUST 8/3/94
THE CRAIG ROBINS REVOCABLE TRUST 8/3/94
AND
THE SCOTT ROBINS REVOCABLE TRUST 8/3/94
Dated as of August 27, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
1. DEFINITIONS.................................................................................... 2
2. CONTRIBUTION AND EXCHANGE...................................................................... 2
2.1. Contribution of the Shares................................................... 2
3. THE CLOSING.................................................................................... 2
3.1. Time and Place of Closing.................................................... 2
3.2. Deliveries................................................................... 2
4. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS.............................................. 3
4.1. Corporate Matters............................................................ 3
4.1.1. Organization, Power and Standing............................ 3
4.1.2. Capitalization.............................................. 3
4.1.3. Subsidiaries................................................ 4
4.1.4. Charter and By-laws......................................... 4
4.2. Financial Statements, etc.................................................... 4
4.2.1. Financial Information....................................... 4
4.2.2. Character of Financial Information.......................... 4
4.2.3. Inventory and Receivables................................... 5
4.2.4. Change in Condition......................................... 5
4.3. Liabilities.................................................................. 6
4.3.1. Debt........................................................ 6
4.3.2. Other Liabilities........................................... 7
4.4. Assets....................................................................... 7
4.4.1. Title to Assets............................................. 7
4.4.2. Real Property and Equipment................................. 7
4.4.3. Intellectual Property Rights................................ 8
4.5. Contracts, etc............................................................... 9
4.5.1. Certain Contractual Obligations............................. 9
4.5.2. Nature of Contracts, etc.................................... 11
4.5.3. Insurance................................................... 11
4.5.4. Transactions with Affiliates................................ 11
4.5.5. Non-Contravention, etc...................................... 12
4.6. Compliance with Laws, etc.................................................... 12
4.6.1. Compliance Generally........................................ 12
4.6.2. Tax Matters................................................. 13
4.6.3. No Illegal Payments, etc.................................... 15
4.6.4. Employee Benefit Plans...................................... 15
4.7. Environmental and Safety Matters, etc........................................ 18
4.8. Labor Relations.............................................................. 18
</TABLE>
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<TABLE>
<S> <C>
4.9. Customers, Suppliers and Distributors........................................ 18
4.10. Litigation, etc.............................................................. 19
4.11. Disclosure................................................................... 19
4.12. Banking Facilities, Powers of Attorney, etc.................................. 19
4.13. Books and Records............................................................ 19
4.14. Brokers or Finders Fees...................................................... 20
4.15. Shareholder Agreements....................................................... 20
4.16. Amendments to Disclosure Schedules........................................... 20
5. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS.................................. 20
5.1. Enforceability............................................................... 20
5.2. Authorization................................................................ 21
5.3. Non-Contravention, etc....................................................... 21
5.4. Title, etc................................................................... 21
5.5. Amendments to Disclosure Schedules........................................... 21
5.6. Organization................................................................. 22
5.7. Investment................................................................... 22
6. REPRESENTATIONS AND WARRANTIES OF HOLDCO ONE................................................... 22
6.1. Corporate Matters............................................................ 22
6.2. Authorization and Enforceability............................................. 23
6.3. Non-Contravention, etc....................................................... 23
6.4. Brokers' Fees................................................................ 23
6.5. Investment................................................................... 23
6.6. Capitalization of Holdco One................................................. 23
6.7. Greyhound Acquisition........................................................ 24
6.8. Commitment Letters........................................................... 24
6.9. Investment Company........................................................... 24
6.10. Liabilities. ............................................................... 24
6.11. Amendments to Disclosure Schedules........................................... 24
6.12. Disclosure................................................................... 25
7. CERTAIN AGREEMENTS OF THE PARTIES.............................................................. 25
7.1. Certain Pre-Closing Matters.................................................. 25
7.1.1. Exclusivity................................................. 25
7.1.2. Access to Premises and Information.......................... 25
7.1.3. Confidentiality Covenant of Holdco One...................... 25
7.1.4. Operation of Business in the Ordinary Course................ 26
7.1.5. Certain Notices............................................. 27
7.1.6. Preparation for Closing..................................... 27
7.1.7. Amendment of Articles of By-Laws............................ 27
7.2. Certain Closing Matters...................................................... 27
</TABLE>
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<TABLE>
<S> <C>
7.2.1. Expenses of Transaction..................................... 27
7.2.2. Publicity, etc.............................................. 28
7.3. Confidentiality Covenants of Subscribers..................................... 28
7.4. Tax Matters.................................................................. 28
7.4.1. Payment of Transfer Taxes and Other Charges.................. 28
7.4.2. Withholding................................................. 29
7.4.3. Certificates................................................ 29
7.4.4. Tax Sharing Agreements...................................... 30
7.4.5. Section 351 Issues.......................................... 30
7.4.6. Applicable Period........................................... 31
7.5. Noncompetition............................................................... 31
7.6. Continuation of Benefits..................................................... 31
7.7. Guarantee.................................................................... 32
7.8. Management Options........................................................... 32
7.9. Assignment and Amendment. .................................................. 32
8. CONDITIONS TO THE HOLDCO ONE'S OBLIGATION TO CLOSE............................................. 32
8.1. Representations, Warranties and Covenants.................................... 33
8.1.1. Continued Accuracy of Representations and Warranties........ 33
8.1.2. Performance of Agreements................................... 33
8.1.3. Closing Certificate......................................... 33
8.2. Indebtedness. .............................................................. 33
8.3. Greyhound Acquisition........................................................ 33
8.4. Consents, etc................................................................ 33
8.5. Closing Agreements........................................................... 33
8.6. Legality; Governmental Authorization; General Litigation..................... 34
8.7. Opinion of Counsel........................................................... 34
8.8. Financing.................................................................... 34
8.9. No Material Adverse Change................................................... 34
8.10. Guarantee.................................................................... 35
8.11. Changes to Schedules......................................................... 35
8.12. Dutch Holding Company........................................................ 35
8.13. Termination of Obligations................................................... 35
8.14. Dutch Law.................................................................... 35
8.15. Side Letter. ............................................................... 35
8.16. Assignment and Amendment..................................................... 35
8.17. General...................................................................... 35
9. CONDITIONS TO THE SUBSCRIBERS' OBLIGATION TO CLOSE............................................. 35
9.1. Representations, Warranties and Covenants.................................... 36
9.1.1. Continued Accuracy of Representations and Warranties........ 36
</TABLE>
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<TABLE>
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9.1.2. Performance of Agreements................................... 36
9.1.3. Officer's Certificate....................................... 36
9.2. Consents, etc................................................................ 36
9.3. Closing Agreements........................................................... 36
9.4. Government Authorization; Litigation......................................... 36
9.5. Opinion of Counsel........................................................... 37
9.6. Options...................................................................... 37
9.7. Greyhound Acquisition........................................................ 37
9.8. Initial Investment........................................................... 37
9.9. Indemnity Agreements......................................................... 37
9.10. Changes to Schedules......................................................... 37
9.11. Commitment Letters........................................................... 37
9.12. Dutch Holding Company. ...................................................... 37
9.13. Dutch Law.................................................................... 37
9.14. Side Letter.................................................................. 38
9.15. Assignment and Amendment..................................................... 38
10. INDEMNIFICATION................................................................................ 38
10.1. Survival of Representations and Warranties................................... 38
10.2. Indemnity by Subscribers..................................................... 38
10.3. Indemnity by Holdco One...................................................... 39
10.4. Matters Involving Third Parties.............................................. 39
10.5. Other Indemnification Provisions............................................. 40
10.6. Limitations on Indemnification............................................... 41
11. DEFINITIONS.................................................................................... 41
11.1. Certain Matters of Construction.............................................. 41
11.2. Cross Reference Table........................................................ 42
11.3. Certain Definitions.......................................................... 43
11.3.1. Action..................................................... 43
11.3.2. Affiliate.................................................. 43
11.3.3. Berkshire Investors LLC.................................... 44
11.3.4. Business................................................... 44
11.3.5. Business Day............................................... 44
11.3.6. By-laws.................................................... 44
11.3.7. Charter.................................................... 44
11.3.8. Code....................................................... 44
11.3.9. Compensation............................................... 44
11.3.10. Contractual Obligation.................................... 45
11.3.11. Debt...................................................... 45
11.3.12. Distribution.............................................. 45
11.3.13. Enforceable............................................... 45
11.3.14. ERISA..................................................... 45
</TABLE>
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<TABLE>
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11.3.15. Gain Recognition Agreement................................ 45
11.3.16. Generally Accepted Accounting Principles.................. 46
11.3.17. Guarantee................................................. 46
11.3.18. Governmental Authority.................................... 46
11.3.19. Governmental Order........................................ 46
11.3.20. Intangibles............................................... 46
11.3.21. Known or Knowledge........................................ 46
11.3.22. Legal Requirement......................................... 47
11.3.23. Lien...................................................... 47
11.3.24. Majority Subscribers. ................................... 47
11.3.25. Material Adverse Effect................................... 47
11.3.26. Members of the Immediate Family........................... 47
11.3.27. Ordinary Course of Business............................... 48
11.3.28. Person.................................................... 48
11.3.29. Subsidiary................................................ 48
11.3.30. Tax Distribution.......................................... 48
11.3.31. Taxes..................................................... 48
11.3.32. Tax Return................................................ 48
12. GOVERNING LAW.................................................................................. 49
12.1. Governing Law................................................................ 49
12.2. [Reserved]................................................................... 49
12.3. Waiver of Jury Trial......................................................... 49
12.4. Reliance..................................................................... 49
13. TERMINATION.................................................................................... 49
13.1. Termination of Agreement..................................................... 49
13.2. Effect of Termination........................................................ 50
14. MISCELLANEOUS.................................................................................. 50
14.1. Entire Agreement; Waivers.................................................... 50
14.2. Amendment or Modification, etc............................................... 51
14.3. Headings, etc................................................................ 51
14.4. Schedules; Listed Documents, etc............................................. 51
14.5. Severability................................................................. 51
14.6. Counterparts................................................................. 51
14.7. Successors and Assigns....................................................... 52
15. NOTICES........................................................................................ 52
</TABLE>
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SCHEDULES
Schedule 4.1.1 Foreign Jurisdictions
Schedule 4.1.3 Subsidiaries
Schedule 4.2.4 Changes in Conditions
Schedule 4.3.1 Indebtedness
Schedule 4.4.1 Liens
Schedule 4.4.2 Listed Leases and Real Property
Schedule 4.4.3 Listed Intangibles/Listed Licenses
Schedule 4.5.1 Contractual Obligations
Schedule 4.5.3 Liability Policies/Loss Runs
Schedule 4.5.4 Transactions with Affiliates
Schedule 4.5.5 Non-Contravention, etc. (Companies)
Schedule 4.6.1 Compliance Generally
Schedule 4.6.2 Tax Matters (Subscribers)
Schedule 4.6.4 Employee Plans
Schedule 4.7 Environmental Claims
Schedule 4.9 Customers, Suppliers and Distributors
Schedule 4.10 Litigation
Schedule 4.12 Banking Facilities
Schedule 5.3 Non-Contravention, etc. (Individual Subscribers)
Schedule 6.6 Holdco One Capital Structure
Schedule 6.8 Commitment Letters
Schedule 7.1.4 Operation of Business
Schedule 7.6 Continued Insurance
EXHIBITS
Exhibit 2.2 Allocation of Purchase Price
Exhibit 8.5(a) Form of Employment Agreement
Exhibit 8.5(b) Form of Shareholders Agreement
Exhibit 8.7 Opinion of White & Case
Exhibit 9.5 Buyer's Opinion
Exhibit 9.9 Form of Indemnity Agreement
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STOCK SUBSCRIPTION AND EXCHANGE AGREEMENT
This STOCK SUBSCRIPTION AND EXCHANGE AGREEMENT (the "Agreement") is
made as of the 27th day of August, 1998 among Cruise Line Holdings Co., a
Delaware corporation ("Holdco One"), Philip Levine, Jerry Chafetz, the Gerald
Robins Revocable Trust 8/3/94, the Craig Robins Revocable Trust 8/3/94 and the
Scott Robins Revocable Trust 8/3/94, the holders of all the issued and
outstanding capital stock of the Companies (Levin, Chafetz and each Trust, each
a "Subscriber" and collectively the "Subscribers").
Recitals
1. The Subscribers own all of the issued and outstanding shares of
common stock (being all of the issued and outstanding shares of capital stock,
the "Capital Stock") of On-Board Media, Inc., a Florida corporation
("On-Board"), Cruise Management International, Inc., a Florida corporation
("Cruise"), Boxer Media, Inc., a Florida corporation ("Boxer") (On-Board, Cruise
and Boxer each a "Company" and collectively, the "Companies").
2. The Subscribers desire to contribute and transfer to Holdco One all
of the issued and outstanding shares of Capital Stock (collectively, the
"Shares" and such contribution, the "Subscribers' Contribution").
3. Each Subscriber is willing to acquire, and Holdco One is willing to
issue to such Subscriber in exchange for the Subscribers' Contribution, shares
of stock of Holdco One and cash, all upon the terms and subject to the
conditions set forth in this Agreement.
4. Berkshire Investors LLC and the Management Investors (as defined in
the Shareholders Agreement) have agreed to contribute cash to Holdco One in
exchange for the issuance of common stock of Holdco One (the "Berkshire
Contribution"). Together with the Subscribers and the Management Investors,
Berkshire Investors LLC will own all of the outstanding common stock of Holdco
One immediately after such contributions.
5. Holdco One, Berkshire Investors LLC and the Subscribers each intend
that the Berkshire Contribution and the Subscribers' Contribution qualify as a
transaction under Section 351 of the Code.
Agreement
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below, the parties hereto hereby agree as follows:
<PAGE> 9
1. DEFINITIONS.
Certain terms are used in this Agreement as specifically defined
herein. These definitions are set forth or referred to in Section 11.
2. CONTRIBUTION AND EXCHANGE.
2.1. Contribution of the Shares. Upon the terms, subject to the
conditions, and in reliance on the representations, warranties and covenants set
forth herein, the Subscribers hereby agree to contribute to Holdco One at the
Closing all of the Shares in exchange for the consideration described below:
(a) an aggregate amount equal to $30,000,000 in cash
payable by wire transfer to the Subscribers in the amounts set
forth opposite each Subscriber's name on Exhibit 2.2 and in
accordance with written instructions of each such Subscriber
delivered at least two business days prior to the Closing; and
(b) the number of shares of common stock of Holdco
One (the "Holdco One Stock" and, together with the cash
described in the preceding paragraph, the "Consideration")
which, at Closing, will represent 27 1/2% of the fully diluted
and outstanding common stock of Holdco One, allocated among
the Subscribers in the percentages set forth on Exhibit
2.2(a).
3. THE CLOSING.
3.1. Time and Place of Closing. Subject to Section 13, the closing of
the contribution and exchange of the Shares and the other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Ropes & Gray, One International Place, Boston, Massachusetts, or such other
location as the parties may agree, at 9:00 a.m. (New York time) on September 15,
1998 or such other time and date as the Majority Subscribers and Holdco One
shall mutually agree (such date being referred to herein as the "Closing Date").
3.2. Deliveries. On the Closing Date:
(a) each Subscriber will contribute, transfer and
deliver to Holdco One a certificate or certificates for all of
the Shares to be contributed by such Subscriber duly endorsed
or accompanied by separate stock powers duly endorsed, with
signature(s) guaranteed, in each case free and clear of any
Liens and in form proper for contribution and transfer and
satisfactory to Holdco One, in exchange for the Consideration
as set forth in Section 2.1; and
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(b) (i) Holdco One will make or cause to be made the
Tax Distributions in the amounts set forth in Schedule 7.1.4
and (ii) Holdco One will pay off the Debt incurred in respect
of the Carnival Commissions as set forth in Section 4.3.1.
4. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS.
In order to induce Holdco One to enter into and perform this Agreement
and to consummate the transactions contemplated hereby, each of the Subscribers
severally and not jointly represents and warrants to Holdco One that the
statements contained in this Article 4 are correct and complete as of the date
of this Agreement and, unless a date is specified in such representation and
warranty, will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement through this Section 4), provided, however, that the Subscribers may
amend such disclosure schedules as set forth in Section 4.16.
4.1. Corporate Matters.
4.1.1. Organization, Power and Standing. Each Company is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to execute, deliver and perform each of
the Closing Agreements to which it is a party, to carry on the Business
as currently conducted, and to consummate the transactions contemplated
hereby. Except as set forth on Schedule 4.6.1, each Company is duly
qualified or licensed to do business as a foreign corporation, and is
in good standing as such, in each jurisdiction in which the failure to
be so qualified or licensed and in good standing could reasonably be
expected to have a Material Adverse Effect upon the Business as
currently conducted, and each such jurisdiction is listed in Schedule
4.1.1.
4.1.2. Capitalization. The only issued and outstanding shares
of capital stock of the Companies are the Shares, consisting of 750
shares of common stock, $1.00 par value of On-Board, 750 shares of
common stock, $1.00 par value of Cruise and 100 shares of common stock
$1.00 par value of Boxer, of which no shares are held as treasury
stock, all of which have been duly authorized and validly issued and
are fully paid and non-assessable, and all of which are beneficially
owned and held of record by the Subscribers. There is no Contractual
Obligation or Charter or By-law provision which obligates any Company
to issue, purchase or redeem, or make any payment in respect of, any
shares of capital stock or other securities convertible into or
exchangeable for shares of capital stock or which provides for any
stock appreciation or similar right or grants any right to share in the
equity, income, revenues (except for sales commission or distribution
agreements entered into in the Ordinary Course of Business) or cash
flow of any Company and no authorization therefor has been given.
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4.1.3. Subsidiaries. No Company has, or ever has had, any
Subsidiary. Except as set forth on Schedule 4.1.3, no Company has,
directly or indirectly, any ownership or other interest in, or control
any corporation, partnership, joint venture, business association or
other entity.
4.1.4. Charter and By-laws. The Subscribers have heretofore
delivered to Holdco One a true and complete copy of each Company's
Charter and By-laws.
4.2. Financial Statements, etc.
4.2.1. Financial Information. Holdco One has been furnished
with true and complete copies of each of the following:
(a) The audited balance sheets of On-Board as of
December 31, 1997, 1996 and 1995, the audited balance sheets
of Cruise as of December 31, 1997 and 1996, and the related
statements of income and retained earnings and cash flows for
the fiscal years then ended, accompanied by the notes thereto
and the report thereon (the "Audited Financials", and together
with the Boxer Financials and the Quarterly Financials, the
"Financial Statements").
(b) The unaudited balance sheet of Boxer as of
December 31, 1997 and related unaudited statements of earnings
and stockholders equity and cash flows for the fiscal year
then ended (the "Boxer Financials").
(c) The unaudited balance sheets of the Companies as
of June 30, 1998 and related statements of earnings and
stockholders equity and cash flows for the fiscal quarter and
six months then ended (the "Quarterly Financials").
(d) Balance Sheet. As used herein, the term "Balance
Sheet Date" shall mean December 31, 1997 and the term "Balance
Sheets" shall mean the balance sheets of the Companies as of
December 31, 1997 contained in the Audited Financials and
Boxer Financials, respectively.
4.2.2. Character of Financial Information. The Financial
Statements relating to On-Board and Cruise (including with respect only
to the Audited Financials the notes thereto) were prepared in
accordance with generally accepted accounting principles consistently
(except as described therein) applied throughout the periods specified
therein, and present fairly the financial position and results of
operations of each Company for the periods specified therein, subject
in the case of the Quarterly Financials to an absence of footnotes and
normal year-end audit adjustments. The Financial Statements relating to
Boxer were prepared on a cash basis methodology, applied consistently
throughout the periods specified therein, and present fairly the
financial position and results of operations of Boxer for the periods
specified therein,
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<PAGE> 12
subject in the case of the Quarterly Financials to an absence of
footnotes and normal year-end adjustments.
4.2.3. Inventory and Receivables.
4.2.3.1. Inventories.
(a) The values at which all inventories are carried
on the balance sheets delivered with the Financial Statements,
including without limitation the reserves with respect thereto
reflected in the Balance Sheets, have been calculated in
accordance with generally accepted accounting principles.
(b) Taking into account the reserves for inventory
set forth in the Balance Sheets, the inventories reflected on
the Balance Sheets are (i) in all material respects in good
and merchantable condition, (ii) salable in the Ordinary
Course of Business of the Companies, and (iii) verifiable in
all material respects by reference to records which are
maintained by the Companies. The inventories reflected on the
Balance Sheets included any and all material amounts of
inventory held on consignment by third parties.
4.2.3.2. Accounts Receivable. Taking into account the
reserves for uncollectible accounts set forth in the Balance
Sheets, all of the accounts reflected on the Balance Sheet
were accounts receivable that (i) arose from sales made and
orders received in the Ordinary Course of Business, and (ii)
to the Subscribers' Knowledge, are not subject to any set-off
or counterclaim, except with respect to the dispute with
Franco A. Mansur d/b/a Brazilian Gems set forth on Schedule
4.10.
4.2.4. Change in Condition. Except for the matters set forth
on Schedule 4.2.4, which matters, in the aggregate, have not had and
could not reasonably be expected to have a Material Adverse Effect,
since the Balance Sheet Date:
(a) The Business has been conducted only in the
Ordinary Course of Business;
(b) No Company has incurred or otherwise become
liable in respect of any Debt except for borrowings in the
Ordinary Course of Business, or become liable in respect of
any Guarantee (other than Guarantees by the Companies of
obligations of the Companies) except such Debt as is permitted
pursuant to subsection 7.1.4(d) hereof;
(c) No Company has declared or made any Distribution
or entered into or performed any other transaction which has
resulted or will result in any
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<PAGE> 13
payment or other transfer of assets to or for the benefit of
any Subscriber or any Affiliate of any Subscriber (other than
transactions among the Companies or Tax Distributions
permitted pursuant to subsection 7.1.4(c) hereof);
(d) No Company has (i) sold, leased to others or
otherwise disposed of any material portion of its assets
(except for sales of inventory and equipment in the Ordinary
Course of Business), (ii) entered into any Contractual
Obligation relating to (A) the purchase of any Debt or equity
interest in any Person, (B) the purchase of assets
constituting a business or (C) any merger, consolidation or
other business combination (other than among the Companies),
(iii) canceled or compromised any material Debt or claim
(other than accounts receivable and other Debts or claims in
the Ordinary Course of Business), (iv) Knowingly waived or
released any right of material value (other than in the
Ordinary Course of Business), or (v) instituted, settled or
agreed to settle any material Action, inquiry or investigation
(other than in the Ordinary Course of Business);
(e) No Company has (i) made any changes in the rate
of Compensation in effect for any of the Subscribers or (ii)
paid or agreed or orally promised to pay, conditionally or
otherwise, any extra Compensation to any Subscriber, or (iii)
made any changes in the rate of Compensation of any other
officer, employee, consultant or agent of any Company (other
than in the case of clause (iii) of this subsection (e) in the
Ordinary Course of Business);
(f) No Company has made any material change in its
customary methods of accounting or accounting practices
(including without limitation with respect to reserves),
pricing policies or payment or credit practices or failed to
pay any creditor any amount owed to such creditor when due or
granted any extensions of credit other than in the Ordinary
Course of Business;
(g) No Subscriber or Company has entered into any
Contractual Obligation to do any of the things referred to in
clauses (a) through (f) above; and
(h) No Material Adverse Effect has occurred, nor, to
the Subscribers' Knowledge, have any event or events occurred
which could reasonably be expected to have, a Material Adverse
Effect.
4.3. Liabilities.
4.3.1. Debt. Immediately prior to the Closing hereunder,
except as set forth on Schedule 4.3.1 hereto, no Company will have any
liabilities in respect of Debt, other than in respect of Debt
outstanding immediately prior to the Closing of up to
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$1,000,000 for the payment of commissions under the contract dated July
31, 1998 among Cruise and Carnival Corporation (the "Carnival
Commissions").
4.3.2. Other Liabilities. Immediately prior to the Closing
hereunder and the consummation of the transactions contemplated hereby,
to Subscribers' Knowledge no Company will have any material liabilities
or other material obligations, whether absolute, accrued, contingent,
due, to become due, or otherwise, other than, to the extent the
existence thereof is consistent with all other representations and
warranties of the Subscribers made in or pursuant to this Agreement,
the following (the "Assumed Liabilities"):
(a) Obligations and liabilities of the Companies
existing on the Balance Sheet Date.
(b) Obligations and liabilities of the Companies
incurred since the Balance Sheet Date in the Ordinary Course
of Business.
(c) Obligations and liabilities of the Companies
described in Schedule 4.2.4 in response to clause (a) thereof.
4.4. Assets.
4.4.1. Title to Assets. The Companies have good and marketable
title to, or in the case of property held under lease or other
Contractual Obligation, a valid and enforceable right to use, all of
their properties, rights and assets, whether real or personal and
whether tangible or intangible (collectively, the "Assets"), including
without limitation all properties, rights and assets reflected in the
Balance Sheets, except (i) as sold or otherwise disposed of since the
Balance Sheet Date in the Ordinary Course of Business and (ii) such as
have not had, and could not reasonably be expected to have, a Material
Adverse Effect. The Assets are not subject to any Lien securing any
Debt or other material obligation of any Company or Subscriber except
as described in Schedule 4.4.1. The Assets (including without
limitation the Equipment, the Intangibles and the Contracts) constitute
all properties, rights and assets held for or used in the conduct of
the Business of the Companies as currently conducted.
4.4.2. Real Property and Equipment.
4.4.2.1. General. No Company owns, or ever has owned,
any real property, except for the fixtures and other
improvements included in the Assets and set forth on Schedule
4.4.2, which reflects the Company's assets as of December 31,
1997 (the "Real Property"). All of the Real Property and all
of the tangible personal property other than inventory
included in the Assets (the "Equipment") are, taken together,
suitable for the purpose for which they are
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<PAGE> 15
presently used in the Business and in a condition sufficient
to conduct the Business as presently conducted. Schedule 4.4.2
sets forth a list of each lease or other Contractual
Obligation (including all amendments) under which any Real
Property or Equipment having a cost, annual aggregate lease
payment or capital lease obligation in excess of $50,000 is
held or used by any Company (the "Listed Leases"; the Listed
Leases, together with all such leases and Contractual
Obligations other than the Listed Leases which have been
entered into in the Ordinary Course of Business, are referred
to herein collectively as the "Leases"). There is no lease or
other Contractual Obligation under which any Company is liable
as lessor with respect to any Real Property or Equipment.
Schedule 4.4.2 also sets forth a list of all of the realty
included in the Real Property and of the addresses of each
other location, if any, at which is located any Equipment or
inventory.
4.4.2.2. Certificates. All certificates, licenses,
approvals and permits necessary in connection with the
construction and present use and operation of the Real
Property and the lawful occupancy thereof (the "Permits") have
been issued by the appropriate governmental authorities,
except for such as has not had, and could not reasonably be
expected to have, a Material Adverse Effect. The Real Property
may be used as currently used under and in material accordance
with the certificates of occupancy with respect thereto. All
such Permits shall continue in full force and effect
immediately after giving effect to the transactions
contemplated hereby.
4.4.2.3. Absence of Certain Notices. No Company, nor
any Subscriber, has received any written, or to Subscriber's
Knowledge, oral notice of (i) any violation of any Legal
Requirement, including, without limitation, zoning
restrictions and ordinances, building, life, safety, health
and fire codes and ordinances affecting any of the Real
Property, (ii) any violation of any material Permit or (iii)
any eminent domain, condemnation or similar proceeding pending
or, to the Subscribers' Knowledge, threatened, or any decree
or order relating thereto, which in each case could reasonably
be expected to have a Material Adverse Effect.
4.4.3. Intellectual Property Rights. Schedule 4.4.3 lists all
trade and product names, foreign letters patent of invention, patents
and patent applications, trademarks and trademark applications, service
marks and copyrights, in each case which are material to the conduct of
the Business in the Ordinary Course of Business or the absence of which
could reasonably be expected to have a Material Adverse Effect (the
"Listed Intangibles"). Schedule 4.4.3 sets forth a list of each license
or other Contractual Obligation (including all amendments) under which
any Intangible material to the conduct of the Business in the Ordinary
Course of Business or the absence of which could reasonably be expected
to have a Material Adverse Effect is held or used
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<PAGE> 16
by any Company (the "Listed Licenses"). Except as described in Schedule
4.4.3, there is no license or other Contractual Obligation under which
any Company is liable as licensor with respect to any Intangible.
Except as set forth on Schedule 4.4.3, registrable or patentable
Intangibles owned by any Company have been duly registered and patented
in accordance with applicable Legal Requirements in all jurisdictions
in which the Business is currently conducted by any Company under such
Intangible except for such failures to be so registered or patented as
have not had and could not reasonably be expected to have a Material
Adverse Effect. No Subscriber or Company has received any notice that
the use by any Company of the Intangibles in the Business and in the
areas where the Business is currently conducted infringes or has
infringed any rights of any third party; to the Subscribers' Knowledge,
such use does not actually infringe and has not actually infringed any
such rights; and to the Subscribers' Knowledge, no activity of any
third party infringes upon the rights of any Company with respect to
any of the Intangibles.
4.5. Contracts, etc.
4.5.1. Certain Contractual Obligations. Set forth on Schedule
4.5.1 is a true and complete list of all of the following Contractual
Obligations of the Companies:
(a) All collective bargaining agreements and other
labor agreements; all employment or consulting agreements; and
all other plans, agreements or arrangements (other than any
Employee Plan listed on Schedule 4.6.4) which constitute
Compensation or benefits to any of the senior executive
officers or employees or consultants of any Company.
(b) All Contractual Obligations under which any
Company has incurred or may incur any severance pay or special
Compensation obligations which would become payable by reason
of this Agreement or the consummation of the transactions
contemplated hereby.
(c) All Contractual Obligations (other than
licensing, sales and distribution agreements disclosed
pursuant to clause (h) below) under which any Company is or
will after the Closing be restricted from carrying on any
business or other activities in any country, state, town,
territory, province, county, city or other political
subdivision of any country.
(d) All Contractual Obligations (including without
limitation options) to sell or otherwise dispose of a material
portion of any Assets except in the Ordinary Course of
Business.
(e) All Contractual Obligations under which any
Company has or will after the Closing have any material
liability or obligation to or for the
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<PAGE> 17
benefit of any Subscriber or any Affiliate of any Subscriber
(other than such Contractual Obligations disclosed on Schedule
4.5.4 or pursuant to any Closing Agreement).
(f) All Contractual Obligations under which any
Company has any material liability or obligation for Debt or
constituting or giving rise to a Guarantee of any material
liability or obligation of any Person, or under which any
Person has any material liability or obligation constituting
or giving rise to a Guarantee of any material liability or
obligation of any Company (including without limitation
partnership and joint venture agreements).
(g) Other than pursuant to the Charter or Bylaws of
the Companies, all Contractual Obligations under which any
Company is or may become obligated to pay any material amount
in respect of indemnification obligations, purchase price
adjustment or otherwise in connection with any (i) acquisition
or disposition of assets or securities, (ii) merger,
consolidation or other business combination, or (iii) series
or group of related transactions or events of a type specified
in subclauses (i) and (ii).
(h) All distributorship agreements and all other
Contractual Obligations (other than purchase orders and sales
orders entered into in the Ordinary Course of Business), with
distributors, suppliers, vendors, or other suppliers of goods
or services.
(i) All advertising contracts which individually
involve material liabilities of any Company.
(j) All material purchase or sales orders not entered
into in the Ordinary Course of Business.
(k) Contractual Obligations (other than purchase
orders or sales orders) not required to be listed on Schedule
4.5.1 pursuant to clauses (a) through (j) above which
individually involve liabilities or payments of any Company in
excess of $50,000 in any given year.
The Subscribers have heretofore made available to Holdco One a true and
complete copy of each of the Contractual Obligations listed on Schedule
4.5.1, each as in effect on the date hereof including without
limitation all amendments thereto (the "Listed Contracts") and true and
complete copies of each of the Listed Leases, Listed Licenses and
Insurance Policies (the Listed Contracts, Listed Leases, Listed
Licenses and Insurance Policies are referred to herein collectively as
the "Contracts").
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<PAGE> 18
4.5.2. Nature of Contracts, etc. No breach or default by any
Company under any of the Contracts has occurred and is continuing, and
to Subscribers' Knowledge no event has occurred which with notice or
lapse of time would constitute such a breach or default or permit
termination, modification or acceleration by any other Person under any
of the Contracts, other than such breaches, defaults and events as have
not had and could not reasonably be expected to have a Material Adverse
Effect. To the Subscribers' Knowledge, no breach or default by any
Person other than the Companies under any of the Contracts has occurred
and is continuing, and no event has occurred which with notice or lapse
of time would constitute such a breach or default or permit
termination, modification or acceleration by any Company under any of
such Contracts.
4.5.3. Insurance. Set forth on Schedule 4.5.3 is a copy of the
declarations page from each liability (including without limitation,
public liability, products liability and automobile liability) policy
by which any Company has been insured since January 1, 1996
(collectively, the "Liability Policies"). Except for the matters set
forth on the loss runs attached hereto ("Loss Runs") and the matters
set forth on Schedule 4.5.3, Subscribers have no Knowledge of any
liability Actions against any Company. Statutory workers' compensation
has been maintained, to the extent required by law, on all employees of
the Companies and all such policies were written by insurers in
existence as of the date hereof. The premiums for all Liability
Policies and workers' compensation policies have been fully paid in
accordance with their terms. Set forth on Schedule 4.5.3 is a copy of
the declarations page from all insurance policies of the Companies
currently in effect other than the Liability Policies and the workers'
compensation policies (together with the Liability Policies and the
workers' compensation policies, the "Insurance Policies"). Immediately
prior to the Closing and the consummation of the transactions
contemplated hereby, and except as set forth on Schedule 4.5.3, each
Insurance Policy will be in full force and effect and be payable to the
respective Company.
4.5.4. Transactions with Affiliates. Except for the matters
set forth on Schedule 4.5.1 pursuant to clause (e) of Section 4.5.1
(the "Affiliate Relationships"), no Subscriber or any Affiliate of any
Subscriber (other than the Companies) is a consultant, competitor,
customer, distributor, supplier or vendor of, or is party to any
Contractual Obligation (except in the course of such Subscriber's
employment) with, any Company involving amounts in excess of $25,000.
Except as set forth on Schedule 4.5.4, there are no trademarks, trade
names (or any component thereof), service marks, service names,
copyrights, patents, patent rights, franchises, or confidential
knowledge that any Subscriber or such Affiliate owns or is licensed or
otherwise has the right to use which are currently used in or are
necessary to the conduct of the Business of the Companies. Since
January 1, 1996 (i) there have been no changes in the terms of the
Affiliate Relationships which have had or could reasonably be expected
to have a Material Adverse Effect, and (ii) except as set forth on
Schedule 4.5.1 pursuant to clause (e) thereof, there have been no
relationships, Contractual Obligations or other
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<PAGE> 19
transactions between any Company on the one hand, and any Subscriber or
such Affiliate on the other hand, other than (x) the Affiliate
Relationships and (y) other relationships, Contractual Obligations and
transactions the termination or non-continuation of which has not had
and could not reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 4.5.4, all transactions between any
Company on the one hand, and any Subscriber or any such Affiliate
(other than the Companies) on the other hand, which occurred during the
periods covered by the Financial Statements and are required by
generally accepted accounting principles to be reflected therein, are
reflected in the Financial Statements at amounts which do not overstate
the net worth or net income of the Companies as compared with fair
market values and prices which would have been charged and paid between
parties at arms' length at the time of the entering into of the
transactions in question.
4.5.5. Non-Contravention, etc. Except as set forth on Schedule
4.5.5, neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby does or
will constitute, result in or give rise to (i) a breach of or a default
or violation under any Charter or By-Laws provision of any Company,
(ii) the acceleration of the time for performance of any obligation
under any Contractual Obligation, (iii) the imposition of any Lien upon
or the forfeiture of any Asset (including without limitation any Asset
held under a Lease or License), (iv) a breach of or a default or
violation under any Contractual Obligation of any Company, or the
requirement that any consent under or waiver of any such Contractual
Obligation, Charter or By-Laws be obtained, or (v) any severance
payments, right of termination, modification of terms, or any other
right or cause of action under any such Contractual Obligation, Charter
or By-laws provision, except as set forth in Schedule 4.5.5.
4.6. Compliance with Laws, etc.
4.6.1. Compliance Generally. Except as set forth on Schedule
4.6.1, the operations of the Business as heretofore or currently
conducted have at no time been and are not in violation of, nor is any
Company in default or violation under, any Legal Requirement, except
for such violations or defaults as have not had and could not
reasonably be expected to have a Material Adverse Effect. The Companies
have been duly granted all licenses, permits, franchises and other
authorizations under any Legal Requirement necessary for the conduct of
the Business as currently conducted, except licenses, permits,
franchises and other authorizations the failure of which to have been
obtained has not had and could not reasonably be expected to have a
Material Adverse Effect. Except for any required filings under the
Hart-Scott-Rodino Act and the expiration of the applicable waiting
period thereunder, (i) neither the execution and delivery of this
Agreement nor the consummation of any of the transactions contemplated
hereby does or will constitute, result in or give rise to a breach or
violation or default under any Legal Requirement applicable to any
Company and (ii)
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<PAGE> 20
no approval, consent, waiver, authorization or other order of, and no
declaration, filing, registration, qualification or recording with, any
Governmental Authority is required to be obtained or made by or on
behalf of the any Company in connection with the execution, delivery or
performance of this Agreement or the consummation of any of the
transactions contemplated hereby.
4.6.2. Tax Matters. Except as set forth on Schedule 4.6.2:
(i) all Tax Returns that are required to be
filed by or with respect to each Company
have been duly and timely filed (including
within any applicable extension period) in
accordance with all applicable Legal
Requirements, all such Tax Returns were
correct and complete in all material
respects, no Company currently is the
beneficiary of any extension of time within
which to file any Tax Return, no claim has
ever been made by any taxing authority in a
jurisdiction where any Company does not file
Tax Returns that it is or may be subject to
taxation by that jurisdiction,
(ii) all Taxes that are due, whether or not shown
on any Tax Return, have been paid in full,
(iii) all other written tax assessments that are
due have been paid in full,
(iv) no Tax Return has been the subject of
examination or audit by the Internal Revenue
Service ("IRS") or the appropriate state,
local or foreign taxing authority,
(v) no deficiencies have been asserted or
assessments made as a result of any
examinations of the Tax Returns referred to
in clause (i) by the IRS or the appropriate
state, local or foreign taxing authority,
(vi) there is no action, suit, proceeding, audit,
claim, deficiency or assessment pending with
respect to any Taxes of the Company, and
there are no Liens or other security
interests on any of the assets of any
Company that arose in connection with any
failure (or alleged failure) to pay any Tax
other than for current Taxes not yet due and
payable,
(vii) no waivers of statutes of limitations have
been given or requested by or with respect
to any Taxes of any Company and no
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<PAGE> 21
Company has agreed to any extension of time
with respect to any Taxes,
(viii) no written powers of attorney (for example,
IRS Form 2848 or other similar authority)
with respect to Taxes of the Companies are
currently in force,
(ix) there is no Contractual Obligation
(including without limitation any of the
Closing Agreements) covering any employee or
former employee of any Company that will
give rise to the payment of any amount that
will be not deductible by reason of Section
280G of the Code or subject to the excise
tax under Section 4999 of the Code,
(x) no Company will have as of the Closing Date
any liability for Taxes, except for Taxes
which have been specifically accrued for in
full on the books and records of the
Companies in the Ordinary Course of Business
(other than any such reserves for deferred
Taxes established to reflect timing
differences between book and Tax income),
(xi) each Company has withheld and paid over to
the proper government authorities all Taxes
required to have been withheld and paid
over, and complied with all information and
backup withholding requirements, including
maintenance of required records with respect
thereto, in connection with amounts paid or
owing to any employee, creditor, independent
contractor or other third party, and the
Companies will continue to do so with
respect to all such amounts paid by it
through the Closing Date,
(xii) no consent to the application of Section
341(f) of the Code has been made by or on
behalf of any Company with regard to any
assets or property held, acquired or to be
acquired by any Company,
(xiii) No Company is a party to any Tax allocation
or sharing agreement,
(xiv) Each Company has, with all requisite consent
of its shareholders, validly elected to be
treated as an S corporation under Section
1362 of the Code since May 14, 1990 for
On-Board, March 27, 1995 for Cruise and
November 21, 1996 for Boxer (the date of
each Company's inception, respectively) and,
where permitted, under the corresponding
provisions of applicable state and local
law.
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<PAGE> 22
None of the Subscribers have taken any
action or omitted to take any action which
action or omission could result in the loss
of subchapter S corporation status for any
Company for such period prior to the
Closing, other than actions or omissions
relating to the loss of S corporation status
which would occur as a result of the
acquisition of the Companies by Holdco One
pursuant to this Agreement.
4.6.3. No Illegal Payments, etc. To the Subscribers'
Knowledge, no Subscriber, Company or any of their respective officers,
employees or agents, has (a) directly or indirectly given or agreed to
give any gift, contribution, payment or similar benefit to any
supplier, customer, governmental employee or other Person who was in a
position to help or hinder any Company (or assist in connection with
any actual or proposed transaction) or made or agreed to make any
contribution, or reimbursed any political gift or contribution made by
any other Person, to any candidate for federal, state, local or foreign
public office (i) which at the time of such action would have subjected
(whether then or in the future) any Company or Holdco One to any damage
or penalty in any civil, criminal or governmental litigation or
proceeding, or (ii) the non-continuation of which has had or could
reasonably be expected to have a Material Adverse Effect, or (b)
established or maintained any unrecorded fund or asset or made any
false entries on any books or records for any purpose.
4.6.4. Employee Benefit Plans.
4.6.4.1. Disclosure. Schedule 4.6.4 sets forth all
Employee Plans to which any Company contributes or is
obligated to contribute, or under which any Company has or may
have any liability for premiums or benefits (an "Existing
Plan"), as well as all plans, agreements, policies and
arrangements that would be Existing Plans if the term
"employee" were construed to include outside directors,
consultants or other independent contractors who provide
services to or for the benefit of any Company. For purposes of
this Agreement, the term "Employee Plan" means any plan,
program, agreement, policy or arrangement (a "plan"), whether
or not reduced to writing, that is: (i) a welfare benefit plan
within the meaning of Section 3(1) of ERISA (a "Welfare
Plan"); (ii) a pension benefit plan within the meaning of
Section 3(2) of ERISA (a "Pension Plan"); (iii) a stock bonus,
stock purchase, stock option, restricted stock, stock
appreciation right or similar equity-based plan; or (iv) any
other deferred-compensation, retirement, welfare-benefit,
bonus, incentive fringe benefit, pension, profit-sharing,
severance, group insurance, death benefit or other employee
benefit plan, arrangement or policy, whether formal or
informal, which benefits or is for the benefit of any of its
employees or former employees or the beneficiaries of any such
employee or former employee. With
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<PAGE> 23
respect to each Existing Plan, the Subscribers have provided
or made available to Holdco One accurate, current and complete
copies of each of the following: (1) where the Existing Plan
has been reduced to writing, the plan document together with
all amendments; (2) where the Existing Plan has not been
reduced to writing, a written summary of all material plan
terms; (3) where applicable, copies of any trust agreements,
custodial agreements, insurance policies, administration
agreements and similar agreements, and investment management
or investment advisory agreements; (4) copies of any summary
plan descriptions, employee handbooks or any other employee
communications that (i) summarize any Existing Plan or the
benefits or coverage thereunder or (ii) describe in detail any
obligations under any Existing Plan; (5) in the case of any
Existing Plan that is intended to be qualified under Section
401(a) of the Code, a copy of the most recent determination
letter from the IRS, if any, and any related correspondence
with the IRS, including a copy of the request for such
determination; (6) in the case of any funding arrangement
intended to qualify as a VEBA under Section 501(c)(9) of the
Code, a copy of any IRS letter determining that it so
qualifies; (7) in the case of any Existing Plan for which
Forms 5500 are required to be filed, a copy of the three most
recently filed Forms 5500, with schedules attached; and (8)
copies of any notices, letters or other correspondence from
the IRS or the Department of Labor relating to the Existing
Plan. Except where the failure would not have a Material
Adverse Effect, all Employee Plans listed on Schedule 4.6.4
have been duly registered where required by, and are in good
standing under, all applicable legislation, and the Company
has fulfilled its funding obligations under all such plans.
4.6.4.2. No Defined Benefit Pension Plans. No
Company, nor any corporation, trust, partnership or other
entity that would be considered as a single employer with any
Company under Section 4001(b)(1) of ERISA or Sections 414(b),
(c), (m) or (o) of the Code has ever maintained or been
required to contribute to any Employee Plan subject to Title
IV of ERISA.
4.6.4.3. Plan Qualification; Plan Administration;
Certain Taxes and Penalties. Each Existing Plan that is
intended to be qualified under Section 401(a) of the Code has
been determined to be so qualified by the IRS and nothing has
occurred or failed to occur which would adversely affect or
result in the revocation of such favorable determination.
Except where the failure or occurrence would not have a
Material Adverse Effect, each Existing Plan, including any
associated trust or fund, has been administered in accordance
with its terms and with all applicable Legal Requirements, and
nothing has occurred with respect to any Existing Plan that
has subjected or could subject any Company to a liability
under Section 502 of ERISA or Chapter 43 of Subtitle D or
section 6652 of the Code, or that has subjected or could
subject any participant in or beneficiary of an Existing Plan
to a tax under Section 4973 of
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<PAGE> 24
the Code. Except where the failure would not have a Material
Adverse Effect, there have been no non-exempt prohibited
transactions within the meaning of Section 4975 of the Code or
406 of ERISA with respect to any Employee Plan.
4.6.4.4. All Contributions and Premiums Paid Funding.
Except where such matters, in the aggregate, would not have a
Material Adverse Effect, all required contributions,
assessments and premium payments on account of each Existing
Plan have been made. With respect to each Employee Plan,
except where such matters, in the aggregate, would not have a
Material Adverse Effect, as of the Quarterly Financials, there
will be no liability of the Company that has not either been
paid or accrued in accordance with GAAP applied consistently
with the past practice of the Company. There are no
liabilities with respect to any employee benefit plan other
than the Existing Plans.
4.6.4.5. Claims. There are no existing (or, to the
Subscribers' Knowledge, threatened) lawsuits, claims or other
controversies relating to an Existing Plan, other than claims
for information or benefits in the normal course, except where
such matters, in the aggregate, would not have a Material
Adverse Effect.
4.6.4.6. Retiree Benefits; Certain Welfare Plans.
Other than as required under Section 601 et seq. of ERISA, no
Existing Plan that is a Welfare Plan provides benefits or
coverage for any period following retirement or other
termination of employment. There is no and never has been any
welfare benefit trust or fund that constitutes or is
associated with an Existing Plan that is intended to be exempt
from federal income tax under Section 501(c)(9) of the Code.
No event has occurred that could result in a loss of any
deduction to any Company under Section 162(n) of the Code.
4.6.4.7. No Restrictions On Termination. Except as
required to maintain the tax-qualified status of any Existing
Plan intended to qualify under Section 401(a) of the Code, no
provision of any Existing Plan would limit the ability of any
Subscriber, the Company, or Holdco One to amend or terminate
any Existing Plan.
4.6.4.8. Employer Securities. No Existing Plan would
require the distribution of "employer securities" within the
meaning of Code Section 409(l) in satisfaction of benefit
obligations thereunder.
4.6.4.9. Effect of Transactions. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby will not involve any
prohibited transaction within the meaning of ERISA.
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<PAGE> 25
4.7. Environmental and Safety Matters, etc. Each Company is and has at
all times been in compliance in all respects with all applicable Legal
Requirements relating to environmental, natural resource, health or safety
matters, except such non-compliance as has not had and could not reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule 4.7,
there is no suit, claim, action or proceeding, pending (or, to the Subscribers'
Knowledge, threatened) against any Company in respect of (i) noncompliance with
any such Legal Requirement, (ii) except as disclosed pursuant to Section 4.10,
personal injury, wrongful death, other tortious conduct, or the existence of any
nuisance relating to materials, commodities or products held, used, sold,
transferred, manufactured or disposed of by or on behalf of any Company or any
predecessor entity made of, containing or incorporating any hazardous, noxious
or toxic materials, commodities or substances, or (iii) the presence or release
or threatened release into the environment of any pollutant, contaminant or
toxic, hazardous or noxious material, substance or waste, whether solid, liquid
or gas and whether generated by any Company or any predecessor entity or located
at or about a site included in the Real Property or heretofore owned by any
Company or any predecessor entity or currently leased or otherwise used by any
Company. No event has occurred or condition exists or operating practice is
being employed that will give rise to any Liability or Losses on the part of any
Company (or, after the Closing, Holdco One) either at the present or at any
future time (including, without limitation, any obligation to conduct any
remedial or monitoring work) under any Environmental Laws or otherwise resulting
from or relating to the handling, storage, use, transportation or disposal of
any Hazardous Substance by or on behalf of any Company or any of their
respective predecessors or otherwise in or near their respective properties.
4.8. Labor Relations. No employee of any Company is represented by a
labor union, and to the Subscribers' Knowledge, no petition has been filed or
proceedings instituted by any employee or group of employees with any labor
relations board seeking recognition of a bargaining representative. To the
Subscribers' Knowledge, there is no organizational effort currently being made
or threatened by or on behalf of any labor union to organize any employees of
any Company. There are no labor or employment disputes pending between any
Company on the one hand and any of their respective employees on the other hand,
except for such disputes with individual employees arising in the Ordinary
Course of Business which have not had and could not reasonably be expected to
have a Material Adverse Effect.
4.9. Customers, Suppliers and Distributors. Except as set forth in
Schedule 4.9, since the Balance Sheet Date (i) no customer (or group of
customers) or any distributor of the Business has given any Company written, or
to Subscriber's Knowledge, oral notice that such customer (or group of
customers) or distributor will cease to purchase products or services or
materially reduce the amount of products and services purchased from any
Company, and (ii) no supplier or vendor (or group of suppliers or vendors) of
the Business has given any Company written, or Subscriber's Knowledge, oral
notice that such supplier or vendor (or group of suppliers or vendors) will
cease to supply or restrict the amount supplied or change
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<PAGE> 26
its price or terms to any Company of any products or services, in each case in a
manner or to a degree which could reasonably be expected to have a Material
Adverse Effect.
4.10. Litigation, etc. There is no litigation, at law or in equity, or
any proceeding before or investigation by any Governmental Authority pending or,
to the Subscribers' Knowledge, threatened against any Company, except for (i)
such of the foregoing as are described in Schedule 4.10, and (ii) matters which
have not had and could not reasonably be expected to have a Material Adverse
Effect. There is no litigation at law or in equity, or any proceeding before or
investigation by any Governmental Authority pending or to Subscribers' Knowledge
threatened against any Company which seeks rescission of, seeks to enjoin the
consummation of, or otherwise relates to, this Agreement or any of the
transactions contemplated hereby. No judgment, decree or order of any
Governmental Authority (i) has been issued against any Company, or (ii) to
Subscribers' Knowledge has been issued against any Person other than the
Companies, in each case which granted equitable relief binding any Company or
which has otherwise had or could reasonably be expected to have a Material
Adverse Effect.
4.11. Disclosure. This Agreement (including without limitation the
Schedules hereto) does not contain and will not contain any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
4.12. Banking Facilities, Powers of Attorney, etc. Schedule 4.12 hereto
sets forth a true, correct and complete list of each bank, savings and loan or
similar financial institution in which any Company has an account or safety
deposit box or other arrangement, and any numbers of the accounts or safety
deposit boxes maintained by any Company thereat, the names of all persons
authorized to draw on each such account or to have access to any such safety
deposit box facility, and any outstanding powers of attorney executed on behalf
of any Company in respect of such Company. No Company has any general or special
powers of attorney outstanding (whether as grantor or grantee thereof) or has
any obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks or letters of credit, respectively, endorsed or made in the
ordinary course of business.
4.13. Books and Records. The minute books, stock record books and other
records of the Companies, all of which have been made available to Holdco One,
are true, complete and correct and have been maintained in accordance with sound
business practices in all material respects. The minute books of the Companies
contain true, accurate and complete records in all material respects of all
meetings held of, and corporate action taken by, the stockholders, the boards of
directors and committees of the boards of directors of the Companies, and no
meeting of any such stockholders, board of directors or committee has been held
for which
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<PAGE> 27
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of those books and records will be in the possession of the
Companies.
4.14. Brokers or Finders Fees. No Company, Subscriber, nor any agent of
any of them has incurred any liability, contingent or otherwise, for brokerage
or finder's fees or agent's commissions or other similar payments in connection
with this Agreement or the transactions contemplated hereby.
4.15. Shareholder Agreements. The Subscribers represent and warrant
that execution of this agreement constitutes required consent to the
transactions contemplated hereby and waiver of all rights under the Restated
Shareholder Agreement, dated as of October 19, 1996 of On-Board Media, Inc., as
amended by the First Amendment to the Restated Shareholder Agreement and the
Shareholder Agreement, dated as of October 19, 1996, of Cruise Management
International, Inc.
4.16. Amendments to Disclosure Schedules. From the date hereof through
the day which is three business days prior to the Closing Date, the Subscribers
may amend or supplement the disclosure schedules provided by them pursuant to
this Agreement by providing Holdco One with a copy of the amendments by
facsimile, hand delivery or overnight courier; provided, however, (a) if such
amendments relate to any fact or circumstance that occurred prior to the date
hereof, the Subscribers shall remain liable pursuant to Section 10 hereof to
Holdco One for any Losses that result from such facts and circumstances, and (b)
if such amendments relate to any fact or circumstance that occurs after the date
hereof, Holdco One shall have the option of (i) accepting and assuming such
disclosures and the same shall become a part of this Agreement or (ii)
terminating this Agreement.
5. INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS.
In order to induce Holdco One to enter into and perform this Agreement
and to consummate the transactions contemplated hereby, each Subscriber
severally and not jointly represents and warrants to Holdco One that the
statements contained in this Article 5 are correct and complete as of the date
of this Agreement and, unless a date is specified in such representation and
warranty, will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article 5); provided, however, that the Subscribers
may amend such disclosures as set forth in Section 5.5 hereof.
5.1. Enforceability. This Agreement has been duly authorized, executed
and delivered by such Subscriber and is Enforceable against such Subscriber and,
on or prior to the Closing Date, each Closing Agreement to which such Subscriber
is a party will be duly executed and delivered by such Subscriber, and will be
Enforceable against such Subscriber.
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<PAGE> 28
5.2. Authorization. The Trustee of each Trust has all power and
authority to enter into and perform this Agreement and the other documents and
instruments to be delivered pursuant to this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by each Trust of
this Agreement have been duly and validly authorized by all necessary action on
the part of each Trust. This Agreement constitutes the legal, valid and binding
obligation of each Trust. Gerald Robins is the qualified and acting Trustee of
each Trust and, as such, has all requisite power and authority to execute,
deliver and perform this Agreement and the other documents and instruments to be
delivered pursuant to this Agreement on behalf of the Trusts and to consummate
the transactions contemplated hereby and thereby.
5.3. Non-Contravention, etc. Except for any required filings under the
Hart-Scott-Rodino Act and the expiration of the applicable waiting period
thereunder, (i) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby does or will constitute,
result in or give rise to any breach or violation of, or any default or right or
cause of action under, any Contractual Obligation of such Subscriber or any
Legal Requirement applicable to such Subscriber and (ii) no approval, consent,
waiver, authorization or other order of, and no declaration, filing,
registration, qualification or recording with, any Governmental Authority or any
other Person, including without limitation any party to any Contractual
Obligation of such Subscriber, is required to be made by or on behalf of such
Subscriber in connection with the execution, delivery or performance of this
Agreement and the transactions contemplated hereby by such Subscriber, except as
set forth in Schedule 5.3. The items set forth in Schedule 5.3 shall have been
obtained or made and be in full force and effect at the Closing. The execution
and delivery of this Agreement and the Closing Documents to which the Trusts are
a party do not, and the performance of the Trusts of the terms thereof
applicable to them will not, violate the terms of or conflict with the governing
documents of any Trust.
5.4. Title, etc. Such Subscriber has good and valid title to the Shares
owned by such Subscriber, free and clear of any Liens (subject to such
restrictions as may be imposed under applicable federal and state securities
laws). Except for this Agreement, there is no Contractual Obligation pursuant to
which such Subscriber has, directly or indirectly, granted any option, warrant
or other right to any Person to acquire any Shares of or direct or indirect
interests in any Company. Upon delivery of certificates representing such
Shares, and payment therefor as contemplated herein, Holdco One will receive
good and valid title to such Shares free and clear of any Liens and subject to
no rescission or similar rights or equities of any kind (subject to such
restrictions as may be imposed under applicable federal and state securities
laws).
5.5. Amendments to Disclosure Schedules. From the date hereof through
the day which is three business days prior to the Closing Date, the Subscribers
may amend or supplement the disclosure schedules provided by them pursuant to
this Agreement by providing Holdco One with a copy of the amendments by
facsimile, hand delivery or overnight courier;
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provided, however, (a) if such amendments relate to any fact or circumstance
that occurred prior to the date hereof, the Subscribers shall remain liable
pursuant to Section 10 hereof to Holdco One for any Losses that result from such
facts and circumstances, and (b) if such amendments relate to any fact or
circumstance that occurs after the date hereof, Holdco One shall have the option
of (i) accepting and assuming such disclosures and the same shall become a part
of this Agreement or (ii) terminating this Agreement.
5.6. Organization. Each Trust has been duly created and is validly
existing under the laws of the State of Florida.
5.7. Investment. Each of the Subscribers (a) understands that the
Holdco One Stock has not been, and will not be, registered under the Securities
Act of 1933, and is being offered and sold in reliance upon U.S. federal and
state exemptions for transactions not involving any public offering, (b) is
acquiring the Holdco One Stock solely for its own account for investment
purposes, and not with a view to the distribution thereof, (c) is a
sophisticated investor with knowledge and experience in business and financial
matters, (d) has received certain information concerning Holdco One and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Holdco One Stock, and (e) is
able to bear the economic risk and lack of liquidity inherent in holding the
Holdco One Stock.
6. REPRESENTATIONS AND WARRANTIES OF HOLDCO ONE.
In order to induce the Subscribers to enter into and perform this
Agreement and to consummate the transactions contemplated hereby, Holdco One
represents and warrants to each Subscriber that the statements contained in this
Article 6 are correct and complete as of the date of this Agreement and, unless
a date is specified in such representation and warranty, will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Article 6);
provided, however, that Holdco One may amend such disclosure schedules as set
forth in Section 6.11 hereof.
6.1. Corporate Matters. Cruise Line Holdings Co. is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has all requisite power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. As of the
Closing Date, Dutch Holding Company will be duly organized, validly existing and
in good standing as a Dutch private company with limited liability and will have
all requisite power and authority to consummate the transactions contemplated
hereby. As of the Closing Date, Dutch Holding Company will be duly qualified or
licensed to do business as a foreign corporation, and will be in good standing
as such, in each jurisdiction in which the failure to be so qualified or
licensed and in good standing could reasonably be expected to have a Material
Adverse Effect. Holdco One has heretofore
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delivered to the Subscribers a true and complete copy of Holdco One's Charter
and By-laws, substantially in the form which such Charter and By-laws will exist
on the Closing Date.
6.2. Authorization and Enforceability. This Agreement has been duly
authorized, executed and delivered by Holdco One and is Enforceable against
Holdco One and, on or prior to the Closing Date, each Closing Agreement to which
it is a party will be duly authorized, executed and delivered by Holdco One, and
will be Enforceable against Holdco One.
6.3. Non-Contravention, etc. Except for any required filings under the
Hart-Scott-Rodino Act and the expiration of the applicable waiting period
thereunder, (i) neither the execution, delivery nor performance of this
Agreement nor the consummation of the transactions contemplated hereby does or
will constitute, result in or give rise to any breach or violation of, or any
default or right or cause of action under, any Contractual Obligation of or the
Charter or By-Laws of Holdco One or any Legal Requirement applicable to Holdco
One and (ii) no approval, consent, waiver, authorization or other order of, and
no declaration, filing, registration, qualification or recording with, any
Governmental Authority or any other Person, including without limitation any
party to any Contractual Obligation of Holdco One, is required to be obtained or
made by or on behalf of Holdco One in connection with the execution, delivery or
performance of this Agreement and the transactions contemplated hereby by Holdco
One, except for items which shall have been obtained or made and shall be in
full force and effect at the Closing.
6.4. Brokers' Fees. Holdco One has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Subscribers could
become liable or obligated.
6.5. Investment. Holdco One (a) understands that the Shares have not
been, and will not be, registered under the Securities Act of 1933, and are
being offered and sold in reliance upon U.S. federal and state exemptions for
transactions not involving any public offering, (b) is acquiring the Shares
solely for its own account for investment purposes, and not with a view to the
distribution thereof, (c) is a sophisticated investor with knowledge and
experience in business and financial matters, (d) has received certain
information concerning the Companies and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding the Shares, and (e) is able to bear the economic risk and
lack of liquidity inherent in holding the Shares.
6.6. Capitalization of Holdco One. Immediately after the Closing, all
of the issued and outstanding stock of Holdco One will have been duly
authorized, validly issued, fully paid, and nonassessable, and will held of
record as set forth in Schedule 6.6 hereto. Except as disclosed in Schedule 6.6
hereto, immediately after the Closing, (i) there will be no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
Holdco One to issue, sell, or otherwise cause to become outstanding any of its
capital stock (ii) there will be
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no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Holdco One, and (iii) there
will be no voting trusts, proxies or other agreements or understandings with
respect to the voting of the capital stock of Holdco One.
To be delivered within a reasonable time after the signing hereof and
prior to the Closing as an addition to Schedule 6.6 is a pro forma balance sheet
for Holdco One, dated as of the date of this Agreement, which gives effect on a
pro forma basis to (i) the consummation of the Greyhound Acquisition, (ii) the
acquisition contemplated by this Agreement, and (iii) the contemplated financing
for both such acquisitions.
6.7. Greyhound Acquisition. The Share Purchase Agreement between Viad
Corp. and Cruise Line Holdings Co. dated as of July 31, 1998 for the acquisition
by Cruise Line Holdings Co. of Greyhound Leisure Services, Inc. (the "Greyhound
Acquisition") has been executed by all parties thereto and to Holdco One's
Knowledge there has been no default thereunder. A true and complete copy of the
such purchase and sale agreement has been provided to the Subscribers. As of the
Closing Date, (i) such agreement shall not, without the written consent of the
Majority Subscribers, have been subject to any amendment or waiver which could
be reasonably expected to have a Material Adverse Effect on the Subscribers; and
(ii) Subscribers shall have been provided notice of all amendments to such
contract.
6.8. Commitment Letters. Holdco One has furnished to Subscribers true
and complete copies of the debt and equity commitment letters attached as
Schedule 6.8 hereto (the "Commitment Letters") by which the funding for the cash
portion of the Consideration will be available for consummation of the
transactions contemplated hereby. As of the date hereof, Holdco One is not aware
of any facts or circumstances causing Holdco One to believe that Holdco One will
not be able to obtain financing in accordance with the terms of the Commitment
Letters.
6.9. Investment Company. Holdco One is not an "Investment Company" as
such term is defined under the Investment Company Act of 1940, as amended, and
the regulations promulgated thereunder.
6.10. Liabilities. Holdco One has not engaged in any business or
entered into or performed any Contractual Obligations or incurred any expenses
or liabilities since the date of its incorporation except for actions, expenses
and liabilities incident to its organization or carrying out the transactions
contemplated by this Agreement, the Closing Agreements and the Greyhound
Acquisition agreements.
6.11. Amendments to Disclosure Schedules. From the date hereof through
the day which is three business days prior to the Closing Date, Holdco One may
amend or supplement the disclosure schedules provided by them pursuant to this
Agreement by providing the Subscribers with a copy of the amendments by
facsimile, hand delivery or overnight courier; provided, however, (a) if such
amendments relate to any fact or circumstance that occurred
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prior to the date hereof, Holdco One shall remain liable pursuant to Section 10
hereof to the Subscribers for any Losses that result from such facts and
circumstances, and (b) if such amendments relate to any fact or circumstance
that occurs after the date hereof, the Majority Subscribers shall have the
option of (i) accepting and assuming such disclosures and the same shall become
a part of this Agreement or (ii) terminating this Agreement.
6.12. Disclosure. This Agreement (including without limitation the
Schedules hereto) does not contain and will not contain any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
7. CERTAIN AGREEMENTS OF THE PARTIES.
7.1. Certain Pre-Closing Matters.
7.1.1. Exclusivity. Prior to the Closing, no Subscriber will,
and the Subscribers, as a group, will cause the Companies and all
affiliates, directors, officers, employees, representatives and agents
of any Company, or any Subscriber not to, directly or indirectly,
solicit or initiate or enter into discussions or transactions or
Contractual Obligations with or encourage or provide any information to
any Person (other than Holdco One and its designees) concerning any
sale of stock by (or by the stockholders of), or any merger or share
exchange or sale or other disposition of securities or substantial
assets or recapitalization or any similar transaction involving, any
Company. Each Subscriber will notify Holdco One immediately upon
becoming aware that any Person has made any proposal, offer, inquiry,
or contact with respect to any such transaction.
7.1.2. Access to Premises and Information. Prior to the
Closing, the Subscribers will cause the Companies to permit Holdco One,
its prospective investors and lenders, and their respective authorized
representatives, to have reasonable access, upon giving reasonable
notice, to their premises and documents, books and records and to make
copies at Holdco One's reasonable expense during normal business hours
of such financial and operating data and other information with respect
to the Companies as Holdco One, such investors or lenders, or any of
their representatives shall reasonably request. The Subscribers will
make available to Holdco One at Holdco One's reasonable expense such
additional information and copies of documents, books and records
relating to the Companies as may be reasonably requested by Holdco One,
such investors or lenders, or any of their representatives.
7.1.3. Confidentiality Covenant of Holdco One. Holdco One will
not, and will not permit any of its prospective investors or lenders or
its or their respective representatives to, directly or indirectly,
without the prior written consent of the Subscribers, disclose any
information relating to the Companies furnished to Holdco
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One or such investors or lenders by or on behalf of any Company or use
any such information for any purpose other than in evaluating the
Companies in connection with the transactions contemplated hereby;
provided, however, that (i) such information may be disclosed to any of
the representatives of Holdco One or to its prospective investors or
lenders and their respective representatives who have a need to know
such information in connection with the transactions contemplated
hereby provided that such Person agrees to keep such information
confidential to the same extent provided for in this Section 7.1.3 with
respect to Holdco One, and (ii) the information subject to the
foregoing provisions of this sentence shall be deemed not to include
any information generally available or known by the public (other than
as a result of disclosure in violation hereof) or any information
received by Holdco One, such investor or lender or any of their
representatives from a third party not bound by a duty of
confidentiality to the Companies or independently developed by Holdco
One, such investor or lender or any of their representatives without
violating any of its obligations under this Section 7.1.3. In addition,
confidential information may be disclosed if required by legal process
or by operation of applicable law, so long as reasonable prior notice
is given of such disclosure and a reasonable opportunity is afforded to
contest the same. In the event of the termination of this Agreement,
upon request of the Subscribers, Holdco One, such investors and
lenders, and their respective representatives will return all copies of
any written materials in their possession furnished by or on behalf of
the Subscribers. The foregoing provisions of this Section 7.1.3 (i)
shall supersede all prior confidentiality obligations of Berkshire
Partners LLC ("Berkshire") or Holdco One, (ii) shall terminate upon the
consummation of the Closing insofar as they relate to the Companies,
and (iii) shall not prohibit any retention of records or disclosure
required by law or made in connection with the enforcement of any right
or remedy relating to this Agreement or the transactions contemplated
hereby.
7.1.4. Operation of Business in the Ordinary Course. Prior to
the Closing, the Subscribers will cause the Companies to conduct their
Business only in the Ordinary Course of Business and maintain the
relationships of the Companies with customers, distributors, suppliers,
vendors, employees, agents and others. Without limiting the generality
of the foregoing, on and prior to the Closing Date the Subscribers will
cause the Companies not to, without the prior written consent of Holdco
One:
(a) Enter into any transactions otherwise than on an
arms'-length basis or any transaction with any Subscriber or
any Affiliate of any Subscriber (other than transactions
between a Company on the one hand and another Company on the
other);
(b) Pay any Compensation other than in the Ordinary
Course of Business at the rates in effect throughout the
period covered by the Monthly Financials or increase any
Compensation of any of the Subscribers;
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(c) Except as contemplated by the Closing Agreements,
make or declare any Distribution;
(d) Incur any Debt or become liable in respect of any
Guarantee except in the Ordinary Course of Business (other
than Guarantees by one Company of obligations of another
Company) except for the incurrence of Debt, up to an aggregate
total of $1,000,000, for the prepayment of the Carnival
Commissions; or
(e) Except as contemplated by the Closing Agreements,
sell, lease to others or otherwise dispose of any portion of
its assets having a net book value equal to or greater than
$50,000 (except for sales of inventory in the Ordinary Course
of Business).
7.1.5. Certain Notices. Prior to the Closing, (i) each
Subscriber will promptly, upon becoming aware thereof, give Holdco One
written notice of any material development affecting or which could
reasonably be expected to affect the Business or the financial
condition of the Companies; and (ii) each party will give the other
prompt written notice upon becoming aware of any breach of any
representation or warranty of such notifying party. The notification
called for by this Section 7.1.5 shall, to the extent it affects an
existing schedule or creates the need for a new schedule, be provided
as a disclosure schedule amendment in accordance with Section 4.16, 5.5
or 6.11, as applicable.
7.1.6. Preparation for Closing. Each party will use its
reasonable best efforts to bring about the fulfillment of each of the
conditions precedent to the obligations of the other parties hereto set
forth in this Agreement, and will render all reasonable assistance (not
requiring the expenditure of funds) to such other parties requested by
such other parties in connection with such other parties' best efforts.
7.1.7. Amendment of Articles of By-Laws. Prior to the Closing,
the Subscribers will not amend nor permit to be amended any Company's
Charter and Bylaws, or make any change in the authorized or issued
capital stock of any Company without the written consent of Holdco One.
7.2. Certain Closing Matters.
7.2.1. Expenses of Transaction. Without in any way limiting
the provisions of Section 10, whether or not the transactions
contemplated hereby are consummated, each party and each Company will
pay the respective expenses incurred by it or for its benefit in
connection with the preparation and execution of this Agreement, the
compliance herewith and the transactions contemplated hereby; provided,
however, that the Companies may pay up to $150,000 in the aggregate of
the expenses incurred by
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the Subscribers. The fees and expenses of Holdco One shall include
without limitation the reasonable fees and expenses of Berkshire,
Holdco One's lenders and their respective attorneys, accountants and
other advisers.
7.2.2. Publicity, etc. No announcement shall be made by any
party to the public, any Company's customers or employees, or to any
other Person with respect to the consummation of the transactions
contemplated hereby or the terms thereof, other than the parties'
respective partners, employees, advisers, agents, Affiliates and
representatives who have a need to know in connection with such
transactions without the prior consent of Holdco One and (prior to the
Closing) the Majority Subscribers; provided, however, that this Section
7.2.2 shall not prohibit (i) any private disclosure by any Person
providing or proposing to provide financing to Holdco One or its
Affiliates in the ordinary course to any of such Person's investors,
(ii) any disclosure required by law, including without limitation
disclosures required under the Hart-Scott Rodino Act (in which case
prior written notice of such announcement shall be given to the other
parties), or (iii) any disclosure made in connection with the
enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby.
7.3. Confidentiality Covenants of Subscribers. Each of the Subscribers
acknowledges that the success of the Companies after the Closing depends upon
the continued preservation of the confidentiality of certain information
possessed by such Subscriber, that the preservation of the confidentiality of
such information by such Subscriber is an essential premise of the bargain
between the Subscribers and Holdco One, and that Holdco One would be unwilling
to enter into this Agreement in the absence of this Section 7.3. Accordingly,
each Subscriber hereby agrees with Holdco One that such Subscriber will not, and
will cause its Affiliates not to, at any time on or after the Closing Date,
directly or indirectly, without the prior written consent of Holdco One,
disclose or use, in any way harmful to Holdco One or any Company, or otherwise
contrary to the interests of Holdco One or any Company, any confidential or
proprietary information involving or relating to Holdco One or any Company;
provided, however, that the information subject to the foregoing provisions of
this sentence shall be deemed not to include any information known generally in
the industry (other than as a result of disclosure in violation hereof by any
Subscriber or any such Affiliate thereof); and provided, further, that the
provisions of this Section 7.3 shall not prohibit any retention of records or
disclosure required by law, so long as reasonable prior notice is given of such
disclosure and a reasonable opportunity is afforded to contest the same or made
in connection with the enforcement of any right or remedy relating to this
Agreement or the transactions contemplated hereby.
7.4. Tax Matters.
7.4.1. Payment of Transfer Taxes and Other Charges. The
Subscribers shall pay all stock transfer Taxes, real property transfer
Taxes, sales Taxes, documentary stamp Taxes, recording charges and
other similar Taxes arising under any Legal Requirement
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in connection with the transfer of the Shares. Each of the parties
hereto shall prepare and file, and shall fully cooperate with each
other party with respect to the preparation and filing of, any Tax
Returns and other filings relating to any such Taxes or charges as may
be required. The Subscribers shall be responsible for, shall indemnify
and hold Holdco One harmless against and from all Taxes of the
Companies and any person for which any of the Companies has any
liability under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) as a transferee or successor,
by contract or otherwise for all taxable periods (or portions thereof)
ending on or before the Closing Date. Holdco One and the Companies
shall be responsible for and shall indemnify and hold Subscribers
harmless against all Taxes relating to ownership and operations of any
of the Companies for all taxable periods (or portions thereof)
beginning on the date immediately following the Closing Date or
thereafter. In order to apportion appropriately any income Taxes
relating to any taxable year or period that begins before or on and
ends after the Closing Date, the parties hereto shall, to the extent
permitted or not prohibited by applicable law, elect with the relevant
taxing authority if required or necessary, to terminate the taxable
year as of the Closing Date. In any case where applicable law does not
permit any of the Companies to treat such date as the end of a taxable
year of such Company, then whenever it is necessary to determine the
liability for income Taxes of such Company, for a portion of a taxable
year, such determination shall (unless otherwise agreed to in writing
by Holdco One and Subscribers) be determined by a closing of such
Company's books, except that exemptions, allowances or deductions that
are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned on a time basis. In order to
apportion appropriately any Taxes, other than income Taxes, relating to
any taxable year or period that begins before or on and ends after the
Closing Date, (a) ad valorem Taxes (including, without limitation, real
and personal property Taxes) shall be accrued on a daily basis over the
period for which the Taxes are levied, or if it cannot be determined
over what period the Taxes are being levied, over the fiscal period of
the relevant taxing authority, in each case irrespective of the lien or
assessment date of such Taxes, and (b) franchise and other privilege
Taxes not measured by income shall be accrued on a daily basis over the
period to which the privilege relates.
7.4.2. Withholding. There shall be withheld from any amount
payable under this Agreement such amounts, if any, as may be required
to be withheld under applicable Legal Requirements.
7.4.3. Certificates. Holdco One and Subscribers further agree,
upon request, to use their best efforts to obtain any certificate or
other document from any Governmental Authority or any other person as
may be necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby). Subscribers agree to deliver to
Holdco One a FIRPTA certificate as provided in Treasury Regulation
Section 1.1445-2(b)(2).
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7.4.4. Tax Sharing Agreements. All Tax sharing agreements,
policies, arrangements and practices with respect to or involving any
Company will terminate as of the Closing Date and will have no further
effect for any taxable year (whether the current year, a future year,
or a past year). Any powers of attorney with respect to Taxes any
Company currently in force will be terminated effective as of the
Closing Date.
7.4.5. Section 351 Issues.
(a) Each of Holdco One and the Subscribers intend the
Berkshire Contribution and the Subscribers' Contribution to
qualify for nonrecognition treatment under Section 351 of the
Code, except with respect to any gain recognized pursuant to
Section 351(b) of the Code.
(b) As of the Closing Date, each Subscriber
represents that it has no present intent, plan or commitment
to sell or exchange the Holdco One stock acquired in exchange
for such Subscriber's Share of the Subscribers' Contribution.
(c) As of the Closing Date, Berkshire Investors LLC
represents that it has no present intent, plan, or commitment
to sell or exchange the Holdco One Stock acquired in exchange
for the Berkshire Contribution.
(d) As of the Closing Date, Holdco One has no present
intent, plan or commitment to issue an amount of additional
shares of its stock or options to acquire shares of its stock,
except for options to be granted to employees of Holdco One or
its subsidiaries and warrants issued to lenders to Holdco One
or its subsidiaries. As of the Closing Date, Holdco One has no
plan or intention to dispose of the Shares other than in the
normal course of business operations, except to transfer such
Shares to its subsidiary that is wholly-owned, which in turn
will transfer such Shares to other subsidiaries that are
wholly-owned through a chain of ownership.
(e) Until such time as the Gain Recognition
Agreements expire, Holdco One agrees not to take any action
which will trigger any gain recognition under any Gain
Recognition Agreement without obtaining the prior written
consent of all of the Subscribers who entered into such Gain
Recognition Agreements.
(f) Each of Holdco One and the Subscribers covenant
and agree not to take any action which would cause either of
the Berkshire Contribution or the Subscribers' Contribution to
fail to qualify for such nonrecognition treatment
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under Section 351 of the Code, except with respect to any gain
recognized pursuant to Section 351(b) of the Code.
(g) Holdco One will indemnify each Subscriber for any
additional Taxes it incurs as a result of any inaccuracy of
the representations in Sections 7.4.5(c) and (d) and any
nonfulfillment of any agreement or covenant of Holdco One in
Section 7.4.5(e) or (f). This shall be each Subscriber's sole
remedy in respect of these matters.
(h) If Holdco One fails to pay to the applicable
Subscribers the amount of any indemnification obligation
arising from Section 7.4.5(g) within 45 days of receiving
notice of, and the amount of, such obligation, beginning on
the 46th day following such notice, the amount of such
obligation shall accrue interest daily at the lesser of (i) an
annual rate equal to the prime rate (defined as the rate of
interest per annum publicly announced from time to time by
Credit Suisse First Boston as its prime rate in effect at its
principal office in New York City) plus 11 percent or (ii) the
highest applicable interest rate permitted by law.
7.4.6. Applicable Period. The obligations of the parties set
forth in this Section 7.4 relating to Taxes will, except as otherwise
agreed in writing, be unconditional and absolute and will remain in
effect without limitation as to time or amount of recovery by any party
hereto until thirty (30) days after the expiration of the applicable
statute of limitations governing the Tax to which such obligations
relate (after giving effect to any agreement extending or tolling such
statute of limitations).
7.5. Noncompetition. Each Subscriber agrees that, in consideration of
the benefits which each of them will realize upon consummation of the
transactions contemplated by this Agreement (including the payment of
substantial cash payments in respect of their equity ownership of the
Companies), it shall not, on or prior to the date which is two (2) years after
the Closing Date, directly or indirectly, run, own, manage, operate, control, be
employed by, provide consulting services to, be an officer or director of,
participate in, lend his, her or its name to, invest in or be connected in any
manner with the management, ownership, operation or control of any business,
venture or activity involved in the business of providing (i) cruise ship art
auction services, (ii) port lecturing, (iii) custom publishing for the cruise
industry, (iv) custom publishing for the hotel or resort industries (v) custom
publishing for the airline industry, or (vi) cruise ship gift shop sales,
provided, however, no Subscriber shall be considered to be in default of this
Section 7.5 solely by virtue of holding for portfolio purposes as a passive
investor not more than five percent (5%) of the issued and outstanding equity
securities of a corporation, the equity securities of which are listed or quoted
on a stock exchange or an over-the-counter market within the United States.
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7.6. Continuation of Benefits. Holdco One agrees, (a) for a period of
at least 2 years from the Closing Date, to continue to provide or enable,
materially the same types at materially the same levels, of benefits disclosed
on Schedule 4.6.4 and (b) for a period of at least 1 year from the Closing Date,
to continue those corporate insurance policies listed on Schedule 7.6 at
materially the same level noted on Schedule 7.6.
7.7. Guarantee. Holdco One will use its reasonable best efforts to
assist in the termination of Philip Levine's guarantee of Cruise's obligations
under the agreement dated April 18, 1996 among Park West at Sea, Inc., Levine,
Cruise and the other parties thereto (the "Park West Contract"). From the date
hereof until such guarantee is eliminated, fees collected from the cruise lines
which are subject to the Park West Contract will be deposited directly into a
separate bank account within 2 business days of receipt of any funds in such
account, in which no other funds may be commingled and for which Mr. Levine
shall be sole signatory. 92% of such collected proceeds will be paid to Park
West at Sea, Inc. and 8% will be paid to Cruise. In the event such guarantee is
not terminated within a reasonable period of time after the Closing, Mr. Levine
shall have the right in his sole discretion to offer to amend, and Holdco One
shall assent to the amendment, of the Park West Contract so that fees collected
from the cruise lines may be collected directly by Park West at Sea, Inc.
7.8. Management Options. Holdco One will grant to mutually agreed upon
management employees of the Companies shortly after the closing options which
will represent 1% of the fully diluted and outstanding common stock of Holdco
One calculated as of the Closing.
7.9. Assignment and Amendment. Holdco One, Berkshire Investors LLC and
the Subscribers agree that on or prior to the Closing, this Agreement shall be
assigned from Cruise Line Holdings Co. to Dutch Holding Company through the
execution of an Assignment and Amendment Agreement pursuant to which (i) Dutch
Holding Company shall assume the rights and obligations of Cruise Line Holdings
Co., and thereafter all references to "Holdco One" within this Agreement shall
be deemed to refer to Dutch Holding Company including, without limitation, such
references within Sections 2, 3 and 6, and (ii) such changes shall be made to
this Agreement as are necessary to comply with Dutch law.
8. CONDITIONS TO THE HOLDCO ONE'S OBLIGATION TO CLOSE.
The obligations of Holdco One at the Closing to consummate the
transactions contemplated by this Agreement and to execute and deliver the
Closing Agreements are subject to the satisfaction, at or prior to the Closing,
of all of the following conditions, compliance with which, or the occurrence of
which, may be waived prior to the Closing in writing by Holdco One in its sole
discretion:
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8.1. Representations, Warranties and Covenants.
8.1.1. Continued Accuracy of Representations and Warranties.
All representations and warranties of any Subscriber contained in this
Agreement shall be true and correct as of the Closing with the same
force and effect as if made at and as of the Closing (except that
representations and warranties made as of a specific date shall
continue to be true and correct as at such date).
8.1.2. Performance of Agreements. Each Subscriber shall have
performed and satisfied all covenants and agreements required by this
Agreement to be performed or satisfied by such Subscriber at or prior
to the Closing.
8.1.3. Closing Certificate. At the Closing, each Subscriber
shall have furnished to Holdco One an unqualified certificate, signed
by such Subscriber, dated the Closing Date, to the effect that the
conditions specified in Sections 8.1.1 and 8.1.2 applicable to such
Subscriber have been satisfied.
8.2. Indebtedness. The Companies shall have no Debt outstanding
immediately prior to the Closing except for (i) up to an aggregate total of
$1,000,000 of Debt for the prepayment of the Carnival Commissions, and (ii) such
Debt as the Companies were required to incur for the payment of Tax
Distributions.
8.3. Greyhound Acquisition. The Greyhound Acquisition shall have been
consummated.
8.4. Consents, etc. The Subscribers shall have secured written consents
or waivers under all Contractual Obligations of the Subscribers and the
Companies set forth on Schedules 4.5.5 and 5.3 in a manner reasonably
satisfactory in form and substance to Holdco One, necessary to permit the
consummation of the transactions contemplated hereby or otherwise reasonably
requested by Holdco One, without affecting any rights of any Company under any
such Contractual Obligations.
8.5. Closing Agreements. The following parties to each of the following
agreements (the "Closing Agreements"), other than Holdco One and Berkshire
Investors LLC, shall have executed and delivered the following agreements:
(a) Each of Levine and Chafetz shall have executed
employment agreements (the "Employment Agreements") in
substantially the form of Exhibit 8.5(a) hereto.
(b) Each Subscriber shall have executed a
Shareholders Agreement (the "Shareholders Agreement") among
Dutch Holding Company, Berkshire Investors LLC, the
Subscribers and other holders of Dutch Holding Company
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stock in substance and form substantially the same as attached
as Exhibit 8.5(b) hereto, except for such changes as may be
required to comply with Dutch law and as are reasonably
satisfactory to Holdco One.
(c) A lease for the property at 960 Alton Road, Miami
Beach, FL (the "Alton Road Lease") in a form acceptable to
Holdco One.
8.6. Legality; Governmental Authorization; General Litigation. Holdco
One's acceptance of the contribution of the Shares, the issuance of the Holdco
One Stock and the consummation of the other transactions contemplated hereby,
shall not be prohibited by any Legal Requirement, and shall not subject any
Company or Holdco One to any penalty or Tax or other liability other than
liabilities created by Holdco One, if any. The Subscribers shall have caused to
have been obtained or made and be in full force and effect all approvals,
consents, approvals, waivers, authorizations and other orders of, and
declarations, filings, registrations, qualifications and recordings with, any
Governmental Authority necessary to be obtained or made by the Subscriber or any
Company, in order to permit the consummation of the transactions contemplated
hereby or otherwise reasonably requested by Holdco One in connection with Holdco
One's financing of the transactions contemplated by this Agreement except where
such failure could not have a Material Adverse Effect, and, without limiting the
generality of the foregoing, all necessary filings, if any, pursuant to the
Hart-Scott-Rodino Act, shall have been made and all applicable waiting periods
thereunder shall have expired or been terminated, except where such failure
could not have a Material Adverse Effect. No action or proceeding shall have
been instituted at or prior to the Closing before any court, arbitrator or other
governmental body by any Person other than Holdco One or any of its Affiliates,
or instituted or threatened in writing by any Governmental Authority, relating
to this Agreement or any of the transactions contemplated hereby or against any
Company, any of the Subscribers or Holdco One, the result of which could prevent
or make illegal the consummation of any such transaction or could otherwise have
a material adverse effect on Holdco One or have a Material Adverse Effect.
8.7. Opinion of Counsel. The Subscribers shall have furnished Holdco
One and Credit Suisse First Boston with a favorable opinion of White & Case LLP
dated the Closing Date in substantially the form of Exhibit 8.7 and covering
such other matters with respect to the transactions contemplated hereby as
Holdco One or its counsel may reasonably request; provided, however, that any
opinion relating to the Trusts shall be provided by Gunster, Yoakley,
Valdes-Fauli & Stewart, P.A.
8.8. Financing. Holdco One shall have received the debt funding from
Credit Suisse First Boston on terms and conditions substantially in accordance
with the terms of the Credit Suisse First Boston Commitment Letter.
8.9. No Material Adverse Change. Without limiting the generality of
Section 8.1, since the Balance Sheet Date, no Material Adverse Effect shall have
occurred, nor shall any
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event or events have occurred which could reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect.
8.10. Guarantee. Gerald Robins shall have executed the Guarantee on the
signature page hereto.
8.11. Changes to Schedules. Holdco One shall be satisfied, in its sole
discretion, with any changes made to the disclosure schedules pursuant to
Section 4.16(b) or 5.5(b).
8.12. Dutch Holding Company. A Dutch private company with limited
liability (the "Dutch Holding Company") shall have been formed and the Articles
of Association and other charter documents of Dutch Holding Company shall be
mutually agreeable to the parties hereto.
8.13. Termination of Obligations. On-Board's guarantee of Media
Holdings, Ltd.'s mortgage with Colonial Bank shall have been terminated.
8.14. Dutch Law. Holdco One shall not have been notified by its Dutch
counsel that the transactions contemplated by this Agreement or the Shareholders
Agreement will result in or give rise to a breach or violation or default under
Dutch law.
8.15. Side Letter. Holdco, Berkshire Investors LLC and the Subscribers
shall have entered into a mutually acceptable side letter regarding the
non-transferability of Berkshire Investor LLC's limited liability company
interests.
8.16. Assignment and Amendment. The parties hereto shall have entered
into an Assignment and Amendment Agreement as contemplated by Section 7.9.
8.17. General. All actions to be taken by the Companies in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to Holdco One.
9. CONDITIONS TO THE SUBSCRIBERS' OBLIGATION TO CLOSE.
The obligations of each Subscriber at the Closing to consummate the
transactions contemplated by this Agreement and to execute and deliver the
Closing Agreements are subject to the satisfaction, at or prior to the Closing,
of all of the following conditions, compliance with which, or the occurrence of
which, may be waived prior to the Closing in writing by the Majority Subscribers
in their sole discretion:
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9.1. Representations, Warranties and Covenants.
9.1.1. Continued Accuracy of Representations and Warranties.
All representations and warranties of Holdco One contained in this
Agreement shall be true and correct as of the Closing with the same
force and effect as if made at and as of the Closing (except that
representations and warranties made as of a specific date shall
continue to be true and correct as at such date).
9.1.2. Performance of Agreements. Holdco One shall have
performed and satisfied all covenants and agreements required by this
Agreement to be performed or satisfied by Holdco One at or prior to the
Closing.
9.1.3. Officer's Certificate. At the Closing, Holdco One shall
have furnished to the Subscribers an unqualified certificate signed by
the President or any Vice President of Holdco One, dated the Closing
Date, to the effect that the conditions specified in Sections 9.1.1 and
9.1.2 have been satisfied.
9.2. Consents, etc. Holdco One shall have secured written consents or
waivers under all Contractual Obligations of Holdco One, in a manner reasonably
satisfactory in form and substance to the Subscribers, necessary to permit the
consummation of the transactions contemplated hereby or otherwise reasonably
requested by the Subscribers.
9.3. Closing Agreements. Holdco One and Berkshire Investors LLC, where
applicable, shall have executed and delivered each of the following agreements
to which it is a party:
(a) The Employment Agreements, in substantially the
form of Exhibit 8.5(a) hereto.
(b) The Shareholders Agreement, in substance and form
substantially the same as attached as Exhibit 8.5(b) hereto,
except for such changes as may be required to comply with
Dutch law and as are reasonably satisfactory to the
Subscribers.
(c) The Alton Road Lease, in a form acceptable to the
Subscribers.
9.4. Government Authorization; Litigation. Holdco One shall have caused
to be obtained or made and be in full force and effect all approvals, consents,
waivers, authorizations and other orders of, and declarations, filings,
registrations, qualifications and recordings with, any Governmental Authority
necessary to be obtained or made by Holdco One in order to permit the
consummation of the transactions contemplated hereby or otherwise reasonably
required by the Subscribers, and, without limiting the generality of the
foregoing, all necessary filings, if any, pursuant to the Hart-Scott-Rodino Act,
shall have been made and
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all applicable waiting periods thereunder shall have expired or been terminated.
No action or proceeding shall have been instituted at or prior to the Closing
before any court, arbitrator or other governmental body by any Person other than
any Subscriber, any Affiliate thereof, any Company, or instituted or threatened
by any Governmental Authority, relating to this Agreement or any of the
transactions contemplated hereby or against Holdco One, the result of which
could prevent or make illegal the consummation any such transaction or could
otherwise have a material adverse effect on such Subscriber.
9.5. Opinion of Counsel. Holdco One shall have furnished each
Subscriber with a favorable opinion of Holdco One's counsel dated the Closing
Date covering the matters set forth in Exhibit 9.5 and covering such other
matters with respect to the transactions contemplated hereby as the Subscribers
or their counsel may reasonably request.
9.6. Options. Jerry Chafetz shall have received options priced at the
share price equal to the price made available to Berkshire Investors LLC on the
Closing Date for shares of common stock which, at Closing, will represent 1% of
the fully diluted and outstanding common stock of Holdco One.
9.7. Greyhound Acquisition. The Greyhound Acquisition shall have been
consummated.
9.8. Initial Investment. There shall have been made an aggregate cash
equity investment of $30,000,000 in Holdco One, of which $28,800,000 shall have
been made by Berkshire Investors LLC.
9.9. Indemnity Agreements. Holdco One shall have executed and delivered
to each Subscriber who will be an officer or director of Holdco One an indemnity
agreement substantially in the form of Exhibit 9.9 hereto.
9.10. Changes to Schedules. The Subscribers shall be satisfied, in its
sole discretion, with any changes made to the Schedules pursuant to Section
6.11(b).
9.11. Commitment Letters. The Commitment Letters shall not have been
terminated, amended, modified or superseded in a manner that is, or is
reasonably likely to be, materially adverse to Subscribers.
9.12. Dutch Holding Company. The Dutch Holding Company shall have been
formed and the Articles of Association and other charter documents of Dutch
Holding Company shall be in a form mutually agreeable to the parties.
9.13. Dutch Law. The Subscribers shall not have been notified by their
Dutch counsel that the transactions contemplated by this Agreement or the
Shareholders Agreement will result
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in or give rise to a breach or violation or default under Dutch law, or that
this Agreement or the Shareholders Agreement are not Enforceable under Dutch
law.
9.14. Side Letter. Holdco, Berkshire Investors LLC and the Subscribers
shall have entered into a mutually acceptable side letter regarding the
non-transferability of Berkshire Investors LLC's limited liability company
interests.
9.15. Assignment and Amendment. The parties hereto shall have entered
into an Assignment and Amendment Agreement as contemplated by Section 7.9.
10. INDEMNIFICATION.
10.1. Survival of Representations and Warranties. All of the
representations and warranties of the Subscribers (except for those contained in
Sections 4.4.1, 4.6.2, 5.2 and 5.4) contained herein or in any document,
certificate or other instrument required to be delivered hereunder shall survive
the Closing and continue in full force and effect only until the first
anniversary of the Closing Date. The representations and warranties of
Subscribers contained in Sections 4.4.1, 4.6.2 and 5.4 shall survive the Closing
and shall continue in full force and effect without limit as to time (subject to
any applicable statutes of limitations and any extensions or waivers thereof for
Taxes). The termination of any such representation and warranty, however, shall
not affect any claim for breaches of representations or warranties if written
notice thereof is given to the breaching party or parties prior to such
termination date. All of the representations and warranties of Holdco One
contained in Article 6 shall survive the Closing and shall continue in full
force and effect until the first anniversary of the Closing Date except for
those contained in Sections 6.2 and 6.6 which shall survive the Closing and
shall continue in full force and effect without limit as to time (subject to any
applicable statutes of limitations). All covenants and indemnities of the
Subscribers and Holdco One in this Agreement or in any document or certificate
delivered hereunder shall, unless otherwise specifically provided therein,
remain in full force and effect forever.
10.2. Indemnity by Subscribers. The Subscribers hereby agree to
severally and not jointly indemnify, defend and hold harmless Holdco One and
each Company, and each of their directors, officers and Affiliates against and
in respect of all liabilities, obligations, judgments, Liens, injunctions,
charges, orders, decrees, rulings, damages, dues, assessments, Taxes, losses,
fines, penalties, expenses, fees, costs, amounts paid in settlement (including
reasonable attorneys' and expert witness fees and disbursements in connection
with investigating, defending or settling any action or threatened action),
which arise out of any claim, damages, complaint, demand, cause of action,
audit, investigation, hearing, action, suit or other proceeding asserted or
initiated or otherwise existing in respect of any matter and are actually paid
by the Indemnified Party (collectively, the "Losses") that results from the
inaccuracy of any representation or warranty made by Subscribers herein, or
resulting from any misrepresentation, breach of warranty as each such
representation or warranty would read if all qualifications as to materiality
(including without limitation the definition of Material Adverse Effect) or
knowledge (including without
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limitation the definition of Knowledge) were deleted therefrom or nonfulfillment
of any agreement or covenant of Subscribers or the Company contained herein or
in any agreement or instrument required to be entered into in connection
herewith or from any misrepresentation in or omission from any schedule,
document, certificate or other instrument required to be furnished by
Subscribers hereunder. Holdco One shall provide Subscribers written notice for
any claim made in respect of the indemnification provided in this Article 10,
whether or not arising out of a claim by a third party.
10.3. Indemnity by Holdco One. Holdco One hereby agrees to indemnify,
defend and hold harmless Subscribers and their respective Affiliates against and
in respect of all liabilities, obligations, judgments, liens, injunctions,
charges, orders, decrees, rulings, damages, dues, assessments, Taxes, losses,
fines, penalties, damages, expenses, fees, costs, amounts paid in settlement
(including reasonable attorneys' and expert witness fees and disbursements in
connection with investigating, defending or settling any action or threatened
action) arising out of any claim, complaint, demand, cause of action, audit,
investigation, hearing, action, suit or other proceeding asserted or initiated
in respect of any matter that results from the inaccuracy of any representation
or warranty made by Holdco One herein, or resulting from any misrepresentation,
breach of warranty as each such representation or warranty would read if all
qualifications as to materiality (including without limitation the definition of
Material Adverse Effect) or knowledge (including without limitation the
definition of Knowledge) were deleted therefrom or nonfulfillment of any
agreement or covenant of Holdco One contained herein or in any agreement or
instrument required to be entered into in connection herewith or from any
misrepresentation in or omission from any schedule, document, certificate or
other instrument required to be furnished by Holdco One hereunder. This Section
10.3 shall not apply to any representations, warranties, covenants or agreements
provided in Section 7.4.
10.4. Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for
indemnification against any other Party (the "Indemnifying
Party") under this Article 10, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(b) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after
the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any
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Losses the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by
the Third Party Claim, (ii) the Indemnifying Party provides
the Indemnified Party with evidence acceptable to the
Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (iii)
the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, (iv) settlement
of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice
adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with
Section 10.4(b) above, (i) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be
withheld), and (iii) the Indemnifying Party will not consent
to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim unless written agreement is
obtained releasing the Indemnified Party from all liability
thereunder.
(d) In the event any of the conditions in Section
10.4(b) above is or becomes unsatisfied, however, (i) the
Indemnified Party may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain
any consent from, any Indemnifying Party in connection
therewith), (ii) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys'
fees and expenses), and (iii) the Indemnifying Parties will
remain responsible for any Losses the Indemnified Party may
suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest
extent provided in this Article 10.
10.5. Other Indemnification Provisions. Each of the Subscribers hereby
agrees that he or it will not make any claim for indemnification against Holdco
One or the Company solely by reason of the fact that he or it was a director,
officer, employee, or agent of the Company or was serving at the request of any
such entity as a partner, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit,
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proceeding, complaint, claim, or demand brought by Holdco One or Company against
such Subscribers (whether such action, suit, proceeding, complaint, claim, or
demand is pursuant to this Agreement, applicable law, or otherwise).
10.6. Limitations on Indemnification.
(a) The maximum aggregate indemnification liability
of each Subscriber for any Losses pursuant to this Article 10
shall be its pro rata portion of $6,000,000.
(b) No indemnifying party under this Article 10 shall
have any obligation to indemnify any indemnified party
pursuant to this Article 10 for damages relating to breaches
of representations and warranties set forth herein or in any
certificate or document delivered in connection herewith until
the aggregate amount of Losses incurred by such indemnitee
(taken together with Losses incurred by its subsidiaries and
Affiliates) exceeds $500,000, and then only to the extent such
Losses exceed $500,000.
(c) The limitations of Sections 10.6(a) and (b) will
not apply with respect to any Losses incurred with respect to
a breach of a representation or warranty contained in Section
4.6.2.
11. DEFINITIONS.
For purposes of this Agreement:
11.1. Certain Matters of Construction. In addition to the definitions
referred to as set forth below in this Section 11:
(a) The words "hereof", "herein", "hereunder" and
words of similar import shall refer to this Agreement as a
whole and not to any particular Section or provision of this
Agreement, reference to Sections, Exhibits or Schedules are,
unless the context otherwise requires, references to Sections
of, and Exhibits and Schedules to, this Agreement, and
references to a particular Section of this Agreement shall
include all subsections thereof.
(b) The words "party" and "parties" shall refer to
each of the Subscribers and Holdco One.
(c) Definitions shall be equally applicable to both
the singular and plural forms of the terms defined, and
references to the masculine, feminine or neuter gender shall
include each other gender.
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(d) Accounting terms used herein and not otherwise
defined herein are used herein as defined by generally
accepted accounting principles in effect as of the date
hereof.
11.2. Cross Reference Table. The following terms defined elsewhere in
this Agreement in the Sections set forth below shall have the respective
meanings therein defined:
Term Definition
"Affiliate Relationships" Section 4.5.4
"Agreement" Preamble
"Alton Road Lease" Section 8.5(c)
"Assets" Section 4.4.1
"Assumed Liabilities" Section 4.3.2
"Audited Financials" Section 4.2.1(a)
"Berkshire" Section 7.1.3
"Berkshire Contribution" Recitals
"Balance Sheet" Section 4.2.1(d)
"Balance Sheet Date" Section 4.2.1(d)
"Boxer" Preamble
"Boxer Financials" Section 4.2.1(c)
"Holdco One" Preamble
"Capital Stock" Recitals
"Carnival Commissions" Section 4.3.1
"Closing" Section 3.1
"Closing Agreements" Section 8.5
"Closing Date" Section 3.1
"Commitment Letters" Section 6.8
"Company" Recitals
"Company Plan" Section 4.6.4
"Consideration" Section 2.1
"Contracts" Section 4.5.1
"Cruise" Preamble
"Dutch Holding Company" Section 8.13
"Employee Plan" Section 4.6.4
"Employment Agreements: Section 8.5(a)
"Equipment" Section 4.4.2.1
"Escrow Agreement" Section 2.2(b)
"Existing Plans" Section 4.6.4
"Final Termination Date" Section 13.1
"Financial Statements" Section 4.2.1.1
"Greyhound Acquisition" Section 6.7
"Indemnified Party" Section 10.4(a)
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"Indemnifying Party" Section 10.4(a)
"Insurance Policies" Section 4.5.3
"IRS" Section 4.6.2
"Leases" Section 4.4.2.1
"Listed Contracts" Section 4.5.1
"Liability Policies" Section 4.5.3
"Listed Intangibles" Section 4.4.3
"Listed Leases" Section 4.4.2.1
"Listed Licenses" Section 4.4.3
"Loss Runs" Section 4.5.3
"Losses" Section 10.2
"NCL Commissions" Section 4.3.1
"Holdco One Stock" Section 2.1(b)
"On Board" Preamble
"Park West Contract" Section 7.7
"Pension Plan" Section 4.6.4
"Permit" Section 4.4.2.2
"Plan" Section 4.6.4
"Purchase" Recitals
"Quarterly Financials" Section 4.2.1(b)
"Real Property" Section 4.4.2.1
"Shares" Recitals
"Shareholders Agreement" Section 8.5(b)
"Stock Purchase Agreement" Recitals
"Subscribers" Preamble
"Subscribers' Contribution" Recitals
"Third Party Claim" Section 10.4(a)
"Welfare Plan" Section 4.6.4
11.3. Certain Definitions. The following terms shall have the following
meanings:
11.3.1. Action. The term "Action" shall mean any claim,
action, cause of action or suit (in contract or tort or otherwise),
arbitration or proceeding by or before any Governmental Authority.
11.3.2. Affiliate. The term "Affiliate" shall mean, as to any
specified Person at any time, (i) each Person directly or indirectly
controlling, controlled by or under direct or indirect common control
with such specified Person at such time, (ii) each Person who is or has
been within two years prior to the time in question an officer,
director or direct or indirect beneficial holder of at least 5% of any
class of the outstanding capital stock of such specified Person and the
Members of the Immediate Family of each such officer, director or
holder (and, if such specified Person is a natural person, of such
specified Person), and (iii) each Person of which such specified
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Person or an Affiliate (as defined in clauses (i) or (ii) above)
thereof shall, directly or indirectly, beneficially own at least 5% of
any class of outstanding capital stock or other evidence of beneficial
interest at such time, provided, however, that in the case the time in
question is after the Closing, the Subscribers and each of their
Affiliates (as determined by the provisions of this Section 11.3.2
other than this proviso) (other than Holdco One and the Companies)
shall be deemed not to be Affiliates of Holdco One or the Companies,
and Holdco One and the Companies shall be deemed not to be Affiliates
of the Subscribers and such Persons, for any purposes of this
Agreement.
11.3.3. Berkshire Investors LLC. The term "Berkshire Investors
LLC" shall mean the limited liability company to be organized under the
laws of Delaware on or prior to the Closing, a majority of the
membership interests of which will be owned by Affiliates of Berkshire.
11.3.4. Business. The term "Business" shall mean the business
of the Companies including without limitation as such business is
reflected in the Financial Statements.
11.3.5. Business Day. The term "Business Day" shall mean any
day on which banking institutions in New York, New York are customarily
open for the purpose of transacting business.
11.3.6. By-laws. The term "By-laws" shall mean all by-laws
relating to such Person, as from time to time in effect.
11.3.7. Charter. The term "Charter" shall mean the certificate
or articles of incorporation or organization, statute, constitution,
joint venture or partnership agreement or articles or other charter
documents of any Person (other than an individual), each as from time
to time in effect.
11.3.8. Code. The term "Code" shall mean the federal Internal
Revenue Code of 1986 or any successor statute, and the rules and
regulations thereunder, and in the case of any referenced section of
any such statute, rule or regulation, any successor section thereto,
collectively and as from time to time amended and in effect.
11.3.9. Compensation. The term "Compensation", as applied to
any Person, shall mean all salaries, compensation, remuneration or
bonuses of any character, and medical, surgical, dental, hospital,
disability, unemployment, retirement, pension, vacation, insurance or
fringe benefits of any kind, or other payments of any kind in the
nature of compensation whatsoever made directly or indirectly by any
Company to such Person or Members of the Immediate Family of such
Person; provided, however, that compensation shall exclude
reimbursements and advances for business expenses.
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11.3.10. Contractual Obligation. The term "Contractual
Obligation" shall mean, with respect to any Person, any contract,
agreement, deed, mortgage, lease, license, commitment, undertaking,
arrangement or understanding, written or oral, or other document or
instrument including without limitation any document or instrument
evidencing or otherwise relating to any indebtedness but excluding the
Charter and Bylaws of such Person, to which or by which such Person is
a party or otherwise subject or bound or to which or by which any
property or right of such Person is subject or bound.
11.3.11. Debt. "Debt" of any Person means all obligations of
such Person (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred purchase
price of goods or services (other than trade payables or accruals
incurred in the Ordinary Course of Business), (iv) under capital leases
and (v) in the nature of Guarantees of the obligations described in
clauses (i) through (iv) above of any other Person.
11.3.12. Distribution. The term "Distribution" shall mean,
with respect to the capital stock of or other evidence of beneficial
interest in any Person, (i) the declaration or payment of any dividend
on or in respect of any shares of any class of such capital stock or
beneficial interest; (ii) the purchase, redemption or other retirement
of any shares of any class of such capital stock or beneficial
interest, directly, or indirectly through a Subsidiary or otherwise;
(iii) any other distribution on or in respect of any shares of any
class of such capital stock or beneficial interest, or on or in respect
of any stock appreciation or similar right, and (iv) any payment or
other transfer of all or any part of any interest in any asset to any
Affiliate.
11.3.13. Enforceable. The term "Enforceable" shall mean, with
respect to any Contractual Obligation stated to be Enforceable by or
against any Person, that such Contractual Obligation is a legal, valid
and binding obligation enforceable by or against such Person in
accordance with its terms, except to the extent that enforcement of the
rights and remedies created thereby is subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws of
general application affecting the rights and remedies of creditors and
to general principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law).
11.3.14. ERISA. The term "ERISA" shall mean the federal
Employee Retirement Income Security Act of 1974 or any successor
statute, and the rules and regulations thereunder, and in the case of
any referenced section of any such statute, rule or regulation, any
successor section thereto, collectively and as from time to time
amended and in effect.
11.3.15. Gain Recognition Agreement. The term "Gain
Recognition Agreement" shall mean an agreement to recognize gain as
described in Section
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<PAGE> 53
1.367(a)-8 of the Income Tax Regulations entered into by those
Subscribers who immediately following the Berkshire Contribution and
the Subscribers' Contribution will hold at least 5 percent of either
the total voting power or the total value of the common stock of Holdco
One.
11.3.16. Generally Accepted Accounting Principles. The term
"generally accepted accounting principles" shall mean generally
accepted accounting principles, as defined by the Financial Accounting
Standards Board as of the Balance Sheet Date.
11.3.17. Guarantee. The term "Guarantee" shall mean (i) any
guarantee of the payment or performance of, or any contingent
obligation in respect of, any indebtedness or other obligation of any
other Person, (ii) any other arrangement whereby credit is extended to
one obligor on the basis of any promise or undertaking of another
Person (A) to pay the indebtedness of such obligor, (B) to purchase any
obligation owed by such obligor, (C) to purchase or lease assets (other
than inventory in the ordinary course of business) under circumstances
that would enable such obligor to discharge one or more of its
obligations, or (D) to maintain the capital, working capital, solvency
or general financial condition of such obligor, and (iii) any liability
as a general partner of a partnership or as a venturer in a joint
venture in respect of indebtedness or other obligations of such
partnership or venture.
11.3.18. Governmental Authority. The term "Governmental
Authority" shall mean any U.S. Federal, state or local or any foreign
government, governmental authority, regulatory or administrative
agency, governmental commission, court or tribunal (or any department,
bureau or division thereof) or any arbitral body or any similar
government, authority or body in any other country.
11.3.19. Governmental Order. The term "Governmental Order"
shall mean any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with any Governmental Authority.
11.3.20. Intangibles. The term "Intangibles" shall mean trade
and product names; foreign letters patent of invention, patents, patent
applications, and unpatented proprietary development records;
trademarks, service marks, logos and copyrights (including
registrations and applications); trade secrets, know-how and other
proprietary or confidential information; computer software; and other
intangible property and rights that are directly or indirectly owned,
licensed or otherwise used by any Company.
11.3.21. Known or Knowledge. The term "Known" or "Knowledge"
means actual knowledge of any one of the parties to this Agreement of
information with respect to a subject, or information with respect to a
subject which any one of the parties obtains or would have obtained
upon reasonable inquiry from directors, officers,
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general managers, or supervisors of or to it who are in possession of
or have access to such information in the performance of his or her
duties within the scope of his or her employment.
11.3.22. Legal Requirement. The term "Legal Requirement" shall
mean any federal, state, local or foreign law (including provincial and
local foreign laws), statute, standard, ordinance, code, order, rule,
regulation, resolution or promulgation, or any order, judgment or
decree of any Governmental Authority, or any license, franchise, permit
or similar right granted under any of the foregoing, or any similar
provision having the force and effect of law.
11.3.23. Lien. The term "Lien" shall mean any mortgage,
pledge, lien, security interest, charge, adverse or prior claim,
encumbrance, restriction on transfer, conditional sale or other title
retention device or arrangement (including without limitation a capital
lease), transfer for the purpose of subjection to the payment of any
indebtedness, or restriction on the creation of any of the foregoing,
whether relating to any property or right or the income or profits
therefrom; provided, however, that the term "Lien" shall not include
(i) statutory liens for Taxes to the extent that the payment thereof is
not in arrears or otherwise due, (ii) encumbrances in the nature of
zoning restrictions, easements, rights or restrictions of record on the
use of real property if the same do not detract from the value of such
property or impair its use in the Business as currently conducted,
(iii) statutory or common law liens to secure landlords, lessors or
renters under leases or rental agreements confined to the premises
rented to the extent that no payment or performance under any such
lease or rental agreement is in arrears or is otherwise due, (iv)
deposits or pledges made in connection with, or to secure payment of,
worker's compensation, unemployment insurance, old age pension programs
mandated under applicable Legal Requirements or other social security,
(v) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, statutory or common law liens to secure
claims for labor, materials or supplies and other like liens, which
secure obligations to the extent that payment thereof is not in arrears
or otherwise due and (vi) liens reflected in the Financial Statements
or notes thereto
11.3.24. Majority Subscribers. The term "Majority Subscribers"
shall mean Subscribers holding at Closing a majority or more (in
number) of the Shares.
11.3.25. Material Adverse Effect. The term "Material Adverse
Effect" shall mean any change in or effect on the business, operations,
assets or financial condition of any Company which is materially
adverse to the Companies considered as one enterprise.
11.3.26. Members of the Immediate Family. The term "Members of
the Immediate Family", with respect to any individual, shall mean each
spouse, parent,
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brother, sister or child of such individual, each spouse of any such
Person, each child of any of the aforementioned Persons, each trust
created in whole or in part for the benefit of one or more of the
aforementioned Persons and each custodian or guardian of any property
of one or more of the aforementioned Persons.
11.3.27. Ordinary Course of Business. The term "Ordinary
Course of Business" shall mean the ordinary course of business
consistent with past custom and practice in light of all circumstances.
11.3.28. Person. The term "Person" shall mean any individual,
partnership, corporation, association, trust, joint venture,
unincorporated organization or other entity, and any government,
governmental department or agency or political subdivision thereof.
11.3.29. Subsidiary. The term "Subsidiary" shall mean any
Person of which any Company (or other specified Person) shall own
directly or indirectly through a Subsidiary, a nominee arrangement or
otherwise at least a majority of the outstanding capital stock (or
other shares of beneficial interest) presently entitled to vote
generally or at least a majority of the partnership, joint venture or
similar interests, or in which any Company (or other specified Person)
is a general partner or joint venturer without limited liability. All
Subsidiaries are listed on Schedule 4.1.3.
11.3.30. Tax Distribution. The term "Tax Distribution" shall
mean cash distributions from the Companies or Holdco One to the
Subscribers in an amount equal to Subscribers' tax liability for the
earnings of the Companies from January 1, 1998 through the Closing Date
as set forth on Schedule 7.1.4.
11.3.31. Taxes. The term "Taxes" shall mean any federal,
state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, profits,
windfall profits, environmental (including taxes under Code Section
59A), customs duties, import or export duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real or personal property, sales, use, goods
and services, customs, duties, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
11.3.32. Tax Return. The term "Tax Return" shall mean all
federal, state, local and foreign Tax returns, Tax reports, claims for
refund of Tax and declarations of estimated Tax, and reports of or
relating to any federal, provincial, municipal, state, foreign or local
tax, assessment or charge of any nature whatsoever or other statement
relating to Taxes and any schedule or attachments to any of the
foregoing.
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11.3.33. Trusts. The term "Trusts" shall mean the Gerald
Robins Revocable Trust 8/3/94, the Craig Robins Revocable Trust 8/3/94
and the Scott Robins Revocable Trust 8/3/94.
12. GOVERNING LAW.
12.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the State of Florida,
without giving effect to any choice or conflict of law provision or rule that
would cause the application of the domestic substantive laws of any other
jurisdiction.
12.2. [Reserved]
12.3. Waiver of Jury Trial. To the extent not prohibited by applicable
law which cannot be waived, each of the parties hereto hereby waives, and
covenants that he or it will not assert (whether as plaintiff, defendant, or
otherwise), any right to trial by jury in any forum in respect of any issue,
claim, demand, cause of action, action, suit or proceeding arising out of or
based upon this Agreement or the subject matter hereof, in each case whether now
existing or hereafter arising and whether in contract or tort or otherwise. Any
of the parties hereto may file an original counterpart or a copy of this Section
12.3 with any court as written evidence of the consent of each of the parties
hereto to the waiver of his or its right to trial by jury.
12.4. Reliance. Each of the parties hereto acknowledges that he or it
has been informed by each other party that the provisions of Section 12
constitute a material inducement upon which such party is relying and will rely
in entering into this Agreement and the transactions contemplated hereby.
13. TERMINATION.
13.1. Termination of Agreement. This Agreement may be terminated by the
parties only as provided below:
(a) Holdco One and the Majority Subscribers may
terminate this Agreement by mutual written consent at any time
prior to the Closing.
(b) Holdco One may terminate this Agreement by giving
written notice to the Majority Subscribers at any time prior
to the Closing in the event there has been a material breach
of any representation or warranty made by any Subscriber in
this Agreement (including without limitation the Schedules
hereto) or a material breach or material violation by any
Subscriber of any covenant or agreement made in or any duty
with respect to this Agreement (including without limitation
the Schedules hereto) which breach cannot be or has not been
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<PAGE> 57
cured within 10 days (but not later than September 30, 1998)
after written notice to the breaching party.
(c) The Majority Subscribers may terminate this
Agreement by giving written notice to Holdco One at any time
prior to the Closing in the event there has been a material
breach of any representation or warranty made by Holdco One in
this Agreement (including without limitation the Schedules
hereto) or a material breach or material violation by Holdco
One of any covenant or agreement made in or any duty with
respect to this Agreement (including without limitation the
Schedules hereto) which breach cannot be or has not been cured
within 10 days (but not later than September 30, 1998) after
written notice to the breaching party.
(d) Holdco One may terminate this Agreement by giving
written notice to the Majority Subscribers at any time after
September 30, 1998 (the "Final Termination Date") if the
Closing shall not have occurred on or before the Final
Termination Date by reason of the failure of any condition set
forth in Section 8 to be satisfied (unless the failure results
primarily from one or more breaches or violations of this
Agreement by Holdco One or inaccuracies in representations of
Holdco One hereunder).
(e) The Majority Subscribers may terminate this
Agreement by giving written notice to Holdco One at any time
after the Final Termination Date if the Closing shall not have
occurred on or before the Final Termination Date by reason of
the failure of any condition set forth in Section 9 to be
satisfied (unless the failure results primarily from one or
more breaches or violations of this Agreement by any
Subscriber or inaccuracies in representations of any
Subscriber hereunder).
13.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, all obligations of the parties hereunder
shall terminate without any liability of any party to any other party; provided,
however, that no termination of this Agreement shall relieve any party of
liabilities in respect of any breaches or violations of this Agreement or any
duty with respect hereto by such party or any inaccuracies in any
representations by such party hereunder prior to termination.
14. MISCELLANEOUS.
14.1. Entire Agreement; Waivers. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect to such subject matter. No waiver of any provision of this Agreement
shall be deemed to or shall constitute a waiver of any other provision hereof
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(whether or not similar), shall constitute a continuing waiver unless otherwise
expressly provided nor shall be effective unless in writing and executed (i) in
the case of a waiver by Holdco One, by Holdco One, and (ii) in the case of a
waiver by any Subscriber, by such Subscriber.
14.2. Amendment or Modification, etc. The parties hereto may not amend
or modify this Agreement except in such manner as may be agreed upon by a
written instrument executed by Holdco One and the Majority Subscribers. Any
written amendment, modification or waiver executed by Holdco One and the
Majority Subscribers shall be binding upon Holdco One and each Subscriber.
14.3. Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for convenience, are not
intended to be full or accurate descriptions of the content thereof and shall
not affect the construction hereof. This Agreement shall be deemed to express
the mutual intent of the parties, and no rule of strict construction shall be
applied against any party.
14.4. Schedules; Listed Documents, etc. Neither the listing nor
description of any item, matter or document in any Schedule hereto nor the
furnishing or availability for review of any document shall be construed to
modify, qualify or disclose an exception to any representation or warranty of
any party made herein or in connection herewith, except to the extent that such
representation or warranty specifically refers to such Schedule and such
modification, qualification or exception is clearly described in such Schedule.
The parties hereto intend that each representation, warranty, covenant and
agreement contained herein shall have independent significance. If any party has
breached any representation, warranty, covenant or agreement contained herein in
any respect, the fact that there exists other representation, warranty, covenant
or agreement relating to the same subject matter (regardless of the relative
levels of specificity) which the party has not breached shall not detract from
or mitigate the fact that such party is in breach of the first representation,
warranty, covenant or agreement.
14.5. Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted by applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
14.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
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14.7. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns (each of which
such transferees, successors and assigns shall be deemed to be a party hereto
for all purposes hereof); provided, however, that (i) no party may transfer any
of its rights or obligations hereunder without the consent of Holdco One and the
Majority Subscribers, except that Holdco One may assign this Agreement to Dutch
Holding Company pursuant to an Assignment and Amendment Agreement as provided in
Section 7.9, and (ii) no transfer or assignment by any party shall relieve such
party of any of its obligations hereunder. Except as expressly provided herein,
this Agreement shall not confer any right or remedy upon any Person other than
the parties and their respective transferees, successors and assigns.
15. NOTICES.
Any notices or other communications required or permitted hereunder
shall be effective if in writing and delivered personally or sent by telecopier,
Federal Express, or registered or certified mail, postage prepaid, addressed as
follows:
If to any Subscriber, ON BOARD MEDIA, INC.
or him or it: 960 Alton Road
Miami Beach, Florida 33139
Telephone: (305) 673-0400
Fax: (305) 674-9396
With a copy to: White & Case LLP
200 South Biscayne Boulevard, Suite 5000
Miami, Florida 33131
Telephone: (305) 371-2700
Fax: (305) 358-5744
Attn: Jorge L. Freeland, Esq.
If to Holdco One to Cruise Line Holdings Co.
it at: c/o Berkshire Partners
One Boston Place
Boston, MA 02108
Telecopier: 617-227-6105
Attention: Bradley M. Bloom
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Telecopier: 617-951-7050
Attention: David C. Chapin, Esq.
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Unless otherwise specified herein, such notices or other communications shall be
deemed effective (a) on the date delivered, if delivered personally, (b) two
business days after being sent by Federal Express, if sent by Federal Express,
(c) one business day after being delivered, if delivered by telecopier with
confirmation of good transmission, and (d) three business days after being sent,
if sent by registered or certified mail. Each of the parties hereto shall be
entitled to specify a different address by giving notice as aforesaid to each of
the other parties hereto.
[SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have hereunto set their hands under seal, as of the date first above
written.
HOLDCO ONE: CRUISE LINE HOLDINGS CO.
/s/ David R. Peeler
---------------------------------
By: David R. Peeler
Title:
SUBSCRIBERS: ON-BOARD MEDIA, INC.
/s/ Philip Levine
--------------------------------------
By: Philip Levine
Title: President
CRUISE MANAGEMENT INTERNATIONAL,
INC.
/s/ Philip Levine
--------------------------------------
By: Philip Levine
Title: President
BOXER MEDIA, INC.
/s/ Philip Levine
--------------------------------------
By: Philip Levine
Title: President
/s/ Philip Levine
--------------------------------------
Philip Levine, Individually
/s/ Jerry Chafetz
--------------------------------------
Jerry Chafetz, Individually
THE GERALD ROBINS REVOCABLE
TRUST 8/3/94
/s/ Gerald Robins
--------------------------------------
Gerald Robins, Trustee
<PAGE> 62
THE CRAIG ROBINS REVOCABLE
TRUST 8/3/94
/s/ Gerald Robins
--------------------------------------
Gerald Robins, Trustee
THE SCOTT ROBINS REVOCABLE
TRUST 8/3/94
/s/ Gerald Robins
--------------------------------------
Gerald Robins, Trustee
GUARANTY
The undersigned, Gerald Robins ("Guarantor"), hereby joins in this
Agreement for the sole purpose of acting as a primary obligor for the several
(and not joint) indemnification liabilities, if any, of the Gerald Robins
Revocable Trust 8/3/94, the Scott Robins Revocable Trust 8/3/94 and the Craig
Robins Revocable Trust 8/3/94 (collectively, the "Trusts") arising pursuant to
Article 10 of this Agreement, provided that the Guarantor shall have the benefit
of, and the right to assert, all of the defenses available to the Trusts as
though any such claims for indemnification against Guarantor were asserted
against the Trusts.
By: /s/ Gerald Robins
---------------------------------
Gerald Robins, Individually
<PAGE> 1
EXHIBIT 10.3
EXECUTION COPY
================================================================================
ASSET PURCHASE AGREEMENT
AMONG
STARBOARD HOLDINGS LTD.
GREYHOUND LEISURE SERVICES, INC.
NUANCE GLOBAL TRADERS LTD.
NUANCE GLOBAL TRADERS INC.
NUANCE GLOBAL SHIPS, INC.
NUANCE GLOBAL TRADERS (USA), INC.
NUANCE GLOBAL TRADERS (SHIPS) LIMITED
December 15, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS:
<TABLE>
<S> <C>
1. Definitions............................................................................................. 1
2. Acquisition of Assets and Assumption of Liabilities by the Buyer........................................ 5
2.1. Purchase and Sale of Assets........................................................... 5
2.2. Excluded Assets....................................................................... 6
2.3. Assumption of Liabilities............................................................. 7
2.4. Liabilities Not Assumed............................................................... 7
2.5. Purchase Price........................................................................ 9
2.6. Adjustment to Purchase Price; Post-Closing Payment Mechanics.......................... 9
2.7. Preliminary Allocation of Purchase Price.............................................. 9
2.8. Consignment Inventory................................................................. 9
3. Representations and Warranties of the Sellers........................................................... 9
3.1. Organization of the Sellers........................................................... 9
3.2. Authorization of Transaction.......................................................... 10
3.3. Noncontravention...................................................................... 10
3.4. Brokers' Fees......................................................................... 10
3.5. Title to Assets....................................................................... 10
3.6. All Assets Necessary to Conduct Business.............................................. 11
3.7. Financial Statements.................................................................. 11
3.8. Guarantees............................................................................ 11
3.9. Absence of Changes.................................................................... 11
3.10. Absence of Undisclosed Liabilities.................................................... 12
3.11. Legal and Other Compliance............................................................ 13
3.12. No Material Adverse Effect............................................................ 13
3.13. Taxes................................................................................. 13
3.14. Property, Plant and Equipment......................................................... 13
3.15. Intellectual Property................................................................. 14
3.16. Inventories........................................................................... 15
3.17. Contracts............................................................................. 15
3.18. Powers of Attorney.................................................................... 16
3.19. Insurance and Risk Management......................................................... 17
3.20. Litigation............................................................................ 17
3.21. Employee Benefits..................................................................... 17
3.22. No Illegal Payments................................................................... 18
3.23. Consents.............................................................................. 18
3.24. Solvency.............................................................................. 18
4. Representations and Warranties of the Buyer............................................................. 18
4.1. Organization of the Buyer............................................................. 18
</TABLE>
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<TABLE>
<S> <C>
4.2. Authority for Agreement............................................................... 18
4.3. Noncontravention...................................................................... 18
4.4. Brokers' Fees......................................................................... 19
4.5. Consents not Obtained................................................................. 19
4.6. Financial Assurances.................................................................. 19
4.7. Supplier Contracts.................................................................... 19
4.8. Software.............................................................................. 19
5. Covenants............................................................................................... 19
5.1. Employee Matters...................................................................... 19
5.2. Access to Records..................................................................... 20
5.3. Transfer Taxes........................................................................ 21
5.4. Information Technology................................................................ 21
5.5. Accounts Receivable................................................................... 21
5.6. Future Assurances..................................................................... 21
6. Deliveries.............................................................................................. 21
7. Confidentiality......................................................................................... 22
8. Noncompetition.......................................................................................... 22
9. Indemnification......................................................................................... 23
9.1. Survival of Representations and Warranties............................................ 23
9.2. Indemnity by Sellers.................................................................. 23
9.3. Indemnity by Buyer and Guarantor...................................................... 24
9.4. Matters Involving Third Parties....................................................... 24
10. Miscellaneous........................................................................................... 26
10.1. No Third Party Beneficiaries.......................................................... 26
10.2. Entire Agreement...................................................................... 26
10.3. Succession and Assignment............................................................. 26
10.4. Counterparts.......................................................................... 26
10.5. Headings.............................................................................. 26
10.6. Notices............................................................................... 26
10.7. Governing Law......................................................................... 28
10.8. Amendments and Waivers................................................................ 28
10.9. Severability.......................................................................... 28
10.10. Expenses.............................................................................. 28
10.11. Construction.......................................................................... 28
10.12. Incorporation of Exhibits and Schedules............................................... 29
10.13. Dispute Resolution of Financial Matters............................................... 29
10.14. Specific Performance.................................................................. 29
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
10.15. Consent to Jurisdiction............................................................... 29
10.16. Waiver of Jury Trial.................................................................. 30
</TABLE>
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<PAGE> 5
EXHIBITS
<TABLE>
<S> <C>
A-1 - Form of Escrow Agreement
A-2 - Side Letter Relating to Post-Closing Operations in the United Kingdom
B-1 - Assignment and Assumption Agreement
B-2 - Bill of Sale
C - Financial Statements
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1(a) - Information Memorandum
Schedule 1(b) - Software Licenses not included in "Intellectual Property"
Schedule 2.1(a) - Inventory
Schedule 2.1(b) - Leases
Schedule 2.1(c) - Equipment and Vehicles
Schedule 2.1(d) - Intellectual Property
Schedule 2.1(e) - Customer, Supplier and Mailing Lists
Schedule 2.1(f) - Contracts
Schedule 2.3(b) - Date of Assumption of Liabilities under the Contracts,
By Ship
Schedule 2.3(c) - Severance Obligations
Schedule 2.3(d) - Liabilities Assumed as Conditions to Consents
Schedule 2.3(e) - Open Purchase Orders
Schedule 2.5 - Calculation of Purchase Price
Schedule 2.6 - Purchase Price Adjustment Mechanics
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
Schedule 2.7 - Preliminary Allocation of Purchase Price
Schedule 2.8 - Consignment Inventory Adjustment Mechanics
Schedule 4.5 - Consents not Obtained
Schedule 5.1(a) - Terminated Employees
Schedule 5.1(b) - Employee Matters
Schedule 8(a) - Permitted Competitive Activities
Disclosure Schedule - Exceptions to Representations and Warranties
</TABLE>
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<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into on
December 15, 1998, by and among (i) STARBOARD HOLDINGS LTD., a Barbados
corporation (the "Buyer"), (ii) GREYHOUND LEISURE SERVICES, INC., a Florida
corporation (the "Guarantor"), and (iii) NUANCE GLOBAL TRADERS LTD., a
corporation organized under the laws of the United Kingdom, NUANCE GLOBAL
TRADERS INC., a Delaware corporation, NUANCE GLOBAL SHIPS, INC. (the "Company"),
a Florida corporation, NUANCE GLOBAL TRADERS (USA), INC., a California
corporation, and NUANCE GLOBAL TRADERS (SHIPS) LIMITED, a corporation organized
under the laws of the United Kingdom (together with the Company, collectively,
the "Sellers"). The Buyer, the Guarantor and the Sellers are collectively
referred to herein as the "Parties."
WHEREAS, this Agreement contemplates a transaction in which the Buyer
purchases certain of the assets (and assumes certain of the liabilities) used in
the ship business of Nuance Global Traders as it is currently conducted, as
described in the Information Memorandum on Nuance Global Ships, Inc. (the
"Information Memorandum") dated September 4, 1998 (the "Business"), in
consideration of the Purchase Price (as defined below).
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
representations, warranties, and covenants herein contained, the Parties agree
as follows:
1. Definitions.
"Acquired Assets" has the meaning set forth in Section 2.1.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" has the meaning set forth in the preamble above.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or, to the Knowledge of the
Sellers, could reasonably form the basis for any specified consequence.
"Business" has the meaning set forth in the recital above. As used
herein, the term "Business" shall refer only to the shipboard concession
business of the Sellers described in the Information Memorandum annexed as
Schedule 1(a), but in no event shall it refer to (i)
<PAGE> 8
the airport concession business, (i) the ferry concession business (iii) the
shipboard concession business aboard ships currently based in Australia, or any
other business or activity of the Sellers or any of them. The Information
Memorandum is referred to solely for a general description of the Business. No
representation or warranty is specifically made with respect to the Information
Memorandum or any of its contents (unless duplicated in Section 3 hereto).
"Buyer" has the meaning set forth in the preamble above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble above.
"Confidential Information" means any and all information concerning the
businesses and affairs of the Company or the Business other than that
information which is already generally or readily obtainable by the public or is
publicly known or becomes publicly known through no fault of the Sellers.
Confidential Information shall in any and all events be limited to information
concerning the Business and shall not include information relating to any other
business or operations of the Sellers or any of them.
"Contracts" has the meaning set forth in Section 2.1(f).
"Disclosure Schedule" has the meaning set forth in Section 3.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program or (e) profit sharing, bonus, stock
option, stock purchase, equity, stock appreciation, deferred compensation,
incentive, severance plan or other benefit plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Employees" has the meaning set forth in Section 5.1(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Account" has the meaning set forth in Section 2.5.
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"Escrow Agent" has the meaning set forth in Section 2.5.
"Financial Statements" has the meaning set forth in Section 3.7.
"Guarantor" has the meaning set forth in the preamble above.
"Indebtedness" means indebtedness for borrowed money or for the
deferred purchase price of property or services relating to the Business (other
than trade payables and other accrued current liabilities incurred in the
Ordinary Course of Business), or capital lease obligations, conditional sale or
other title retention agreements.
"Indemnified Party" has the meaning set forth in Section 9.4(a).
"Indemnifying Party" has the meaning set forth in Section 9.4(a).
"Information Memorandum" has the meaning set forth in the recital
above.
"Intellectual Property" means the entire right, title and interest in
and to all proprietary rights of every kind and nature, including patents,
copyrights, trademarks, mask works, trade secrets and proprietary information,
all applications for any of the foregoing, and any license or agreement granting
rights related to the foregoing (i) subsisting in, covering, reading on,
directly applicable to or existing in the Business, including, without
limitation, all Intellectual Property identified on Schedule 2.1(d); or (ii)
that are owned, licensed or controlled in whole or in part by the Company, or
any other Seller and relate to the Business; provided, however, that for
purposes of this Agreement, Intellectual Property shall not include (i) the
right, title and interest in and to the name "Nuance", and (ii) the right, title
and interest in and to the software licenses listed on Schedule 1(b).
"Inventory" means all inventory of the Business that is scheduled on
Schedule 2.1(a) hereto.
"Knowledge" means actual knowledge of Ruedi Keller, Rolf Dobeli or
Gwendolyn Gilleland-Rich, after reasonable investigation by such individuals,
including discussions with the directors, officers and employees who would
reasonably be expected to have knowledge of the matter in question.
"Laws" means all laws, rules, regulations, codes, injunctions,
judgments, orders, decrees, rulings, interpretations, constitutions, ordinances,
common laws, or treaties, of any federal, state, local municipal and foreign,
international, or multinational government or administration and related
agencies.
"Leases" has the meaning set forth in Section 2.1(b).
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"Liability" means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, whether incurred or
consequential and whether due or to become due), including any liability for
Taxes.
"Lien" means any mortgage, pledge, lien, security interest, charge,
claim, equitable interest, encumbrance, restriction on transfer, conditional
sale or other title retention device or arrangement (including, without
limitation, a capital lease), transfer for the purpose of subjection to the
payment of any Indebtedness, or restriction on the creation of any of the
foregoing, whether relating to any property or right or the income or profits
therefrom; provided, however, that the term "Lien" shall not include (i)
statutory liens for Taxes to the extent that the payment thereof is not in
arrears or otherwise due, (ii) encumbrances in the nature of zoning
restrictions, easements, rights or restrictions of record on the uses of real
property if the same do not detract from the value of the property encumbered
thereby or impair the use of such property in the Business, (iii) statutory or
common law liens to secure landlords, lessors or renters under leases or rental
agreements confined to the premises rented to the extent that no payment or
performance under any such lease or rental agreement is in arrears or is
otherwise due, (iv) deposits or pledges made in connection with, or to secure
payment of, worker's compensation, unemployment insurance, old age pension
programs mandated under applicable laws or other social security regulations,
and (v) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, statutory or common law liens to secure claims for
labor, materials or supplies and other like liens, which secure obligations to
the extent that payment thereof is not in arrears or otherwise due in the case
of (i) - (v), which have been incurred in the Ordinary Course of Business.
"Losses" has the meaning set forth in Section 9.2.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, operations and results of operations of the
Business, taken as a whole.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" and "Parties" have the meanings set forth in the preamble
above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Purchase Price" has the meaning set forth in Section 2.5.
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<PAGE> 11
"Purchase Price Adjustment" has the meaning set forth in Section 2.6.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Sellers" has the meaning set forth in the preamble.
"Subsidiary" means with respect to any Person, (i) any corporation at
least a majority of whose outstanding voting stock is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries; (ii) any general partnership, joint
venture or similar entity, at least a majority of whose outstanding partnership
or similar interests shall at the time be owned by such Person, or by one or
more of its Subsidiaries, or by such Person and one or more of its Subsidiaries;
and (iii) any limited partnership of which such Person or any of its
Subsidiaries is a general partner. For the purposes of this definition, "voting
stock" means shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person having ordinary voting power
for the election of a majority of the directors (or the equivalent) of such
Person other than shares, interests, participations or other equivalents having
such power only by reason of the occurrence of a contingency.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar, including
FICA), unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Third Party Claim" has the meaning set forth in Section 9.4(a).
2. Acquisition of Assets and Assumption of Liabilities by the Buyer.
2.1. Purchase and Sale of Assets. The Sellers agree to sell and
transfer to the Buyer, and the Buyer agrees to purchase from the Sellers on and
as of the date hereof, subject to and upon the terms and conditions contained
herein, free and clear of any Lien, or other encumbrance of any kind whatsoever,
the following properties and assets of the Sellers relating to the Business
(collectively, the "Acquired Assets"):
(a) All rights with respect to the Inventory described on
Schedule 2.1(a) hereto;
(b) All rights with respect to leasehold interests and rights
thereunder relating to the real property and the personal property
listed on Schedule 2.1(b) (the "Leases");
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(c) All rights with respect to the shop equipment, warehouse
equipment, computer equipment, office equipment and vehicles listed on
Schedule 2.1(c).
(d) All rights with respect to the Intellectual Property
listed on Schedule 2.1(d), which is all Intellectual Property relating
to the Business, goodwill associated therewith, licenses and
sublicenses granted in respect thereto and rights thereunder, remedies
against infringements thereof and rights to protection of interest
therein other than (i) the rights in and to the name "Nuance", to which
the Sellers shall retain all ownership rights but which the Buyer shall
have the right to use in connection with the operation of the Business
for a period of 90 days after the date hereof, and (ii) the rights in
and to the software licenses listed on Schedule 1(b).
(e) All rights with respect to the customer (i.e. cruise
ships), supplier and mailing lists listed on Schedule 2.1(e), which are
all of the customer (i.e. cruise ships), supplier and mailing lists
relating to the Business; provided, that the Sellers or any one or more
of them shall have the right to use any such supplier lists other than
in activities related to the Business.
(f) All rights of the Sellers under the concession agreements
and other contracts or agreements relating to the Business and
described on Schedule 2.1(f) (the "Contracts"); and
(g) All business and financial records (or copies thereof),
books, ledgers, files, plans, documents, correspondence, lists,
notebooks, specifications, creative materials, advertising and
promotional materials, marketing materials, studies, reports, equipment
repair, maintenance or service records relating to the Business whether
written or electronically stored or otherwise recorded, to be
transferred to the Buyer "as-is".
2.2. Excluded Assets. There shall be excluded from the Acquired Assets
to be sold, assigned, transferred, conveyed and delivered to the Buyer
hereunder, and to the extent in existence on the date hereof, there shall be
retained by the Sellers, the following assets:
(a) all cash of the Business;
(b) all accounts receivable of the Business;
(c) the name "Nuance", subject to the Buyer's right to use
such name in connection with the operation of the Business for a period
of 90 days after the date hereof; and
(d) all other assets of the Sellers that are not Acquired
Assets.
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<PAGE> 13
2.3. Assumption of Liabilities. On the terms and subject to the
conditions set forth herein and except as contemplated by Section 2.4 hereof,
from and after the date hereof, the Buyer assumes and agrees to satisfy or
perform when due only the following Liabilities of the Sellers (the "Assumed
Liabilities"):
(a) all Liabilities of the Sellers under the Leases listed on
Schedule 2.1(b) arising after the date hereof, other than Liabilities
arising after the date hereof from any breach or default occurring
prior to the date hereof;
(b) all Liabilities under the Contracts listed on Schedule
2.1(f) arising after the date set forth on Schedule 2.3(b) hereof
opposite the ship at issue in the Contract, other than Liabilities
arising after such date set forth on Schedule 2.3(b) from any breach or
default occurring prior to such date;
(c) all Liabilities of the Sellers relating to the severance
obligations listed on Schedule 2.3(c). Such Liabilities are in addition
to the future obligations relating to Employees created because of the
Buyer's covenants in Section 5.1(b);
(d) all Liabilities required to be assumed by the Buyer as a
condition to any consent to assignment of any Contract and which are
listed on Schedule 2.3(d); provided, that the Sellers will indemnify
and hold the Buyer harmless with respect to any Losses arising from any
such Liabilities, other than Liabilities arising after the date hereof
from any breach or default occurring after the date hereof; and
(e) all Liabilities relating to open purchase orders of the
Business on the date hereof and which are listed on Schedule 2.3(e) or
which are otherwise permitted as described on Schedule 2.3(e).
2.4. Liabilities Not Assumed. Except as expressly set forth in this
Agreement, the Buyer will not assume or perform any Liabilities not specifically
contemplated by Section 2.3 hereof nor any of the following Liabilities (whether
or not contemplated by Section 2.3):
(a) any Liability of any Seller for income, franchise,
transfer, sales, use and other similar Taxes whether or not relating to
the Business and whether or not incurred prior to the date hereof;
(b) any Liability of any Seller for the unpaid Taxes of any
Person including Taxes imposed on the Company or any other Seller, as a
transferee or successor, by contract, or otherwise;
(c) any Liability of any Seller to indemnify any Person
(including any of the Sellers) by reason of the fact that such Person
was a director, officer, employee, or
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<PAGE> 14
agent of the Company or any other Seller or was serving at the request
of such entity as a partner, trustee, director, officer, employee, or
agent of another entity;
(d) any Liability of any Seller arising as a result of any
legal or equitable action or judicial or administrative proceeding
initiated at any time in respect of anything done, suffered to be done
or omitted to be done by such Sellers or any of their respective
directors, officers, employees or agents;
(e) any Liability of the Sellers for costs and expenses
incurred in connection with this Agreement, the making or performance
of this Agreement and the transactions contemplated hereby;
(f) any Liability of the Sellers under this Agreement;
(g) any Liability relating to or arising out of services
rendered by the Company or any other Seller prior to the date hereof;
(h) any Liability of the Business for trade payables and other
accrued liabilities incurred in the Ordinary Course of Business prior
to the date hereof, other than those assumed by the Buyer as set forth
on Schedule 2.6;
(i) any Liability of the Sellers arising out of any (i)
Employee Benefit Plan established or maintained by the Company or any
other Seller, (ii) Employee Benefit Plan to which the Company or any
other Seller contributes, or (iii) any termination of any such Employee
Benefit Plan, other than as specifically assumed pursuant to Section
2.3(c) hereto;
(j) except as specifically set forth in Section 2.3(c) hereto,
any Liability of the Sellers for making payments or providing benefits
of any kind to its employees or former employees and beneficiaries of
employees and former employees (including, without limitation, (i) as a
result of the sale of the Acquired Assets, (ii) any obligation to
provide former employees so-called COBRA continuation coverage, (iii)
any liability or obligation in respect of medical and other benefits
for existing and future retirees, (iv) any liability or obligation in
respect of work-related employee injuries or worker's compensation
claims arising out of injuries occurring prior to the date hereof, and
(v) any liability of Sellers pursuant to Section 5.1(a) hereof);
(k) any Liability pertaining to the Business arising out of or
resulting from noncompliance prior to the date hereof with any
national, regional or local laws, statutes, ordinances, rules,
regulations, orders, determinations, judgments, or directives, whether
legislatively, judicially or administratively promulgated; and
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<PAGE> 15
(l) any Liability of the Sellers under any leases, contracts,
or agreements not listed on Schedules 2.1(b) or 2.1(f).
2.5. Purchase Price. The Buyer agrees to assume the Assumed Liabilities
and pay to the Sellers on the date hereof, an aggregate amount (as adjusted
pursuant to Section 2.6, collectively the "Purchase Price") equal to $17,253,123
million, calculated in accordance with Schedule 2.5 and consisting of (i)
$16,503,123 million in cash payable by wire transfer to the Sellers in
accordance with written instructions of the Sellers given to the Buyer, and (ii)
$750,000 in cash payable by wire transfer to Boston Safe Deposit and Trust
Company, as escrow agent (the "Escrow Agent"), to be held in an escrow account
(the "Escrow Account") pursuant to the Escrow Agreement among the Buyer, the
Sellers and the Escrow Agent in the form of Exhibit A-1 hereto.
2.6. Adjustment to Purchase Price; Post-Closing Payment Mechanics. The
Purchase Price shall be increased or decreased by the amount, if any, calculated
as set forth on Schedule 2.6. Such amount is referred to herein as the "Purchase
Price Adjustment" and shall be determined and paid as set forth on Schedule 2.6.
Schedule 2.6 also sets forth the mechanics for the allocation of payables and of
receivables among the Buyer and the Sellers.
2.7. Preliminary Allocation of Purchase Price. The Parties agree that
the preliminary allocation of the Purchase Price for the Acquired Assets of the
Sellers shall be as determined as set forth on Schedule 2.7, as may be adjusted
to reflect any Purchase Price Adjustments. The Sellers and the Buyer agree that
the allocation may be amended or modified by mutual agreement to establish a
final allocation prior to the filing of the applicable tax returns of the Buyer
and the Sellers. The Sellers and the Buyer shall use such final allocation in
all relevant tax returns.
2.8. Consignment Inventory. After the date hereof, the Buyer shall be
responsible for handling all consignment inventory of the Business. The amounts
owed to the Sellers with respect to consignment inventory sold prior to the date
hereof shall be determined and paid as set forth on Schedule 2.8.
3. Representations and Warranties of the Sellers.
The Sellers jointly and severally represent and warrant to the Buyer
that the statements contained in this Section 3 are correct and complete as of
the date hereof, except as set forth in the disclosure schedule accompanying
this Agreement (the "Disclosure Schedule"). The Disclosure Schedule is arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3.
3.1. Organization of the Sellers. Each of the Sellers is a corporation,
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Sellers is qualified to do
business and is in good standing as a
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<PAGE> 16
foreign corporation in each jurisdiction listed in Section 3.1 of the Disclosure
Schedule, which such jurisdictions are the only jurisdictions where the nature
of the activities conducted by it or the character of the property owned, leased
or operated by it make such qualification necessary or appropriate except for
those jurisdictions where the failure to be so qualified will not have a
Material Adverse Effect.
3.2. Authorization of Transaction. Each of the Sellers has the power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform their respective obligations hereunder.
All corporate and other actions or proceedings to be taken by or on the part of
the Sellers to authorize and permit the execution and delivery by the Sellers of
this Agreement and the instruments required to be executed and delivered by the
Sellers pursuant hereto, the performance by the Sellers of their obligations
hereunder, and the consummation by the Sellers of the transactions contemplated
herein, have been duly and properly taken. This Agreement has been duly executed
and delivered by each of the Sellers and constitutes the legal, valid and
binding obligation of each of the Sellers, enforceable in accordance with its
terms and conditions.
3.3. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Sellers or any of their
property is subject or any provision of the charter or by-laws of any of the
Sellers or (ii) except as set forth in Sections 3.3 or 3.23 of the Disclosure
Schedule, conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which any of the
Sellers is a party or by which any of them is bound or to which any of their
assets is subject (or result in the imposition of any Lien upon any of their
assets). None of the Sellers needs to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 2 above).
3.4. Brokers' Fees. None of the Sellers has any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.5. Title to Assets. The Sellers have good and marketable title to, or
a valid and subsisting leasehold interest in, and (subject to the consents set
forth in Section 3.23 of the Disclosure Schedule) the power to sell all of the
Acquired Assets, free and clear of all Liens.
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3.6. All Assets Necessary to Conduct Business. The Acquired Assets
comprise all of the assets, properties and rights of every type and description,
real, personal, tangible and intangible used in the Business as it is presently
conducted, except that (i) the Acquired Assets do not include any consignment
agreements of the Sellers; (ii) the Sellers do not own, and the Acquired Assets
do not include, any of the goods held on consignment pursuant to one or more of
the consignment agreements of the Sellers, (iii) except as provided in Section
2.1(d), the Sellers are retaining all rights to the name "Nuance", (iv) the
Sellers do not own, and the Acquired Assets do not include, the fixtures,
furnishings and equipment used by Sellers on certain vessels, as described in
Section 3.6 of the Disclosure Schedule, (v) the Acquired Assets do not include
the computer software licenses listed on Schedule 1(b), and (vi) the Buyer will
not have the benefit of certain discounts for suppliers, as described in Section
3.6 of the Disclosure Schedule.
3.7. Financial Statements. Attached hereto as Exhibit C is the
following financial information relating to the Business (collectively the
"Financial Statements"): (i) schedules of revenues of the Business, calculated
by ship, (ii) schedules of employee costs, (iii) schedules of ship overhead
costs, calculated by ship, (iv) schedules of costs of operating leases, and (v)
schedules of costs of products, each prepared on an annual and monthly basis for
(a) the calendar year ended December 31, 1997 and (b) the period January 1, 1998
through June 30, 1998. The Financial Statements have been prepared on a
consistent basis throughout the periods covered thereby, are correct and
complete in all material respects and present fairly the financial information
presented. Also attached hereto as part of Exhibit C is a schedule of fixed
assets, net of accumulated depreciation through the date hereof. The schedule
described in the preceding sentence is correct and complete in all material
respects and presents fairly the fixed assets of the Business as of the date
hereof.
3.8. Guarantees. None of the Sellers is a guarantor or otherwise liable
for any Liability or obligation of any other Person for which the Buyer could
become liable.
3.9. Absence of Changes. Since July 1, 1998 and except as disclosed in
Section 3.9 of the Disclosure Schedule, the Company and the other Sellers have
conducted the Business only in the Ordinary Course of Business and there has not
been:
(a) any sale, lease, transfer, or assignment of any of the
assets of the Business, tangible or intangible, other than sales of
inventory for a fair consideration in the Ordinary Course of Business;
(b) any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) entered into other
than in the Ordinary Course of Business and in an amount not in excess
of $50,000;
(c) any acceleration, termination, modification, or
cancellation of any agreement, contract, lease, or license (or series
of related agreements, contracts,
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<PAGE> 18
leases, and licenses) to which any of the Sellers is a party or by
which any of them is bound and which relate to the Business;
(d) any creation or imposition of any Lien upon any of the
Acquired Assets;
(e) any capital expenditure (or series of related capital
expenditures) relating to the Business and involving more than $10,000
singly or $50,000 in the aggregate;
(f) any delay or postponement of payment of accounts payable
and other Liabilities of the Business outside the Ordinary Course of
Business;
(g) any grant of any license or sublicense of any rights or
modified any rights under or with respect to, or entered into any
settlement regarding any infringement of its rights to, any
Intellectual Property;
(h) any material damage, destruction, or loss (whether or not
covered by insurance) to its property;
(i) any employment contract or collective bargaining
agreement, written or oral, or modification of the terms of any
existing such contract or agreement;
(j) any increase, modification or change in the compensation
of any of the directors, officers, and employees of the Business
outside the Ordinary Course of Business;
(k) any modification or change in the employment terms
(including severance obligations) for any of the directors, officers,
and employees of the Business outside the Ordinary Course of Business;
and
(l) any other material occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business
involving the Company or the Business, except pursuant to the terms of
this Agreement.
3.10. Absence of Undisclosed Liabilities. None of the Sellers has any
Liability relating to the Acquired Assets (and there is no Basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability relating to
the Acquired Assets), except for (i) Liabilities which have arisen in the
Ordinary Course of Business (none of which liabilities results from, arises out
of, relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law) and (ii)
Liabilities which would not reasonably be likely to, individually or in the
aggregate, result in a Material Adverse Effect.
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3.11. Legal and Other Compliance. Each of the Company, the other
Sellers and their respective predecessors is in compliance in all material
respects with all applicable Laws the violation of which, either singularly or
in the aggregate, could have a Material Adverse Effect, and to the Knowledge of
the Sellers, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Neither the ownership nor use of the
Acquired Assets nor the conduct of the Business by the Sellers conflicts with
the rights of any other Person or violates, or with the giving of notice or the
passage of time or both will violate, conflict with or result in a default,
right to accelerate or loss of rights under any Lien, lease, license, agreement,
understanding or Law to which any Seller is a party or by which it may be bound
or affected. None of the Company or other Sellers has Knowledge of any proposed
Laws, governmental takings, condemnations or other proceedings which would be
specifically applicable to the Acquired Assets or the Business and which might
have a Material Adverse Effect.
3.12. No Material Adverse Effect. Since July 1, 1998, there has not
been any change which has resulted in a Material Adverse Effect and to the
Knowledge of the Sellers, no event has occurred or circumstance exists that may
result in a Material Adverse Effect.
3.13. Taxes. There are no Liens or other encumbrances on any of the
Acquired Assets that arose in connection with any failure (or alleged failure)
to pay any Tax. The Buyer is not, and after the date hereof will not become,
liable for any liability relating to any Taxes of the Sellers or any liability
relating to Taxes of the Employees listed on Schedule 5.1(a) required to be
withheld or paid prior to the date hereof.
3.14. Property, Plant and Equipment.
(a) The Company owns no real property and, except as set forth
in Section 3.14(a) of the Disclosure Schedule, the other Sellers own no
real property used in the operation of the Business.
(b) Section 3.14(b) of the Disclosure Schedule lists all real
property leased or subleased to the Company or to the other Sellers and
used in the Business. The Company has delivered to the Buyer correct
and complete copies of the leases and subleases listed in Section
3.14(b) of the Disclosure Schedule, which leases and subleases have not
been amended or modified since the date thereof, except as shown in
Section 3.14(b) of the Disclosure Schedule. With respect to each lease
and sublease listed in Section 3.14(b) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
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(ii) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby (including the assignments and assumptions
referred to in Section 2 above);
(iii) none of the Sellers, or to their Knowledge, any
other party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) to the Knowledge of the Sellers, no party to the
lease or sublease has repudiated any provision thereof;
(v) to the Knowledge of the Sellers, there are no
disputes, oral or written agreements, or forbearance programs
in effect as to the lease or sublease;
(vi) none of the Sellers has assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(vii) all facilities leased or subleased thereunder
have received all approvals of governmental authorities
(including licenses and permits) required in connection with
the operation thereof and have been operated and maintained in
accordance with applicable Laws, in all material respects; and
(viii) all facilities leased or subleased thereunder
are supplied with utilities and other services necessary for
the operation of said facilities for the Business as presently
conducted.
(c) The Sellers own or lease all buildings, real property,
improvements, machinery, equipment, and other tangible assets necessary
for the conduct of the Business as presently conducted. Each such
tangible asset is free from material defects (patent and latent), has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and
is suitable, adequate and sufficient for the purposes for which it
presently is used.
3.15. Intellectual Property. Section 3.15 of the Disclosure Schedule
lists all material Intellectual Property of the Business. Section 3.15 of the
Disclosure Schedule sets forth a list of each license or other contractual
obligation (including all amendments) under which any Intellectual Property
material to the conduct of the Business is held or used by any Seller. Except as
described in Section 3.15 of the Disclosure Schedule, there is no license or
other contractual obligation under which the Company, or with respect to the
Business, any other
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Seller is liable as licensor with respect to any Intellectual Property. Except
as set forth in Section 3.15 of the Disclosure Schedule, registrable
Intellectual Property owned by the Company, or with respect to the Business, the
other Sellers, has been duly registered in accordance with applicable Laws in
all jurisdictions in which the Business is currently conducted, except for such
failures to be so registered as have not had and could not reasonably be
expected to have a Material Adverse Effect. No Seller has received any notice
that the use by the Company or any other Seller of the Intellectual Property in
the Business and in the areas where the Business is currently conducted
infringes or has infringed any rights of any third party; to the Sellers'
Knowledge, such use does not actually infringe and has not actually infringed
any such rights; and to the Sellers' Knowledge, no activity of any third party
infringes upon the rights of the Sellers with respect to any of the Intellectual
Property.
3.16. Inventories. Since the date of the physical inventory conducted
on each vessel and in the warehouse listed in Section 3.16 of the Disclosure
Schedule, the value of the inventory on such vessels and in such warehouse
(which is being sold hereunder "as-is and where is", subject only to adjustments
for quantity as provided in Schedule 2.6) has been rolled forward based on the
deliveries to and sales from each such vessel and warehouse and quantified by
the tracking system in effect as of date set forth opposite the name of such
ship in Section 3.16 of the Disclosure Schedule. Since July 1, 1998, no
inventory has been sold or disposed of except through sales in the Ordinary
Course of Business.
3.17. Contracts. Section 3.17 of the Disclosure Schedule lists the
following contracts and other agreements to which either (i) the Company is a
party or (ii) any of the other Sellers is a party and which relate to the
Business, other than Contracts and leases listed on Schedules 2.1(b) and 2.1(f):
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for annual
lease payments in excess of $50,000;
(b) any agreement (or group of related agreements) for the
purchase or sale of commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year or involve
consideration in excess of $50,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any Indebtedness in
excess of $50,000 or under which it has imposed a Lien on any of its
assets, tangible or intangible;
(e) any agreement concerning confidentiality or
noncompetition;
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(f) any material agreement relating to the Business, the
Company, its assets, liabilities and business or between or among the
Company, any of the other Sellers and any of their Affiliates and
relating to the Business;
(g) any deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(h) any collective bargaining agreement;
(i) any agreement providing for the employment or consultancy
with any individual on a full-time, part-time, consulting or other
basis in excess of $50,000 or providing severance or retirement
benefits;
(j) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $50,000.
The Company has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3.17 of the Disclosure Schedule and listed
on Schedules 2.1(b) and 2.1(f) (as amended to date) (provided, that certain
pricing information in certain contracts listed in Section 3.17 of the
Disclosure Schedule and listed on Schedules 2.1(b) and 2.1(f) has been deleted)
and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 3.17 of the Disclosure Schedule and listed on
Schedules 2.1(b) and 2.1(f). Except as disclosed in Section 3.17 of the
Disclosure Schedule, with respect to each such agreement: (i) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (ii) subject
to obtaining the necessary consents disclosed in Section 3.23 of the Disclosure
Schedule, the agreement will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments and assumptions
referred to in Section 2 above); provided, that as set forth in Section 3.17 of
the Disclosure Schedule, certain pricing discounts currently available to the
Sellers may not be available to the Buyer; and provided, further, that the
computer software licenses listed on Schedule 1(b) will not be available to the
Buyer after the date hereof; (iii) to the Knowledge of the Sellers, no party is
in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (iv) to the Knowledge of the Sellers,
no party has repudiated any provision of the agreement.
3.18. Powers of Attorney. Except as specifically contemplated by this
Agreement and the Exhibits hereto, there are no outstanding powers of attorney
executed on behalf of
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the Company or the other Sellers, in either case, in respect of the Business or
the Acquired Assets.
3.19. Insurance and Risk Management. Section 3.19 of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which Company or,
with respect to the Business, any other Seller, is a party, a named insured, or
otherwise the beneficiary of coverage and which relates to the Business or
otherwise relates to the Acquired Assets: (i) the name, address, and telephone
number of the agent; (ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured; (iii) the policy number, the period of
coverage and premium; and (iv) a description of any retrospective premium
adjustments or other loss-sensitive premium arrangements. Other than as set
forth in Section 3.19 of the Disclosure Schedule, with respect to each such
insurance policy: (a) the policy is legal, valid, binding, enforceable, and in
full force and effect and (b) the Sellers have delivered true and complete
copies of all policies (or summaries thereof) and related indemnity or premium
payment agreements to the Buyer. Section 3.19 of the Disclosure Schedule
describes any self-insurance arrangements affecting the Company and, with
respect to the Acquired Assets and the Business, the other Sellers.
3.20. Litigation. Except as disclosed in Section 3.20 of the Disclosure
Schedule, there are no judicial or administrative actions, claims, suits,
proceedings or investigations pending or, to the Sellers' Knowledge, threatened,
that would be reasonably likely to result in a Material Adverse Effect, or that
question the validity of this Agreement or of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement nor, to the
Knowledge of the Sellers, is there any Basis for any such action, claim, suit,
proceeding or investigation. There are no judgments, orders, decrees, citations,
fines or penalties heretofore assessed against any of the Sellers affecting the
Acquired Assets, the Assumed Liabilities or the Business under any federal,
state or local law.
3.21. Employee Benefits. Attached hereto as Section 3.21 of the
Disclosure Schedule is a list of all Employee Benefit Plans maintained or
contributed to by any of the Sellers and in which any one or more of the current
or former employees of the Business (including former employees and
beneficiaries of employees or former employees) participates, or is eligible to
participate. The Sellers have furnished the Buyer with true and complete copies
of all Employee Benefit Plans that have been reduced to writing, and written
summaries of the material terms of all unwritten Employee Benefit Plans. All
Employee Benefit Plans are in substantial compliance with all applicable
provisions of ERISA, as well as with all other applicable federal, state and
local statutes, ordinances and regulations. To the Sellers' Knowledge, the
Sellers have not, during the past six years, maintained an Employee Benefit Plan
that is subject to the provisions of Title IV of ERISA, and the Company, or any
other entity with whom the Company is under common control (as such term is
defined in Section 4062 of ERISA), have not incurred and do not expect to incur
any liability under Section
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4062 of ERISA with respect to any "multiemployer plan" (as such term is defined
in Section 4001(a)(3) of ERISA).
3.22. No Illegal Payments, Etc. None of the Sellers, nor any of their
directors, officers, employees or agents, has (a) directly or indirectly given
or agreed to give any illegal gift, contribution, payment or similar benefit to
any supplier, customer, governmental official or employee or other person who
was, is or may be in a position to help or hinder the Business (or assist in
connection with any actual or proposed transaction) or made or agreed to make
any illegal contribution, or reimbursed any illegal political gift or
contribution made by any other person, to any candidate for federal, state,
local or foreign public office (i) which might subject any of the Company or the
other Sellers to any damage or penalty in any civil, criminal or governmental
litigation or proceeding or (ii) the non-continuation of which has had or might
have, individually or in the aggregate, a Material Adverse Effect or (b)
established or maintained any unrecorded fund or asset or made any false entries
on any books or records for any purpose.
3.23. Consents. Section 3.23 of the Disclosure Schedule sets forth a
true, correct and complete list of the identities of any Person whose consent or
approval is required and the matter, agreement or contract to which such consent
relates in connection with the transfer, assignment or conveyance by the Sellers
of any of the Acquired Assets.
3.24. Solvency. As of the date hereof, each Seller has capital
sufficient to carry on its business and transactions and all businesses and
transactions in which it is about to engage and is solvent and able to pay its
debts as they mature, and each Seller owns property the fair saleable value of
which (on a going concern basis) is greater than the amount required to pay such
Seller's indebtedness.
4. Representations and Warranties of the Buyer and the Guarantor.
The Buyer and the Guarantor jointly and severally represent and warrant
to the Sellers that the statements contained in this Section 4 are correct and
complete as of the date hereof.
4.1. Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2. Authority for Agreement. Each of the Buyer and the Guarantor has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of each of
the Buyer and the Guarantor, enforceable in accordance with its terms and
conditions.
4.3. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and
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assumptions referred to in Section 2 above), will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of its charter or bylaws or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. The Buyer does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above).
4.4. Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
4.5. Consents not Obtained. On the date hereof, the Buyer is satisfied
with all of the consents listed on Schedule 3.23 which have been obtained. The
Buyer hereby acknowledges that the consents listed on Schedule 4.5 have not been
obtained and that the Sellers are not responsible for any obligations arising
from the failure to obtain the consents listed on Schedule 4.5.
4.6. Financial Assurances. As of the date hereof, the Guarantor has
sufficient net assets to guaranty the Buyer's obligations hereunder.
4.7. Supplier Contracts. The Buyer hereby acknowledges that the Sellers
do not currently maintain any contracts with suppliers to the Business.
4.8. Software. Buyer hereby acknowledges that it shall not be entitled
to any right, title or interest in the software licenses listed on Schedule
1(b).
5. Covenants. The Parties agree as follows:
5.1. Employee Matters.
(a) The Sellers have (i) on the date hereof, released for
rehiring by the Buyer, the persons employed by them and listed on
Schedule 5.1(a) (the "Employees") and, except with respect to Assumed
Liabilities specifically referenced in Section 2.3(c) hereto, agree to
pay any and all Liabilities relating to such release, including,
without limitation any payments and benefits due such Employees
pursuant to accrued salary and wages, pension, retirement, savings,
health, welfare and other benefits and severance payments or similar
payments (whether arising by contract, plan, statute or otherwise) of
the Employees, and (ii) provided to all Employees any notice (which
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notice shall be reasonably acceptable to Buyer) required under any Law,
including without limitation, COBRA.
(b) Buyer hereby hires, effective on the date hereof, all
Employees listed on Schedule 5.1(a) upon terms and conditions set forth
on Schedule 5.1(b).
5.2. Access to Records.
(a) For a period of three years after the date hereof, the
Sellers and their representatives shall have reasonable access to all
of the books and records of the Business to the extent that such access
may reasonably be required by the Sellers in connection with matters
relating to or affected by the operations of the Business prior to the
date hereof. Such access shall be afforded by Buyer upon receipt of
reasonable advance notice and during normal business hours. Without
limiting the generality of the foregoing, it is expressly understood
and agreed that: (i) until the Purchase Price Adjustment is finally
determined and paid, the Sellers and their representatives shall have
reasonable access to all of the Employees and books and records
relevant to a determination of the Purchase Price Adjustment, and (ii)
for a period of four months from the date hereof, the Sellers and their
representatives shall have access to the employees, premises and books
and records of the Buyer relevant to an orderly segregation of the
Business from the other businesses and activities of the Sellers, in
each case, upon receipt of reasonable advance notice to the Buyer and
during normal business hours. Sellers shall be solely responsible for
any costs or expenses incurred by them pursuant to this Section 5.2(a).
If the Buyer shall desire to dispose of any of such books and records
prior to the expiration of such three-year period, the Buyer shall,
prior to such disposition, give the Sellers a reasonable opportunity,
at Sellers' expense, to segregate and remove such books and records as
Sellers may select.
(b) For a period of three years after the date hereof, the Buyer
and its representatives shall have reasonable access to all of the
books and records of the Sellers not contained in the Acquired Assets,
to the extent that such access may reasonably be required by the Buyer
in connection with matters relating to or affected by the operations of
the Business prior to the date hereof, including without limitation,
access as may be required in connection with an audit of the Business
by the Buyer. Such access shall be afforded by the Sellers upon receipt
of reasonable advance notice and during normal business hours. The
Buyer shall be solely responsible for any costs or expenses incurred by
it pursuant to this Section 5.2(b). If any Seller shall desire to
dispose of any of such books and records prior to the expiration of
such three-year period, such Seller shall, prior to such disposition,
give the Buyer a reasonable opportunity, at the Buyer's expense, to
segregate and remove such books and records as the Buyer may select.
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5.3. Transfer Taxes. The Buyer agrees to pay all sales and use Taxes on
the transfer of the Acquired Assets hereunder.
5.4. Information Technology. The Sellers covenant that from and after
the date hereof and for a period of 90 days, the Sellers will cooperate with the
Buyer in the Buyer's transition from the current computer operating system of
the Business to the Buyer's operating system, including without limitation
helping the Buyer with respect to (i) day to day processing, (ii) debugging of
the system if necessary, (iii) maintenance of the proper data base, and (iv)
preparing electronic hand-over/transfer of inventory data to the Buyer. In
furtherance of the foregoing, the Sellers agree that Hugh Lohan (or a substitute
designated by the Company and reasonably acceptable to the Buyer if Hugh Lohan
is not reasonably accessible) will be available for not less than 40 hours per
week in such capacity, at the expense of the Buyer.
5.5. Accounts Receivable. The Buyer covenants that if at any time after
the date hereof the Buyer receives payment for any accounts receivable retained
by the Sellers pursuant to Section 2.2(b) hereof, the Buyer shall remit such
payments to the Sellers. All payments received by the Buyer on account of
accounts receivable shall be first credited to accounts receivable of the
Sellers, on a ship-by-ship basis.
5.6. Future Assurances. At any time and from time to time after the
date hereof, at the request of Buyer and without further consideration, except
as stated below, Sellers will execute and deliver such other instruments of
sale, transfer, conveyance, assignment and confirmation and take such action as
Buyer may reasonably determine is necessary to transfer, convey and assign to
Buyer, and to confirm Buyer's title to or interest in the Acquired Assets, to
put Buyer in actual possession and operating control thereof and to assist Buyer
in exercising all rights with respect thereto.
6. Deliveries.
6.1. On or prior to the date hereof:
(a) Escrow Agreement. The Sellers shall have executed and
delivered the Escrow Agreement, in form and substance the same as the
Escrow Agreement set forth in Exhibit A-1;
(b) Side Letter. Ocean Trading Limited, an affiliate of the
Sellers, shall have executed and delivered the Side Letter relating to
post-closing operations in the United Kingdom, in form and substance
the same as the Side Letter set forth in Exhibit A-2;
(c) Inventory Lists. The Sellers shall have provided to the
Buyer a completed inventory list of the inventory on the ships on which
a physical inventory has been conducted prior to the date hereof.
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(d) Stockholder Approval. The Sellers shall have procured all
stockholder approvals necessary for the consummation of the
transactions contemplated hereby and such approvals shall be in full
force and effect;
(e) Escrow Agreement. The Buyer shall have executed and
delivered the Escrow Agreement, in form and substance the same as the
Escrow Agreement set forth in Exhibit A-1; and
(f) Side Letter. The Buyer shall have executed and delivered
the Side Letter relating to post-closing operations in the United
Kingdom, in form and substance the same as the Side Letter set forth in
Exhibit A-2.
7. Confidentiality.
Each of the Sellers will treat and hold as such, all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or in connection with preparing its own
financial records and tax returns, and will deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information which are in his or its possession
which it does not need for the foregoing purposes. In the event that any of the
Sellers is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, that
Seller will notify the Buyer promptly of the request or requirement so that the
Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 7. If, in the absence of a protective order or the
receipt of a waiver hereunder, any of the Sellers is, on the advice of counsel,
compelled to disclose any Confidential Information to any Person or tribunal or
else stand liable for contempt, that Seller may disclose the Confidential
Information to the Person or tribunal; provided, however, that the disclosing
Sellers shall use their best efforts to obtain, at the request of the Buyer, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Buyer
shall designate.
8. Noncompetition.
(a) Each Seller agrees that, in consideration of the purchase by Buyer
hereunder, it shall not, and it shall cause its Affiliates not to, on or prior
to the date which is five (5) years after the date hereof, directly or
indirectly, run, own, manage, operate, control, be employed by, provide
consulting services to, be an officer or director of, participate in, lend his,
her or its name to, invest in or be connected in any manner with the management,
ownership, operation or control of any business, venture or activity which
competes with the Business, as it is being conducted on the date hereof;
provided, however, no Seller or its Affiliates shall be considered to be in
default of this Section 8 solely by virtue of (i) its
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holding for portfolio purposes as a passive investor not more than five percent
(5%) of the issued and outstanding equity securities of a corporation, the
equity securities of which are listed or quoted on a stock exchange or an
over-the-counter market or (ii) conducting the activities set forth on Schedule
8(a) hereto.
(b) Each of the Sellers further agrees that for a period of two (2)
years after the date hereof such Seller will not directly or indirectly without
the prior written consent of Buyer, recruit, offer employment, employ, engage as
a consultant, lure or entice away or in any other manner persuade or attempt to
persuade any person who is an employee of the Buyer or the Guarantor, to leave
the employ the Buyer or the Guarantor, as the case may be, unless such person
has been terminated by the Buyer or the Guarantor, as the case may be.
9. Indemnification.
9.1. Survival of Representations and Warranties. All of the
representations and warranties of the Sellers (except for those contained in
Sections 3.2 (Authorization of Transaction), 3.5 (Title to Assets) and 3.13
(Taxes)) contained herein or in any document certificate or other instrument
required to be delivered hereunder shall survive and continue in full force and
effect until the second anniversary of the date hereof. The representations and
warranties of Sellers contained in Sections 3.2, 3.5 and 3.13 shall survive and
continue in full force and effect without limit as to time (subject to any
applicable statutes of limitations and any extensions or waivers thereof). The
termination of any such representation and warranty, however, shall not affect
any claim for breaches of representations or warranties if written notice
thereof is given to the breaching party or parties prior to such termination
date. All of the representations and warranties of the Buyer and the Guarantor
contained in Section 4 shall survive and shall continue in full force and effect
until the second anniversary of the date hereof. All covenants and indemnities
of any Party in this Agreement or in any document or certificate delivered
hereunder shall, remain in full force and effect for the period specified
therein, and if no period is specified, shall remain in full force and effect
forever.
9.2. Indemnity by Sellers. The Sellers hereby agree to jointly and
severally indemnify, defend and hold harmless Buyer, the Guarantor and their
respective directors, officers and Affiliates against and in respect of all
Liabilities, obligations, judgments, Liens, injunctions, charges, orders,
decrees, rulings, damages, dues, assessments, Taxes, losses, fines, penalties,
expenses, fees, costs, amounts paid in settlement (including reasonable
attorneys' and expert witness fees and disbursements in connection with
investigating, defending or settling any action or threatened action), arising
out of any claim, damages, complaint, demand, cause of action, audit,
investigation, hearing, action, suit or other proceeding asserted or initiated
or otherwise existing in respect of any matter (collectively, the "Losses") that
results from:
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(a) the inaccuracy of any representation or warranty made by
Sellers herein or resulting from any misrepresentation or breach of
warranty (as if all materiality provisions were not contained therein),
or nonfulfillment of any agreement or covenant of Sellers contained
herein or in any agreement or instrument required to be entered into in
connection herewith, or from any misrepresentation in or omission from
any schedule, document, certificate or other instrument required to be
furnished by Sellers hereunder; provided, however, that the Sellers
shall be liable under this Section 9.2(a) in respect of Losses only if
the aggregate of such Losses exceeds $172,500, in which case the
Sellers shall be liable for the total amount of such Losses in excess
of $172,500, up to an aggregate amount equal to $2 million.
(b) (i) any Liability of the Business (including any Liability of
the Sellers that becomes a Liability of the Buyer under any bulk
transfer law of any jurisdiction, under any common law doctrine of de
facto merger or successor liability, or otherwise by operation of law)
which is not an Assumed Liability or (ii) any Liability of the Business
assumed by the Buyer pursuant to Section 2.3(d).
In the event that Sellers may be obliged to indemnify Buyer under both
subsection (a) and subsection (b) of this Section 9.2, their obligations under
subsection (b) shall be controlling and the limitations provided in Sections 9.1
and 9.2(a) hereof relating to their obligations in respect of Losses resulting
from the inaccuracy of any representation and warranty, or any
misrepresentation, breach of warranty or non-fulfillment of an agreement or
covenant as described in Section 9.2(a), shall not apply. Buyer shall provide
Sellers written notice for any claim made in respect of the indemnification
provided in this Section 9.2, whether or not arising out of a claim by a third
party.
9.3. Indemnity by Buyer and Guarantor. The Buyer and the Guarantor
hereby jointly and severally agree to indemnify, defend and hold harmless
Sellers and their respective directors, officers and Affiliates against and in
respect of all Losses that results from the inaccuracy of any representation or
warranty made by Buyer or the Guarantor herein, or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any agreement or
covenant of Buyer, including Buyer's agreement to assume certain Liabilities of
the Sellers pursuant to Section 2.3 of this Agreement, contained herein or in
any agreement or instrument required to be entered into in connection herewith
or from any misrepresentation in or omission from any schedule, document,
certificate or other instrument required to be furnished by Buyer hereunder and
from Losses arising out of the operation or use of the Acquired Assets by the
Buyer after the date hereof.
9.4. Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this
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Section 9, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that no delay
on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Losses the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence acceptable to the
Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other
equitable relief, (iv) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense
of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 9.4(b) above, (i)
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim,
(ii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party
(which consent shall not unreasonably be withheld), and (iii) the
Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim unless
written agreement is obtained releasing the Indemnified Party from all
liability thereunder.
(d) In the event any of the conditions in Section 9.4(b) above is
or becomes unsatisfied, (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem
appropriate (and the Indemnified Party need not consult with, or obtain
any consent from, any Indemnifying Party in connection therewith), (ii)
the Indemnifying Parties will reimburse the Indemnified Party promptly
and periodically for the costs of defending against the Third Party
Claim (including attorneys' fees and expenses), and (iii) the
Indemnifying Parties will remain responsible for any Losses the
Indemnified Party may suffer resulting from, arising
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<PAGE> 32
out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Section 9.
10. Miscellaneous.
10.1. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
10.2. Entire Agreement. This Agreement (including the Schedules and
Exhibits attached hereto) constitutes the entire agreement between the Parties
and supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
10.3. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns including without limitation Buyer's lenders as
collateral assignees of the Buyer; provided, that no Party may assign either
this Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the other Party, except that the Buyer may (a)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates, (b) designate one or more of its Affiliates to perform its
obligations hereunder, without affecting the Buyer's obligations hereunder, and
(c) assign any or all of its rights and interests hereunder to its lenders, as
collateral assignees of the Buyer.
10.4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.6. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) upon
confirmation of facsimile, (ii) one business day following the date sent when
sent by overnight delivery and (iii) five business days following the date
mailed when mailed by registered or certified mail return receipt requested and
postage prepaid at the following address:
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If to the Sellers:
Nuance Global Traders AG
Unterrietstr. 2a
8152 Glattbrugg
Switzerland
Attn: Mr. Ruedi Keller
Telephone: (41-1) 874-39-70
Facsimile: (41-1) 874-39-79
Copy to:
Faust, Rabbach & Oppenheim, LLP
488 Madison Avenue
New York, New York 10022
Attn: David Faust, Esq.
Telephone: (212) 751-7700
Facsimile: (212) 371-8410
If to the Buyer:
Starboard Holdings Ltd.
c/o Berkshire Partners LLC
One Boston Place, Suite 3300
Boston, Massachusetts 02108
Attn: Mr. Bradley Bloom
Telephone: (617) 227-0050
Facsimile: (617) 227-6105
Copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attn: David C. Chapin, Esq.
Telephone: (617) 951-7000
Facsimile: (617) 951-7050
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means, but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change
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<PAGE> 34
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
10.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
10.8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties hereto. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
10.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.10. Expenses. Each of the Buyer and the Sellers will bear its own
costs and expenses (including legal and accounting fees and expenses) incurred
in connection with this Agreement and the transactions contemplated hereby. The
Sellers also covenant and agree that it has not paid any amount to any third
party, and will not pay any amount to any third party, with respect to any of
the costs and expenses of the Company and the other Sellers (including any of
their legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby for which the Buyer may become liable.
10.11. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
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<PAGE> 35
10.12. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
10.13. Dispute Resolution of Financial Matters. If the Parties are unable
to resolve a dispute relating to inventory, accounts receivable or accounts
payable, including without limitation, a dispute relating to the Purchase Price
Adjustment, as provided in Section 2.6, the Parties shall appoint Deloitte &
Touche LLP, certified public accountants or, if unavailable, such firm which
shall be mutually agreed upon who shall, at Sellers' and Buyer's joint expense,
review such matter in dispute and determine the appropriate resolution of such
matter. The finding of such accounting firm shall be binding on the Parties
hereto. All fees and expenses payable in connection with any dispute resolution
under this Section 10.13 shall be borne 50% by the Buyer and 50% by the Sellers.
10.14. Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter in addition to any other remedy to which it may be
entitled, at law or in equity.
10.15. Consent to Jurisdiction. With respect to matters other than those
resolved in accordance with Section 10.13 hereof, each of the Parties, by its,
his or her execution hereof, (i) hereby irrevocably submits to the exclusive
jurisdiction of the federal district court in Miami, Florida, for the purpose of
any claim or action arising out of or based upon this Agreement or relating to
the subject matter hereof, (ii) hereby waives, to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such claim or action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in the above-named courts is improper, or that this Agreement or the subject
matter hereof may not be enforced in or by such court, and (iii) hereby agrees
not to commence any claim or action arising out of or based upon this Agreement
or relating to the subject matter hereof other than before the above-named
courts nor to make any motion or take any other action seeking or intending to
cause the transfer or removal of any such claim or action to any court other
than the above-named courts whether on the grounds of inconvenient forum or
otherwise. Each of the Parties hereby consents to service of process in any such
proceeding in any manner permitted by law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 10.6 hereof is reasonably calculated to give actual notice.
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<PAGE> 36
10.16. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY
WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING OUT OF OR PASSED UPON THIS AGREEMENT OR THE SUBJECT
MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN
TORT OR CONTRACT OR OTHERWISE.
*****
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<PAGE> 37
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
STARBOARD HOLDINGS LTD.
By: /s/ C. R. Haste
------------------------------------------
Title: Vice President
-----------------------------------------
GREYHOUND LEISURE SERVICES, INC.
By: /s/ C. R. Haste
------------------------------------------
Title: Vice President
------------------------------------------
NUANCE GLOBAL SHIPS, INC.
By: /s/ N. Jein
------------------------------------------
Title: Director
------------------------------------------
NUANCE GLOBAL TRADERS LTD.
By: /s/ N. Jein
------------------------------------------
Title: Director
------------------------------------------
NUANCE GLOBAL TRADERS INC.
By: /s/ N. Jein
------------------------------------------
Title: Director
------------------------------------------
NUANCE GLOBAL TRADERS (USA), INC.
By: /s/ N. Jein
------------------------------------------
Title: Director
------------------------------------------
NUANCE GLOBAL TRADERS (SHIPS) LIMITED
By: /s/ N. Jein
------------------------------------------
Title: Director
------------------------------------------
<PAGE> 1
EX. 10.4
Cruise Line Holdings Co.
c/o Berkshire Partners LLC
One Boston Place
Boston, Massachusetts 02108
September 17, 1998
Mr. J.P. Miquel
Greyhound Leisure Services, Inc.
8052 Northwest 14th Street
Miami, FL 33126
Dear Mr. Miquel:
I am pleased to offer you the position of President and Chief Executive
of Greyhound Leisure Services Inc. (the "Company"), starting upon the
consummation of the purchase of the Company by Miami Cruiseline Services
Holdings I B.V. ("Miami"), the ultimate parent of Cruise Line Holdings Co. (the
"Parent").
1. Salary / Benefits
If you accept this offer, your initial aggregate salary will be at the
rate of $300,000 per year, less applicable legal deductions, payable in
accordance with the regular payroll practices of the Company and subject to
increase from time to time in the discretion of the Board of Directors of the
Parent (the "Parent Board"). You will also be eligible to participate in any
bonus plan established by the Parent for employees in positions comparable to
yours, as such plan may be, as in effect from time to time.
During employment, you will be entitled to participate in all employee
benefit plans from time to time in effect for employees of the Parent generally,
except to the extent such plans are duplicative of benefits otherwise provided
you under this agreement. Your initial employee benefits will be as set forth on
Exhibit A hereto, which such benefits may be materially changed only with the
approval of the Parent Board. Your participation will be subject to the terms of
the applicable plan documents and generally applicable Parent policies. Your
earning and use of vacation time shall be subject to the generally applicable
policies of the Parent.
<PAGE> 2
During employment, the Company will provide you with group life and
health insurance protection to the same extent that protection is made available
to the Parent's other executive employees.
2. Position / Duties
You will be expected to devote your full business time and your best
professional efforts to the performance of your duties and responsibilities for
the Company and to abide by all Parent and Company's policies and procedures, as
in effect from time to time. As President and Chief Executive Officer of the
Company, your responsibilities will include those inherent to your position and
such other duties commensurate with those positions and generally consistent
with your current duties as may be assigned to you from time to time. It is
understood by the parties that after 24 months they will negotiate in good faith
for you to be less involved in the day-to-day operations of the business.
3. Confidential Information
During the course of your employment, you will learn of Confidential
Information, as defined below, and you may develop Confidential Information, as
defined below, on behalf of the Parent and the Company. You agree that, except
as required by applicable law or for the proper performance of your duties and
responsibilities to the Parent and the Company, you will never use on behalf of
or disclose to any Person other than the Parent and the Company, any
Confidential Information obtained by you incident to your employment and other
associations with the Parent or the Company or any of their Subsidiaries or
predecessors. You understand that this restriction shall continue to apply after
your employment terminates, regardless of the reason for such termination.
4. Non-Solicitation and Non-Competition
You acknowledge that in your employment with the Company you will have
access to Confidential Information that is sensitive and which, if disclosed,
would assist in competition against the Parent, the Company and their
Subsidiaries. You agree that the following restrictions on your activities
during and after your employment are necessary to protect the goodwill,
Confidential Information and other legitimate interests of the Parent, the
Company and their Subsidiaries.
While you are employed by the Company and during the twelve months
immediately following termination of your employment (the "Non-Competition
Period"), you shall not, directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or otherwise, compete with
the Parent, the Company or
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<PAGE> 3
any of their Subsidiaries anywhere in the world or undertake any planning for
any business competitive with the business that the Parent, the Company or any
of their Subsidiaries are engaged in (or actively planning to engage in) as of
the termination of your employment. Specifically, but without limiting the
foregoing, you agree not to work or provide services, in any capacity, whether
as an employee, independent contractor or otherwise, with or without
compensation, to any Person in competition with the Parent, the Company or any
of their Subsidiaries. The foregoing shall not prevent you from owning not more
than five percent (5%) of the voting stock of any publicly held corporation.
You agree that, during the Non-Competition Period, you will not (A)
hire any employee of the Parent, the Company or any of their Subsidiaries or
seek to persuade any employee of the Parent, the Company or any of their
Subsidiaries to discontinue employment, (B) solicit or encourage any customer of
the Parent, the Company or any of their Subsidiaries, as defined below, or any
other entity to whom the Parent, the Company or any of their Subsidiaries
provides services or any entity or independent contractor providing services to
the Parent, the Company or any of their Subsidiaries to terminate or diminish
its relationship with the Parent, the Company or any of their Subsidiaries or
(C) to solicit or encourage any customer of Parent, the Company or any of their
Subsidiaries or whose business the Parent, the Company or any of their
Subsidiaries have actively sought within the twelve months preceding termination
of your employment, to conduct with anyone else any business or activity that
such customer or business conducts or could conduct with the Parent, the Company
or any of their Subsidiaries.
In signing this agreement, you give the Parent assurance that you have
carefully read and considered all the terms and conditions of this agreement,
including the restraints imposed on you under this paragraph 4. You agree
without reservation that these restraints are necessary for the reasonable and
proper protection of the Parent, the Company and their Subsidiaries and that
each and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area. You further agree that, were you to breach
any of the covenants contained in this paragraph 4, the damage to the Parent,
the Company and their Subsidiaries would be irreparable. You therefore agree
that the Parent and the Company, in addition to any other remedies available to
them, shall be entitled to preliminary and permanent injunctive relief against
any breach or threatened breach by you of any of those covenants, without having
to post bond. You and the Parent and the Company further agree that, in the
event that any provision of this paragraph 4 is determined by any court of
competent jurisdiction to be unenforceable by reason of its being extended over
too great a time, too large a geographic area or too great a range of
activities, that provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law. It is also agreed that each
of the Parent's Subsidiaries shall have the right to enforce all of your
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<PAGE> 4
obligations to that Subsidiary under this agreement, including without
limitation pursuant to this paragraph 4.
5. Term and Termination
Your employment under this agreement shall continue until September 17,
2001, unless earlier terminated pursuant to this paragraph 5.
a. The Parent may terminate your employment at any time other
than for Cause upon notice to you. The Parent may terminate your employment for
Cause upon notice to you setting forth in reasonable detail the nature of the
Cause. The following, as determined by the Parent in its reasonable judgment
shall constitute "Cause" for termination: (i) your having been convicted of, or
your having pleaded guilty or nolo contendere to, any felony (other than a
conviction arising solely under a statutory provision imposing criminal
liability on you on a per se basis due to the position you hold, so long as any
act or omission with respect to such matter was not taken or omitted in
contravention of any applicable policy or directive of the Parent Board or the
Company's Boards of Directors); (ii) your having willfully failed or having
refused to materially perform, or material negligence in the performance of your
duties to the Parent, the Company or any of their Subsidiaries (other than as a
result of illness or disability), it being understood that the Company's failure
to achieve their business plans or projections shall not itself be considered a
failure or refusal to materially perform duties or material negligence in your
performance; (iii) your material breach of this agreement or any other agreement
between you and the Parent, the Company or any of their Subsidiaries; or (iv)
other conduct by you that is materially harmful to the business, interests or
reputation of the Parent, the Company or any of their Subsidiaries.
b. You may resign your employment at any time upon sixty days'
prior written notice to the Parent. The Parent may elect to accept your
resignation prior to the expiration of the notice period but, in that event, the
Company shall pay you your base salary for the remainder of the notice period,
to a maximum of sixty days' pay.
c. This agreement will automatically terminate in the event of
your death during employment. In the event you become disabled during employment
and, as a result, are unable to continue to perform substantially all of your
duties and responsibilities under this agreement, the Company will continue to
pay you your base salary and to provide you benefits in accordance with
paragraph 2.d above for up to twelve weeks of disability during any period of
three hundred and sixty-five consecutive calendar days. If you are unable to
return to work after twelve weeks of disability, the Parent may terminate your
employment, upon notice to you. If any question shall arise as to whether you
are disabled to the extent that you are unable to perform substantially all of
your duties and responsibilities for the Parent, the Company and their
Subsidiaries,
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<PAGE> 5
you shall, at the Parent's request, submit to a medical examination by a
physician selected by the Parent to whom you or your guardian, as applicable,
has no reasonable objection to determine whether you are so disabled and such
determination shall for the purposes of this agreement be conclusive of the
issue. If such a question arises and you fail to submit to the requested medical
examination, the Parent's determination of the issue shall be binding on you.
6. Severance Payments
a. In the event of (i) termination of your employment by the
Company other than for cause pursuant to the first sentence of paragraph 5a or
(ii) termination of your employment by you within 18 months of a Change of
Control due to a material diminution in your position, duties or authority, the
Company will provide you severance pay for a period of twelve months. Also,
during any period in which you are receiving severance pay under this paragraph
6.a or, if less, until you become eligible for coverage under the health plan of
another employer, the Company will waive the premium cost of your continued
participation and that of your eligible dependents in its group health plan,
provided that you and your dependents are eligible to, and do, continue your
participation under the applicable federal law known as COBRA, or any successor
law. In addition, the Company will pay you any bonus to which you are entitled
in accordance with paragraph 1 above, prorated to the date of termination and
payable at the time such bonuses are payable to Company executives generally. In
addition to the foregoing, the Company will pay you on the date of termination
any base salary earned but not paid through the date of termination and any
vacation pay accrued but not used to that date. The obligation of the Company to
provide you severance and bonus payments and to waive group health insurance
premiums under this paragraph 6.a is conditioned, however, upon your execution
of a general release of claims in a form satisfactory to the Parent and the
Company (the "Employee Release").
b. In the event of your resignation or the termination of your
employment by the Parent for "cause," the Company will pay you any base salary
earned but not paid through the date of termination and any vacation pay accrued
but not used to that date. All payments, salary and other benefits hereunder
shall cease at the effective date of termination. The Parent, the Company and
their Subsidiaries shall have no obligation to you for bonus or severance
payments. As in the case of any other termination, your obligations under
paragraph 4 will remain in full force and effect in accordance with their terms.
c. Severance payments under paragraph 6.a will be in the form
of salary continuation, at the base salary rate in effect on the date of
termination, and shall be payable in accordance with the normal payroll
practices of the Company. Payments will begin at the Company's next regular
payroll period following the effective date of
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<PAGE> 6
the Employee Release, but shall be retroactive to the date of termination.
Notwithstanding anything else contained in this agreement, no bonus payment will
be due and payable under paragraph 6.a until the next regular Company payday
following the effective date of the Employee Release. Except for any right you
may have under the federal law known as "COBRA" to continue participation in the
Company's group health plan, benefits shall terminate in accordance with the
terms of the applicable benefit plans based on the date of termination of your
employment, without regard to any continuation of base salary or other payment
to you following termination.
d. Provisions of this agreement shall survive termination if
so provided in this agreement or if necessary or desirable to accomplish the
purposes of other surviving provisions, including without limitation your
obligations under paragraph 4 of this agreement. The obligation of the Company
to make payments to you under this paragraph 6 is expressly conditioned upon
your continued full performance of obligations under paragraph 4 hereof. Upon
termination by either you or the Parent, all rights, duties and obligations of
you and the Parent, the Company and their Subsidiaries, collectively, to each
other shall cease, except as otherwise expressly provided in this agreement.
7. Intellectual Property
You agree to promptly and fully disclose all Intellectual Property (as
hereinafter defined), to the Parent and Company. You hereby assign and agree to
assign to the Company (or as otherwise directed by the Parent) your full right,
title and interest in and to all Intellectual Property. You agree to execute any
and all applications for domestic and foreign patents, copyrights or other
proprietary rights and to do such other acts (including without limitation the
execution and delivery of instruments of further assurance or confirmation)
requested by the Parent or Company to assign the Intellectual Property to the
Company and to permit the Company to enforce any patents, copyrights or other
proprietary rights to the Intellectual Property. You agree not to charge the
Parent, the Company or their Subsidiaries for time spent in complying with these
obligations. All copyrightable works that you create shall be considered "work
made for hire". Your obligation to assign your rights to Intellectual Property
under this provision shall not apply, however, to any invention (i) that you
develop on your own time, without using the Parent's, the Company's or their
Subsidiaries' equipment, supplies, facilities or trade secret information,
unless such invention relates at the time of conception or reduction to practice
of the invention to the Parent's, the Company's or their Subsidiaries' business
or to the actual or demonstrably anticipated research or development of the
Parent, the Company or their Subsidiaries or results from any work performed by
you for the Parent, the Company or their Subsidiaries or (ii) that, under
applicable law, you may not be required to assign to the Parent, the Company or
their Subsidiaries.
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<PAGE> 7
8. Definitions
For purposes of this agreement, the following definitions apply:
"Change of Control" means (i) a Change of Control of Miami as defined
in the Shareholders Agreement dated as of September 17, 1998 among Miami,
Berkshire Cruise Holdings LLC and the other parties signatory thereto (the
"Shareholders Agreement") or (ii) the acquisition by any person, corporation,
partnership, or limited liability company other than Miami and its affiliates of
ultimate beneficial ownership of a majority of the then outstanding shares of
common stock of the Company, provided that a Public Offering (as defined in the
Shareholders Agreement) shall not constitute a Change of Control for the
purposes hereof.
"Confidential Information" means any and all information of the Parent,
the Company or their Subsidiaries that is not generally known by others with
whom any of them competes or does business or with whom any of them plans to
compete or do business. Confidential information includes, without limitation,
information relating to (i) the products and services, technical data, methods
and processes of the Parent, the Company or their Subsidiaries, (ii) their
marketing activities and strategic plans, (iii) their costs and sources of
supply, (iv) the identity and special needs of the customers and prospective
customers of the Parent, the Company or their Subsidiaries, (v) the people and
organizations with whom the Parent, the Company or their Subsidiaries have
business relationships and those relationships. Confidential Information also
includes any information received by the Parent, the Company or their
Subsidiaries from any Person with any understanding, express or implied, that it
would not be disclosed.
"Intellectual Property" means the entire right, title and interest in
and to all proprietary rights of every kind and nature, including patents,
copyrights, trademarks, trade secrets, processes, know-how, procedures, formula
and proprietary information, all applications for any of the foregoing, and any
license or agreements granting rights related to the foregoing (i) applicable to
or existing in any products of the Parent, the Company or their Subsidiaries; or
(ii) that are otherwise used in, proposed to be used in or necessary to the
development, manufacture, sales, marketing or testing of any products of the
Parent, the Company or their Subsidiaries.
"Person" means an individual, a corporation, an association, a
partnership, an estate, a trust, any other entity or organization, other than
the Parent, the Company or any of their Subsidiaries.
"Subsidiary" shall mean any individual, partnership, corporation,
association, trust, joint venture, unincorporated organization or other entity,
and any government, governmental department or agency or political subdivision
thereof of which any
-7-
<PAGE> 8
Company (or other specified Person) shall own directly or indirectly through a
Subsidiary, a nominee arrangement or otherwise at least a majority of the
outstanding capital stock (or other shares of beneficial interest) presently
entitled to vote generally or at least a majority of the partnership, joint
venture or similar interests, or in which any Company (or other specified
Person) is a general partner or joint venturer without limited liability.
9. Miscellaneous
This agreement is expressly conditioned upon the consummation of the
purchase of all of the issued and outstanding capital stock of Greyhound Leisure
Services Inc. by Parent.
None of you, the Parent or the Company may make any assignment of this
agreement or any interest in it, by operation of law or otherwise, without the
prior written consent of the other; provided however, that the Parent or the
Company may assign their rights and obligations under this agreement without
your consent (i) to any Subsidiary, and (ii) in the event that the Parent or the
Company shall hereafter affect a reorganization, consolidate with, or merge into
any Person or transfer all or substantially all of its properties or assets to
any Person, provided that any assignment by the Company shall require the
approval of the Parent. This Agreement shall inure to the benefit of and be
binding upon you, the Parent and the Company, and each of our respective
successors, executors, administrators, heirs and permitted assigns.
If any portion or provision of this agreement shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the
remainder of this agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this agreement shall be valid and enforceable to the fullest extent permitted by
law.
This agreement sets forth the entire agreement between you and the
Parent and the Company and replaces all prior and contemporaneous
communications, agreements and understandings, written or oral, with respect to
the terms and conditions of your employment. This agreement may not be modified
or amended, and no breach shall be deemed to be waived, unless agreed to in
writing by you and an expressly authorized representative of the Parent Board.
This is a Florida contract and shall be governed and construed in accordance
with the laws of the State of Florida, without regard to the conflict of laws
principles thereof.
Any notices provided for in this agreement shall be in writing and
shall be effective when delivered in person or deposited in the United States
mail, postage
-8-
<PAGE> 9
prepaid or sent via Federal Express (or comparable overnight delivery service)
or facsimile and addressed to you at your last known address on the books of the
Company or, in the case of the Parent or the Company, to them at their
respective principal places of business, attention of Managing Director with a
copy to Berkshire Partners, LLC, or to such other address as either party may
specify by notice to the other actually received.
If the foregoing is acceptable to you, please sign the enclosed copy of
this letter in the space provided and return it to me no later than November 15,
1998, at which time this letter and that copy will take effect as a binding
agreement between you and the Company on the basis set forth above.
Sincerely yours,
CRUISE LINE HOLDINGS CO. Accepted and Agreed
By: /s/ Toby G. Feinstock By: /s/ J.P. Miquel
President J.P. Miquel
Date: as of Sept. 17, 1998
GREYHOUND LEISURE SERVICES INC.
By: /s/ Toby G. Feinstock
Date: 11/6/98
-9-
<PAGE> 10
EXHIBIT A
BENEFITS
<TABLE>
<CAPTION>
Not
Continued Continued Comments
--------- --------- --------
<S> <C> <C> <C>
Health Care Benefits X
Executive Physical X
Long Term Disability X
Life Insurance 2x Salary 500,000 limit X
Life AD&D 100,000 X
Business Travel 250,000 X
Retirement X As revised per discussions
Serp X
Post Retirement Medical X
401(k) X As revised per discussions with Mercer
MIP LOB [ARROW] 170% of 10 to 45% of base X New plan up to 50% of salary
PUP [ARROW] 145% of base X
Stock Options X New plan; 1% of total to J.P. Miquel
Vacation 1 to 5 weeks X Continue existing policies
Automobile X
Executive Health Care Insurance X Available to J.P. Miquel, if needed
Income Tax Preparation X Available to J.P. Miquel, if needed
Country Club Fees X Available to J.P. Miquel, if needed
Luncheon Club Fees X Available to J.P. Miquel, if needed
Health Club Fees X Available to J.P. Miquel, if needed
Parking Expenses X Available to J.P. Miquel, if needed
First Class Travel X
Supplementary 401(K) X As revised
Performance Base Stock [ARROW] 50% of base X
Financial Counseling X Available to J.P. Miquel, if needed
</TABLE>
-10-
<PAGE> 1
Exhibit 10.5
Cruise Line Holdings Co.
c/o Berkshire Partners LLC
One Boston Place
Boston, Massachusetts 02108
September 17, 1998
Mr. Philip Levine
c/o On-Board Media, Inc.
960 Alton Road
Miami Beach, FL 33139
Dear Mr. Levine:
I am pleased to offer you the position of President and Chief Executive
Officer of On-Board Media, Inc., Cruise Management International, Inc. and Boxer
Media, Inc. (the "Companies"), starting upon the consummation of the purchase of
the Companies by Miami Cruiseline Services Holdings I B.V. and contribution of
the Companies to Cruise Line Holdings Co. (the "Parent").
1. Salary / Benefits
If you accept this offer, your initial aggregate salary will be at the
rate of $250,000 per year, less applicable legal deductions, payable in
accordance with the regular payroll practices of the Companies and subject to
increase from time to time in the discretion of the Board of Directors of the
Parent (the "Parent Board"). You will also be eligible to participate in any
bonus plan established by the Parent for employees in positions comparable to
yours, as such plan may be, as in effect from time to time.
During employment, you will be entitled to participate in all employee
benefit plans from time to time in effect for employees of the Parent generally
(including a 401(k) plan), except to the extent such plans are duplicative of
benefits otherwise provided you under this agreement. Your participation will be
subject to the terms of the applicable plan documents and generally applicable
Parent policies. Your earning and use of vacation time shall be subject to the
generally applicable policies of the Parent.
<PAGE> 2
During employment, the Companies will provide you with group life and
health insurance protection to the same extent that protection is made available
to the Parent's other executive employees.
2. Position / Duties
You will be expected to devote your full business time and your best
professional efforts to the performance of your duties and responsibilities for
the Companies and to abide by all Parent and Companies' policies and procedures,
as in effect from time to time. As President and Chief Executive Officer of the
Companies, your responsibilities will include those inherent to your position
and such other duties commensurate with those positions and generally consistent
with your current duties as may be assigned to you from time to time.
3. Confidential Information
During the course of your employment, you will learn of Confidential
Information, as defined below, and you may develop Confidential Information, as
defined below, on behalf of the Parent and the Companies. You agree that, except
as required by applicable law or for the proper performance of your duties and
responsibilities to the Parent and the Companies, you will never use on behalf
of or disclose to any Person other than the Parent and the Companies, any
Confidential Information obtained by you incident to your employment and other
associations with the Parent or the Companies or any of their Subsidiaries or
predecessors. You understand that this restriction shall continue to apply after
your employment terminates, regardless of the reason for such termination.
4. Non-Solicitation and Non-Competition
You acknowledge that in your employment with the Companies you will
have access to Confidential Information that is sensitive and which, if
disclosed, would assist in competition against the Parent, the Companies and
their Subsidiaries. You agree that the following restrictions on your activities
during and after your employment are necessary to protect the goodwill,
Confidential Information and other legitimate interests of the Parent, the
Companies and their Subsidiaries.
While you are employed by the Companies and during the twelve months
immediately following termination of your employment (the "Non-Competition
Period"), you shall not, directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or otherwise, compete with
the Parent, the Companies or any of their Subsidiaries anywhere in the world or
undertake any planning for any business competitive with the business that the
Parent, the Companies or any of their
-2-
<PAGE> 3
Subsidiaries are engaged in (or actively planning to engage in) as the time of
termination of your employment. Specifically, but without limiting the
foregoing, you agree not to work or provide services, in any capacity, whether
as an employee, independent contractor or otherwise, with or without
compensation, to any Person in competition with the Parent, the Companies or any
of their Subsidiaries. The foregoing shall not prevent you from owning not more
than five percent (5%) of the voting stock of any publicly held corporation.
You agree that, during the Non-Competition Period, you will not (A)
hire any employee of the Parent, the Companies or any of their Subsidiaries or
seek to persuade any employee of the Parent, the Companies or any of their
Subsidiaries to discontinue employment, (B) solicit or encourage any customer of
the Parent, the Companies or any of their Subsidiaries, as defined below, or any
other entity to whom the Parent, the Companies or any of their Subsidiaries
provides services or any entity or independent contractor providing services to
the Parent, the Companies or any of their Subsidiaries to terminate or diminish
its relationship with the Parent, the Companies or any of their Subsidiaries or
(C) to solicit or encourage any customer of Parent, the Companies or any of
their Subsidiaries or whose business the Parent, the Companies or any of their
Subsidiaries have actively sought within the twelve months preceding termination
of your employment, to conduct with anyone else any business or activity that
such customer or business conducts or could conduct with the Parent, the
Companies or any of their Subsidiaries.
In signing this agreement, you give the Parent assurance that you have
carefully read and considered all the terms and conditions of this agreement,
including the restraints imposed on you under this paragraph 4. You agree
without reservation that these restraints are necessary for the reasonable and
proper protection of the Parent, the Companies and their Subsidiaries and that
each and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area. You further agree that, were you to breach
any of the covenants contained in this paragraph 4, the damage to the Parent,
the Companies and their Subsidiaries would be irreparable. You therefore agree
that the Parent and the Companies, in addition to any other remedies available
to them, shall be entitled to preliminary and permanent injunctive relief
against any breach or threatened breach by you of any of those covenants,
without having to post bond. You and the Parent and the Companies further agree
that, in the event that any provision of this paragraph 4 is determined by any
court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, that provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law. It is also agreed that each
of the Parent's Subsidiaries shall have the right to enforce all of your
obligations to that Subsidiary under this agreement, including without
limitation pursuant to this paragraph 4.
-3-
<PAGE> 4
5. Termination
Your employment under this agreement shall continue until terminated
pursuant to this paragraph 5.
a. The Parent may terminate your employment at any time other
than for Cause upon notice to you. The Parent may terminate your employment for
Cause upon notice to you setting forth in reasonable detail the nature of the
Cause. The following, as determined by the Parent in its reasonable judgment
shall constitute "Cause" for termination: (i) your having been convicted of, or
your having pleaded guilty or nolo contendere to, any felony (other than a
conviction arising solely under a statutory provision imposing criminal
liability on you on a per se basis due to the position you hold, so long as any
act or omission with respect to such matter was not taken or omitted in
contravention of any applicable policy or directive of the Parent Board or the
Companies' Boards of Directors); (ii) your having willfully failed or having
refused to perform, or material negligence in the performance of your duties to
the Parent, the Companies or any of their Subsidiaries (other than as a result
of illness or disability), it being understood that the Companies' failure to
achieve their business plans or projections shall not itself be considered a
failure or refusal to perform duties; (iii) your material breach of this
agreement or any other agreement between you and the Parent, the Companies or
any of their Subsidiaries; or (iv) other conduct by you that is materially
harmful to the business, interests or reputation of the Parent, the Companies or
any of their Subsidiaries.
b. You may resign your employment at any time upon sixty days'
prior written notice to the Parent. The Parent may elect to accept your
resignation prior to the expiration of the notice period but, in that event, the
Companies shall pay you your base salary for the remainder of the notice period,
to a maximum of sixty days' pay.
c. This agreement will automatically terminate in the event of
your death during employment. In the event you become disabled during employment
and, as a result, are unable to continue to perform substantially all of your
duties and responsibilities under this agreement, the Companies will continue to
pay you your base salary and to provide you benefits in accordance with
paragraph 2.d above for up to twelve weeks of disability during any period of
three hundred and sixty-five consecutive calendar days. If you are unable to
return to work after twelve weeks of disability, the Parent may terminate your
employment, upon notice to you. If any question shall arise as to whether you
are disabled to the extent that you are unable to perform substantially all of
your duties and responsibilities for the Parent, the Companies and their
Subsidiaries, you shall, at the Parent's request, submit to a medical
examination by a physician selected by the Parent to whom you or your guardian,
as applicable, has no reasonable objection to determine whether you are so
disabled and such determination
-4-
<PAGE> 5
shall for the purposes of this agreement be conclusive of the issue. If such a
question arises and you fail to submit to the requested medical examination, the
Parent's determination of the issue shall be binding on you.
6. Severance Payments
a. In the event of termination of your employment by the
Parent other than for cause pursuant to the first sentence of paragraph 5a, the
Companies will provide you severance pay for a period of twelve months. Also,
during any period in which you are receiving severance pay under this paragraph
6.a or, if less, until you become eligible for coverage under the health plan of
another employer, the Companies will waive the premium cost of your continued
participation and that of your eligible dependents in its group health plan,
provided that you and your dependents are eligible to, and do, continue your
participation under the applicable federal law known as COBRA, or any successor
law. In addition, the Company will pay you any bonus to which you are entitled
in accordance with paragraph 1 above, prorated to the date of termination and
payable at the time such bonuses are payable to Company executives generally. In
addition to the foregoing, the Company will pay you on the date of termination
any base salary earned but not paid through the date of termination and any
vacation pay accrued but not used to that date. The obligation of the Companies
to provide you severance and bonus payments and to waive group health insurance
premiums under this paragraph 6.a is conditioned, however, upon your execution
of a general release of claims in a form satisfactory to the Parent and the
Companies (the "Employee Release").
b. In the event of your resignation or the termination of your
employment by the Parent for "cause," the Companies will pay you any base salary
earned but not paid through the date of termination and any vacation pay accrued
but not used to that date. All payments, salary and other benefits hereunder
shall cease at the effective date of termination. The Parent, the Companies and
their Subsidiaries shall have no obligation to you for bonus or severance
payments. As in the case of any other termination, your obligations under
paragraph 4 will remain in full force and effect in accordance with their terms.
c. Severance payments under paragraph 6.a will be in the form
of salary continuation, at the base salary rate in effect on the date of
termination, and shall be payable in accordance with the normal payroll
practices of the Companies. Payments will begin at the Companies' next regular
payroll period following the effective date of the Employee Release, but shall
be retroactive to the date of termination. Notwithstanding anything else
contained in this agreement, no bonus payment will be due and payable under
paragraph 6.a until the next regular Companies payday following the effective
date of the Employee Release. Except for any right you may have under the
-5-
<PAGE> 6
federal law known as "COBRA" to continue participation in the Companies' group
health plan, benefits shall terminate in accordance with the terms of the
applicable benefit plans based on the date of termination of your employment,
without regard to any continuation of base salary or other payment to you
following termination.
d. Provisions of this agreement shall survive termination if
so provided in this agreement or if necessary or desirable to accomplish the
purposes of other surviving provisions, including without limitation your
obligations under paragraph 4 of this agreement. The obligation of the Companies
to make payments to you under this paragraph 6 is expressly conditioned upon
your continued full performance of obligations under paragraph 4 hereof. Upon
termination by either you or the Parent, all rights, duties and obligations of
you and the Parent, the Companies and their Subsidiaries, collectively, to each
other shall cease, except as otherwise expressly provided in this agreement.
7. Intellectual Property
You agree to promptly and fully disclose all Intellectual Property (as
hereinafter defined), to the Parent and Companies. You hereby assign and agree
to assign to the Companies (or as otherwise directed by the Parent) your full
right, title and interest in and to all Intellectual Property. You agree to
execute any and all applications for domestic and foreign patents, copyrights or
other proprietary rights and to do such other acts (including without limitation
the execution and delivery of instruments of further assurance or confirmation)
requested by the Parent or Companies to assign the Intellectual Property to the
Companies and to permit the Companies to enforce any patents, copyrights or
other proprietary rights to the Intellectual Property. You agree not to charge
the Parent, the Companies or their Subsidiaries for time spent in complying with
these obligations. All copyrightable works that you create shall be considered
"work made for hire". Your obligation to assign your rights to Intellectual
Property under this provision shall not apply, however, to any invention (i)
that you develop on your own time, without using the Parent's, the Companies' or
their Subsidiaries' equipment, supplies, facilities or trade secret information,
unless such invention relates at the time of conception or reduction to practice
of the invention to the Parent's, the Companies' or their Subsidiaries' business
or to the actual or demonstrably anticipated research or development of the
Parent's, the Companies' or their Subsidiaries' or results from any work
performed by you for the Parent's, the Companies' or their Subsidiaries' or (ii)
that, under applicable law, you may not be required to assign to the Parent's,
the Companies' or their Subsidiaries'.
-6-
<PAGE> 7
8. Definitions
For purposes of this agreement, the following definitions apply:
"Confidential Information" means any and all information of the Parent,
the Companies or their Subsidiaries that is not generally known by others with
whom any of them competes or does business or with whom any of them plans to
compete or do business. Confidential information includes, without limitation,
information relating to (i) the products and services, technical data, methods
and processes of the Parent, the Companies or their Subsidiaries, (ii) their
marketing activities and strategic plans, (iii) their costs and sources of
supply, (iv) the identity and special needs of the customers and prospective
customers of the Parent, the Companies or their Subsidiaries, (v) the people and
organizations with whom the Parent, the Companies or their Subsidiaries have
business relationships and those relationships. Confidential Information also
includes any information received by the Parent, the Companies or their
Subsidiaries from any Person with any understanding, express or implied, that it
would not be disclosed.
"Intellectual Property" means the entire right, title and interest in
and to all proprietary rights of every kind and nature, including patents,
copyrights, trademarks, trade secrets, processes, know-how, procedures, formula
and proprietary information, all applications for any of the foregoing, and any
license or agreements granting rights related to the foregoing (i) applicable to
or existing in any products of the Parent, the Companies or their Subsidiaries;
or (ii) that are otherwise used in, proposed to be used in or necessary to the
development, manufacture, sales, marketing or testing of any products of the
Parent, the Companies or their Subsidiaries.
"Person" means an individual, a corporation, an association, a
partnership, an estate, a trust, any other entity or organization, other than
the Parent, the Companies or any of their Subsidiaries.
"Subsidiary" shall mean any individual, partnership, corporation,
association, trust, joint venture, unincorporated organization or other entity,
and any government, governmental department or agency or political subdivision
thereof of which any Company (or other specified Person) shall own directly or
indirectly through a Subsidiary, a nominee arrangement or otherwise at least a
majority of the outstanding capital stock (or other shares of beneficial
interest) presently entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which any Company (or
other specified Person) is a general partner or joint venturer without limited
liability.
-7-
<PAGE> 8
9. Miscellaneous
This agreement is expressly conditioned upon the consummation of the
purchase of all of the issued and outstanding capital stock of On Board Media,
Inc., Cruise Management International, Inc. and Boxer Media, Inc. by Parent.
None of you, the Parent or the Companies may make any assignment of
this agreement or any interest in it, by operation of law or otherwise, without
the prior written consent of the other; provided however, that the Parent or the
Companies may assign their rights and obligations under this agreement without
your consent (i) to any Subsidiary, and (ii) in the event that the Parent or the
Companies shall hereafter affect a reorganization, consolidate with, or merge
into any Person or transfer all or substantially all of its properties or assets
to any Person, provided that any assignment by the Companies shall require the
approval of the Parent. This Agreement shall inure to the benefit of and be
binding upon you, the Parent and the Companies, and each of our respective
successors, executors, administrators, heirs and permitted assigns.
If any portion or provision of this agreement shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the
remainder of this agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this agreement shall be valid and enforceable to the fullest extent permitted by
law.
This agreement sets forth the entire agreement between you and the
Parent and the Companies and replaces all prior and contemporaneous
communications, agreements and understandings, written or oral, with respect to
the terms and conditions of your employment. This agreement may not be modified
or amended, and no breach shall be deemed to be waived, unless agreed to in
writing by you and an expressly authorized representative of the Parent Board.
This is a Florida contract and shall be governed and construed in accordance
with the laws of the State of Florida, without regard to the conflict of laws
principles thereof.
Any notices provided for in this agreement shall be in writing and
shall be effective when delivered in person or deposited in the United States
mail, postage prepaid or sent via Federal Express (or comparable overnight
delivery service) or facsimile and addressed to you at your last known address
on the books of the Companies or, in the case of the Parent or the Companies, to
them at their respective principal places of business, attention of Managing
Director with a copy to Berkshire Partners, LLC, or to such other address as
either party may specify by notice to the other actually received.
-8-
<PAGE> 9
If the foregoing is acceptable to you, please sign the enclosed copy of
this letter in the space provided and return it to me no later than September
17, 1998, at which time this letter and that copy will take effect as a binding
agreement between you and the Company on the basis set forth above.
Sincerely yours,
CRUISE LINE HOLDINGS CO. Accepted and Agreed
By: /s/ Bradley Bloom By: /s/Philip Levine
Philip Levine
Date: 9/17/98
ON-BOARD MEDIA, INC.
By: /s/ Philip Levine
Date: 9/17/98
CRUISE MANAGEMENT INTERNATIONAL, INC.
By: /s/ Philip Levine
Date: 9/17/98
BOXER MEDIA, INC.
By: /s/ Philip Levine
Date: 9/17/98
-9-
<PAGE> 1
Exhibit 10.6
Cruise Line Holdings Co.
c/o Berkshire Partners LLC
One Boston Place
Boston, Massachusetts 02108
September 17, 1998
Mr. Jerry Chafetz
c/o On-Board Media, Inc.
960 Alton Road
Miami Beach, FL 33139
Dear Mr. Chafetz:
I am pleased to offer you the position of Senior Vice President of
On-Board Media, Inc., Cruise Management International, Inc. and Boxer Media,
Inc. (the "Companies"), starting upon the consummation of the purchase of the
Companies by Miami Cruiseline Services Holdings I B.V. and contribution of the
Companies to Cruise Line Holdings Co. (the "Parent").
1. Salary / Benefits
If you accept this offer, your initial aggregate salary will be at the
rate of $250,000 per year, less applicable legal deductions, payable in
accordance with the regular payroll practices of the Companies and subject to
increase from time to time in the discretion of the Board of Directors of the
Parent (the "Parent Board"). You will also be eligible to participate in any
bonus plan established by the Parent for employees in positions comparable to
yours, as such plan may be, as in effect from time to time.
During employment, you will be entitled to participate in all employee
benefit plans from time to time in effect for employees of the Parent generally
(including a 401(k) plan), except to the extent such plans are duplicative of
benefits otherwise provided you under this agreement. Your participation will be
subject to the terms of the applicable plan documents and generally applicable
Parent policies. Your earning and use of vacation time shall be subject to the
generally applicable policies of the Parent.
<PAGE> 2
During employment, the Companies will provide you with group life and
health insurance protection to the same extent that protection is made available
to the Parent's other executive employees.
2. Position / Duties
You will be expected to devote your full business time and your best
professional efforts to the performance of your duties and responsibilities for
the Companies and to abide by all Parent and Companies' policies and procedures,
as in effect from time to time. As Senior Vice President of the Companies, your
responsibilities will include those inherent to your position and such other
duties commensurate with those positions and generally consistent with your
current duties as may be assigned to you from time to time.
3. Confidential Information
During the course of your employment, you will learn of Confidential
Information, as defined below, and you may develop Confidential Information, as
defined below, on behalf of the Parent and the Companies. You agree that, except
as required by applicable law or for the proper performance of your duties and
responsibilities to the Parent and the Companies, you will never use on behalf
of or disclose to any Person other than the Parent and the Companies, any
Confidential Information obtained by you incident to your employment and other
associations with the Parent or the Companies or any of their Subsidiaries or
predecessors. You understand that this restriction shall continue to apply after
your employment terminates, regardless of the reason for such termination.
4. Non-Solicitation and Non-Competition
You acknowledge that in your employment with the Companies you will
have access to Confidential Information that is sensitive and which, if
disclosed, would assist in competition against the Parent, the Companies and
their Subsidiaries. You agree that the following restrictions on your activities
during and after your employment are necessary to protect the goodwill,
Confidential Information and other legitimate interests of the Parent, the
Companies and their Subsidiaries.
While you are employed by the Companies and during the twelve months
immediately following termination of your employment (the "Non-Competition
Period"), you shall not, directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or otherwise, compete with
the Parent, the Companies or any of their Subsidiaries anywhere in the world or
undertake any planning for any business competitive with the business that the
Parent, the Companies or any of their
-2-
<PAGE> 3
Subsidiaries are engaged in (or actively planning to engage in) as the time of
termination of your employment. Specifically, but without limiting the
foregoing, you agree not to work or provide services, in any capacity, whether
as an employee, independent contractor or otherwise, with or without
compensation, to any Person in competition with the Parent, the Companies or any
of their Subsidiaries. The foregoing shall not prevent you from owning not more
than five percent (5%) of the voting stock of any publicly held corporation.
You agree that, during the Non-Competition Period, you will not (A)
hire any employee of the Parent, the Companies or any of their Subsidiaries or
seek to persuade any employee of the Parent, the Companies or any of their
Subsidiaries to discontinue employment, (B) solicit or encourage any customer of
the Parent, the Companies or any of their Subsidiaries, as defined below, or any
other entity to whom the Parent, the Companies or any of their Subsidiaries
provides services or any entity or independent contractor providing services to
the Parent, the Companies or any of their Subsidiaries to terminate or diminish
its relationship with the Parent, the Companies or any of their Subsidiaries or
(C) to solicit or encourage any customer of Parent, the Companies or any of
their Subsidiaries or whose business the Parent, the Companies or any of their
Subsidiaries have actively sought within the twelve months preceding termination
of your employment, to conduct with anyone else any business or activity that
such customer or business conducts or could conduct with the Parent, the
Companies or any of their Subsidiaries.
In signing this agreement, you give the Parent assurance that you have
carefully read and considered all the terms and conditions of this agreement,
including the restraints imposed on you under this paragraph 4. You agree
without reservation that these restraints are necessary for the reasonable and
proper protection of the Parent, the Companies and their Subsidiaries and that
each and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area. You further agree that, were you to breach
any of the covenants contained in this paragraph 4, the damage to the Parent,
the Companies and their Subsidiaries would be irreparable. You therefore agree
that the Parent and the Companies, in addition to any other remedies available
to them, shall be entitled to preliminary and permanent injunctive relief
against any breach or threatened breach by you of any of those covenants,
without having to post bond. You and the Parent and the Companies further agree
that, in the event that any provision of this paragraph 4 is determined by any
court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, that provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law. It is also agreed that each
of the Parent's Subsidiaries shall have the right to enforce all of your
obligations to that Subsidiary under this agreement, including without
limitation pursuant to this paragraph 4.
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<PAGE> 4
5. Termination
Your employment under this agreement shall continue until terminated
pursuant to this paragraph 5.
a. The Parent may terminate your employment at any time other
than for Cause upon notice to you. The Parent may terminate your employment for
Cause upon notice to you setting forth in reasonable detail the nature of the
Cause. The following, as determined by the Parent in its reasonable judgment
shall constitute "Cause" for termination: (i) your having been convicted of, or
your having pleaded guilty or nolo contendere to, any felony (other than a
conviction arising solely under a statutory provision imposing criminal
liability on you on a per se basis due to the position you hold, so long as any
act or omission with respect to such matter was not taken or omitted in
contravention of any applicable policy or directive of the Parent Board or the
Companies' Boards of Directors); (ii) your having willfully failed or having
refused to perform, or material negligence in the performance of your duties to
the Parent, the Companies or any of their Subsidiaries (other than as a result
of illness or disability), it being understood that the Companies' failure to
achieve their business plans or projections shall not itself be considered a
failure or refusal to perform duties; (iii) your material breach of this
agreement or any other agreement between you and the Parent, the Companies or
any of their Subsidiaries; or (iv) other conduct by you that is materially
harmful to the business, interests or reputation of the Parent, the Companies or
any of their Subsidiaries.
b. You may resign your employment at any time upon sixty days'
prior written notice to the Parent. The Parent may elect to accept your
resignation prior to the expiration of the notice period but, in that event, the
Companies shall pay you your base salary for the remainder of the notice period,
to a maximum of sixty days' pay.
c. This agreement will automatically terminate in the event of
your death during employment. In the event you become disabled during employment
and, as a result, are unable to continue to perform substantially all of your
duties and responsibilities under this agreement, the Companies will continue to
pay you your base salary and to provide you benefits in accordance with
paragraph 2.d above for up to twelve weeks of disability during any period of
three hundred and sixty-five consecutive calendar days. If you are unable to
return to work after twelve weeks of disability, the Parent may terminate your
employment, upon notice to you. If any question shall arise as to whether you
are disabled to the extent that you are unable to perform substantially all of
your duties and responsibilities for the Parent, the Companies and their
Subsidiaries, you shall, at the Parent's request, submit to a medical
examination by a physician selected by the Parent to whom you or your guardian,
as applicable, has no reasonable objection to determine whether you are so
disabled and such determination
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<PAGE> 5
shall for the purposes of this agreement be conclusive of the issue. If such a
question arises and you fail to submit to the requested medical examination, the
Parent's determination of the issue shall be binding on you.
6. Severance Payments
a. In the event of termination of your employment by the
Parent other than for cause pursuant to the first sentence of paragraph 5a, the
Companies will provide you severance pay for a period of twelve months. Also,
during any period in which you are receiving severance pay under this paragraph
6.a or, if less, until you become eligible for coverage under the health plan of
another employer, the Companies will waive the premium cost of your continued
participation and that of your eligible dependents in its group health plan,
provided that you and your dependents are eligible to, and do, continue your
participation under the applicable federal law known as COBRA, or any successor
law. In addition, the Company will pay you any bonus to which you are entitled
in accordance with paragraph 1 above, prorated to the date of termination and
payable at the time such bonuses are payable to Company executives generally. In
addition to the foregoing, the Company will pay you on the date of termination
any base salary earned but not paid through the date of termination and any
vacation pay accrued but not used to that date. The obligation of the Companies
to provide you severance and bonus payments and to waive group health insurance
premiums under this paragraph 6.a is conditioned, however, upon your execution
of a general release of claims in a form satisfactory to the Parent and the
Companies (the "Employee Release").
b. In the event of your resignation or the termination of your
employment by the Parent for "cause," the Companies will pay you any base salary
earned but not paid through the date of termination and any vacation pay accrued
but not used to that date. All payments, salary and other benefits hereunder
shall cease at the effective date of termination. The Parent, the Companies and
their Subsidiaries shall have no obligation to you for bonus or severance
payments. As in the case of any other termination, your obligations under
paragraph 4 will remain in full force and effect in accordance with their terms.
c. Severance payments under paragraph 6.a will be in the form
of salary continuation, at the base salary rate in effect on the date of
termination, and shall be payable in accordance with the normal payroll
practices of the Companies. Payments will begin at the Companies' next regular
payroll period following the effective date of the Employee Release, but shall
be retroactive to the date of termination. Notwithstanding anything else
contained in this agreement, no bonus payment will be due and payable under
paragraph 6.a until the next regular Companies payday following the effective
date of the Employee Release. Except for any right you may have under the
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federal law known as "COBRA" to continue participation in the Companies' group
health plan, benefits shall terminate in accordance with the terms of the
applicable benefit plans based on the date of termination of your employment,
without regard to any continuation of base salary or other payment to you
following termination.
d. Provisions of this agreement shall survive termination if
so provided in this agreement or if necessary or desirable to accomplish the
purposes of other surviving provisions, including without limitation your
obligations under paragraph 4 of this agreement. The obligation of the Companies
to make payments to you under this paragraph 6 is expressly conditioned upon
your continued full performance of obligations under paragraph 4 hereof. Upon
termination by either you or the Parent, all rights, duties and obligations of
you and the Parent, the Companies and their Subsidiaries, collectively, to each
other shall cease, except as otherwise expressly provided in this agreement.
7. Intellectual Property
You agree to promptly and fully disclose all Intellectual Property (as
hereinafter defined), to the Parent and Companies. You hereby assign and agree
to assign to the Companies (or as otherwise directed by the Parent) your full
right, title and interest in and to all Intellectual Property. You agree to
execute any and all applications for domestic and foreign patents, copyrights or
other proprietary rights and to do such other acts (including without limitation
the execution and delivery of instruments of further assurance or confirmation)
requested by the Parent or Companies to assign the Intellectual Property to the
Companies and to permit the Companies to enforce any patents, copyrights or
other proprietary rights to the Intellectual Property. You agree not to charge
the Parent, the Companies or their Subsidiaries for time spent in complying with
these obligations. All copyrightable works that you create shall be considered
"work made for hire". Your obligation to assign your rights to Intellectual
Property under this provision shall not apply, however, to any invention (i)
that you develop on your own time, without using the Parent's, the Companies' or
their Subsidiaries' equipment, supplies, facilities or trade secret information,
unless such invention relates at the time of conception or reduction to practice
of the invention to the Parent's, the Companies' or their Subsidiaries' business
or to the actual or demonstrably anticipated research or development of the
Parent's, the Companies' or their Subsidiaries' or results from any work
performed by you for the Parent's, the Companies' or their Subsidiaries' or (ii)
that, under applicable law, you may not be required to assign to the Parent's,
the Companies' or their Subsidiaries'.
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8. Definitions
For purposes of this agreement, the following definitions apply:
"Confidential Information" means any and all information of the Parent,
the Companies or their Subsidiaries that is not generally known by others with
whom any of them competes or does business or with whom any of them plans to
compete or do business. Confidential information includes, without limitation,
information relating to (i) the products and services, technical data, methods
and processes of the Parent, the Companies or their Subsidiaries, (ii) their
marketing activities and strategic plans, (iii) their costs and sources of
supply, (iv) the identity and special needs of the customers and prospective
customers of the Parent, the Companies or their Subsidiaries, (v) the people and
organizations with whom the Parent, the Companies or their Subsidiaries have
business relationships and those relationships. Confidential Information also
includes any information received by the Parent, the Companies or their
Subsidiaries from any Person with any understanding, express or implied, that it
would not be disclosed.
"Intellectual Property" means the entire right, title and interest in
and to all proprietary rights of every kind and nature, including patents,
copyrights, trademarks, trade secrets, processes, know-how, procedures, formula
and proprietary information, all applications for any of the foregoing, and any
license or agreements granting rights related to the foregoing (i) applicable to
or existing in any products of the Parent, the Companies or their Subsidiaries;
or (ii) that are otherwise used in, proposed to be used in or necessary to the
development, manufacture, sales, marketing or testing of any products of the
Parent, the Companies or their Subsidiaries.
"Person" means an individual, a corporation, an association, a
partnership, an estate, a trust, any other entity or organization, other than
the Parent, the Companies or any of their Subsidiaries.
"Subsidiary" shall mean any individual, partnership, corporation,
association, trust, joint venture, unincorporated organization or other entity,
and any government, governmental department or agency or political subdivision
thereof of which any Company (or other specified Person) shall own directly or
indirectly through a Subsidiary, a nominee arrangement or otherwise at least a
majority of the outstanding capital stock (or other shares of beneficial
interest) presently entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which any Company (or
other specified Person) is a general partner or joint venturer without limited
liability.
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<PAGE> 8
9. Miscellaneous
This agreement is expressly conditioned upon the consummation of the
purchase of all of the issued and outstanding capital stock of On Board Media,
Inc., Cruise Management International, Inc. and Boxer Media, Inc. by Parent.
None of you, the Parent or the Companies may make any assignment of
this agreement or any interest in it, by operation of law or otherwise, without
the prior written consent of the other; provided however, that the Parent or the
Companies may assign their rights and obligations under this agreement without
your consent (i) to any Subsidiary, and (ii) in the event that the Parent or the
Companies shall hereafter affect a reorganization, consolidate with, or merge
into any Person or transfer all or substantially all of its properties or assets
to any Person, provided that any assignment by the Companies shall require the
approval of the Parent. This Agreement shall inure to the benefit of and be
binding upon you, the Parent and the Companies, and each of our respective
successors, executors, administrators, heirs and permitted assigns.
If any portion or provision of this agreement shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the
remainder of this agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this agreement shall be valid and enforceable to the fullest extent permitted by
law.
This agreement sets forth the entire agreement between you and the
Parent and the Companies and replaces all prior and contemporaneous
communications, agreements and understandings, written or oral, with respect to
the terms and conditions of your employment. This agreement may not be modified
or amended, and no breach shall be deemed to be waived, unless agreed to in
writing by you and an expressly authorized representative of the Parent Board.
This is a Florida contract and shall be governed and construed in accordance
with the laws of the State of Florida, without regard to the conflict of laws
principles thereof.
Any notices provided for in this agreement shall be in writing and
shall be effective when delivered in person or deposited in the United States
mail, postage prepaid or sent via Federal Express (or comparable overnight
delivery service) or facsimile and addressed to you at your last known address
on the books of the Companies or, in the case of the Parent or the Companies, to
them at their respective principal places of business, attention of Managing
Director with a copy to Berkshire Partners, LLC, or to such other address as
either party may specify by notice to the other actually received.
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<PAGE> 9
If the foregoing is acceptable to you, please sign the enclosed copy of
this letter in the space provided and return it to me no later than September
__, 1998, at which time this letter and that copy will take effect as a binding
agreement between you and the Company on the basis set forth above.
Sincerely yours,
CRUISE LINE HOLDINGS CO. Accepted and Agreed
By: /s/ Bradley Bloom By: /s/Jerry Chafetz
Jerry Chafetz
Date: 9/17/98
ON-BOARD MEDIA, INC.
By: /s/ Philip Levine
Date: 9/17/98
CRUISE MANAGEMENT INTERNATIONAL, INC.
By: /s/ Philip Levine
Date: 9/17/98
BOXER MEDIA, INC.
By: /s/ Philip Levine
Date: 9/17/98
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Exhibit 10.11
EXECUTION COPY
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MIAMI CRUISELINE SERVICES
HOLDINGS I B.V.
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SHAREHOLDERS AGREEMENT
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DATED AS OF SEPTEMBER 17, 1998
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Recitals ..................................................................................................... 1
1. EFFECTIVENESS; DEFINITIONS .......................................................................... 2
1.1 Closing ............................................................................. 2
1.2 Definitions ......................................................................... 2
2. VOTING AND WAIVER AGREEMENT ......................................................................... 3
2.1 Initial Board ......................................................................... 3
2.2 Election of Directors ............................................................... 3
2.3 Significant Transactions ............................................................ 3
2.4 Seats on Board of Directors ......................................................... 3
2.5 The Company ........................................................................... 4
2.6 Approval of Transfers ................................................................. 4
2.7 Amendment of Articles ................................................................. 4
2.8 Preemptive Rights ..................................................................... 4
2.9 Good Faith ............................................................................ 4
2.10 Levine Vote .......................................................................... 5
2.11 Waiver of Offer; Appraisal ........................................................... 5
2.12 Management Representative ............................................................ 5
2.13 Lender Rights ........................................................................ 5
2.14 [Reserved] ........................................................................... 6
2.17 Period ............................................................................... 6
3. GENERAL TRANSFER PROVISIONS; "TAG ALONG" RIGHTS, "DRAG ALONG"
OBLIGATIONS AND RIGHT OF FIRST OFFER ................................................................ 6
3.1 Tag Along ........................................................................... 6
3.1.1. Notice ......................................................... 7
3.1.2. Exercise ....................................................... 7
3.1.3. Reduction of Shares Sold ....................................... 7
3.1.4. Irrevocable Offer .............................................. 8
3.1.5. Additional Compliance .......................................... 8
3.1.6. Excluded Transactions .......................................... 9
3.2 Drag Along ............................................................................ 10
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
3.2.1. Exercise ....................................................... 10
3.3 Miscellaneous ......................................................................... 10
3.3.1. Certain Legal Requirements ..................................... 10
3.3.2. Further Assurances ............................................. 11
3.3.3. Certain Determinations ......................................... 12
3.3.4. Expenses ....................................................... 12
3.3.5. Closing ........................................................ 12
3.4 Right of First Offer .................................................................. 13
3.4.1. Notice; Offer .................................................... 13
3.4.2. Exercise ....................................................... 13
3.4.3. Excluded Transactions ............................................ 14
3.5 Period ................................................................................ 15
4. SUBSCRIBER AND MANAGEMENT TRANSFER RIGHTS ........................................................... 15
4.1 Transfers to Immediate Family ......................................................... 16
4.2 Transfer Upon Death ................................................................... 16
4.3 Other Permitted Transfers ............................................................. 16
4.3.1. Investors and Company .......................................... 16
4.3.2. Calls .......................................................... 16
4.3.3. Tag Alongs, Drag Alongs, Right of First Refusal, etc ........... 16
4.3.4. Sales to Public ................................................ 17
4.4 Period ................................................................................ 17
5. OPTIONS TO PURCHASE SHARES .......................................................................... 17
5.1 Call Options .......................................................................... 17
5.1.1. Termination .................................................... 17
5.1.1.1 Termination due to Death or Disability or
by Company without Cause ......................................... 17
5.1.1.2 Termination by Company for Cause ............. 18
5.1.2. Cash Payments .................................................. 19
5.1.3. Notices, etc ................................................... 20
5.2 Closing ............................................................................... 20
5.3 Period ................................................................................ 20
6. CERTAIN ISSUANCES AND TRANSFERS, ETC ................................................................ 20
6.1 Transfers to Permitted Transferees .................................................. 20
6.2 Other Transfers and Issuances ....................................................... 21
6.3 Certain Issuances and Redemptions ................................................... 21
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
7. PREEMPTIVE RIGHT .................................................................................... 21
7.1 Right of Participation ................................................................ 21
7.1.1. Offer .......................................................... 21
7.1.2. Exercise ....................................................... 22
7.1.2.1 General ...................................... 22
7.1.2.2 Irrevocable Acceptance ....................... 23
7.1.2.3 Time Limitation .............................. 23
7.1.3. Other Securities ............................................... 23
7.1.4. Certain Legal Requirements ..................................... 24
7.1.5. Further Assurances ............................................. 24
7.1.6. Expenses ....................................................... 25
7.1.7. Closing ........................................................ 25
7.2 Excluded Transactions ................................................................. 25
7.3 Period ................................................................................ 26
8. REMEDIES ............................................................................................ 26
8.1 Generally ........................................................................... 26
8.2 Deposit ............................................................................. 26
9. REGISTRATION RIGHTS ................................................................................. 27
9.1 Demand Registration Rights ............................................................ 27
9.1.1. Investor Shares .................................................. 27
9.1.1.1 Form ........................................... 28
9.1.2. Subscriber Shares ................................................ 28
9.1.2.1 Form ........................................... 30
9.1.3. Lender Shares .................................................... 30
9.1.3.1 Form ........................................... 31
9.1.4. Payment of Expenses .............................................. 32
9.1.5. Additional Procedures ............................................ 32
9.2 Piggyback Registration Rights ......................................................... 32
9.2.1. Piggyback Registration ........................................... 32
9.2.1.1 General ........................................ 32
9.2.1.2 Excluded Transactions .......................... 33
9.2.2. Payment of Expenses .............................................. 33
9.2.3. Additional Procedures ............................................ 33
9.3 Certain Other Provisions .............................................................. 34
9.3.1. Underwriter's Cutback ............................................ 34
9.3.2. Other Actions .................................................... 35
9.3.3. Selection of Underwriters and Counsel ............................ 37
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
9.3.4. LockUp ........................................................... 38
9.4 Indemnification and Contribution ...................................................... 38
9.4.1. Indemnities of the Company ....................................... 38
9.4.2. Indemnities to the Company ....................................... 40
9.4.3. Indemnification Procedures ....................................... 40
9.4.4. Contribution ..................................................... 41
9.4.5. Limitation on Liability of Holders of Registrable Securities ..... 42
10. AMENDMENT, TERMINATION, ETC ......................................................................... 42
10.1 Oral Modifications ................................................................. 42
10.2 Written Modifications .............................................................. 42
10.3 Termination ........................................................................ 42
11. DEFINITIONS ......................................................................................... 42
11.1 Certain Matters of Construction .................................................... 43
11.2 Cross Reference Table .............................................................. 43
11.3 Certain Definitions ................................................................ 44
11.3.1. "Affiliate" ................................................... 44
11.3.2. "Affiliated Fund" ............................................. 45
11.3.3. "Cash Equivalents" ............................................ 45
11.3.4. "Cause" ....................................................... 45
11.3.5. "Change of Control" ........................................... 45
11.3.6. "Competitor" .................................................. 45
11.3.7. "Convertible Securities" ...................................... 46
11.3.8. "Cost" ........................................................ 46
11.3.9. "Equivalent Shares" ........................................... 46
11.3.10. "Equivalent Value" ........................................... 46
11.3.11. "Exchange Act" ............................................... 46
11.3.12. "Fair Market Value" .......................................... 46
11.3.13. "Initial Public Offering" .................................... 46
11.3.14. "Investor Shares" ............................................ 46
11.3.15. "Lender Shares" .............................................. 46
11.3.16. "Majority Investors" ......................................... 46
11.3.17. "Management Shares" .......................................... 46
11.3.18. "Members of the Immediate Family" ............................ 47
11.3.19. "Options" .................................................... 47
11.3.20. "Permitted Transferee" ........................................ 47
11.3.21. "Person" ..................................................... 47
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
11.3.22. "Price Per Equivalent Share" ................................. 47
11.3.23. "Public Offering" ............................................ 47
11.3.25. "Regulation D" ............................................... 47
11.3.26. "Rule 144" ................................................... 48
11.3.27. "Rule 145 Transaction" ....................................... 48
11.3.28. "Securities Act" ............................................. 48
11.3.29. "Subscriber Shares" ........................................... 48
11.3.30. "Shares" ...................................................... 48
11.3.31. "Termination Event" .......................................... 48
11.3.32. "Transfer" ................................................... 48
12. CERTAIN OTHER MATTERS ............................................................................... 48
12.1 Fees and Expenses .................................................................... 48
12.2 Corporate Opportunities .............................................................. 48
12.3 Reporting ............................................................................ 49
12.4 Lender Review ........................................................................ 49
13. MISCELLANEOUS ....................................................................................... 49
13.1 Authority; Effect .................................................................. 49
13.2 Notices ............................................................................ 49
13.3 Binding Effect, etc ................................................................ 50
13.4 Descriptive Headings ............................................................... 50
13.5 Counterparts ....................................................................... 50
13.6 Severability ....................................................................... 51
14. GOVERNING LAW, ARBITRATION .......................................................................... 51
14.1 Governing Law ...................................................................... 51
14.2 Arbitration ........................................................................ 51
14.2.1. Generally ..................................................... 51
14.2.2. Place of Arbitration .......................................... 51
14.2.3. Recourse to Courts ............................................ 52
14.3 Reliance ........................................................................... 52
15. TERMINATION ......................................................................................... 52
15.1 Termination ........................................................................ 52
</TABLE>
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SHAREHOLDERS AGREEMENT
This Shareholders Agreement (the "Agreement") is made as of September
17 , 1998 by and among:
(i) Miami Cruiseline Services Holdings I B.V., a Dutch private
company with limited liability (the "Company");
(ii) Berkshire Cruise Holdings LLC (the "Investor");
(iii) Philip Levine ("Levine"), Jerry Chafetz ("Chafetz") and The
Gerald Robins Revocable Trust 8/3/94, The Craig Robins
Revocable Trust 8/3/94, and The Scott Robins Revocable Trust
8/3/94 (the "Trusts", and collectively with Levine and
Chafetz, the "Subscribers");
(iv) J. P. Miquel (the "Management Investors");
(v) Berkshire Partners LLC (the "Interim Purchaser"); and
(vi) New York Life Insurance Company, American Home Assurance
Company and The Northwestern Mutual Life Insurance Company
(the "Lenders" and collectively with the Investor, the
Subscribers the Management Investors and the Interim
Purchaser, the "Shareholders").
Recitals
1. Pursuant to one or more subscription agreements, the Investor has
agreed to purchase 19,649 shares of the Company's common stock, par value of NLG
1.00 per share (the "Common Stock") which will cause its total holdings at
Closing to be 59,649 shares.
2. On or about the date hereof, pursuant to the Stock Subscription and
Exchange Agreement dated as of August 27, 1998 (the "Exchange Agreement") among
the Company and the Subscribers, the Subscribers will receive consideration
including shares of Common Stock.
3. Pursuant to one or more subscription agreements, the Lenders have
agreed to purchase 9,999 shares of Common Stock.
<PAGE> 8
4. Pursuant to a subscription agreement, the Interim Purchaser has
agreed to purchase 1,663 shares of Common Stock.
5. Pursuant to one or more subscription agreements, the Management
Investors have agreed to purchase 1,039 shares of Common Stock.
6. Certain members of management may in the future acquire shares of
Common Stock.
7. Pursuant to one or more stock options, certain employees of the
Company have been or may be granted certain options ("Options") by the Company
to acquire shares of Common Stock.
8. The number of shares of Common Stock held by the Shareholders on the
date on which this Agreement is executed is set forth on Schedule 1 hereto.
9. The parties believe that it is in the best interests of the Company
and the Shareholders to: (i) provide that the Shares shall be transferable only
upon compliance with the terms hereof; (ii) provide the Company with certain
rights and obligations with respect to the purchase of the Shares under certain
circumstances; (iii) provide for certain rights and obligations with respect to
the election of directors of the Company; (iv) provide for certain rights and
obligations with respect to the voting of shares; and (v) set forth their
agreements on certain other matters.
Agreement
Therefore, the parties hereto hereby agree as follows:
1. EFFECTIVENESS; DEFINITIONS.
1.1 Closing. This Agreement shall become effective upon consummation of
the closing (the "Closing") under the Share Purchase Agreement between Viad
Corand Cruise Line Holdings Co. dated July 31, 1998 and the Exchange
Agreement.
1.2 Definitions. Certain terms are used in this Agreement as
specifically defined herein. These definitions are set forth or referred to in
Section 11 hereof.
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<PAGE> 9
2. VOTING AND WAIVER AGREEMENT.
2.1 Initial Board. The initial Board shall be comprised of Bradley
Bloom and Randy Peeler, as Class A directors, and Jerry Chafetz, Joel Cutler,
David Fialkow, Steve Fischman, Philip Levine, J.Miquel and Leonard
Schlesinger as Class B directors. Bloom, Cutler, Fialkow, Fischman, Peeler, and
Schlesinger shall be the initial Investor nominees, Levine and Chafetz the
initial Subscriber nominees and Miquel the initial Management nominee, each
pursuant to Section 2.1.
2.2 Election of Directors. Each Shareholder hereby agrees to cast all
votes to which such holder is entitled in respect of the Shares, whether at any
annual or special meeting, by written consent or otherwise, to fix the number of
Class A and Class B members of the management board of the Company (the "Board")
at such number as may be specified from time to time by the Majority Investors.
Each Shareholder agrees to vote in favor of the election as directors of the
individuals listed in Section 2.1, or their respective replacements as nominated
by the Investor, the Subscribers or the Management Investors, as the case may
be. The Company's directors shall be elected in accordance with Article 13 of
the Company's Articles of Association, as amended.
2.3 Significant Transactions. Each holder of Shares agrees to vote the
Shares held by such holder in the same proportion as Investor Shares are voted
by the Majority Investors in connection with any transaction with respect to
which the Majority Investors exercise their "drag along" rights in Section 3.2
(including without limitation any merger, recapitalization, consolidation,
reorganization, or sale of substantially all the assets of the Company).
2.4 Seats on Board of Directors.
(a) So long as the Subscribers, collectively, hold at
least 10% of the Common Stock, Philip Levine and Jerry Chafetz
shall each be entitled to hold a Class B seat on the Board or
select a successor. In the event either such Board member is
suspended, dismissed or removed under Article 13, paragraph 3
of the Articles of Association, while the conditions of the
preceding sentence remain satisfied, each holder of Shares
shall vote to fill such vacancy with a successor nominated by
the respective Subscriber.
(b) So long as Greyhound Leisure Services Inc.
("GLSI") is a direct or indirect subsidiary of the Company and
J.Miquel remains the Chief Executive Officer of GLSI, J.P.
Miquel shall be entitled to hold a Class B seat on the Board.
In the event he is suspended, dismissed or removed under
Article 13 paragraph 3 of the
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<PAGE> 10
Company's Articles of Association, while the conditions of the
preceding sentence remain satisfied, each holder of Shares
shall vote to fill such vacancy with a successor nominated by
Miquel.
2.5 The Company. The Company agrees not to give effect to any action by
any holder of Shares or any other Person which is in contravention of this
Section 2.
2.6 Approval of Transfers. Each holder of Shares agrees to vote all the
Shares held by such holder in any shareholder vote pursuant to Article 11,
paragraph 1 of the Articles of Association to permit any Approved Transfer and
to disallow any Transfer which is not an Approved Transfer.
2.7 Amendment of Articles. Prior to an event of termination of this
Shareholders Agreement, the closing of a Public Offering or a Change of Control,
the Shareholders agree (i) not to amend Article 11, paragraph 1 of the Articles
of Association without the vote of the Majority Investors and the majority of
Subscriber Shares and (ii) not to amend Article 13 of the Articles of
Association to differentiate the voting rights of the Class A and Class B
directors. In the event of any such termination, Public Offering or Change of
Control, each holder of Shares agrees to vote all the Shares held by such holder
to amend Article 11, paragraph 1 of the Articles of Association (to the extent
not already amended or deleted by conversion into a N.V.) immediately prior to
such event to delete any supermajority requirements for the approval of
Transfers.
2.8 Preemptive Rights. Each holder of Shares agrees to vote all the
Shares held by such holder in any shareholder vote pursuant to Article 4 of the
Articles of Association to (i) require preemptive rights for any Issuance where
Section 7 of this Agreement requires preemptive rights; and (ii) to exclude
preemptive rights for any Issuance exempted from the preemptive right
requirement by Section 7.2 hereof. Each holder of Shares agrees not to exercise
such holder's preemptive rights under Article 4 of the Articles of Association
with respect to any Issuance for which such holder is not entitled to preemptive
rights under Section 7 hereof.
2.9 Good Faith. Each holder of Shares agrees to act in good faith and
cast the votes agreed to in this Section 2, whether by written consent, proxy or
in person, expeditiously and without delay. If any vote required by this Section
2 is solicited by written consent, each holder of shares agrees to execute and
return such vote (including all forms of transmission) by facsimile as soon as
possible and in no event later than 10 days from receipt of such solicitation.
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<PAGE> 11
2.10 Levine Vote. So long as the Subscribers, collectively, hold at
least 10% of the Common Stock, no vote pursuant to Section 2.6 hereof will be
taken without Philip Levine casting a vote, by written consent, proxy or in
person, provided that Philip Levine will not withhold or delay any vote agreed
to in this Section 2.
2.11 Waiver of Offer; Appraisal. Each holder of shares agrees to
unconditionally and irrevocably waive any right that he may have under the
Articles of Association for a third party offer to be arranged by the Company
for the purchase of Shares, the Transfer of which would be prohibited by the
Shareholder vote and an independent price determination in relation to any
Transfer proposed by such holder of Shares which is not an Approved Transfer.
Each holder of Shares acknowledges that such holder has sufficient opportunities
under this Agreement to Transfer Shares and notwithstanding any provisions of
the Articles of Association, each holder of Shares agrees not to make any
Transfer not permitted by this Agreement including, without limitation, pursuant
to a deemed approval.
2.12 Management Representative. J. P. Miquel shall be designated a
"Purchaser Representative" to represent each holder of Management Shares. Each
holder of Management Shares hereby grants to J. P. Miquel an irrevocable proxy
coupled with an interest to vote such holder's Shares with respect to any vote
agreed to in this Section 2.
2.13 Lender Rights. At any time, and from time to time, during which
any Lender shall hold any Shares, a representative of each such Lender shall
have the right to have its designated representative attend (or, in the case of
a telephonic meeting, to listen by telephone to) each meeting of the Board. The
Company shall reimburse the reasonably incurred out of pocket expenses incurred
by such Lender in attending any such meeting. The Company shall give to the
Lenders' purchaser representative:
(a) prior written notice of each such meeting, to be given no
later than the earlier of:
(i) the date written notice is actually given to the directors;
and
(ii) the latest date on which notice may permissibly be given by
law;
(b) within sixty (60) days of each such meeting, copies of the
records of proceedings of, or minutes of, such meeting; and
(c) all information provided to the directors at or prior to such
meeting in respect of the matters to be discussed thereat.
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<PAGE> 12
2.14 [Reserved].
2.15 Transition of Articles. The Shareholders acknowledge that as soon
as practicable after the Closing, the Articles of Association will be amended as
set forth in the revised Articles of association delivered at the Closing. All
section references to the Articles of Association contained in this Agreement
are references to the revised Articles of Association. Prior to the
effectiveness of the revised Articles, each holder of Shares agrees to cast all
votes and take other actions reasonably required, including the waiver of rights
of first refusal, to permit Transfers permitted under this Agreement and not to
permit Transfers not permitted under this Agreement.
2.16 Repurchase of Shares. Each holder of Shares agrees as a continuous
obligation that, upon and after the delivery of a Put Notice to Miami Cruiseline
Services Holdings II B.V. ("Holdco II") in accordance with, and in compliance
with the time periods provided under, the Put Agreements dated as of September
17, 1998 between Holdco II and each of New York Life Insurance Company, The
Northwestern Mutual Life Insurance Company and American Home Assurance Company
(the "Put Agreements") such holder shall vote its Shares so as to authorize and
direct the Company's management board to cause the Company to authorize and
direct the management board of Holdco II to effect a purchase of the Shares
which are the subject of the Put Notice, at the purchase price for such Shares
which is provided under the applicable Put Agreement.
2.17 Period. The foregoing provisions of this Section 2 shall expire on
the earlier of (i) the closing of a Public Offering and (ii) a Change of
Control.
3. GENERAL TRANSFER PROVISIONS; "TAG ALONG" RIGHTS, "DRAG ALONG"
OBLIGATIONS AND RIGHT OF FIRST OFFER.
3.1 Tag Along. No holder of Shares (each such holder if initiating a
proposed Transfer, an "Initiating Transferor") shall Transfer for value (a
"Sale") any such Shares to any Person (each, a "Prospective Buyer") except
in the manner and on the terms set forth in Sections 3 or 4. Any attempted
Transfer of Shares not permitted by Sections 3 or 4 shall be deemed null
and void, and the Company shall not, to the extent permitted by law, in any
way give effect to any such impermissible Transfer. Any Transfer of Shares
permitted by Sections 3, 4 and 6 of this Agreement, as such Sections work
in conjunction with each other, or required under this Agreement shall be
deemed an Approved Transfer.
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<PAGE> 13
3.1.1. Notice. After compliance with Section 3.4 hereof, a written
notice (the "Tag Along Notice") shall be furnished by all of the Initiating
Transferors to each other holder of Shares (the "Tag Along Offerors"). The
Tag Along Notice shall include:
(a) The principal terms of the proposed Sale, including the
number of Shares to be purchased from the Initiating Transferors, the
percentage of the total number of Shares held by the Initiating
Transferors which such number of Shares constitutes (the "Tag Along
Sale Percentage"), the maximum and minimum per share purchase price
(which minimum price shall be no less than 90% of the maximum price)
and the name and address of the Prospective Buyer; and
(b) An invitation to each Tag Along Offeror to include in the
proposed Sale to the Prospective Buyer a number of Shares which shall
not in any event exceed the Tag Along Sale Percentage of the total
number of Shares held by such Tag Along Offeror on the same terms and
conditions, with respect to each Share sold, as the Initiating
Transferors shall sell each of their Shares.
3.1.2. Exercise. Within 45 days after the effectiveness of the Tag
Along Notice, each Tag Along Offeror desiring to make an offer to include
Shares in the proposed Sale (each a "Participating Seller") shall send a
written offer (the "Tag Along Offer") to the Initiating Transferors
specifying the number of Shares (not in any event to exceed the Tag Along
Sale Percentage of the total number of Shares held by such Participating
Seller) which such Participating Seller desires to have included in the
proposed Sale. Each Tag Along Offeror who does not accept the Initiating
Transferor's invitation to make an offer to include Shares in the proposed
Sale shall be deemed to have waived all of his rights with respect to
participation in such Sale, and the Initiating Transferors and the
Participating Sellers shall thereafter be free to sell to the Prospective
Buyer, at a per Share price no greater than the maximum per share price set
forth in the Tag Along Notice and on other principal terms which are not
materially more favorable to the Initiating Transferors and the
Participating Sellers than those set forth in the Tag Along Notice, without
any further obligation to such non-accepting Tag Along Offerors.
3.1.3. Reduction of Shares Sold. The Initiating Transferors shall use
all reasonable efforts to obtain the inclusion in the proposed Sale of the
entire number of Shares which the Initiating Transferors and each
Participating Seller desires to have included in the Sale (as evidenced in
the case of the Initiating Transferors by the Tag Along Notice and in the
case of each Participating Seller by such Participating Seller's Tag Along
Offer). In the event the Initiating Transferors shall be unable to obtain
the inclusion in the proposed Sale of such entire number of Shares which
each Initiating
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<PAGE> 14
Transferor and Participating Seller desires to have included in the Sale,
the number of Shares to be sold in the proposed Sale by the Initiating
Transferors and each Participating Seller shall be reduced on a pro rata
basis according to the proportion which the number of Shares which each
such Participating Seller and Initiating Transferor desires to have
included in the Sale bears to the total number of Shares desired by all
such Initiating Transferors and Initiating Transferor to have included in
the Sale.
3.1.4. Irrevocable Offer. The offer of each Participating Seller
contained in his Tag Along Offer shall be irrevocable, and, to the extent
such offer is accepted, such Participating Seller shall be bound and
obligated to sell in the proposed Sale on the same terms and conditions as
set forth in such offer, with respect to each Share sold, as the Initiating
Transferor, up to such number of Shares as such Participating Seller shall
have specified in his Tag Along Offer; provided, however, that (a) if the
Initiating Transferors are unable to obtain the inclusion of at least 50%
of the Shares any Participating Seller desires to include in the proposed
Sale, such Participating Seller shall be permitted to withdraw the offer
contained in his Tag Along Offer and shall be released from his obligations
thereunder, (b) if the principal terms of the proposed Sale change with the
result that the per Share price shall be less than the minimum per Share
price set forth in the Tag Along Notice or the other principal terms shall
be materially less favorable to the Initiating Transferors and the
Participating Sellers than those set forth in the Tag Along Notice, each
Participating Seller shall be permitted to withdraw the offer contained in
his Tag Along Offer and shall be released from his obligations thereunder
and (c) if at the end of the 90th day following the date of the
effectiveness of the Tag Along Notice the Initiating Transferor have not
completed the proposed Sale, each Participating Seller shall be released
from his obligations under his Tag Along Offer, the Tag Along Notice shall
be null and void, and it shall be necessary for a separate Tag Along Notice
to be furnished, and the terms and provisions of this Section 3.1
separately complied with, in order to consummate such Sale pursuant to this
Section 3.1.
3.1.5. Additional Compliance. If, prior to consummation, the terms of
the proposed Sale shall change with the result that the per Share price
shall be greater than the maximum per Share price set forth in the Tag
Along Notice or the other principal terms shall be materially more
favorable to the Initiating Transferor and the Participating Sellers than
those set forth in the Tag Along Notice, the Tag Along Notice shall be null
and void, and it shall be necessary for a separate Tag Along Notice to be
furnished, and the terms and provisions of this Section 3.1 separately
complied with, in order to consummate such proposed Sale pursuant to this
Section 3.1.
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<PAGE> 15
3.1.6. Excluded Transactions. Notwithstanding the foregoing no other
holder of Shares shall have any right of participation pursuant to the
provisions of this Section 3.1 or otherwise with respect to any Transfer:
(a) to the Investor or an Affiliated Fund within 90 days of the
date of this Agreement;
(b) by the Investor or an Affiliated Fund pro rata to its
partners, members or Affiliates of such partners or members within 90
days of the date of this Agreement;
(c) in an Initial Public Offering or to the public under Rule
144;
(d) with respect to which the Majority Investors exercise their
"drag along" rights under Section 3.2 of this Agreement;
(e) in a Sale to the Company pursuant to Sections 4.3.1 or 4.3.2
or a sale to one or more Shareholders pursuant to Sections 4.3.1 or
4.3.2;
(f) in a Sale of Investor Shares if, after giving effect to such
Sale, the initial holders of Investor Shares will continue to own not
less than 90% of the shares initially issued to the Investor;
(g) in a Transfer permitted pursuant to Section 4.1 or 4.2;
(h) in a Transfer by any holder of Shares to a Member of the
Immediate Family of such holder or to a trust, the sole beneficiary of
which is the holder or a Member of the Immediate Family of such
holder; provided, however, that no such Transfer shall be permitted
until such Member of the Immediate Family has delivered to the Company
a written acknowledgment and agreement in form and substance
reasonably satisfactory to the Company that the Investor Shares,
Subscriber Shares or Management Shares to be received by such Member
of the Immediate Family are subject to all the provisions of this
Agreement and that such Member of the Immediate Family is bound hereby
and a party hereto as a holder of Subscriber Shares or Management
Shares, as the case may be; or
(i) from the Interim Purchaser or any Affiliate to any employee
of Greyhound Leisure Services Inc., within 60 days from the date of
this Agreement.
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<PAGE> 16
(j) from any Lender to Holders II pursuant to the put right in
the Put Agreements.
3.2 Drag Along. After compliance with the terms of Section 3.4 hereof,
each holder of Shares or Options hereby agrees, if requested by the Majority
Investors, to sell all of such holder's Shares and Options to a Person other
than an Affiliate of the Investor (each, a "Prospective Buyer") in the manner
and on the terms set forth in this Section 3.2 in connection with the Sale by
the Majority Investors of the total number of Investor Shares held by the
Majority Investors; provided, however, that (i) the provisions of this Section
3.2 shall not apply unless the Majority Investors are collectively selling all
of the Common Stock then held by the Majority Investors, (ii) the Participating
Sellers (as defined below) receive the same type and amount of consideration,
fees, payments, etc., on a pro rata basis, as the Majority Investors and (iii)
the provisions of this Section 3.2 shall not apply to a Sale to an Affiliated
Fund or an Affiliate of either Berkshire Partners LLC or an Affiliated Fund.
3.2.1. Exercise. If the Majority Investors elect to exercise
their rights under this Section 3.2, a written notice (the "Drag Along
Notice") shall be furnished by the Majority Investors to each other
holder of Shares and Options. The Drag Along Notice shall set forth the
principal terms of the proposed Sale, including the number of Shares to
be purchased from the Majority Investors, the consideration (which
shall be only in cash or Cash Equivalents) and expected per share price
and the name and address of the Prospective Buyer. If the Majority
Investors consummate the proposed Sale to which reference is made in
the Drag Along Notice, each other holder of Shares and Options (each a
"Participating Seller") shall be bound and obligated to sell his Shares
in the proposed Sale on the same terms and conditions, with respect to
each Share sold, as the Majority Investors shall sell each Investor
Share in the Sale. If, at the end of the 90th day following the date of
the effectiveness of the Drag Along Notice, the Majority Investors have
not completed the Sale, each Participating Seller shall be released
from his obligation under the Drag Along Notice, the Drag Along Notice
shall be null and void, and it shall be necessary for a separate Drag
Along Notice to be furnished and the terms and provisions of this
Section 3.2 separately complied with, in order to consummate such Sale
pursuant to this Section 3.2.
3.3 Miscellaneous. The following provisions shall be applied to any
Sale to which Section 3.1 or 3.2 applies:
3.3.1. Certain Legal Requirements. In the event the
consideration to be paid in exchange for Shares in the proposed Sale
pursuant to Section 3.1 includes any securities and the receipt thereof
by a holder of Shares as a Participating Seller would require under
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<PAGE> 17
applicable law (i) the registration or qualification of such securities
or of any person as a broker or dealer or agent with respect to such
securities or (ii) the provision to any participant in the Sale of any
information other than such information as would be required under
Regulation D in an offering made pursuant to Regulation D solely to
"accredited investors" as defined in Regulation D, the Majority
Investors or Prospective Subscribers, respectively, shall be obligated
only to use their reasonable efforts to cause the requirements under
Regulation D to be complied with to the extent necessary to permit such
Participating Seller to receive such securities, it being understood
and agreed that the Majority Investors shall not be under any
obligation to effect a registration of such securities under the
Securities Act or similar state statutes. Notwithstanding any
provisions of this Section 3, if use of reasonable efforts does not
result in the requirements under Regulation D being complied with to
the extent necessary to permit such Participating Seller to receive
such securities, the Majority Investor or Prospective Subscribers,
respectively, shall cause to be paid to such Participating Seller in
lieu thereof, against surrender of the Shares (in accordance with
Section 3.3.5 hereof) which would have otherwise been sold by such
Participating Seller to the Prospective Buyer in the Sale, an amount in
cash equal to the Equivalent Value of the securities which such
Participating Seller would otherwise receive as of the date of the
issuance of such securities in exchange for Shares. The obligation of
the Majority Investor or Prospective Subscribers, respectively, to use
reasonable efforts to cause such requirements to have been complied
with to the extent necessary to permit a Participating Seller to
receive such securities shall be conditioned on such Participating
Seller executing such documents and instruments, and taking such other
actions (including, without limitation, if required by the Majority
Investor, to the extent that the Participating Seller is not an
accredited investor, agreeing to be represented during the course of
such transaction by a "purchaser representative" (as defined in
Regulation D) in connection with evaluating the merits and risks of the
prospective investment and acknowledging that he was so represented),
as the Majority Investor or Prospective Subscribers, respectively,
shall reasonably request in order to permit such requirements to be
complied with. Unless the Participating Seller in question shall have
taken all actions reasonably requested by the Majority Investor or
Prospective Subscribers, respectively, in order to comply with the
requirements under Regulation D, no Participating Seller shall have the
right to require the payment of cash in lieu of securities under this
Section 3.3.1.
3.3.2. Further Assurances. Each Participating Seller, whether
in his capacity as a Participating Seller, Shareholder, officer or
director of the Company, or otherwise shall, to the fullest extent
permitted by applicable law, take or cause to be taken all such actions
as may be necessary or reasonably desirable in order expeditiously to
consummate each Sale pursuant to Section 3.1 or Section 3.2 and any
related transactions, including,
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<PAGE> 18
without limitation, executing, acknowledging and delivering consents,
assignments, waivers and other documents or instruments; furnishing
information and copies of documents; filing applications, reports,
returns, filings and other documents or instruments with governmental
authorities; and otherwise cooperating with the Majority Investor and
the Prospective Buyer; provided, however, that the extent to which any
Participating Seller shall be obligated to become liable in respect of
any representations, warranties, covenants, indemnities or otherwise to
the Prospective Buyer shall be governed by the provisions of the
immediately following sentence. Without limiting the generality of the
foregoing, each Participating Seller agrees to execute and deliver such
agreements as may be reasonably specified by the Majority Investor to
which such Majority Investor or Prospective Subscribers, respectively,
will also be party, including, without limitation, an agreement by such
Participating Seller to (a) make individual representations as to the
unencumbered title to its Shares and the power, authority and legal
right to transfer such Shares to the extent such agreements are also
made by the Majority Investor and (b) be liable in respect of any
purchase price escrow or adjustment provisions or reduction in purchase
price as may apply to Shareholders generally resulting from
representations, warranties, covenants and indemnities in respect of
the Company to the extent that the Majority Investor or Prospective
Subscribers, respectively, are also liable; provided, however, that
such liability shall be several, and not joint, and, (i) except with
respect to individual representations, warranties, covenants,
indemnities and other agreements of holders of Shares, the aggregate
amount of such liability shall not exceed the lesser of (a) such
Participating Seller's pro rata portion of any such liability, in
accordance with such Participating Seller's portion of the total number
of Shares included in the Sale or (b) the proceeds to such
Participating Seller as a result of such Sale and (ii) with respect to
individual representations, warranties, covenants, indemnities and
other agreements of holders of Shares, the aggregate amount of such
liability shall not exceed the proceeds to such Participating Seller as
a result of such Sale.
3.3.3. Certain Determinations. The Tag Along Sale Percentage
for purposes of Section 3.1 shall be determined on the basis of
Equivalent Shares. The Consideration to be paid to any holder of
Options shall be reduced by the exercise price for the shares pursuant
to the Options.
3.3.4. Expenses. All reasonable and documented costs and
expenses incurred by any holder of Shares or the Company in connection
with any proposed Sale pursuant to this Section 3 (whether or not
consummated), including, without limitation, all attorneys fees and
charges, all accounting fees and charges and all finders, brokerage or
investment banking fees, charges or commissions, shall be paid by the
Company.
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<PAGE> 19
3.3.5. Closing. The closing of a Sale pursuant to Section 3.1
or 3.2 shall take place at such time and place as the Initiating
Transferor or Majority Investor, respectively, shall specify by notice
to each Participating Seller. The closing of a Sale pursuant to Section
3.4 shall take place as soon as reasonably practicable and in no event
later than 60 days after termination of the applicable exercise period
at the principal office of the Company, or at such other time and
location as the parties to such purchase may mutually determine. At the
closing of any Sale under this Section 3, each Participating Seller
shall transfer the Shares to be sold by such Participating Seller,
through the execution of a deed before the Dutch civil law notary
(notaris), for transfer with signature guaranteed, free and clear of
any liens or encumbrances, against delivery of the applicable
consideration.
3.4 Right of First Offer. No holder of Shares shall Transfer any of
such Shares to any Prospective Buyer except as permitted by this Section 3.4.
Any attempted Transfer of Shares not permitted by this Section 3.4 shall be
deemed null and void, and the Company shall not, to the extent permitted by law,
in any way give effect to any such impermissible Transfer.
3.4.1. Notice; Offer. The holder of Shares proposing to
Transfer such Shares shall deliver to each holder of Investor Shares,
Subscriber Shares, Lender Shares or Management Shares (each, a "Sale
Offeree") a notice (a "Sale Notice") of the holder's intention to
Transfer such Shares. Such notice shall include:
(a) The principal terms of the proposed Transfer,
including the number of Shares to be sold, the proposed price
per Share to be received and the form of consideration which
the holder of Shares proposes to offer to accept from any
transferee in such Transfer (which may only be consideration
readily obtainable and deliverable by the Sale Offerees in
compliance with law) and;
(b) An offer by the holder of Shares to sell to the
Sale Offerees all of the Shares to be Transferred, on the same
terms and conditions (subject to Section 3.4.1(a)), with
respect to each Share so Transferred, as the holder of Shares
proposes to Transfer such Shares as described in the Sale
Notice.
3.4.2. Exercise. Each Sale Offeree desiring to accept the
offer contained in the Sale Notice shall send a written commitment to
the holder of Shares in question specifying the number of Shares which
such Sale Offeree desires to purchase within 30 days after the
effectiveness of the Sale Notice (each a "Participating Offeree"). In
the event that the Sale Offerees, in the aggregate, do not agree to
accept the offer to purchase
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<PAGE> 20
all of the Shares offered for Sale in the Sale Notice, then each Sale
Offeree shall be deemed to have waived all of its rights to purchase
such Shares prior to such proposed Transfer, and the holder of Shares
in question shall thereafter be free to Transfer in a transaction which
is exempt from the registration requirements of applicable securities
laws to one or more Persons, at a price no less than 95% of the per
Share price set forth in the Sale Notice and on other principal terms
not materially more favorable to the buyer than as set forth in the
Sale Notice, without any further obligation to such non-accepting Sale
Offerees pursuant to this Section 3.4; provided, however, that no such
Transfer shall be effective until such Person has delivered to the
Company a written acknowledgment and agreement in form and substance
reasonably satisfactory to the Company that the Shares to be acquired
by such buyer are subject to all the provisions of this Agreement and
that such buyer is bound hereby and a party hereto as a holder of the
category of Shares which were held by the selling holder.
In the event that the Participating Offerees, in the
aggregate, agree to accept the offer to purchase all of the Shares
offered for Sale in the Sale Notice, then (i) each Sale Offeree who has
not accepted such offer shall be deemed to have waived all of its
rights to purchase such Shares prior to such proposed Transfer and (ii)
in the event the Participating Offerees desire to purchase more Shares
than are being offered pursuant to the Sale Notice, each Participating
Offeree shall be deemed to have accepted an offer to purchase an
allocated portion (such portion to be allocated by agreement among the
Participating Offerees or, to the extent such agreement cannot be
reached, by proration among such Participating Offerees on the basis of
the number of Shares such Participating Offerees committed to purchase)
of such Shares. If, prior to consummation, the terms of such proposed
Transfer shall change with the result that the price shall be less than
95% of the per Share price set forth in the Sale Notice or the other
principal terms shall be materially more favorable to the buyer than
those set forth in the Sale Notice, it shall be necessary for a
separate Sale Notice to have been furnished, and the terms and
provisions of this Section 3.4 separately complied with, in order to
consummate such proposed Transfer pursuant to this Section 3.4.
If, at the end of the 90th day following the date of the
effectiveness of the Sale Notice, the holder of Shares in question has
not completed the Transfer, each Participating Offeree shall be
released from its obligations under its written commitment, the Sale
Notice shall be null and void, and it shall be necessary for a separate
Sale Notice to have been furnished, and the terms and provisions of
this Section 3.4 separately complied with, in order to consummate such
Transfer pursuant to this Section 3.4.
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<PAGE> 21
3.4.3. Excluded Transactions. Notwithstanding the foregoing
provisions of this Section 3.4, no holder of Shares shall have any
right to a First Offer Notice or offer pursuant to this Section 3.4
with respect to any Transfer:
(a) to an Investor or an Affiliated Fund within 90 days of
the date of this Agreement;
(b) by the Investor or an Affiliated Fund pro rata to its
partners, members or Affiliates of such partners or members
within 90 days of the date of this Agreement;
(c) in a Public Offering or to the Public under Rule 144;
(d) in a Transfer permitted pursuant to Section 4.1 or 4.2;
(e) in a Transfer among Subscribers;
(f) in a Transfer by any holder of Shares to a Member of the
Immediate Family of such holder or to a trust, the sole
beneficiary of which is the holder or a Member of the Immediate
Family of such holder; provided, however, that no such Transfer
shall be effective until such Member of the Immediate Family has
delivered to the Company a written acknowledgment and agreement
in form and substance reasonably satisfactory to the Company that
the Investor Shares, Subscriber Shares or Management Shares to be
received by such Member of the Immediate Family are subject to
all the provisions of this Agreement and that such Member of the
Immediate Family is bound hereby and a party hereto as a holder
of Subscriber Shares or Management Shares, as the case may be; or
(g) from the Interim Purchaser or any Affiliate to any
employee of Greyhound Leisure Services Inc., within 60 days from
the date of this Agreement.
(h) from any Lender to Holdco II pursuant to the put right
in the Put Agreement.
3.5 Period. The foregoing provisions of this Section 3 shall expire on
the earlier of (i) the closing of a Public Offering or (ii) a Change of Control.
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<PAGE> 22
4. SUBSCRIBER AND MANAGEMENT TRANSFER RIGHTS. No holder of Subscriber Shares or
Management Shares shall Transfer any of such Shares to any other Person except
as permitted by Sections 3 or 4. Any attempted Transfer of Subscriber Shares or
Management Shares not permitted by this Section 4 shall deemed null and void,
and the Company shall not, to the extent permitted by law, in any way give
effect to any such impermissible Transfer.
4.1 Transfers to Immediate Family. Any holder of Subscriber Shares or
Management Shares may Transfer any or all of such person's Subscriber Shares or
Management Shares to a Member of the Immediate Family of such holder or to a
trust, the sole beneficiary of which is the holder or a Member of the Immediate
Family of such holder; provided, however, that no such Transfer shall be
permitted until such Member of the Immediate Family has delivered to the Company
a written acknowledgment and agreement in form and substance reasonably
satisfactory to the Company that the Subscriber Shares or Management Shares to
be acquired by such Member of the Immediate Family are subject to all the
provisions of this Agreement and that such Member of the Immediate Family is
bound hereby and a party hereto as a holder of Subscriber Shares or Management
Shares, as the case may be.
4.2 Transfer Upon Death. Subject to the provisions of Section 5 hereof,
upon the death of any holder of Subscriber Shares or Management Shares, the
Subscriber Shares or Management Shares held by such holder may be distributed by
will or other instrument taking effect at death or by applicable laws of descent
and distribution to such holder's estate, executors, administrators and personal
representatives, and then to such holder's heirs, legatees or distributees,
whether or not such recipients are Members of the Immediate Family of such
holder; provided, however, that no such Transfer shall be permitted until the
recipient has delivered to the Company a written acknowledgment and agreement in
form and substance reasonably satisfactory to the Company that the Subscriber
Shares or Management Shares to be acquired by such recipient are subject to all
the provisions of this Agreement and that such recipient is bound hereby and a
party hereto as a holder of Subscriber Shares or Management Shares as the case
may be.
4.3 Other Permitted Transfers. Notwithstanding the foregoing, any
Subscriber or Management Investor may Transfer any or all Subscriber Shares or
Management Shares held by such Person respectively as set forth below:
4.3.1. Investors and Company. Any holder of Subscriber Shares
or Management Shares may Transfer any or all of such Subscriber Shares
or Management Shares to (i) the Investor, an Affiliated Fund or a
Subscriber or (ii) with the Board's approval, the Company or any
subsidiary of the Company.
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4.3.2. Calls. Any holder of Management Shares may Transfer any
or all of such Management Shares in accordance with the provisions,
terms and conditions of Section 5.1 hereof.
4.3.3. Tag Alongs, Drag Alongs, Right of First Refusal, etc.
Any holder of Subscriber Shares or Management Shares may Transfer any
or all of such Subscriber Shares or Management Shares in accordance
with the provisions, terms and conditions of Section 3 hereof.
4.3.4. Sales to Public. Subject to the provisions of Sections
5 any holder of Subscriber Shares or Management Shares may Transfer any
or all of such Subscriber Shares or Management Shares in a Public
Offering registered under the Securities Act or pursuant to Rule 144.
4.4 Period. The foregoing provisions of this Section 4 shall expire on
the earlier of (i) the closing of the Initial Public Offering or (ii) a Change
of Control.
5. OPTIONS TO PURCHASE SHARES.
5.1 Call Options. Upon any termination of the employment by the Company
or its subsidiaries of any holder of Management Shares, the Company shall have
the right to purchase for cash or notes (as provided below in this Section 5.1)
the Management Shares held by such holder or originally issued to such holder
but held by one or more Permitted Transferees (collectively, the "Shareholder
Call Group") on the following terms; provided, however, that no such call may be
made if the payment of the applicable purchase price as set forth below would
constitute, result in or give rise to any breach or violation of, or any default
under, any of the Company's credit agreements. (the "Call Option"). Any Transfer
required under this Article 5 shall be an Approved Transfer. Any holder of
Shares Transferring such Shares pursuant to this Article 5 will consent to the
Company's purchase of such shares.
5.1.1. Termination.
5.1.1.1 Termination due to Death or Disability or by Company
without Cause
(a) If such termination is the result of (i) the death or
disability of such holder, (ii) termination of such holder's
employment by the Company or its subsidiaries without Cause or
(iii) termination by the holder then, in any such
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<PAGE> 24
event, the Company may purchase all or any portion of the
Management Shares which were acquired upon exercise of Options
and which are held by such holder (or Permitted Transferee, if
applicable) at a per Share price equal to the Fair Market Value
of such Shares; provided, however, that notwithstanding the
foregoing, if such termination occurs pursuant to clause (ii)
above, and if within 90 days after such termination the Company
consummates an Initial Public Offering or a Change of Control
occurs, then Fair Market Value shall be deemed to be the price to
the public in the Initial Public Offering or the value as
ascribed to the Shares in the Change of Control, as the case may
be, and the amount payable under this Section 5.1.1.1(a) shall be
retroactively adjusted if it would result in a higher payment to
the holder of Management Shares. In the event the holder
disagrees with the Board's determination of Fair Market Value,
the holder may give written notice to the Company of a demand for
a third-party appraisal of the value of the Shares. Within 30
days after the receipt of such notice, such holder and the
Company shall agree upon the selection of an independent
investment banking firm to perform the appraisal. If the parties
are unable to agree upon the selection of an independent
investment banking firm, each shall make a selection, and the two
firms so chosen shall nominate the independent investment banking
firm. Within 60 days of the date of selection of the independent
investment banking firm, such firm shall prepare a written report
detailing its determination as to the fair value of a Share
(without giving effect to minority discounts or the terms of this
Agreement). Absent manifest error, the fair value as so
determined shall be the price used in lieu of Fair Market Value
for purposes of this Section 5.1.1.1. The fees and expenses of
the investment banking firm shall be borne one-half by the
Company and one-half by the holder.
(b) Subject to the provisions of Section 5.1.2, in each case
Shares are purchased pursuant to clause (a) above, the Company
will pay for such Shares by (i) paying the holder not less than
one-half of the purchase price in cash, as determined by the
Board and (ii) issuing for the balance of the purchase price not
so paid in cash a promissory note in a principal amount equal to
such balance. The principal of such note will be due and payable
in four equal annual installments, the first such installment
becoming due and payable on the first anniversary of the issuance
of such note, and interest will accrue thereon at a rate equal to
the applicable federal rate at the date of issuance and be
payable annually in arrears, in each case subject to the
provisions of Section 5.1.2. Such note shall be fully
subordinated to any indebtedness or similar obligations
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<PAGE> 25
of the Company owing to banks or other financial institutions to
such extent as any such bank or financial institution may
reasonably request.
5.1.1.2 Termination by Company for Cause.
(a) If such termination is the result of termination of such
holder's employment by the Company for Cause, then the Company
may purchase all or any portion of the Management Shares held by
such holder (or Permitted Transferee, if applicable) at a per
Share price equal to the lesser of the Cost or the Fair Market
Value of such Shares.
(b) In each case Shares are purchased pursuant to clause (a)
above, unless the Board determines otherwise, the Company will
pay for such Shares by issuing a promissory note in a principal
amount equal to the purchase price. The principal of such note
will be due and payable in four equal annual installments, the
first such installment becoming due and payable on the first
anniversary of the issuance of such note, and interest will
accrue thereon at a rate equal to the applicable federal rate and
be payable annually in arrears, in each case subject to the
provisions of Section 5.1.2. Such note shall be fully
subordinated to any indebtedness or similar obligations of the
Company owing to banks or other financial institutions to such
extent as any such bank or financial institution may reasonably
request.
5.1.2. Cash Payments. If it is determined after the date of the
Call Notice (as defined in Section 5.1.3) that any payment of cash
required under the terms of this Section 5.1 or any payment on a
promissory note issued hereunder would (a) constitute, result in or
give rise to any breach or violation of, or any default or right or
cause of action under, any agreement to which the Company or any of
its subsidiaries is, from time to time, a party or (b) leave the
Company and its subsidiaries with less cash than, in the good faith
judgment of the Board, is desirable to operate the business of the
Company and its subsidiaries in the ordinary course of business, then,
(i) in the case of a cash payment under Sections
5.1.1.1(b)(i), the Company will issue a promissory note of the
type described in the second and third sentences of Sections
5.1.1.1(b) in the aggregate principal amount of such payment, and
(ii) in the case of the cash payment in respect of a
promissory note issued under this Section 5.1, notwithstanding
any of the provisions of such
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<PAGE> 26
note, including without limitation, the stated maturity of such
note and the stated date on which interest payments are due, such
payment will not become due and payable until such time as such
payment can be made without violating any such agreement and not
resulting in the Company and its subsidiaries having less cash
than the Board determines is desirable to operate the business as
contemplated above.
5.1.3. Notices, etc. Any Call Option may be exercised by delivery
of written notice thereof (the "Call Notice") to all members of the
applicable Shareholder Call Group within 120 days of the effectiveness
of the termination of employment in question (the "Call Option
Exercise Period"). The Call Notice shall state that the Company has
elected to exercise the Call Option, and the number and price of the
Shares with respect which the Call Option is being exercised.
5.2 Closing. The closing of any purchase and sale of Management Shares
pursuant to the exercise of any Call Options pursuant to this Section 5 shall
take place as soon as reasonably practicable and in no event later than 30 days
after termination of the applicable Call Option Exercise Period at the principal
office of the Company, or at such other time and location as the parties to such
purchase may mutually determine. In the event the price of any Shares to be
purchased is specified to be Fair Market Value, such Fair Market Value shall be
determined as of the date of the applicable Termination Event. At the closing of
any purchase and sale of Management Shares pursuant this Section 5, the holder
of Shares to be sold shall transfer to the Company the Shares to be purchased by
the Company through the execution of a deed before a Dutch civil law notary
(notaris), for transfer with signature guaranteed, free and clear of any lien or
encumbrance, and the Company shall pay to such holder by certified or bank check
or wire transfer of immediately available federal funds or note, as may be
applicable pursuant to Section 5.1.1 and 5.1.2, the purchase price of the Shares
being purchased by the Company. The delivery of a certificate or certificates,
if any, for Shares by any Person selling Shares pursuant to this Section 5 shall
be deemed a representation and warranty by such Person that: (i) such Person has
full right, title and interest in and to such Shares; (ii) such Person has all
necessary power and authority and has taken all necessary action to sell such
Shares as contemplated; and (iii) such Shares are free and clear of any and all
liens or encumbrances.
5.3 Period. The foregoing provisions of this Section 5 shall expire on
the earlier of (i) the closing of the Initial Public Offering or (ii) a Change
of Control.
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<PAGE> 27
6. CERTAIN ISSUANCES AND TRANSFERS, ETC.
6.1 Transfers to Permitted Transferees. Each holder of Shares agrees
that it will not Transfer any such shares to any Permitted Transferee unless
such Permitted Transferee has delivered to the Company a written acknowledgment
and agreement that such shares to be acquired by such Permitted Transferee shall
become or remain Investor Shares, Subscriber Shares, Lender Shares or Management
Shares hereunder, as the case may be, and shall continue to be subject to all of
the provisions of this Agreement and that such Permitted Transferee shall be
bound by and a party to this Agreement as the holder of Investor Shares,
Subscriber Shares, Lender Shares or Management Shares, as the case may be,
hereunder; provided, however, that no transfer by any party to a Permitted
Transferee shall relieve such party of any of its obligations hereunder.
6.2 Other Transfers and Issuances. Notwithstanding any other provision
of this Agreement, (i) Shares transferred pursuant to Section 3.1 (other than
Section 3.1.6(a), (b), (e), (f), (g) or (h)) or Section 3.2 hereof or in a
Public Offering or to the public under Rule 144 shall be conclusively deemed
thereafter not to be Shares under this Agreement and not to be subject to any of
the provisions hereof or entitled to the benefit of any of the provisions
hereof, and (ii) any Shares acquired by any Investor, Subscriber, Lender or
Management Investor shall be deemed to be Investor Shares, Subscriber Shares,
Lender Shares or Management Shares, respectively.
6.3 Certain Issuances and Redemptions. The Company shall not issue
Shares at a price below fair market value, except pursuant to the Company's
option plan if permitted by such plan and by law. The Company shall not redeem
shares at a price above fair market value. For purposes of this Section 6.3 fair
market value shall be determined in good faith by the Board.
7. PREEMPTIVE RIGHT. The Company shall not issue or sell any shares of any
of its capital stock or any securities convertible into or exchangeable for any
shares of its capital stock, or securities which are linked with the issuance of
its capital stock, issue or grant any options or warrants for the purchase of,
or enter into any agreements providing for the issuance (contingent or
otherwise) of, any of its capital stock or any stock or securities convertible
into or exchangeable for any shares of its capital stock, (each an "Issuance" of
"Subject Securities"), except in compliance with the following provisions of
this Section 7.
7.1 Right of Participation.
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<PAGE> 28
7.1.1. Offer. Not fewer than 30 days prior to the consummation
of the Issuance, a notice (the "Preemption Notice") shall be furnished
by the Company to each holder of Shares (other than holders of Shares
solely issuable upon exercise of Options) (the "Preemptive Offerees").
The Preemption Notice shall include:
(a) The principal terms of the proposed Issuance,
including, without limitation, the amount and kind of Subject
Securities to be included in the Issuance, the number of
Equivalent Shares represented by such Subject Securities (if
applicable), the percentage of the total number of Shares
outstanding as of immediately prior to giving effect to such
Issuance which the number of Shares held by such Preemptive
Offeree constitutes (the "Preemptive Portion"), the maximum
and minimum price (including, without limitation, if
applicable, the maximum and minimum Price Per Equivalent
Share) per unit of the Subject Securities and the name and
address of the Persons to whom the Subject Securities will be
Issued (the "Prospective Subscriber");
(b) An offer by the Company to Issue, at the option
of each Preemptive Offeree, to such Preemptive Offeree such
portion of the Subject Securities to be included in the
Issuance as may be requested by such Preemptive Offeree (not
to exceed the Preemptive Portion of the total amount of
Subject Securities to be included in the Issuance), on the
same terms and conditions, with respect to each unit of
Subject Securities issued to the Preemptive Offerees, as each
of the Prospective Subscribers shall be Issued units of
Subject Securities; and
(c) A resolution by the Board indicating that it is
the Board's good faith determination that the price of the
Issuance is fair from a financial point of view to the
Company.
If reasonably requested by the Company, any Preemptive Offeree who is not an
original party to this Agreement may be required to furnish evidence of such
Preemptive Offeree's financial ability as a condition to such Preemptive
Offeree's acceptance of the offer made pursuant to clause (b) above.
7.1.2. Exercise.
7.1.2.1 General. Each Preemptive Offeree desiring to
accept the offer contained in the Preemption Notice shall
send a written commitment to the Company specifying the
amount of Subject Securities (not in any event to exceed the
Preemptive Portion of the total amount of Subject Securities
to be
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<PAGE> 29
included in the Issuance) which such Preemptive Offeree
desires to be issued within 20 days after the effectiveness of
the Preemption Notice (each a "Participating Buyer"). Each
Preemptive Offeree who has not so accepted such offer shall be
deemed to have waived all of his rights with respect to the
Issuance, and the Company shall first offer to the
Participating Buyers the right to purchase the Subject
Securities that the Preemptive Offerees collectively have
elected not to purchase on the same terms as were offered to
the Preemptive Offeree based on the number of Subject
Securities each Participating Buyer has elected to purchase,
and the Company shall thereafter be free to Issue Subject
Securities in the Issuance to the Prospective Subscriber, at a
price no less than the minimum price set forth in the
Preemption Notice and on other principal terms not
substantially more favorable to the Prospective Subscriber
than those set forth in the Preemption Notice, without any
further obligation to such non-accepting Preemptive Offerees.
If, prior to consummation, the terms of such proposed Issuance
shall change with the result that the price shall be less than
the minimum price set forth in the Preemption Notice or the
other principal terms shall be substantially more favorable to
the Prospective Subscriber than those set forth in the
Preemption Notice, it shall be necessary for a separate
Preemption Notice to be furnished, and the terms and
provisions of this Section 7.1 separately complied with, in
order to consummate such Issuance pursuant to this Section
7.1.
7.1.2.2 Irrevocable Acceptance. The acceptance of
each Participating Buyer shall be irrevocable except as
provided in Section 7.1.2.1 above or 7.1.2.3 below, and each
such Participating Buyer shall be bound and obligated to
acquire in the Issuance on the same terms and conditions, with
respect to each unit of Subject Securities Issued, as the
Prospective Subscriber, such amount of Subject Securities as
such Participating Buyer shall have specified in such
Participating Buyer's written commitment.
7.1.2.3 Time Limitation. If at the end of the 120th
day following the date of the effectiveness of the Preemption
Notice the Company has not completed the Issuance, each
Participating Buyer shall be released from his obligations
under the written commitment, the Preemption Notice shall be
null and void, and it shall be necessary for a separate
Preemption Notice to be furnished, and the terms and
provisions of this Section 7.1 separately complied with, in
order to consummate such Issuance pursuant to this Section
7.1.
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<PAGE> 30
7.1.3. Other Securities. The Company may condition the
participation of the Preemptive Offerees in an Issuance upon the
purchase by such Preemptive Offerees of any securities (including,
without limitation, debt securities) linked with capital stock ("Other
Securities") in the event that the participation of the Prospective
Subscriber in such Issuance is so conditioned. In such case, each
Participating Buyer shall acquire in the Issuance, together with the
Subject Securities to be acquired by it, Other Securities in the same
proportion to the Subject Securities to be acquired by it as Other
Securities are acquired by the Prospective Subscriber in proportion to
the Subject Securities acquired in the Issuance by such Prospective
Subscriber, on the same terms and conditions, as to each unit of
Subject Securities and Other Securities issued to the Participating
Buyers, as the Prospective Subscriber shall be issued units of Subject
Securities and Other Securities.
7.1.4. Certain Legal Requirements. In the event that the
participation in the Issuance by a holder of Shares as a Participating
Buyer would require under applicable law (i) the registration or
qualification of such securities or of any person as a broker or dealer
or agent with respect to such securities or (ii) the provision to any
participant in the Sale of any information other than such information
as would be required under Regulation D in an offering made pursuant to
Regulation D solely to "accredited investors" as defined in Regulation
D, the Company shall be obligated only to use its reasonable efforts to
cause the requirements under Regulation D to be complied with to the
extent necessary to permit such Participating Buyer to receive such
securities, it being understood and agreed that the Company shall not
be under any obligation to effect a registration of such securities
under the Securities Act or similar state statutes. Notwithstanding any
provision of this Section 7, if the use of reasonable efforts shall not
result in such requirements being complied with to the extent necessary
to permit such holder of Shares to participate in the Issuance, such
holder shall not be entitled to participate in the Issuance. The
obligation of the Company to use reasonable efforts to cause such
requirements to be complied with to the extent necessary to permit a
holder of Shares to participate in the Issuance shall be conditioned
upon such holder of Shares executing such documents and instruments,
and taking such other actions (including, without limitation, if
required by the Company to the extent that the holder of Shares is not
an accredited investor, agreeing to be represented during the course of
such transaction by a "purchaser representative" (as defined in
Regulation D) in connection with evaluating the merits and risks of the
prospective investment and acknowledging that he was so represented),
as the Company shall reasonably request in order to permit such
requirements to have been complied with.
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<PAGE> 31
7.1.5. Further Assurances. Each Participating Buyer and each
Shareholder to whom the Shares held by such Participating Buyer were
originally issued, shall, to the fullest extent permitted by applicable
law, whether in his capacity as a Participating Buyer, Shareholder,
officer or director of the Company, or otherwise, take or cause to be
taken all such reasonable actions as may be necessary or reasonably
desirable in order expeditiously to consummate each Issuance pursuant
to this Section 7.1 and any related transactions, including, without
limitation, executing, acknowledging and delivering consents,
assignments, waivers and other documents or instruments; filing
applications, reports, returns, filings and other documents or
instruments with governmental authorities; and otherwise cooperating
with the Company and the Prospective Subscriber. Without limiting the
generality of the foregoing, each such Participating Buyer and
Shareholder agrees to execute and deliver such subscription and other
agreements specified by the Company to which the Prospective Subscriber
will be party.
7.1.6. Expenses. All reasonable and documented costs and
expenses incurred by any holder of Shares or the Company in connection
with any proposed Issuance of Subject Securities (whether or not
consummated), including, without limitation, all attorney's fees and
charges, all accounting fees and charges and all finders, brokerage or
investment banking fees, charges or commissions, shall be paid by the
Company.
7.1.7. Closing. The closing of an Issuance pursuant to Section
7.1 shall take place at such time and place as the Company shall
specify by notice to each Participating Buyer. At the Closing of any
Issuance under this Section 7.1.7, each Participating Buyer shall be
delivered the notes, certificates or other instruments evidencing the
Subject Securities (and, if applicable, Other Securities) to be Issued
to such Participating Buyer, registered in the name of such
Participating Buyer or his designated nominee, free and clear of any
liens or encumbrances, with any transfer tax stamps affixed, against
delivery by such Participating Buyer of the applicable consideration.
7.2 Excluded Transactions. Notwithstanding the preceding provisions of
this Section 7, the preceding provisions of this Section 7 shall not restrict:
(a) Any Issuance of shares of Common Stock, Options or
Convertible Securities to officers, employees, directors or
consultants of the Company or its subsidiaries, other than
Issuances to any such Persons who are also employees or partners
of Berkshire or any of the Affiliated Funds, after the date
hereof provided that such Issuance, together with all prior
Issuances pursuant to this
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Section 7.2(a), shall not exceed 5% of the Common Stock of the
Company as of the Closing on a fully diluted basis;
(b) Any Issuance of shares of Common Stock, Options or
Convertible Securities as consideration for the acquisition after
the date hereof by the Company or any of its subsidiaries of any
acquired businesses from Persons who are Sellers of such acquired
business and who are not Affiliates of Berkshire Partners LLC or
an Affiliated Fund;
(c) any Issuance of warrants in connecting with the Company
or its subsidiaries raising capital from financial institutions
who are not Affiliates of Berkshire Partners LLC or an Affiliated
Fund provided that the Company shall have provided the Lenders
with notice of such financing opportunity;
(d) any Issuance of shares of Common Stock, Options or
Convertible Securities to a strategic investor approved by the
Board who is not an Affiliate of Berkshire Partners LLC or an
Affiliated Fund;
(e) Any Issuance of Common Stock upon the exercise or
conversion of any Options or Convertible Securities outstanding
on the date hereof or Issued after the date hereof in compliance
with the provisions of this Section 7;
(f) Any Issuance of Common Stock pursuant to any Public
Offering; and
(g) The Issuance of Shares to the Investor, the Subscribers,
the Lenders and Management at Closing.
7.3 Period. The foregoing provisions of this Section 7 shall expire on
the earlier of (i) the closing of the Initial Public Offering or (ii) a Change
of Control.
8. REMEDIES.
8.1 Generally. The Company, the holders of Investor Shares, Subscriber
Shares, Lender Shares and Management Shares shall have all remedies available at
law, in equity or otherwise (including without limitation the commencement of a
lawsuit in Federal court or the courts of the State of New York) in the event of
any breach or violation of this Agreement or any default hereunder by the
Company or any holder of Shares. The parties acknowledge and agree that in the
event of any breach of this Agreement, in addition to any other remedies which
may be available, each of the parties hereto shall be entitled to specific
performance of
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<PAGE> 33
the obligations of the other parties hereto and, in addition, to such other
equitable remedies (including, without limitation, preliminary or temporary
injunctive relief) as may be appropriate in the circumstances, without the
requirement of a posting of a bond. By seeking or obtaining any such relief, the
aggrieved party shall not be precluded from obtaining any other relief to which
it is entitled.
8.2 Deposit. Without limiting the generality of Section 8.1, if any
Shareholder fails to transfer to the Company the Shares to be sold pursuant to
Section 3.2 or Section 5.1 hereof, the Company may, at its option, in addition
to all other remedies it may have, deposit the purchase price for such Shares
with any national bank or trust company having combined capital, surplus and
undivided profits in excess of Five Hundred Million Dollars ($500,000,000) (the
"Escrow Agent") and the Company shall cancel on its books such Shares and
thereupon all of such holder's rights in and to such Shares shall terminate.
Thereafter, upon transfer to the Company by such holder of such Shares (free and
clear of any liens or encumbrances), the Company shall instruct the Escrow Agent
to deliver the purchase price (without any interest from the date of the closing
to the date of such delivery, any such interest to accrue to the Company) to
such holder.
9. REGISTRATION RIGHTS. The Company will perform and comply, and cause its
respective subsidiaries to perform and comply, with such of the following
provisions as are applicable to it. Each holder of Shares will perform and
comply with such of the following provisions as are applicable to such holder.
9.1 Demand Registration Rights.
9.1.1. Investor Shares. After an Initial Public Offering, one
or more holders of Investor Shares representing at least 25% of the
total amount of Investor Shares then outstanding ("Initiating
Investors"), by notice to the Company specifying the intended method or
methods of disposition, may request that the Company effect the
registration under the Securities Act for a Public Offering of all or a
specified part of the Registrable Securities held by such Initiating
Investors (for purposes of this Agreement, "Registrable Investor
Securities" shall mean Investor Shares which have not been registered).
The Company will then use its reasonable efforts to effect the
registration under the Securities Act of the Registrable Securities
which the Company has been requested to register by such Initiating
Investors together with all other Registrable Securities which the
Company has been requested to register pursuant to Section 9.2 or by
other holders of Registrable Investor Securities by notice delivered to
the Company within 20 days after the Company has given the notice
required by Section 9.2.1 (which request shall specify the intended
method of disposition of such Registrable Securities),
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<PAGE> 34
all to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable
Securities which the Company has been so requested to register;
provided, however, that the Company shall not be obligated to take any
action to effect any such registration pursuant to this Section 9.1.1:
(a) Within 180 days immediately following the
effective date of any registration statement pertaining to an
underwritten public offering of securities of the Company for
its own account (other than a Rule 145 Transaction, or a
registration relating solely to employee benefit plans);
(b) If the Company has previously effected three or
more registrations of Registrable Securities under this
Section 9.1.1 at the request of such Initiating Investor;
provided, however, that no registrations of Registrable
Securities which shall not have become and remained effective
in accordance with the provisions of this Section 9, and no
registrations of Registrable Securities pursuant to which the
Initiating Investors and all other holders of Registrable
Investor Securities joining therein are not able to include at
least 90% of the Registrable Securities which they desired to
include, shall be included in the calculation of numbers of
registrations contemplated by this clause (b);
(c) If the Company shall have furnished to the
Initiating Investors and such other holders of Registrable
Securities which the Company has been requested to register
pursuant to this Section 9.1.1 a certificate, signed by the
President of the Company, stating that in the good faith
judgment of the Board it would be seriously detrimental to the
Company and its shareholders for such Registration Statement
to be filed at the date filing would have been required, in
which case the Company shall have an additional period of not
more than 60 days within which to file such Registration
Statement; provided, however, that the Company shall not so
postpone a registration pursuant to this clause (c) more than
once in any twelve month period;
(d) On any form other than Form S-3 (or any successor
form), if the anticipated aggregate offering price to the
public of the Registrable Securities to be included in the
registration by all holders is less than $5,000,000; or
(e) Prior to the 360th day following or after five
years after the closing of the Initial Public Offering.
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9.1.1.1 Form. Except as otherwise provided above,
each registration requested pursuant to this Section 9.1.1
shall be effected by the filing of a registration statement on
Form S-1 (or any other form which includes substantially the
same information as would be required to be included in a
registration statement on such form as currently constituted),
unless the use of a different form has been agreed to in
writing by holders of at least a majority of the Registrable
Investor Securities to be included in the proposed
registration statement in question (the "Majority
Participating Investors").
9.1.2. Subscriber Shares. After an Initial Public Offering,
one or more holders of Subscriber Shares representing at least 25% of
the total amount of Subscriber Shares then outstanding ("Initiating
Subscribers"), by notice to the Company specifying the intended method
or methods of disposition, may request that the Company effect the
registration under the Securities Act for a Public Offering of all or a
specified part of the Registrable Securities held by such Initiating
Subscribers (for purposes of this Agreement, "Registrable Subscriber
Securities" shall mean Subscriber Shares which have not been
registered). The Company will then use its reasonable efforts to effect
the registration under the Securities Act of the Registrable Securities
which the Company has been requested to register by such Initiating
Subscribers together with all other Registrable Securities which the
Company has been requested to register pursuant to Section 9.2 or by
other holders of Registrable Subscriber Securities by notice delivered
to the Company within 20 days after the Company has given the notice
required by Section 9.2.1 (which request shall specify the intended
method of disposition of such Registrable Securities), all to the
extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities
which the Company has been so requested to register; provided, however,
that the Company shall not be obligated to take any action to effect
any such registration pursuant to this Section 9.1.2:
(a) Within 180 days immediately following the
effective date of any registration statement pertaining to an
underwritten public offering of securities of the Company for
its own account (other than a Rule 145 Transaction, or a
registration relating solely to employee benefit plans);
(b) If the Company has previously effected two or
more registrations of Registrable Securities under this
Section 9.1.2 at the request of such Initiating Subscriber (or
any successor form); provided, however, that no registrations
of Registrable Securities which shall not have become and
remained effective in accordance with the provisions of this
Section 9, and no registrations of
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Registrable Securities pursuant to which the Initiating
Subscribers and all other holders of Registrable Subscriber
Securities joining therein are not able to include at least
90% of the Registrable Securities which they desired to
include, shall be included in the calculation of numbers of
registrations contemplated by this clause (b);
(c) If the Company shall have furnished to the
Initiating Subscribers and such other holders of Registrable
Securities which the Company has been requested to register
pursuant to this Section 9.1.2 a certificate, signed by the
President of the Company, stating that in the good faith
judgment of the Board it would be seriously detrimental to the
Company and its shareholders for such Registration Statement
to be filed at the date filing would have been required, in
which case the Company shall have an additional period of not
more than 60 days within which to file such Registration
Statement; provided, however, that the Company shall not so
postpone a registration pursuant to this clause (c) more than
once in any twelve month period;
(d) On any form other than Form S-3 (or any successor
form), if the anticipated aggregate offering price to the
public of the Registrable Securities to be included in the
registration by all holders is less than $5,000,000; or
(e) Prior to the 360th day following or after five
years after the closing of the Initial Public Offering.
9.1.2.1 Form. Except as otherwise provided above,
each registration requested pursuant to this Section 9.1.2
shall be effected by the filing of a registration statement on
Form S-1 (or any other form which includes substantially the
same information as would be required to be included in a
registration statement on such form as currently constituted),
unless the use of a different form has been agreed to in
writing by holders of at least a majority of the Registrable
Subscriber Securities to be included in the proposed
registration statement in question (the "Majority
Participating Subscribers").
9.1.3. Lender Shares. After an Initial Public Offering, one or
more holders of Lender Shares representing at least 25% of the total
amount of Lender Shares then outstanding ("Initiating Lenders"), by
notice to the Company specifying the intended method or methods of
disposition, may request that the Company effect the registration under
the Securities Act for a Public Offering of all or a specified part of
the Registrable Securities held by such Initiating Lenders (for
purposes of this Agreement,
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<PAGE> 37
"Registrable Lender Securities" shall mean Lender Shares which have not
been registered). The Company will then use its reasonable efforts to
effect the registration under the Securities Act of the Registrable
Securities which the Company has been requested to register by such
Initiating Lenders together with all other Registrable Securities which
the Company has been requested to register pursuant to Section 9.2 or
by other holders of Registrable Lender Securities by notice delivered
to the Company within 20 days after the Company has given the notice
required by Section 9.2.1 (which request shall specify the intended
method of disposition of such Registrable Securities), all to the
extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities
which the Company has been so requested to register; provided, however,
that the Company shall not be obligated to take any action to effect
any such registration pursuant to this Section 9.1.3:
(a) Within 180 days immediately following the
effective date of any registration statement pertaining to an
underwritten public offering of securities of the Company for
its own account (other than a Rule 145 Transaction, or a
registration relating solely to employee benefit plans);
(b) If the Company has previously effected two or
more registrations of Registrable Securities under this
Section 9.1.3 at the request of such Initiating Lender;
provided, however, that (i) if the Company is able to file a
Registration Statement on Form S-3 (or any similar successor
form providing for the incorporation by reference of the
reports filed by the Company pursuant to section 13 of the
Exchange Act, an additional registration shall be permitted
under this Section 9.1.3, and (ii) no registrations of
Registrable Securities which shall not have become and
remained effective in accordance with the provisions of this
Section 9, and no registrations of Registrable Securities
pursuant to which the Initiating Lenders and all other holders
of Registrable Lender Securities joining therein are not able
to include at least 90% of the Registrable Securities which
they desired to include, shall be included in the calculation
of numbers of registrations contemplated by this clause (b);
(c) If the Company shall have furnished to the
Initiating Lenders and such other holders of Registrable
Securities which the Company has been requested to register
pursuant to this Section 9.1.3 a certificate, signed by the
President of the Company, stating that in the good faith
judgment of the Board it would be seriously detrimental to the
Company and its shareholders for such Registration Statement
to be filed at the date filing would have been required, in
which case the Company shall have an additional period of not
more than 60
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<PAGE> 38
days within which to file such Registration Statement;
provided, however, that the Company shall not so postpone a
registration pursuant to this clause (c) more than once in any
twelve month period;
(d) On any form other than Form S-3 (or any successor
form), if the anticipated aggregate offering price to the
public of the Registrable Securities to be included in the
registration by all holders is less than $5,000,000; or
(e) Prior to the 360th day following or after five
years after the closing of the Initial Public Offering.
9.1.3.1 Form. Except as otherwise provided above,
each registration requested pursuant to this Section 9.1.3
shall be effected by the filing of a registration statement on
Form S-1 (or any other form which includes substantially the
same information as would be required to be included in a
registration statement on such form as currently constituted),
unless the use of a different form has been agreed to in
writing by holders of at least a majority of the Registrable
Lender Securities to be included in the proposed registration
statement in question (the "Majority Participating Lenders").
9.1.4. Payment of Expenses. The Company shall pay all
reasonable expenses of holders of Investor Shares or Subscriber Shares,
respectively incurred in connection with each registration of
Registrable Securities requested pursuant to this Section 9.1, other
than underwriting discount and commission, if any, and applicable
transfer taxes, if any.
9.1.5. Additional Procedures. In the case of a registration
pursuant to Section 9.1 hereof, whenever the Majority Participating
Investors, Majority Participating Subscribers or Majority Participating
Lenders, respectively shall request that such registration shall be
effected pursuant to an underwritten offering, the Company shall
include such information in the written notices to holders of
Registrable Securities referred to in Section 9.2. In such event, the
right of any holder of Registrable Securities to have securities owned
by such holder included in such registration pursuant to Section 9.1
shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Securities
in the underwriting (unless otherwise mutually agreed upon by the
Majority Participating Investors, the Majority Participating
Subscribers or Majority Participating Lenders, respectively and such
holder) to the extent provided herein. If requested by such
underwriters, the Company together with the holders of Registrable
Securities
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<PAGE> 39
proposing to distribute their securities through such underwriting will
enter into an underwriting agreement with such underwriters for such
offering containing such representations and warranties by the Company
and such holders and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary
distributions, including, without limitation, customary indemnity and
contribution provisions.
9.2 Piggyback Registration Rights.
9.2.1. Piggyback Registration.
9.2.1.1 General. Each time the Company proposes to
register any shares of Common Stock under the Securities Act
on a form which would permit registration of Registrable
Securities for sale to the public, for its own account or for
the account of any holder of its shares of Common Stock, for
sale in a Public Offering, the Company will give notice to all
holders of shares of Common Stock of its intention to do so.
Any such holder may, by written response delivered to the
Company within 20 days after the effectiveness of such notice,
request that all or a specified part of the Registrable
Securities held by such holder be included in such
registration. The Company thereupon will use its reasonable
efforts to cause to be included in such registration under the
Securities Act all shares of Common Stock which the Company
has been so requested to register by such holders, to the
extent required to permit the disposition (in accordance with
the methods to be used by the Company or other holders of
shares of Common Stock in such Public Offering) of the
Registrable Securities to be so registered. No registration of
Registrable Securities effected under this Section 9.2 shall
relieve the Company of any of its obligations to effect
registrations of Registrable Securities pursuant to Section
9.1 hereof.
9.2.1.2 Excluded Transactions. The Company shall not
be obligated to effect any registration of Registrable
Securities under this Section 9.2 incidental to the
registration of any of its securities in connection with:
(a) Any Public Offering on Form S-4 (or any
successor form) relating to employee benefit plans or
dividend reinvestment plans;
(b) Any Public Offering relating to the
acquisition or merger after the date hereof by the
Company or any of its subsidiaries of or with any
other businesses; or
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<PAGE> 40
(c) The Initial Public Offering, provided
that if the Investors have the opportunity to sell
Investor Shares in such offering the Subscribers and
Lenders shall have the opportunity to sell Subscriber
Shares and Lender Shares, respectively, in such
offering.
9.2.2. Payment of Expenses. The Company shall pay all
reasonable expenses of holders of Registrable Securities incurred in
connection with each registration of Registrable Securities requested
pursuant to this Section 9.2, other than underwriting discount and
commission, if any, and applicable transfer taxes, if any.
9.2.3. Additional Procedures. Holders of Shares participating
in any Public Offering pursuant to this Section 9.2 shall take all such
actions and execute all such documents and instruments that are
reasonably requested by the Company to effect the sale of their Shares
in such Public Offering, including, without limitation, being parties
to the underwriting agreement entered into by the Company and any other
selling shareholders in connection therewith, including to the extent
required by the underwriters, making customary representations,
warranties and indemnities, and being parties to the other agreements
(including customary selling shareholder indemnifications and "lock-up"
agreements in substantially the form of Sections 9.3.4 and 9.4 hereof)
to and for the benefit of the underwriters in such underwriting
agreement; provided, however, that (i) with respect to individual
representations, warranties and agreements of sellers of Shares in such
Public Offering, the aggregate amount of such liability shall not
exceed such holder's net proceeds from such offering and (ii) with
respect to all other representations, warranties and agreements of
sellers of shares in such Public Offering, the aggregate amount of such
liability shall not exceed the lesser of (a) such holder's pro rata
portion of any such liability, in accordance with such holder's portion
of the total number of Shares included in the offering or (b) such
holder's net proceeds from such offering.
9.3 Certain Other Provisions.
9.3.1. Underwriter's Cutback. In connection with any
registration of shares, the underwriter may determine that marketing
factors (including, without limitation, an adverse effect on the per
share offering price) require a limitation of the number of shares to
be underwritten. Notwithstanding any contrary provision of this Article
9 and subject to the terms of this Section 9.3.1, the underwriter may
limit the number of shares which would otherwise be included in such
registration by excluding any or all Registrable Securities from such
registration (it being understood that the number of shares which the
Company seeks to have registered in such registration shall not be
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<PAGE> 41
subject to exclusion, in whole or in part, under this Section 9.3.1).
Upon receipt of notice from the underwriter of the need to reduce the
number of shares to be included in the registration, the Company shall
advise all holders of the Company's securities that would otherwise be
registered and underwritten pursuant hereto, and the number of shares
of such securities, including Registrable Securities, that may be
included in the registration shall be allocated in the following
manner, unless the underwriter shall determine that marketing factors
require a different allocation: first, shares, other than Registrable
Securities, requested to be included in such registration by
shareholders shall be excluded; and, second, if a limitation on the
number of shares is still required, the number of Registrable
Securities that may be included in such registration by holders of
Shares under Section 9.2 shall be reduced by allocating such reduction
among the holders of Registrable Securities in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities which
each such shareholder requested be registered under Section 9.2 in such
registration; and, third, if a limitation on the number of shares is
still required, the number of Registrable Securities that may be
included in such registration by shareholders under Section 9.1 shall
be reduced by allocating such reduction among the holders of
Registrable Securities in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities which each such
shareholder requested be registered under Section 9.1 in such
registration. No securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such
registration. If any holder of Registrable Securities disapproves of
the terms of the underwriting, it may elect to withdraw therefrom by
written notice to the Company and the underwriter. The Registrable
Securities so withdrawn shall also be withdrawn from registration.
9.3.2. Other Actions. If and in each case when the Company is
required to use its reasonable efforts to effect a registration of any
Registrable Securities as provided in this Section 9, the Company shall
take appropriate and customary actions in furtherance thereof,
including, without limitation:
(i) promptly filing with the Commission a
registration statement and using reasonable efforts to cause
such registration statement to become effective;
(ii) preparing and filing with the Commission such
amendments and supplements to such registration statements as
may be required to comply with the Securities Act and to keep
such registration statement effective for a period not to
exceed 270 days from the date of effectiveness or such earlier
time as the Registrable Securities covered by such
registration statement shall have been disposed of in
accordance with the intended method of distribution therefor
or
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<PAGE> 42
the expiration of the time when a prospectus relating to such
registration is required to be delivered under the Securities
Act;
(iii) furnishing to holders of Registrable Securities
participating in such offering such number of copies of such
registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement
(including each preliminary prospectus) and such other
documents as such holder may reasonable request in order to
facilitate the disposition of the securities being registered;
(iv) using its reasonable efforts to register or
qualify such Registrable Securities under the state securities
or "blue sky" laws of such jurisdictions as the sellers shall
reasonably request; provided, however, that the Company shall
not be obligated to file any general consent to service of
process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any
jurisdiction in which it would not otherwise be so subject;
(v) notifying each holder of Registrable Securities
being registered, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the
prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and,
at the request of any such holder, the Company shall prepare a
supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
(vi) causing all such securities to be listed on each
securities exchange on which similar securities issued by the
Company are then listed and, if not so listed, to be listed on
the NASD automated quotation system and, if listed on the NASD
automated quotation system, using its reasonable efforts to
secure designation of all such securities covered by such
registration statement as a Nasdaq Stock Market security
within the meaning of Rule 11Aa2-1 of the Securities and
Exchange Commission or, failing that, to secure NASDAQ
authorization for such securities and, without limiting the
generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such
securities with the NASD;
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(vii) providing a transfer agent and registrar for
all such securities not later than the effective date of such
registration statement;
(viii) entering into such customary agreements
(including underwriting agreements in customary form), and
taking all such other actions as the holder or the
underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such securities (including,
without limitation, effecting a stock split or a combination
of shares);
(ix) making available for inspection by any holder,
any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or
other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and causing the Company's officers,
directors, employees and independent accountants to supply all
information reasonably requested by any such holder,
underwriter, attorney, accountant or agent in connection with
such registration statement;
(x) otherwise using its reasonable efforts to comply
with all applicable rules and regulations of the Securities
and Exchange Commission, and making available to its security
holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months
beginning with the first day of the first full calendar
quarter after the effective date of the registration
statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(xi) permitting a holder which, in its sole and
exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the
preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to the
Company in writing, which in the reasonable judgment of such
holder and its counsel should be included;
(xii) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or
of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any Common Stock
included in such registration statement for sale in any
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jurisdiction, the Company shall use its reasonable efforts
promptly to obtain the withdrawal of such order;
(xiii) obtaining a cold comfort letter from the
Company's independent public accountants in customary form and
covering such matters of the type customarily covered by cold
comfort letters as the holder may reasonable request; and
(xiv) otherwise cooperating reasonably with, and
taking such customary actions as may reasonably be requested
by the holders of Registrable Securities in connection with,
such registration.
9.3.3. Selection of Underwriters and Counsel. The underwriters
and legal counsel to be retained in connection with any Public Offering
shall be selected by the Board.
9.3.4. Lock-Up. Without the prior written consent of the
underwriters managing any Public Offering, for a period beginning seven
days immediately preceding and ending on the 180th day or such shorter
period as required in writing by the underwriters following the
effective date of the registration statement used in connection with
such offering, no holder of Shares (whether or not a selling
shareholder pursuant to such registration statement) shall Transfer any
Shares except pursuant to such registration statement or to a Permitted
Transferee in accordance with the terms of this Agreement.
9.4 Indemnification and Contribution.
9.4.1. Indemnities of the Company. In the event of any
registration of any Registrable Securities or other debt or equity
securities of the Company or any of its subsidiaries under the
Securities Act pursuant to this Article 9 or otherwise, and in
connection with any registration statement or any other disclosure
document produced by or on behalf of the Company or any of its
subsidiaries including, without limitation, reports required and other
documents filed under the Exchange Act, and other documents pursuant to
which any debt or equity securities of the Company or any of its
subsidiaries are sold (whether or not for the account of the Company or
its subsidiaries), the Company will, and hereby does, and will cause
its subsidiaries, jointly and severally to, indemnify and hold harmless
each seller of Registrable Securities, any Person who is or might be
deemed to be a controlling Person of the Company or any of its
subsidiaries within the meaning of Section 15 of the Securities
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<PAGE> 45
Act or Section 20 of the Exchange Act, their respective direct and
indirect partners, advisory board members, directors, officers,
trustees, members and shareholders, and each other Person, if any, who
controls any such seller or any such holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such person being referred to herein as a "Covered Person"),
against any losses, claims, damages or liabilities, joint or several,
to which such Covered Person may be or become subject under the
Securities Act, the Exchange Act, any other securities or other law of
any jurisdiction, the common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained or incorporated
by reference in any registration statement under the Securities Act,
any preliminary prospectus or final prospectus included therein, or any
related summary prospectus, or any amendment or supplement thereto, or
any document incorporated by reference therein, or any other such
disclosure document (including without limitation reports and other
documents filed under the Exchange Act and any document incorporated by
reference therein) or other document or report, (ii) any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or
(iii) any violation or alleged violation by the Company or any of its
subsidiaries of any federal, state, foreign or common law rule or
regulation applicable to the Company or any of its subsidiaries and
relating to action or inaction in connection with any such
registration, disclosure document or other document or report, and will
reimburse such Covered Person for any legal or any other expenses
incurred by it in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided,
however, that neither the Company nor any of its subsidiaries shall be
liable to any Covered Person in any such case to the extent that any
such loss, claim, damage, liability, action or proceeding arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any
such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement, incorporated document or other such disclosure
document or other document or report, in reliance upon and in
conformity with written information furnished to the Company or to any
of its subsidiaries through an instrument duly executed by such Covered
Person specifically stating that it is for use in the preparation
thereof. Without limiting the generality of the foregoing, the Company
or its respective subsidiary, as an interim measure during the pendency
of any claim, action, investigation, inquiry or proceeding arising out
of or based upon any matter or subject for which indemnity (or
contribution in lieu thereof) may be available to any Covered Person
under this Section 9.4.1, it will promptly reimburse each Covered
Person, as often as invoiced therefor (but in no event more often than
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<PAGE> 46
monthly) for all expenses reasonably incurred in connection with the
investigation or defense of any such claim, action, investigation,
inquiry or proceeding, notwithstanding the absence of any judicial
determination as to the propriety or enforceability of the indemnifying
party's obligation to reimburse the indemnified party for such expenses
and notwithstanding the possibility that the obligations to pay such
expenses might later have been held to be improper by a court of
competent jurisdiction. To the extent that any such interim
reimbursement is held to be improper or not justified under this
Section 9.4.1, the indemnified party agrees to promptly return the
amount so advanced to the indemnified party, together with interest,
compounded monthly, at the prime rate (or other commercial lending rate
for borrowers of the highest credit standing) listed from time to time
in the Wall Street Journal which represents the base rate on corporate
loans posted by a substantial majority of the nation's thirty largest
banks. Any such interim reimbursement payments which are not made to
the indemnified party within thirty days of a request therefor shall
bear interest at such prime rate from the date of such request unless
determined to be improper or not justified under this Section 9.4.1.
The indemnities of the Company and of its subsidiaries contained in
this Section 9.4.1 shall remain in full force and effect regardless of
any investigation made by or on behalf of such Covered Person and shall
survive any transfer of securities.
9.4.2. Indemnities to the Company. The Company and any of its
subsidiaries may require, as a condition to including any securities in
any registration statement filed pursuant to this Section 9, that the
Company and any of its subsidiaries shall have received an undertaking
satisfactory to it from the prospective seller of such securities, to
indemnify and hold harmless the Company and any of its subsidiaries,
each director of the Company or any of its subsidiaries, each officer
of the Company or any of its subsidiaries who shall sign such
registration statement and each other Person (other than such seller),
if any, who controls the Company and any of its subsidiaries within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act with respect to any statement in or omission from such
registration statement, any preliminary prospectus or final prospectus
included therein, or any amendment or supplement thereto, or any other
disclosure document (including, without limitation, reports and other
documents filed under the Exchange Act which are incorporated by
reference incorporated therein) if such statement or omission was made
in reliance upon and in conformity with written information furnished
to the Company or any of its subsidiaries through an instrument
executed by such seller specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement
incorporated document. Such indemnity shall remain in full force and
effect regardless of any investigation
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<PAGE> 47
made by or on behalf of the Company, any of its subsidiaries or any
such director, officer or controlling Person and shall survive any
transfer of securities.
9.4.3. Indemnification Procedures. Promptly after receipt by a
Person entitled to indemnification pursuant to the foregoing provisions
of this Section 9.4 (an "Indemnitee") of notice of the commencement of
any action or proceeding involving a claim of the type referred to in
the foregoing provisions of this Section 9.4, such Indemnitee will, if
a claim in respect thereof is to be made by such Indemnitee against any
indemnifying party, give written notice to each such indemnifying party
of the commencement of such action; provided, however, that the failure
of any Indemnitee to give notice to such indemnifying party as provided
herein shall not relieve any indemnifying party of its obligations
under the foregoing provisions of this Section 9.4, except and solely
to the extent that such indemnifying party is actually and materially
prejudiced by such failure to give notice. In case any such action is
brought against an Indemnitee, each indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such Indemnitee, and
after notice from an indemnifying party to such Indemnitee of its
election so to assume the defense thereof, such indemnifying party will
not be liable to such Indemnitee for any legal or other expenses
subsequently incurred by the latter in connection with the defense
thereof; provided, however, that (i) if the Indemnitee reasonably
determines that there may be a conflict between the positions of such
indemnifying party and the Indemnitee in conducting the defense of such
action, then counsel for the Indemnitee shall conduct the defense to
the extent reasonably determined by such counsel to be necessary to
protect the interests of the Indemnitee and such indemnifying party
shall employ separate counsel for its own defense, (ii) in any event,
the Indemnitee shall be entitled to have counsel chosen by such
Indemnitee participate in, but not conduct, the defense and (iii) the
indemnifying party shall bear the legal expenses incurred in connection
with the conduct of, and the participation in, the defense as referred
to in clauses (i) and (ii) above. If, within 30 days after receipt of
the notice, such indemnifying party shall not have elected to assume
the defense of the action, such indemnifying party shall be responsible
for any legal or other expenses incurred by such Indemnitee in
connection with the defense of the action, suit, investigation, inquiry
or proceeding. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such Indemnitee of a release from all liabilities in respect of such
claim or litigation.
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<PAGE> 48
9.4.4. Contribution. If the indemnification provided for in
Sections 9.4.1 or 9.4.2 hereof is unavailable to a party that would
have been an Indemnitee under any such Section in respect of any
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to therein, then each party that would have
been an indemnifying party thereunder shall, in lieu of indemnifying
such Indemnitee, contribute to the amount paid or payable by such
Indemnitee as a result of such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative fault of such indemnifying party on
the one hand and such Indemnitee on the other in connection with the
statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof). The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or such Indemnitee and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
parties agree that it would not be just or equitable if contribution
pursuant to this Section 9.4.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the preceding sentence. The
amount paid or payable by a contributing party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above in this Section 9.4.4 shall include
any legal or other expenses reasonably incurred by such Indemnitee in
connection with investigating or defending any such action or claim. 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.
9.4.5. Limitation on Liability of Holders of Registrable
Securities. The liability of each holder of Registrable Securities in
respect of any indemnification or contribution obligation of such
holder arising under this Section 9.4 shall not in any event exceed an
amount equal to the net proceeds to such holder (after deduction of all
underwriters' discounts and commissions) from the disposition of the
Registrable Securities disposed of by such holder pursuant to such
registration.
10. AMENDMENT, TERMINATION, ETC.
10.1 Oral Modifications. This Agreement may not be orally amended,
modified, extended or terminated, nor shall any oral waiver of any of its terms
be effective.
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<PAGE> 49
10.2 Written Modifications. This Agreement may be amended, modified,
extended or terminated, and the provisions hereof may be waived, only by an
agreement in writing signed by the Majority Investors, a majority of the Lenders
and a majority Subscriber Shares provided, that no amendment to this Agreement
materially adverse to the rights of any Subscriber, Lender or Management
Investor may be entered into without the written agreement of such Subscriber,
Lender or Management Investor. Each such amendment, modification, extension,
termination and waiver shall be binding upon each party hereto and each holder
of Shares subject hereto. In addition, each party hereto and each holder of
Shares subject hereto may waive any right hereunder by an instrument in writing
signed by such party or holder.
10.3 Termination. No termination under this Agreement shall relieve any
Person of liability for breach prior to termination.
11. DEFINITIONS. For purposes of this Agreement:
11.1 Certain Matters of Construction. In addition to the definitions
referred to or set forth below in this Section 11:
(a) The words "hereof", "herein", "hereunder" and
words of similar import shall refer to this Agreement as a
whole and not to any particular Section or provision of this
Agreement, and reference to a particular Section of this
Agreement shall include all subsections thereof;
(b) Definitions shall be equally applicable to both
the singular and plural forms of the terms defined; and
(c) The masculine, feminine and neuter genders shall
each include the other.
11.2 Cross Reference Table. The following terms defined elsewhere in
this Agreement in the Sections set forth below shall have the respective
meanings therein defined:
Term Definition
"AAA" Section 14.2.1
"Agreement" Preamble
"Approved Transfer" Section 3.1, 5.1
"Board" Section 2.2
"Berkshire" Section 11.3.5
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<PAGE> 50
"Call Notice" Section 5.1.3
"Call Option" Section 5.1
"Call Option Exercise Period" Section 5.1.3
"Chafetz" Preamble
"Closing" Section 1.1
"Common Stock" Recitals
"Company" Preamble
"Covered Person" Section 9.4.1
"Drag Along Notice" Section 3.2.1
"Escrow Agent" Section 8.2
"Exchange Agreement" Recitals
"GLSI" Section 2.4(b)
"Indemnitee" Section 9.4.3
"Interim Purchaser" Recitals
"Initiating Investors" Section 9.1.1
"Initiating Lenders" Section 9.1.3
"Initiating Subscribers" Section 9.1.2
"Initiating Transferor" Section 3.1
"Investor" Preamble
"Issuance" Section 7
"Levine" Preamble
"Majority Participating Investors" Section 9.1.1.1
"Majority Participating Lenders" Section 9.1.3.1
"Majority Participating Subscribers" Section 9.1.2.1
"Management Investors" Preamble
"Options" Recitals
"Other Securities" Section 7.1.3
"Participating Buyer" Section 7.1.2.1
"Participating Offeree" Section 3.4.2
"Participating Seller" Section 3.1.2, 3.2.1
"Preemption Notice" Section 7.1.1
"Preemptive Offerees" Section 7.1.1
"Preemptive Portion" Section 7.1.1
"Prospective Buyer" Section 3.1, 3.2
"Prospective Subscriber" Section 7.1.1
"Put Agreements" Section 2.16
"Registrable Investor Securities" Section 9.1.1
"Registrable Lender Securities" Section 9.1.3
"Registrable Subscriber Securities" Section 9.1.2
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<PAGE> 51
"Sale" Section 3.1
"Sale Offeree" Section 3.4.1
"Sale Notice" Section 3.4.1
"Subscribers" Preamble
"Shareholder Call Group" Section 5.1
"Shareholders" Preamble
"Subject Securities" Section 7
"Tag Along Notice" Section 3.1.1
"Tag Along Offer" Section 3.1.2
"Tag Along Offerors" Section 3.1.1
"Tag Along Sale Percentage" Section 3.1.1
"Trusts" Preamble
11.3 Certain Definitions. The following terms shall have the following
meanings:
11.3.1. "Affiliate" shall mean with respect to any Person, (a)
any person or entity which, directly or indirectly, is in control of,
is controlled by, or is under common control with such Person, (b) any
Person which is a director, officer, partner, joint venturer or
employee of, or investor in, any person described in clause (a) above,
or (c) any Person which is an immediate relative of, or a trust or
foundation controlled by, or controlled by an immediate relative of,
any Person or entity described in clause (a) or (b) above. For purposes
of this definition, "control" of a Person shall mean the power, direct
or indirect, to direct or cause the direction of the management and
policies of such Person whether by contract (including consulting
contracts) or otherwise.
11.3.2. "Affiliated Fund" shall mean each corporation, trust,
general or limited partnership or other entity under common control
with Berkshire Fund IV, L.P. or Berkshire Fund V, L.P. which is managed
by an Affiliate of Berkshire Partners LLC.
11.3.3. "Cash Equivalents" shall mean (i) cash, (ii) U.S.
Treasury notes, (iii) AAA rated, publicly traded corporate bonds and
(iv) securities traded on the New York Stock Exchange, Inc., the
American Stock Exchange or the Nasdaq National Market.
11.3.4. "Cause" shall mean, the following events or
conditions, as determined by the Board in its reasonable judgment: (i)
the material refusal or failure to perform (other than by reason of
disability), or material negligence in the performance of such
employee's duties and responsibilities to the Company or any of its
Affiliates; (ii) the material breach by the employee of any provision
of any agreement between such employee and the Company or any of its
Affiliates; or (iii) other conduct by the employee
- 45 -
<PAGE> 52
that is materially harmful to the business, interests or reputation of
the Company or any of its Affiliates including, but not limited to the
commission of fraud, embezzlement, theft or other dishonesty, or the
conviction of such Person of, or plea by such Person of nolo contendre
to, any felony or other crime involving dishonesty or moral turpitude.
11.3.5. "Change of Control" shall mean such time as: (a) the
Investor, Berkshire Fund IV, L.P., Berkshire Fund V, L.P. and their
Affiliates (collectively, "Berkshire") beneficially own, through
Berkshire Cruise Investors L.L.C. or another Person, securities of the
Company representing less than fifty percent (50%) of the voting power
of all classes of voting securities of the Company that Berkshire
beneficially owned on the date of the Closing; or (b) a sale or
transfer of all or substantially all of the assets of the Company to
any person or group other than a Berkshire Affiliate has been
consummated.
11.3.6. "Competitor" means any Person who is engaged in the
business in which the Company is engaged or planning to become engaged.
11.3.7. "Convertible Securities" shall mean any evidence of
indebtedness, shares of stock (other than Common Stock) or other
securities directly or indirectly convertible into or exchangeable or
exercisable for shares of Common Stock.
11.3.8. "Cost" shall mean the price paid for the Shares in
question on the Closing Date or such other date on which the Shares in
question were acquired.
11.3.9. "Equivalent Shares" shall mean as to any outstanding
shares of Common Stock, such number of shares of Common Stock, and as
to any outstanding Options or Convertible Securities, the maximum
number of shares of Common Stock for which or into which such options
or convertible securities may at the time be exercised or converted,
but only if the contingencies to such exercise or conversion had been
satisfied.
11.3.10. "Equivalent Value" shall mean, as of any date, the
Board's good faith determination of the fair value of securities or any
non Cash Equivalents.
11.3.11. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as in effect from time to time.
11.3.12. "Fair Market Value" shall mean, as of any date, the
Board's good faith determination of the fair value of one Share as of
the applicable reference date.
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<PAGE> 53
11.3.13. "Initial Public Offering" shall mean the initial
public offering registered on Form S-1 (or any successor form under the
Securities Act) of common stock of the Company.
11.3.14. "Investor Shares" shall mean all shares of Common
Stock originally issued to, or issued with respect to shares originally
issued to, or held by, the Investor, whenever issued.
11.3.15. "Lender Shares" shall mean all shares of Common Stock
originally issued to, or issued with respect to shares originally
issued to the Lenders.
11.3.16. "Majority Investors" shall mean, as of any date, the
holders of a majority of the Investor Shares outstanding on such date
which are held by the Investor and its Affiliates.
11.3.17. "Management Shares" shall mean (i) all shares of
Common Stock originally issued to, or issued with respect to shares or
Option originally issued to, or held by, the Management Investors
whether such issuance takes place before or after the date of this
Agreement.
11.3.18. "Members of the Immediate Family" shall mean, with
respect to any individual, each spouse, parent or child of such
individual, each trust created solely for the benefit of one or more of
the aforementioned Persons and each custodian or guardian of any
property of one or more of the aforementioned Persons in his capacity
as such custodian or guardian.
11.3.19. "Options" shall mean any options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
11.3.20. "Permitted Transferee" shall mean (i) as to each
Investor Share, a Transferee of such Investor Share in compliance with
Section 3.1.6 (a), (b), (f), (g) or (h), (ii) as to each Share held by
the Interim Purchaser, a Transferee of such Share in compliance with
Section 3.1.6(i), and (iii) as to each Subscriber Share or Management
Share, a Transferee of such Subscriber Share or Management Share in
compliance with Section 4.1 or 4.2.
11.3.21. "Person" shall mean any individual, partnership,
corporation, company, association, trust, joint venture, unincorporated
organization, entity or division, or any government, governmental
department or agency or political subdivision thereof.
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<PAGE> 54
11.3.22. "Price Per Equivalent Share" shall mean in the case
of any Issuance pursuant to Section 8 hereof, the price per Equivalent
Share included in the Issuance, calculated, in the case of Shares
constituting Convertible Securities, with appropriate deductions for
amounts in respect of accrued but unpaid interest or dividends added in
determining the proceeds payable in the Issuance to the Company and, in
the case of Options, with appropriate additions for amounts payable in
the Issuance to the Company.
11.3.23. "Public Offering" shall mean a public offering and
sale of common stock of the Company for cash pursuant to an effective
registration statement under the Securities Act.
11.3.24. "Registrable Securities" shall mean Investor Shares,
Subscriber Shares, Lender Shares and Management Shares which have not
been registered.
11.3.25. "Regulation D" shall mean Regulation D under the
Securities Act.
11.3.26. "Rule 144" shall mean Rule 144 under the Securities
Act.
11.3.27. "Rule 145 Transaction" shall mean a registration on
Form S-4 pursuant to Rule 145 of the Securities Act.
11.3.28. "Securities Act" shall mean the Securities Act of
1933, as in effect from time to time.
11.3.29. "Subscriber Shares" shall mean all shares of Common
Stock originally issued to, or issued with respect to shares or Options
originally issued to, or held by, the Subscribers whenever issued.
11.3.30. "Shares" shall mean all Investor Shares, Subscriber
Shares, Lender Shares and Management Shares and all Shares held by the
Interim Purchaser.
11.3.31. "Termination Event" shall mean any event specified in
Section 5.2 which gives rise to any of the call rights specified
therein.
11.3.32. "Transfer" shall mean any sale, pledge, assignment,
encumbrance or other transfer or disposition of any Shares to any other
Person, whether directly, indirectly, voluntarily, involuntarily, by
operation of law, pursuant to judicial process or otherwise.
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<PAGE> 55
12. CERTAIN OTHER MATTERS.
12.1 Fees and Expenses. Simultaneously with the Closing, the Company
shall pay to Berkshire Partners LLC an aggregate fee of $1,500,000, by wire
transfer of immediately available funds. Berkshire Partners LLC, or a designated
Affiliate, shall also be entitled to (i) annual management fees of $400,000 per
annum, (ii) an investment banking fee of up to 1% of the aggregate principal
amount of financing arranged by Berkshire Partners LLC (or its Affiliate)
following the Closing and (iii) if placed by Berkshire Partners LLC, an
investment banking fee of up to 2% of the debt placed by Berkshire Partners LLC
in the Company's initial financing. Neither Berkshire Partners LLC nor its
Affiliates will charge the Company any other fees.
12.2 Corporate Opportunities. The Investor and the Subscribers agree
that all corporate opportunities including, but not limited to, acquisitions and
strategic alliances, related to the business of the Company and its
Subsidiaries, as such businesses are being conducted at any time and including
any areas in which the Company and its Subsidiaries are actively planning to
become involved, shall first be presented to the Company. The decision by the
Company to not proceed with any such opportunity shall be deemed to be made only
with prior written approval of the Majority Investors and majority of the
Subscribers. In the event the Company rejects such corporate opportunity as set
forth above and as otherwise required by any applicable laws, an Investor or
Subscriber shall be free to otherwise pursue such corporate opportunity on
substantially the same terms as presented to the Company.
12.3 Reporting. The Company will provide to the Investor, the Lender
and the Subscribers, for so long as such person holds Shares, (i) unaudited
quarterly balance sheets and the related statements of income and shareholders
equity and cash flows for the Company and its subsidiaries within 60 days of the
end of each of the first three quarters of the Company's fiscal year and (ii)
audited annual balance sheets and the related statements of earnings and
shareholders equity and cash flows for the Company and its subsidiaries within
90 days of the end of each fiscal year.
12.4 Lender Review. At all times during which any Lender shall hold
Shares, the Company shall permit the representative of such Lender, at its
expense, to visit and inspect any properties of the Company or its Subsidiaries,
to examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants (and by this provision the Company authorizes
said accountants
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<PAGE> 56
to discuss the finances and affairs of the Company and its Subsidiaries) all at
such reasonable times and as often as may be reasonably requested.
13. MISCELLANEOUS.
13.1 Authority; Effect. Each party hereto represents and warrants to
and agrees with each other party that the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized on behalf of such party and do not violate any agreement or
other instrument applicable to such party or by which its assets are bound. This
Agreement does not, and shall not be construed to, give rise to the creation of
a partnership among any of the parties hereto, or to constitute any of such
parties members of a joint venture or other association.
13.2 Notices. Any notices and other communications required or
permitted in this Agreement shall be effective if in writing and delivered
personally, by facsimile, or by Federal Express, DHL or UPS or another
nationally recognized express mail service, delivery charges prepaid, in each
case, addressed as follows:
If to the Company or Berkshire, to them:
c/o Berkshire Partners LLC
One Boston Place
Boston, Massachusetts 02108
Attention: Bradley M. Bloom
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: David C. Chapin, Esq.
If to a holder of Subscriber Shares, Management Shares, Lender Shares
or Investor Shares other than Berkshire, to him at the address or telecopier
number set forth in the shareholder register of the Company.
Notice to the holder of record of any shares of capital stock shall be
deemed to be notice to the holder of such shares for all purposes hereof.
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<PAGE> 57
Unless otherwise specified herein, such notices or other communications
shall be deemed effective on the date received. Each of the parties hereto shall
be entitled to specify a different address or telecopier number by giving notice
as aforesaid to each of the other parties hereto.
13.3 Binding Effect, etc. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter, supersedes all
prior or contemporaneous oral or written agreements or discussions with respect
to such subject matter, and shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, representatives, successors and
assigns.
13.4 Descriptive Headings. The descriptive headings of this Agreement
are for convenience of reference only, are not to be considered a part hereof
and shall not be construed to define or limit any of the terms or provisions
hereof.
13.5 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
13.6 Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
be construed by modifying or limiting it so as to be valid and enforceable to
the maximum extent compatible with, and possible under, applicable law. The
provisions hereof are severable, and in the event any provision hereof should be
held invalid or unenforceable in any respect, it shall not invalidate, render
unenforceable or otherwise affect any other provision hereof.
14. GOVERNING LAW, ARBITRATION.
14.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the Netherlands without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction; provided, however, that any dispute relating to the provisions of
Section 14.2 hereof shall be governed by the United States Arbitration Act as
then in force.
14.2 Arbitration.
14.2.1. Generally. Except as set forth in Sections 8.1 and
14.2.3 hereof, each dispute, difference, controversy or claim arising
in connection with or related or incidental to, or question occurring
under, this Agreement or the subject matter hereof
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<PAGE> 58
shall be finally settled under the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA") by an arbitral tribunal
composed of three arbitrators, at least one of whom shall be an
attorney experienced in corporate transactions, appointed by agreement
of the parties in accordance with said Rules. In the event the parties
fail to agree upon a panel of arbitrators from the first list of
potential arbitrators proposed by the AAA, the AAA will submit a second
list in accordance with said Rules. In the event the parties shall have
failed to agree upon a full panel of arbitrators from said second list,
any remaining arbitrators to be selected shall be appointed by the AAA
in accordance with said Rules. If, at the time of the arbitration, the
parties agree in writing to submit the dispute to a single arbitrator,
said single arbitrator shall be appointed by agreement of the parties
in accordance with the foregoing procedure, or, failing such agreement,
by the AAA in accordance with said Rules. The foregoing arbitration
proceedings may be commenced by any party by notice to the other
parties.
14.2.2. Place of Arbitration. The place of arbitration shall
be New York, New York.
14.2.3. Recourse to Courts. The parties hereby exclude any
right of appeal to any court on the merits of the dispute. The
provisions of this Section 14.2 may be enforced in any court having
jurisdiction over the award or any of the parties or any of their
respective assets, and judgment on the award (including, without
limitation, equitable remedies) granted in any arbitration hereunder
may be entered in any such court. Nothing contained in this Section
14.2 shall prevent any party from seeking interim measures of
protection in the form of pre-award attachment of assets or preliminary
or temporary equitable relief.
14.3 Reliance. Each of the parties hereto acknowledges that he has been
informed by each other party that the provisions of this Section 14 constitute a
material inducement upon which such party is relying and will rely in entering
into this Agreement and the transactions contemplated hereby.
14.4 Domicile. Each of the parties hereto acknowledges and accepts
that, for the purposes of seeking interim measures of protection in the form of
pre-award attachment of assets or preliminary or temporary equitable relief in
the Netherlands, as contemplated by the last sentence of section 14.2.3 hereof,
he chooses domicile in the Netherlands at the offices of ABN Amro Trust Company
(Nederland) B.V. at Strawinshylaen 3105, 1077 ZX Amsterdam.
15. TERMINATION
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<PAGE> 59
15.1 Termination. This Agreement shall terminate upon the earlier of
(i) the date on which the Investor, Subscribers and Lenders no longer hold any
Shares and (ii) the date which is ten years from the date hereof.
[INTENTIONALLY LEFT BLANK]
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<PAGE> 60
Shareholders Agreement
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement (or caused this Agreement to be executed on its behalf by its officer
or representative thereunto duly authorized) under seal as of the date first
above written.
THE COMPANY: MIAMI CRUISELINE SERVICES HOLDINGS I B.V.
By /s/ Bradley Bloom
-----------------------------------------
Title: Director A
<PAGE> 61
Shareholders Agreement
THE INVESTORS: BERKSHIRE CRUISE HOLDINGS LLC
By its managing member
By /s/ Bradley Bloom
--------------------------------------
Title: Authorized Person
<PAGE> 62
Shareholders Agreement
THE SUBSCRIBERS:
/s/ Philip Levine
----------------------------------------
Philip Levine, Individually
The Gerald Robins Revocable Trust 8/3/94
By: /s/ Gerald Robins
------------------------------------
Gerald Robins, Trustee
The Craig Robins Revocable Trust 8/3/94
By: /s/ Gerald Robins
------------------------------------
Gerald Robins, Trustee
The Scott Robins Revocable Trust 8/3/94
By: /s/ Gerald Robins
------------------------------------
Gerald Robins, Trustee
/s/ Jerry Chafetz
----------------------------------------
Jerry Chafetz, Individually
<PAGE> 63
Shareholders Agreement
THE LENDERS:
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Adam G. Clemens
---------------------------------
Name: Adam G. Clemens
Title: Managing Director
AMERICAN HOME ASSURANCE COMPANY
By: /s/ David B. Pinkerton
---------------------------------
Name: David B. Pinkerton
Title: Vice President
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Jerome R. Baier
---------------------------------
Name: Jerome R. Baier
Title: Its Authorized Representative
<PAGE> 64
Shareholders Agreement
MANAGEMENT:
/s/ J.P. Miquel
--------------------------------
J.P. Miquel
<PAGE> 65
Shareholders Agreement
INTERIM PURCHASER:
BERKSHIRE PARTNERS LLC
By: /s/ Brad Bloom
-------------------------------
Name: Brad Bloom
Title: Authorized Person
<PAGE> 66
JOINDER AND AGREEMENT RELATING TO
SHAREHOLDERS AGREEMENT
THIS JOINDER AND AGREEMENT relating to the Shareholders Agreement dated
as of September 17, 1998 by and among Miami Cruiseline Services Holdings I B.V.,
a Netherlands corporation (besloten vennootschap met beperkte aanspraklijkheid)
(the "Company"), The Gerald Robins Revocable Trust 8/3/94, a Florida trust (the
"Trust") and certain other shareholders of the Company (the "Shareholders
Agreement"), is made and entered into as of November 13, 1998 by and between the
Company and each signatory listed on the signature page hereto (each a
"Holder"). Capitalized terms used herein but not otherwise defined shall have
the meanings set forth in the Shareholders Agreement.
WHEREAS, each Holder has acquired certain Shares from the Trust and the
Shareholders Agreement requires each Holder, as a holder of such Shares, to
become a party to the Shareholders Agreement, and each Holder agrees to do so in
accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Joinder and Agreement hereby
agree as follows:
1. Agreement to be Bound. Each Holder hereby agrees that upon execution
of this Joinder and Agreement, it shall become a party to the Shareholders
Agreement and shall be fully bound by, and subject to, all of the covenants,
terms and conditions of the Shareholders Agreement as though an original party
thereto and shall be deemed a Subscriber and a holder of Shares for all purposes
thereof. In addition, each Holder hereby agrees that all Shares held by such
Holder shall be deemed Subscriber Shares and Shares for all purposes of the
Shareholders Agreement.
2. Successors and Assigns. Except as otherwise provided herein, this
Joinder and Agreement shall bind and inure to the benefit of and be enforceable
by the Company and its successors, heirs and assigns and each Holder and any
subsequent holders of Shares and the respective successors, heirs and assigns of
each of them, so long as they hold any Shares.
3. Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
<PAGE> 67
4. Notices. For purposes of Section 13.2 of the Shareholders Agreement,
all notices, demands or other communications to the Holder shall be directed to:
Gerald Robins, Trustee
33 Star Island
Miami Beach, Florida 33139
fax (305) 673-8552
5. GOVERNING LAW. This Joinder and Agreement shall be governed by and
construed in accordance with the laws of the Netherlands without giving effect
to any choice of or conflict of laws provision or rule that would cause the
application of the domestic substantive laws of any other jurisdiction.
6. DESCRIPTIVE HEADINGS. The descriptive headings of this Joinder and
Agreement are for convenience of reference only and do not constitute a part of
this Joinder and Agreement.
* * * * *
-2-
<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have executed this Joinder as of
the date first above written.
MIAMI CRUISELINE SERVICES HOLDINGS I B.V.
By: /s/ Bradley M. Bloom
-------------------------------------------------
Name: Bradley M. Bloom
Managing Director A
By: /s/ Gerald Robins
-------------------------------------------------
Gerald Robins as Trustee of
the Gina Robins 1998 Trust
Agreement dated October 5,
1998
By: /s/ Gerald Robins
-------------------------------------------------
Gerald Robins as Trustee of the Stacy Robins 1998
Trust Agreement dated October 5, 1998
-3-
<PAGE> 69
JOINDER AND AGREEMENT RELATING TO
SHAREHOLDERS AGREEMENT
THIS JOINDER AND AGREEMENT relating to the Shareholders Agreement dated
as of September 17, 1998 by and among Miami Cruiseline Services Holdings I B.V.,
a Netherlands corporation (besloten vennootschap met beperkte aanspraklijkheid)
(the "Company"), Berkshire Partners LLC, a Massachusetts limited liability
company ("Berkshire") and certain other shareholders of the Company (the
"Shareholders Agreement"), is made and entered into as of November 13, 1998 by
and between the Company and each Management Investor listed on the signature
page hereto (each a "Holder"). Capitalized terms used herein but not otherwise
defined shall have the meanings set forth in the Shareholders Agreement.
WHEREAS, each Holder has acquired certain Shares from Berkshire and the
Shareholders Agreement requires each Holder, as a holder of such Shares, to
become a party to the Shareholders Agreement, and each Holder agrees to do so in
accordance with the terms hereof; and
WHEREAS, the parties believe that it is in the best interests of the
Company and its stockholders to provide for certain rights and obligations with
respect to the voting of shares of the Company and certain other matters.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Joinder and Agreement hereby
agree as follows:
1. Agreement to be Bound. Each Holder hereby agrees that upon execution
of this Joinder and Agreement, it shall become a party to the Shareholders
Agreement and shall be fully bound by, and subject to, all of the covenants,
terms and conditions of the Shareholders Agreement as though an original party
thereto and shall be deemed a Management Investor and a holder of Shares for all
purposes thereof. In addition, each Holder hereby agrees that all Shares held by
such Holder shall be deemed Management Shares and Shares for all purposes of the
Shareholders Agreement.
2. Proxy to Vote Shares. Each Holder hereby designates J.P. Miquel as
"Purchaser Representative" to represent such Holder and grants to J.P. Miquel an
irrevocable proxy coupled with an interest to vote such Holder's Shares with
respect to any vote agreed to be cast pursuant to Section 2 of the Shareholders
Agreement.
3. Successors and Assigns. Except as otherwise provided herein, this
Joinder and Agreement shall bind and inure to the benefit of and be enforceable
by the Company and its
<PAGE> 70
successors, heirs and assigns and each Holder and any subsequent holders of
Shares and the respective successors, heirs and assigns of each of them, so long
as they hold any Shares.
4. Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
5. Notices. For purposes of Section 13.2 of the Shareholders Agreement,
all notices, demands or other communications to the Holder shall be directed to:
[The Holder]
c/o Greyhound Leisure Services, Inc.
8052 Northwest 14th Street
Miami, FL 93126
6. GOVERNING LAW. This Joinder and Agreement shall be governed by and
construed in accordance with the laws of the Netherlands without giving effect
to any choice of or conflict of laws provision or rule that would cause the
application of the domestic substantive laws of any other jurisdiction.
7. DESCRIPTIVE HEADINGS. The descriptive headings of this Joinder and
Agreement are for convenience of reference only and do not constitute a part of
this Joinder and Agreement.
* * * * *
<PAGE> 71
IN WITNESS WHEREOF, the parties hereto have executed this Joinder as of
the date first above written.
MIAMI CRUISELINE SERVICES HOLDINGS I B.V.
By: /s/ Bradley Bloom
-------------------------------------
Name: Bradley Bloom
Managing Director A
/s/ Jorge A. Fernandez
-----------------------------------------
Jorge A. Fernandez
/s/ Michael G. Merhige
-----------------------------------------
Michael G. Merhige
/s/ Damiano J. Pignato
-----------------------------------------
Damiano J. Pignato
/s/ Stephen G. Chait
-----------------------------------------
Stephen G. Chait
/s/ Susan Wright
-----------------------------------------
Susan Wright
/s/ Sonia Jensen
-----------------------------------------
Sonia Jensen
/s/ Senulus Brea
-----------------------------------------
Senulus Brea
/s/ Marc Townsend
-----------------------------------------
Marc Townsend
/s/ Thomas J. Perkins
-----------------------------------------
Thomas J. Perkins
/s/ Tracy Allen-Eck
-----------------------------------------
Tracy Allen-Eck
<PAGE> 1
EXHIBIT 10.12
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the 15th of September,
1998, between Miami Cruiseline Services Holdings I B.V., a Dutch private company
with limited liability (the "Company") and Philip Levine, a resident of the
State of Florida (the "Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee to
serve as a director of the Company.
B. As a condition to the Indemnitee's agreement to continue to serve as
a director of the Company, the Indemnitee requires that he be indemnified from
liability to the fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law in order to retain the services of the Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER THAN THOSE BY
OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company shall
indemnify and hold harmless the Indemnitee from and against any and all claims,
damages, expenses (including attorneys' fees), judgments, penalties, fines
(including excise taxes assessed with respect to an employee benefit plan),
settlements, and all other liabilities incurred or paid by him in connection
with the investigation, defense, prosecution, settlement or appeal of 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 Company) and to which the Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that the Indemnitee is or
was an officer, director, shareholder, employee or agent of the Company, or is
or was serving at the request of the Company as an officer, director, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, or by reason of anything done
or not done by the Indemnitee in any such capacity or capacities, provided that
the Indemnitee acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to
ally criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
SECTION 2. MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT
OF THE COMPANY. Subject to Section 4 hereof, the Company shall indemnify and
hold harmless the Indemnitee from and against any and all expenses (including
attorneys' fees) and amounts actually and reasonably incurred or paid by him in
connection with the investigation, defense, prosecution, settlement or appeal of
any threatened, pending or completed action, suit or proceeding by or in the
right of the Company to procure a judgment in
<PAGE> 2
its favor, whether civil, criminal, administrative or investigative, and to
which the Indemnitee was or is a party or is threatened to be made a party by
reason of the fact that the Indemnitee is or was an officer, director,
shareholder, employee or agent of the Company, or is or was serving at the
request of the Company as an officer, director, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of anything done or not done by
the Indemnitee in any such capacity or capacities, provided that (i3 the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and (ii) no indemnification
shall be made under this Section 2 in respect of any claim, issue or matter as
to which the Indemnitee shall have been adjudged to be liable to the Company for
misconduct in the performance of his duty to the Company unless, and only to the
extent that, the court in which such proceeding was brought (or any other court
of competent jurisdiction) shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
SECTION 3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF
NEGLIGENCE. The Company shall reimburse the Indemnitee for any expenses
(including attorney's fees) and amounts actually and reasonably incurred or paid
by him in connection with the investigation, defense, settlement or appeal of
any action or suit described in Section 2 hereof that results in an adjudication
that the Indemnitee was liable for negligence, gross negligence or recklessness
(but not willful misconduct) in the performance of his duty to the Company;
provided, however, that the Indemnitee acted in good faith and in a manner he
believed to be in the best interests of the Company.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
Sections 1 and 2 hereof (unless ordered by a court) and any reimbursement made
under Section 3 hereof shall be made by the Company only as authorized in the
specific case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7 and 8 of this
Agreement, the Determination shall be made in the following order of preference:
(1) first, by the Company's Managing Board (the "Board")
by majority vote or consent of a quorum consisting of directors ("Disinterested
Directors") who are not, at the time of the Determination, named parties to such
action, suit or proceeding; or
(2) next, if such a quorum of Disinterested Directors cannot
be obtained, by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
(3) next, if such a committee cannot be designated, by any
independent legal counsel (who may be any outside counsel regularly employed by
the Company) in a written opinion; or
<PAGE> 3
(4) next, if such legal counsel determination cannot be
obtained, by vote or consent of the holders of a majority of the Company s
common stock.
4.1 No Presumptions. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Indemnitee did not act in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the Company; and-with
respect to-any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
4.2 Benefit Plan Conduct. The Indemnitee's conduct with respect to
an employee benefit plan for a purpose he reasonably believed to be in the
interests of the participants in and beneficiaries of the plan shall be deemed
to be conduct that the Indemnitee reasonably believed to be not opposed to the
best interests of the Company.
4.3 Reliance as Safe Harbor. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on (i) the records or books of account of the Company or another enterprise,
including financial statements, (ii) information supplied to him by the officers
of the Company or another enterprise in the course of their duties, (iii) the
advice of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.3 shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof,
as the case may be.
4.4 Success on Merits or Otherwise. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described in Section 1 or 2 hereof, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal thereof. For purposes of this
Section 4.4, the term "successful on the merits or otherwise" shall include, but
not be limited to, (i) any termination, withdrawal, or dismissal (with or
without prejudice) of any claim, action, suit or proceeding against the
Indemnitee without any express finding of liability or guilt against him, (ii)
the expiration of 120 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
or payment made to induce a settlement, or (iii) the settlement of
<PAGE> 4
any action, suit or proceeding under Section 1, 2 or 3 hereof pursuant to which
the Indemnitee pays less than $10,000.
4.5 Partial Indemnification or Reimbursement. If the Indemnitee is
entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Company for some or a portion of the claims, damages,
expenses (including attorneys' fees), judgments, fines or amounts paid in
settlement by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Section 1, 2 or 3 hereof, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement for
which the Indemnitee is entitled to indemnification and/or reimbursement under
this Agreement.
SECTION 5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN
SATISFIED.
5.1 Costs. All costs of making the Determination required by
Section 4 hereof shall be borne solely by the Company, including, but not
limited to, the costs of legal counsel, proxy solicitations and judicial
determinations. The Company shall also be solely responsible for paying (i) all
reasonable expenses incurred by the Indemnitee to enforce this Agreement,
including, but not limited to, the costs incurred by the Indemnitee to obtain
court-ordered indemnification pursuant to Section 8 hereof, regardless of the
outcome of any such application or proceeding, and (ii) all costs of defending
any suits or proceedings challenging payments to the Indemnitee under this
Agreement.
5.2 Timing of the Determination. The Company shall use its best
efforts to make the Determination contemplated by Section 4 hereof promptly. In
addition, the Company agrees:
(a) if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 15 days after
a written request for a Determination (a "Request") is delivered to the Company
by the Indemnitee;
(b) if the Determination is to be made by independent legal
counsel, such Determination shall be made not later than 30 days after a Request
is delivered to the Company by the Indemnitee; and
(c) if the Determination is to be made by the stockholders of
the Company, such Determination shall be made not later than 90 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or incurring) of
expenses with respect to which indemnification or
<PAGE> 5
reimbursement is sought, and/or (ii) final disposition of the action, suit or
proceeding with respect to which indemnification or reimbursement is sought.
5.3 Reasonableness of Expenses. The evaluation and finding as to
the reasonableness of expenses incurred by the Indemnitee for purposes of this
Agreement shall be made (in the following order of preference) within 15 days of
the Indemnitee's delivery to the Company of a Request that includes a reasonable
accounting of expenses incurred:
(a) first, by the Board by a majority vote of a quorum
consisting of Disinterested Directors; or
(b) next, if a quorum cannot be obtained under subdivision
(a), by majority vote or consent of a committee duly designated by the Board (in
which designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
(c) next, if a finding cannot be obtained under either
subdivision (a) or (b), by vote or consent of the holders of a majority of the
Company's Common Stock that are represented in person or by proxy at a meeting
called for such purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 5.3 is not made within the prescribed
time. The finding required by this Section 5.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
5.4 Payment of Indemnified Amount. Immediately following a
Determination that the Indemnitee has met the applicable standard of conduct set
forth in Section 1, 2 or 3 hereof, as the case may be, and the finding of
reasonableness of expenses contemplated by Section 5.3 hereof, or the passage of
time prescribed for making such determination(s), the Company shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
5.5 Stockholder Vote on Determination. Notwithstanding the
provisions of the Dutch law, the Indemnitee and any other stockholder who
is a party to the proceeding for which indemnification or reimbursement is
sought shall be entitled to vote on any Determination to be made by the
Company's stockholders, including a Determination made pursuant to Section 5.7
hereof. In addition, in connection with each meeting at which a stockholder
Determination will be made, the Company shall solicit proxies that expressly
include a proposal to indemnify or reimburse the Indemnitee. The Company proxy
statement relating to the proposal to indemnify or reimburse the Indemnitee
shall not include a recommendation against indemnification or reimbursement.
5.6 Selection of Independent Legal Counsel. If the Determination
required under Section 4 is to be made by independent legal counsel, such
counsel shall be selected by the
<PAGE> 6
Indemnitee with the approval of the Board, which approval shall not be
unreasonably withheld. The fees and expenses incurred by counsel in making any
Determination (including Determinations pursuant to Section 5.8 hereof) shall be
borne solely by the Company regardless of the results of any Determination and,
if requested by counsel, the Company shall give such counsel an appropriate
written agreement with respect to the payment of their fees and expenses and
such other matters as may be reasonably requested by counsel.
5.7 Right of Indemnitee to Appeal an Adverse Determination by
Board. If a Determination is made by the Board or a committee thereof that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1, 2 or 3 hereof, upon the written request of- the Indemnitee and the
Indemnitee's delivery of $500 to the Company, the Company shall cause a new
Determination to be made by the Company's stockholders at the next regular or
special meeting of stockholders. Subject to Section 8 hereof, such Determination
by the Company's stockholders shall be binding and conclusive for all purposes
of this Agreement.
5.8 Right of Indemnitee To Select Forum For Determination. If, at
any time subsequent to the date of this Agreement, "Continuing Directors" do not
constitute a majority of the members of the Board, or there is otherwise a
change in control of the Company (as contemplated by Item 403(c) of Regulation
S-K), then upon the request of the Indemnitee, the Company shall cause the
Determination required by Section 4 hereof to be made by independent legal
counsel selected by the Indemnitee and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of clause (3) of Section 4 hereof. If none of the legal counsel
selected by the Indemnitee are willing and/or able to make the Determination,
then the Company shall cause the Determination to be made by a majority vote or
consent of a Board committee consisting solely of Continuing Directors. For
purposes of this Agreement, a "Continuing Director" means either a member of the
Board at the date of this Agreement or a person nominated to serve as a member
of the Board by a majority of the then Continuing Directors.
5.9 Access by Indemnitee to Determination. The Company shall
afford to the Indemnitee and his representatives ample opportunity to present
evidence of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Company proxy
statement relating to a stockholder Determination.
5.10 Judicial Determinations in Derivative Suits. In each action
or suit described in Section 2 hereof, the Company shall cause its counsel to
use its best efforts to obtain from the Court in which such action or suit was
brought (i) an express adjudication whether the Indemnitee is liable for
negligence or misconduct in the performance of his duty to the Company, and, if
the Indemnitee is so liable, (ii) a determination whether and to what extent,
despite the-adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Indemnitee is fairly and reasonably
entitled to indemnification.
<PAGE> 7
SECTION 6. SCOPE OF INDEMNITY. The actions, suits and proceedings
described in Sections 1 and 2 hereof shall include, for purposes of this
Agreement, any actions that involve, directly or indirectly, activities of the
Indemnitee both in his official capacities as a Company director or officer and
actions taken in another capacity while serving as director or officer,
including, but not limited to, actions or proceedings involving (i) compensation
paid to the Indemnitee by the Company, (ii) activities by the Indemnitee on
behalf of the Company, including actions in which the Indemnitee is plaintiff,
(iii) actions alleging a misappropriation of a "corporate opportunity," (iv)
responses to a takeover attempt or threatened takeover attempt of the Company,
(v) transactions by the Indemnitee in Company securities, and (vi) the
Indemnitee's preparation for and appearance (or potential appearance) as a
witness in any proceeding relating, directly or indirectly, to the Company. In
addition, the Company agrees that, for purposes of this Agreement, all services
performed by the Indemnitee on behalf of, in connection with or related to any
subsidiary of the Company, any employee benefit plan established for the benefit
of employees of the Company or any subsidiary, any corporation or partnership or
other entity in which the Company or any subsidiary has a 5% ownership interest,
or any other affiliate shall be deemed to be at the request of the Company.
SECTION 7. ADVANCE FOR EXPENSES.
7.1 Mandatory Advance. Expenses (including attorneys' fees)
incurred by the Indemnitee in investigating, defending, settling or appealing
any action, suit or proceeding described in Section 1 or 2 hereof shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding. The Company shall promptly pay the amount of such expenses to the
Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Company of a written request for an advance pursuant to this
Section 7, together with a reasonable accounting of such expenses.
7.2 Undertaking to Repay. The Indemnitee hereby undertakes and
agrees to repay to the Company any advances made pursuant to this Section 7 if
and to the extent that it shall ultimately be found that the Indemnitee is not
entitled to be indemnified by the Company for such amounts.
7.3 Miscellaneous. The Company shall make the advances
contemplated by this Section 7 regardless of the Indemnitee's, financial ability
to make repayment, and regardless whether indemnification of the Indemnitee by
the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 7 shall be unsecured and interest-free.
SECTION 8. COURT-ORDERED INDEMNIFICATION. Regardless whether the
Indemnitee has met the standard of conduct set forth in Sections 1, 2 or 3
hereof, as the case may be, and notwithstanding the presence or absence of any
Determination whether such standards have been satisfied, the Indemnitee may
apply for indemnification (and/or reimbursement pursuant to Section 3 or 12
hereof) to the court conducting any proceeding to which the Indemnitee is a
party or to any other court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order
<PAGE> 8
indemnification (and/or reimbursement) if it determines the Indemnitee is fairly
and reasonably entitled to indemnification (and/or reimbursement) in view of all
the relevant circumstances (including this Agreement).
SECTION 9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by
Federal securities laws, neither party shall disclose any payments under this
Agreement unless prior approval of the other party is obtained. Any payments to
the Indemnitee that must be disclosed shall, unless otherwise required by law,
be described only in Company proxy or information statements relating to special
and/or annual meetings of the Company's stockholders, and the Company shall
afford the Indemnitee the reasonable opportunity to review all such disclosures
and, if requested, to explain in such statement any mitigating circumstances
regarding the events reported.
SECTION 10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF
CLAIMS. No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Company (or any of its subsidiaries) against the
Indemnitee, his spouse, heirs, executors, personal representatives or
administrators after the expiration of 2 years from the date the Indemnitee
ceases (for any reason) to serve as either an officer or a director of the
Company, and any claim or cause of action of the Company (or any of its
subsidiaries) shall be extinguished and deemed released unless asserted by
filing of a legal action within such 2-year period.
SECTION 11. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any
other provision of this Agreement, and regardless whether indemnification of the
Indemnitee would be permitted and/or required under this Agreement, if the
Indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives and
executors (collectively the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof.
Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be
mandatory and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
SECTION 12. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any
other provision of this Agreement, and regardless of the presence or absence of
any Determination, the Company promptly (but not later than 30 days following
the Indemnitee's submission of a reasonable accounting) shall reimburse the
Indemnitee for all attorneys' fees and related court costs and other expenses
incurred by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
<PAGE> 9
SECTION 13. MISCELLANEOUS.
13.1 Notice Provision. Any notice, payment, demand or
communication required or permitted to be delivered or given by the provisions
of this Agreement shall be deemed to have been effectively delivered or given
and received on the date personally delivered to the respective party to whom it
is directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the addresses set forth below
opposite their signatures to this Agreement.
13.2 Entire Agreement. Except for the Company's Articles of
Incorporation, this Agreement constitutes the entire understanding of the
parties and supersedes all prior understandings, whether written or oral,
between the parties with respect to the subject matter of this Agreement.
13.3 Severability of Provisions. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid, and enforceable.
13.4 Applicable Law. This Agreement shall be governed by and
construed under the laws of the Netherlands.
13.5 Execution in Counterparts. This Agreement and any amendment
may be executed simultaneously or in counterparts, each of which together shall
constitute one and the same instrument.
13.6 Cooperation and Intent. The Company shall cooperate in good
faith with the Indemnitee and use its best efforts to ensure that the Indemnitee
is indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
13.7 Amendment. No amendment, modification or alteration of the
terms of this Agreement shall be binding unless in writing, dated subsequent to
the date of this Agreement, and executed by the parties.
13.8 Binding Effect. The obligations of the Company to the
Indemnitee hereunder shall survive and continue as to the Indemnitee even if the
Indemnitee ceases to be a director, officer, employee and/or agent of the
Company. Each and all of the covenants, terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the successors to the Company
and, upon the death of the Indemnitee, to the benefit of the estate, heirs,
executors, administrators and personal representatives of the Indemnitee.
<PAGE> 10
13.9 Nonexclusivity. The rights of indemnification and
reimbursement provided in this Agreement shall be in addition to any rights to
which the Indemnitee may otherwise be entitled by statute, bylaw, agreement,
vote of stockholders or otherwise.
13.10 Effective Date. The provisions of this Agreement shall cover
claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions which heretofore have taken place.
-------------
<PAGE> 11
IN WITNESS WHEREOF, EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.
ADDRESS: THE COMPANY:
- -------------------------------- Miami Cruiseline Services Holdings I B.V., a
- -------------------------------- Dutch private company with limited liability
- --------------------------------
Attention: By: /s/ Bradley M. Bloom
----------------------------------------
Name: Bradley M. Bloom
Title: Authorized Person
ADDRESS: THE INDEMNITEE:
1440 North View Drive
Miami Beach, Florida 33140
/s/ Philip Levine
--------------------------------------------
Name: Philip Levine
<PAGE> 1
EXHIBIT 10.13
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the 15th of September,
1998, between Miami Cruiseline Services Holdings I B.V., a Dutch private company
with limited liability (the "Company") and Jerry Chafetz, a resident of the
State of Florida (the "Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee to
serve as a director of the Company.
B. As a condition to the Indemnitee's agreement to continue to serve as
a director of the Company, the Indemnitee requires that he be indemnified from
liability to the fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law in order to retain the services of the Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
SECTION 14. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER THAN THOSE
BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company
shall indemnify and hold harmless the Indemnitee from and against any and all
claims, damages, expenses (including attorneys' fees), judgments, penalties,
fines (including excise taxes assessed with respect to an employee benefit
plan), settlements, and all other liabilities incurred or paid by him in
connection with the investigation, defense, prosecution, settlement or appeal of
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 Company) and to which the Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that the Indemnitee is or
was an officer, director, shareholder, employee or agent of the Company, or is
or was serving at the request of the Company as an officer, director, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, or by reason of anything done
or not done by the Indemnitee in any such capacity or capacities, provided that
the Indemnitee acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to
ally criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
SECTION 15. MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT
OF THE COMPANY. Subject to Section 4 hereof, the Company shall indemnify and
hold harmless the Indemnitee from and against any and all expenses (including
attorneys' fees) and amounts actually and reasonably incurred or paid by him in
connection with the investigation, defense, prosecution, settlement or appeal of
any threatened, pending or completed action, suit or proceeding by or in the
right of the Company to procure a judgment in
<PAGE> 2
its favor, whether civil, criminal, administrative or investigative, and to
which the Indemnitee was or is a party or is threatened to be made a party by
reason of the fact that the Indemnitee is or was an officer, director,
shareholder, employee or agent of the Company, or is or was serving at the
request of the Company as an officer, director, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of anything done or not done by
the Indemnitee in any such capacity or capacities, provided that (i) the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and (ii) no indemnification
shall be made under this Section 2 in respect of any claim, issue or matter as
to which the Indemnitee shall have been adjudged to be liable to the Company for
misconduct in the performance of his duty to the Company unless, and only to the
extent that, the court in which such proceeding was brought (or any other court
of competent jurisdiction) shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
SECTION 16. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF
NEGLIGENCE. The Company shall reimburse the Indemnitee for any expenses
(including attorney's fees) and amounts actually and reasonably incurred or paid
by him in connection with the investigation, defense, settlement or appeal of
any action or suit described in Section 2 hereof that results in an adjudication
that the Indemnitee was liable for negligence, gross negligence or recklessness
(but not willful misconduct) in the performance of his duty to the Company;
provided, however, that the Indemnitee acted in good faith and in a manner he
believed to be in the best interests of the Company.
SECTION 17. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
Sections 1 and 2 hereof (unless ordered by a court) and any reimbursement made
under Section 3 hereof shall be made by the Company only as authorized in the
specific case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7 and 8 of this
Agreement, the Determination shall be made in the following order of preference:
(1) first, by the Company's Managing Board (the "Board")
by majority vote or consent of a quorum consisting of directors ("Disinterested
Directors") who are not, at the time of the Determination, named parties to such
action, suit or proceeding; or
(2) next, if such a quorum of Disinterested Directors cannot
be obtained, by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
(3) next, if such a committee cannot be designated, by any
independent legal counsel (who may be any outside counsel regularly employed by
the Company) in a written opinion; or
<PAGE> 3
(4) next, if such legal counsel determination cannot be
obtained, by vote or consent of the holders of a majority of the Company s
common stock.
17.1 No Presumptions. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Indemnitee did not act in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the Company; and-with
respect to-any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
17.2 Benefit Plan Conduct. The Indemnitee's conduct with respect to
an employee benefit plan for a purpose he reasonably believed to be in the
interests of the participants in and beneficiaries of the plan shall be deemed
to be conduct that the Indemnitee reasonably believed to be not opposed to the
best interests of the Company.
17.3 Reliance as Safe Harbor. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on (i) the records or books of account of the Company or another enterprise,
including financial statements, (ii) information supplied to him by the officers
of the Company or another enterprise in the course of their duties, (iii) the
advice of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.3 shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof,
as the case may be.
17.4 Success on Merits or Otherwise. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described in Section 1 or 2 hereof, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal thereof. For purposes of this
Section 4.4, the term "successful on the merits or otherwise" shall include, but
not be limited to, (i) any termination, withdrawal, or dismissal (with or
without prejudice) of any claim, action, suit or proceeding against the
Indemnitee without any express finding of liability or guilt against him, (ii)
the expiration of 120 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
or payment made to induce a settlement, or (iii) the settlement of
<PAGE> 4
any action, suit or proceeding under Section 1, 2 or 3 hereof pursuant to which
the Indemnitee pays less than $10,000.
17.5 Partial Indemnification or Reimbursement. If the Indemnitee is
entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Company for some or a portion of the claims, damages,
expenses (including attorneys' fees), judgments, fines or amounts paid in
settlement by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Section 1, 2 or 3 hereof, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement for
which the Indemnitee is entitled to indemnification and/or reimbursement under
this Agreement.
SECTION 18. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN
SATISFIED.
18.1 Costs. All costs of making the Determination required by
Section 4 hereof shall be borne solely by the Company, including, but not
limited to, the costs of legal counsel, proxy solicitations and judicial
determinations. The Company shall also be solely responsible for paying (i) all
reasonable expenses incurred by the Indemnitee to enforce this Agreement,
including, but not limited to, the costs incurred by the Indemnitee to obtain
court-ordered indemnification pursuant to Section 8 hereof, regardless of the
outcome of any such application or proceeding, and (ii) all costs of defending
any suits or proceedings challenging payments to the Indemnitee under this
Agreement.
18.2 Timing of the Determination. The Company shall use its best
efforts to make the Determination contemplated by Section 4 hereof promptly. In
addition, the Company agrees:
(a) if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 15 days after
a written request for a Determination (a "Request") is delivered to the Company
by the Indemnitee;
(b) if the Determination is to be made by independent legal
counsel, such Determination shall be made not later than 30 days after a Request
is delivered to the Company by the Indemnitee; and
(c) if the Determination is to be made by the stockholders of
the Company, such Determination shall be made not later than 90 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or incurring) of
expenses with respect to which indemnification or
<PAGE> 5
reimbursement is sought, and/or (ii) final disposition of the action, suit or
proceeding with respect to which indemnification or reimbursement is sought.
18.3 Reasonableness of Expenses. The evaluation and finding as to
the reasonableness of expenses incurred by the Indemnitee for purposes of this
Agreement shall be made (in the following order of preference) within 15 days of
the Indemnitee's delivery to the Company of a Request that includes a reasonable
accounting of expenses incurred:
(a) first, by the Board by a majority vote of a quorum
consisting of Disinterested Directors; or
(b) next, if a quorum cannot be obtained under subdivision
(a), by majority vote or consent of a committee duly designated by the Board (in
which designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
(c) next, if a finding cannot be obtained under either
subdivision (a) or (b), by vote or consent of the holders of a majority of the
Company's Common Stock that are represented in person or by proxy at a meeting
called for such purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 5.3 is not made within the prescribed
time. The finding required by this Section 5.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
18.4 Payment of Indemnified Amount. Immediately following a
Determination that the Indemnitee has met the applicable standard of conduct set
forth in Section 1, 2 or 3 hereof, as the case may be, and the finding of
reasonableness of expenses contemplated by Section 5.3 hereof, or the passage of
time prescribed for making such determination(s), the Company shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
18.5 Stockholder Vote on Determination. Notwithstanding the
provisions of the Dutch law, the Indemnitee and any other stockholder who
is a party to the proceeding for which indemnification or reimbursement is
sought shall be entitled to vote on any Determination to be made by the
Company's stockholders, including a Determination made pursuant to Section 5.7
hereof. In addition, in connection with each meeting at which a stockholder
Determination will be made, the Company shall solicit proxies that expressly
include a proposal to indemnify or reimburse the Indemnitee. The Company proxy
statement relating to the proposal to indemnify or reimburse the Indemnitee
shall not include a recommendation against indemnification or reimbursement.
18.6 Selection of Independent Legal Counsel. If the Determination
required under Section 4 is to be made by independent legal counsel, such
counsel shall be selected by the
<PAGE> 6
Indemnitee with the approval of the Board, which approval shall not be
unreasonably withheld. The fees and expenses incurred by counsel in making any
Determination (including Determinations pursuant to Section 5.8 hereof) shall be
borne solely by the Company regardless of the results of any Determination and,
if requested by counsel, the Company shall give such counsel an appropriate
written agreement with respect to the payment of their fees and expenses and
such other matters as may be reasonably requested by counsel.
18.7 Right of Indemnitee to Appeal an Adverse Determination by
Board. If a Determination is made by the Board or a committee thereof that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1, 2 or 3 hereof, upon the written request of- the Indemnitee and the
Indemnitee's delivery of $500 to the Company, the Company shall cause a new
Determination to be made by the Company's stockholders at the next regular or
special meeting of stockholders. Subject to Section 8 hereof, such Determination
by the Company's stockholders shall be binding and conclusive for all purposes
of this Agreement.
18.8 Right of Indemnitee To Select Forum For Determination. If, at
any time subsequent to the date of this Agreement, "Continuing Directors" do not
constitute a majority of the members of the Board, or there is otherwise a
change in control of the Company (as contemplated by Item 403(c) of Regulation
S-K), then upon the request of the Indemnitee, the Company shall cause the
Determination required by Section 4 hereof to be made by independent legal
counsel selected by the Indemnitee and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of clause (3) of Section 4 hereof. If none of the legal counsel
selected by the Indemnitee are willing and/or able to make the Determination,
then the Company shall cause the Determination to be made by a majority vote or
consent of a Board committee consisting solely of Continuing Directors. For
purposes of this Agreement, a "Continuing Director" means either a member of the
Board at the date of this Agreement or a person nominated to serve as a member
of the Board by a majority of the then Continuing Directors.
18.9 Access by Indemnitee to Determination. The Company shall
afford to the Indemnitee and his representatives ample opportunity to present
evidence of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Company proxy
statement relating to a stockholder Determination.
18.10 Judicial Determinations in Derivative Suits. In each action
or suit described in Section 2 hereof, the Company shall cause its counsel to
use its best efforts to obtain from the Court in which such action or suit was
brought (i) an express adjudication whether the Indemnitee is liable for
negligence or misconduct in the performance of his duty to the Company, and, if
the Indemnitee is so liable, (ii) a determination whether and to what extent,
despite the-adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Indemnitee is fairly and reasonably
entitled to indemnification.
<PAGE> 7
SECTION 19. SCOPE OF INDEMNITY. The actions, suits and proceedings
described in Sections 1 and 2 hereof shall include, for purposes of this
Agreement, any actions that involve, directly or indirectly, activities of the
Indemnitee both in his official capacities as a Company director or officer and
actions taken in another capacity while serving as director or officer,
including, but not limited to, actions or proceedings involving (i) compensation
paid to the Indemnitee by the Company, (ii) activities by the Indemnitee on
behalf of the Company, including actions in which the Indemnitee is plaintiff,
(iii) actions alleging a misappropriation of a "corporate opportunity," (iv)
responses to a takeover attempt or threatened takeover attempt of the Company,
(v) transactions by the Indemnitee in Company securities, and (vi) the
Indemnitee's preparation for and appearance (or potential appearance) as a
witness in any proceeding relating, directly or indirectly, to the Company. In
addition, the Company agrees that, for purposes of this Agreement, all services
performed by the Indemnitee on behalf of, in connection with or related to any
subsidiary of the Company, any employee benefit plan established for the benefit
of employees of the Company or any subsidiary, any corporation or partnership or
other entity in which the Company or any subsidiary has a 5% ownership interest,
or any other affiliate shall be deemed to be at the request of the Company.
SECTION 20. ADVANCE FOR EXPENSES.
20.1 Mandatory Advance. Expenses (including attorneys' fees)
incurred by the Indemnitee in investigating, defending, settling or appealing
any action, suit or proceeding described in Section 1 or 2 hereof shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding. The Company shall promptly pay the amount of such expenses to the
Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Company of a written request for an advance pursuant to this
Section 7, together with a reasonable accounting of such expenses.
20.2 Undertaking to Repay. The Indemnitee hereby undertakes and
agrees to repay to the Company any advances made pursuant to this Section 7 if
and to the extent that it shall ultimately be found that the Indemnitee is not
entitled to be indemnified by the Company for such amounts.
20.3 Miscellaneous. The Company shall make the advances
contemplated by this Section 7 regardless of the Indemnitee's, financial ability
to make repayment, and regardless whether indemnification of the Indemnitee by
the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 7 shall be unsecured and interest-free.
SECTION 21. COURT-ORDERED INDEMNIFICATION. Regardless whether the
Indemnitee has met the standard of conduct set forth in Sections 1, 2 or 3
hereof, as the case may be, and notwithstanding the presence or absence of any
Determination whether such standards have been satisfied, the Indemnitee may
apply for indemnification (and/or reimbursement pursuant to Section 3 or 12
hereof) to the court conducting any proceeding to which the Indemnitee is a
party or to any other court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order
<PAGE> 8
indemnification (and/or reimbursement) if it determines the Indemnitee is fairly
and reasonably entitled to indemnification (and/or reimbursement) in view of all
the relevant circumstances (including this Agreement).
SECTION 22. NONDISCLOSURE OF PAYMENTS. Except as expressly required by
Federal securities laws, neither party shall disclose any payments under this
Agreement unless prior approval of the other party is obtained. Any payments to
the Indemnitee that must be disclosed shall, unless otherwise required by law,
be described only in Company proxy or information statements relating to special
and/or annual meetings of the Company's stockholders, and the Company shall
afford the Indemnitee the reasonable opportunity to review all such disclosures
and, if requested, to explain in such statement any mitigating circumstances
regarding the events reported.
SECTION 23. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF
CLAIMS. No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Company (or any of its subsidiaries) against the
Indemnitee, his spouse, heirs, executors, personal representatives or
administrators after the expiration of 2 years from the date the Indemnitee
ceases (for any reason) to serve as either an officer or a director of the
Company, and any claim or cause of action of the Company (or any of its
subsidiaries) shall be extinguished and deemed released unless asserted by
filing of a legal action within such 2-year period.
SECTION 24. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any
other provision of this Agreement, and regardless whether indemnification of the
Indemnitee would be permitted and/or required under this Agreement, if the
Indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives and
executors (collectively the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof.
Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be
mandatory and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
SECTION 25. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any
other provision of this Agreement, and regardless of the presence or absence of
any Determination, the Company promptly (but not later than 30 days following
the Indemnitee's submission of a reasonable accounting) shall reimburse the
Indemnitee for all attorneys' fees and related court costs and other expenses
incurred by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
SECTION 26. MISCELLANEOUS.
<PAGE> 9
26.1 Notice Provision. Any notice, payment, demand or communication
required or permitted to be delivered or given by the provisions of this
Agreement shall be deemed to have been effectively delivered or given and
received on the date personally delivered to the respective party to whom it is
directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the addresses set forth below
opposite their signatures to this Agreement.
26.2 Entire Agreement. Except for the Company's Articles of
Incorporation, this Agreement constitutes the entire understanding of the
parties and supersedes all prior understandings, whether written or oral,
between the parties with respect to the subject matter of this Agreement.
26.3 Severability of Provisions. If any provision of this Agreement
is held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid, and enforceable.
26.4 Applicable Law. This Agreement shall be governed by and
construed under the laws of the Netherlands.
26.5 Execution in Counterparts. This Agreement and any amendment
may be executed simultaneously or in counterparts, each of which together shall
constitute one and the same instrument.
26.6 Cooperation and Intent. The Company shall cooperate in good
faith with the Indemnitee and use its best efforts to ensure that the Indemnitee
is indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
26.7 Amendment. No amendment, modification or alteration of the
terms of this Agreement shall be binding unless in writing, dated subsequent to
the date of this Agreement, and executed by the parties.
26.8 Binding Effect. The obligations of the Company to the
Indemnitee hereunder shall survive and continue as to the Indemnitee even if the
Indemnitee ceases to be a director, officer, employee and/or agent of the
Company. Each and all of the covenants, terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the successors to the Company
and, upon the death of the Indemnitee, to the benefit of the estate, heirs,
executors, administrators and personal representatives of the Indemnitee.
<PAGE> 10
26.9 Nonexclusivity. The rights of indemnification and
reimbursement provided in this Agreement shall be in addition to any rights to
which the Indemnitee may otherwise be entitled by statute, bylaw, agreement,
vote of stockholders or otherwise.
26.10 Effective Date. The provisions of this Agreement shall cover
claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions which heretofore have taken place.
-------------------
<PAGE> 11
IN WITNESS WHEREOF, EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.
ADDRESS: THE COMPANY:
- --------------------------------- Miami Cruiseline Services Holdings I B.V., a
- --------------------------------- Dutch private company with limited liability
- ---------------------------------
Attention: By: /s/ Bradley M. Bloom
----------------------------------------
Name: Bradley M. Bloom
Title: Authorized Signature
ADDRESS: THE INDEMNITEE:
300 South Pointe Drive, Apt. 404
Miami Beach, Florida 33139
/s/ Jerry Chafetz
--------------------------------------------
Name: Jerry Chafetz
<PAGE> 1
EXHIBIT 10.15
CRUISE LINE HOLDINGS CO.
September 17, 1998
Berkshire Partners LLC
One Boston Place
Boston, Massachusetts 02108
Attn: Bradley M. Bloom
Ladies and Gentlemen:
This letter sets forth our agreement whereby Cruise Line Holdings Co.,
a Delaware corporation (the "Company"), shall pay to Berkshire Partners LLC, a
Massachusetts limited liability company ("Berkshire"), a finance and structuring
fee in the amount of $1,250,000 for arranging the financing and certain other
transactions on behalf of the Company in connection with the transactions
contemplated by the Share Purchase Agreement between Viad Corp and the Company,
dated as of July 31, 1998 (the "Viad Agreement") and the Subscription and
Exchange Agreement among the Company, Philip Levine and the other signatories
thereto dated as of August 27, 1998. The Company shall also pay Berkshire's
reasonably incurred out-of-pocket expenses incurred in conduction with these
transactions, including but not limited to reasonable attorney's fees.
The finance and structuring fee shall be due and payable by the Company
on the Closing Date (as defined in the Viad Agreement).
If the foregoing accords with your understanding of our agreement,
kindly execute a copy of this letter in the space provided below and return it
to the Company.
Very truly yours,
CRUISE LINE HOLDINGS CO.
By: /s/ Bradley Bloom
---------------------------
Title: Authorized Person
The foregoing is accepted
and agreed to as of the
date first above written:
BERKSHIRE PARTNERS LLC
By: /s/ Bradley Bloom
-------------------
Name: Bradley Bloom
Title: Authorized Person
<PAGE> 1
EXHIBIT 10.16
CRUISE LINE HOLDINGS CO.
September 17, 1998
F.C. Capital Partners, LLC
Prudential Tower, Suite 1400
800 Boylston Street
Boston, Massachusetts 02199
Attn: David P. Fialkow
Ladies and Gentlemen:
This letter sets forth our agreement whereby Cruise Line Holdings Co.,
a Delaware corporation (the "Company"), shall pay to F.C. Capital Partners, LLC,
a Delaware limited liability company ("FC"), a finance and structuring fee in
the amount of $250,000 for arranging the financing and certain other
transactions on behalf of the Company in connection with the transactions
contemplated by the Share Purchase Agreement between Viad Corp. and the Company,
dated as of July 31, 1998 (the "Viad Agreement") and the Subscription and
Exchange Agreement among the Company, Philip Levine and the other signatories
thereto dated as of August 27, 1998. The Company shall also pay FC's reasonably
incurred out-of-pocket expenses incurred in conjunction with these transactions,
including but not limited to reasonable attorney's fees.
The finance and structuring fee and expense reimbursement shall be due
and payable by the Company on the Closing Date (as defined in the Viad
Agreement).
If the foregoing accords with your understanding of our agreement,
kindly execute a copy of this letter in the space provided below and return it
to the Company.
Very truly yours,
CRUISE LINE HOLDINGS CO.
By: /s/ Bradley Bloom
------------------------
Title: Authorized Person
The foregoing is accepted
and agreed to as of the
date first above written:
F.C. CAPITAL PARTNERS, LLC
By: /s/ Joel Cutler
-----------------------
Name: Joel Cutler
Title: Member
<PAGE> 1
EXHIBIT 10.22
SCHEDULE TO FORM OF PUT AGREEMENT
The form of the Put Agreement is used for Put Agreements which Miami
Cruiseline Services Holdings II B.V. has entered into with the following
parties:
REPURCHASE AMOUNT
NAME FOR ALL OF THE SUBJECT STOCK
American Home Assurance Company $ 1,603,849.33
New York Life Insurance Company $ 1,603,849.34
The Norwestern Mutual Life Insurance $ 1,603,849.33
Company
<PAGE> 2
MIAMI CRUISELINE SERVICES HOLDINGS II B.V.
ONE BOSTON PLACE
BOSTON, MA 02108-4401
September 17, 1998
Re: Put Agreement regarding Common Stock of Miami Cruiseline Services
Holdings I B.V.
Ladies and Gentlemen:
This Agreement is made in connection with the issuance by Miami Cruiseline
Services Holdings II B.V., a besloten vennootschap met beprekte
aansprakelijkheid (private company with limited liability) (the "Company") of
its Senior Subordinated Notes due 2006 (the "Notes") pursuant to a Debt
Securities Purchase Agreement dated September 17, 1998 by and between the
Company, as issuer of the Notes, and (together with its successors and permitted
assigns, the "Holder"), as Purchaser of a portion of the Notes. The rights and
obligations of the Company and the Purchasers with respect to the Notes are
governed by a Note Agreement dated September 17, 1998 (the "Note Agreement")
between the Company and the Holder, The Northwestern Mutual Life Insurance
Company and American Home Assurance Company. As part of the inducement to the
Holder to purchase the Notes, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company agrees that:
1. On the date hereof (the "Closing Date"), the Holder acquired from the
Company's corporate parent, Miami Cruiseline Services Holdings I B.V., a
besloten vennootschap met beprekte aansprakelijkheid (private company with
limited liability) (the "Parent") 3,333 shares of its Common Stock (the
"Parent Stock"). The Parent Stock so acquired by the Holder on the Closing
Date, together with any securities issued in respect of such Parent Stock
(whether by stock split, stock dividend, reclassification or in connection
with a corporate reorganization or otherwise), is referred to herein as the
"Subject Stock".
2. In consideration of the Holder's agreement to purchase the Notes, the
Company has agreed to enter into this Agreement and hereby agrees that the
Holder may, by exercising the Put Right provided by this Agreement, require
the Company to purchase all or any portion of the Subject Stock for a
purchase price (the "Purchase Price") equal (x) if all of the Subject Stock
is required to be purchased, to U.S. $ and
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<PAGE> 3
(y) if only a portion of the Subject Stock is required to be purchased, to
a like percentage of such amount.
3. This Put Right is exercisable at any time prior to its expiry by the
Holder's delivery of a written notice to the Company (a "Put Notice");
provided, that the Put Right shall be deemed to have been exercised without
the need for delivery of a Put Notice upon the occurrence of an Insolvency
Event described in clause (b) of the definition thereof.
The term "Insolvency Event" shall mean (a) the acceleration of indebtedness
of the Company in an aggregate principal amount equal to or greater than
U.S. $8 million or (b) any of the events described in Annex I hereto.
4. The Purchase Price shall be payable in cash, in U.S. dollars, provided
that, at the Company's option, all or a portion of the Purchase Price may
be paid by the issuance of a note of the Company in a principal amount
equal to the portion of the Purchase Price represented by such note. Any
such note shall be payable in U.S. dollars; shall be subordinated to the
Company's guarantee obligations with respect to its Subsidiary's bank
indebtedness on substantially the same terms as the Notes; shall be pari
passu with other indebtedness of the Company (other than the Company's
guarantee of its Subsidiary's bank indebtedness) and shall not be senior to
the indebtedness represented by the Viad Note (as defined in the Note
Agreement); shall be prepayable without premium; shall bear interest at 15%
per annum (or 17% per annum on any overdue payment), calculated on the
basis of twelve 30-day months, compounded semi-annually, such interest to
be payable upon maturity or acceleration; and shall mature September 17,
2006 (subject to acceleration upon an Insolvency Event).
5. If not earlier exercised, the Put Right provided under this Agreement will
expire on the earlier of (i) September 15, 2006 or (ii) the consummation of
a Liquidity Event (as defined below); provided, that the Put Right shall be
exercisable in connection with a Liquidity Event until the conclusion of
the notice period related to such event referenced in paragraph 6.
The term "Liquidity Event" is defined in Annex II hereto.
6. The Company shall provide prompt written notice to the Holder of the
occurrence of an Insolvency Event or a Liquidity Event (provided that such
notice shall be given at least 20 days prior to the occurrence of any
Liquidity Event which is precipitated by action by the Company or by the
Parent). A Put Notice delivered in connection with a Liquidity Event may be
delivered to the Company within 20 days following delivery of the Put
Notice of such event.
7. The rights and obligations represented by this Agreement shall bind and
inure to the parties' successors and assigns; provided that the Holder's
rights under this Agreement shall only be assignable to, and in connection
with, a transfer of its Subject Stock which is permitted under the
shareholders agreement dated as of the date hereof among the shareholders
of the Parent Stock (as amended and in effect from time to time).
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<PAGE> 4
8. Notices hereunder shall be in writing and shall be delivered by either (i)
delivery by a recognized national (U.S.A.) courier service or (ii) by
facsimile transmission (confirmed by delivery by a recognized national
courier service sent, to be delivered the following business day, on the
day of sending of such facsimile transmission).
Notices to the Company shall be delivered to: Miami Cruiseline Services
Holdings II B.V., c/o Berkshire Partners LLC, One Boston Place, Boston, MA
02108-4401, Attn: Bradley M. Bloom.
Notices to the Holder shall be delivered to the attention of .
Notices addressed and delivered as herein provided shall be deemed to be
received when actually delivered to the address of the addressee (whether
or not delivery is accepted) or received by the telecopy machine of the
recipient. Any communication not so addressed and delivered shall be
ineffective.
9. This Agreement shall be governed by and construed in accordance with the
domestic substantive laws of the Netherlands without giving effect to any
choice or conflict of laws provision or rule that would cause the
application of the domestic substantive laws of any other jurisdiction.
[Remainder of page left intentionally blank]
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<PAGE> 5
Very truly yours,
MIAMI CRUISELINE SERVICES HOLDINGS II
B.V.
By
----------------------------
Title:
Accepted and Agreed:
By
-------------------------------
Title:
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<PAGE> 6
ANNEX I
(E) INSOLVENCY --
(I) INVOLUNTARY BANKRUPTCY PROCEEDINGS --
(A) a receiver, liquidator, custodian, curator or trustee of the
Company, or of all or any substantial part of its Property, is appointed by
court order and such order remains in effect for more than sixty (60) days;
or an order for relief is entered with respect to the Company, or the
Company is adjudicated a bankrupt or insolvent;
(B) all or any substantial part of the Property of the Company is
sequestered by court order and such order remains in effect for more than
sixty (60) days; or
(C) a proceeding for a faillisement is filed against the Company, or a
petition is filed against the Company under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
law of any jurisdiction, whether now or hereafter in effect, and, in any
case, is not dismissed within sixty (60) days after such filing;
(ii) VOLUNTARY PETITIONS -- the Company commences a proceeding for a
faillisement or surseance van betaling or otherwise files a petition in
voluntary bankruptcy or seeks relief under any provision of any bankruptcy,
reorganization, arrangement, moratorium, suspension of payments,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, or consents to the filing
of any petition against it under any such law; or
(iii) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -- the Company makes
an assignment for the benefit of its creditors, or admits in writing its
inability, or fails, to pay its debts generally as they become due, or
consents to the appointment of a receiver, liquidator, curator or trustee
of the Company or of all or a substantial part of its Property;
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<PAGE> 7
ANNEX II
LIQUIDITY EVENT - means either:
(a) a distribution in a bona fide public offering of at least
twenty-five percent (25%) (by number of shares, assuming that all options,
warrants or other rights to acquire the Parent Stock ("Rights") have been
exercised or converted into Parent Stock, whether or not such Rights are
then currently exercisable or convertible) of the Parent (or, in the case
of a public offering in the United States, of American Depositary Shares
representing such shares of Parent Stock), resulting in gross proceeds to
the Parent of not less than Twenty-Five Million Dollars ($25,000,000) (or
an equivalent amount in guilders) and, as a result of which offering and
any other related transactions, either:
(i) the Parent Stock or such American Depositary Shares become
registered under section 12(b) or 12(g) of the Exchange Act, or are
exempt from registration under section 12(g) thereof solely as a
result of the operation of Rule 12g3-2 under the Exchange Act; or
(ii) the Parent converts to, or otherwise becomes, a naamloze
vennootschap (public corporation with limited liability) and the
Parent Stock becomes listed on a designated offshore securities market
(as such term is defined in Rule 902(a) under the Securities Act); or
(iii) a Change in Control (as defined in the Note Agreement)
shall occur;
(b) all of the Parent Stock and any remaining Rights of the Parent are
sold to a third party which is not an Affiliate (as defined in the Note
Agreement) in an arm's length transaction; or
(c) either the Parent transfers all or substantially all of the
Property of the Company and its Subsidiaries or shall merge with or into or
consolidate or amalgamate with any other Person, as a result of which all
holders of the Parent Stock receive, in lieu of or in exchange for such
Parent Stock, securities of any Person other than the Parent or an
Affiliate, cash or other Property.
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<PAGE> 1
EXHIBIT 10.23
JOINT VENTURE AGREEMENT
FOR OPERATION OF
MIAMI AIRPORT DUTY FREE JOINT VENTURE
This Joint Venture Agreement is made as of this 31st day of August, 1995, by and
among Greyhound Leisure Services, Inc. ("GLSI") Century Duty Free, Inc., Media
Consultants, Inc., Maria J. Argudin, and Bayside Company Store d/b/a Bayside To
Go, Inc., all of whom intend to participate in the operation of the joint
venture herein described ("Venture" herein).
1. ASSOCIATION, NAME, PURPOSES.
1.1. ASSOCIATION. The parties hereto ("Members") hereby associate
themselves as partners to operate the Venture. The Members from time to
time hereafter, as may be required by law, shall execute all amendments
to this Agreement, and do all acts as may be appropriate to comply with
all applicable law in the organization and operation of the Venture.
1.2. GOVERNING LAW. The Venture has been formed pursuant to the Florida
Uniform Partnership Act, Florida Statutes Sections 620.56-620.77
("Act"), and should any provision of this Agreement conflict with the
Act, the Act shall be controlling as to such provision but only to the
extent of the conflict.
1.3. PARTNERSHIP ATTRIBUTES. It is the intent of the Members hereto
that Venture shall be operated in a manner consistent with its
treatment as a "partnership" for all purposes, including federal and
state income tax purposes. No Member shall take any action inconsistent
with this expressed intention.
1.4. NAME. The name of the Venture shall be Miami Airport Duty Free
Joint Venture.
1.5. PLACE OF BUSINESS. The principal place of business of Venture
shall be 8052 N.W. 14th Street, Miami, Florida 33126-1612, or such
other place as the Manager shall determine in its sole discretion.
1.6. PURPOSE. Venture has been established to operate a retail shop
concession or concessions at the Miami International Airport
("Airport") at Miami, Florida, bidding for which currently is pending
PMD No. 000036 ("Concession") to operate pursuant to an agreement
between Dade County, Florida, and Venture for the Concession
("Concession Agreement") and to engage in any activities that are
related to the accomplishment of such purpose.
<PAGE> 2
1.7. TERM. This Agreement shall be effective as of June 21, 1995. The
Venture shall continue in existence until such time as the Venture
fails to be awarded the Concession or no longer has the right to
operate the Concession, unless sooner dissolved and terminated as
specifically provided for in this Agreement. It is understood by the
Members that this Agreement and the Venture shall continue in existence
throughout any renewals or extension of the Concession to the Venture.
1.8. MEMBERS. The name and address of each of the Members of Venture
are:
Greyhound Leisure Services, Inc.
8052 N.W. 14th Street
Miami, Florida 33126-1612
Century Duty Free, Inc.
901 SW 69 Avenue
Miami, FL 33144
Media Consultants, Inc.
1150 NW 72 Avenue, Suite 760
Miami, FL 33126
Maria J. Argudin, Individually
545 W. Park Drive #5
Miami, FL 33172
Bayside Company Store, Inc.
d/b/a Bayside To Go
401 Biscayne Blvd. #P107
Miami, FL 33132
1.9. AGENT FOR SERVICE OF PROCESS. The name and business address of the
agent for service of process for Venture is CT Corp., 1200 South Pine
Island Road, Plantation, Florida 33324, or such other person as Manager
shall appoint from time to time.
1.10. MANAGEMENT. The affairs of Venture shall be conducted by GLSI as
Manager, subject to the provisions of Section 3 hereof, to hold such
authority until its successor is appointed by the Members.
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<PAGE> 3
2. CAPITALIZATION.
2.1. CAPITAL CONTRIBUTIONS; CAPITAL INTERESTS. Each Member shall make
the following contributions of property to the Venture on or before
December 1, 1995, herein referred to as "Interest" or "Capital
Interest".
GLSI $8,118,000, being a 66%
interest in the capital of
Venture Capital Interest.
Century Duty Free, Inc. $1,722,000, being a 14% Capital Interest.
Media Consultants, Inc. $492,000, being a 4% Capital Interest.
Maria J. Argudin $492,000, being a 4% Capital Interest.
Bayside Company Store $1,476,000, being a 12% Capital Interest.
Each DBE Member will borrow:
o 10% of their capital contribution from outside sources,
o 90% of their capital contribution from Greyhound Leisure
Services, Inc.
Interest charged to DBE Members will be fixed at prime rate.
DBE Members will reimburse interest charges to GLSI from the proceeds
of their profit shares. Depreciation and financing expenses will be
charged to income statement prior to profit distribution.
2.2. CAPITAL ACCOUNTS.
(a) DEBITS AND CREDITS. Manager shall cause Venture to
maintain separate accounts of the capital for each Member
("Capital Account") reflecting such Member's Capital Interest
in accordance with the applicable provisions of the Internal
Revenue Code of 1986, as amended ("Code"), and the regulations
issued thereunder ("Regulations").
(b) Each Member's Capital Account shall be credited with such
Member's capital contributions, and a portion of the Profits
(herein defined) of Venture equal to such Members Capital
Interest, determined for each fiscal year of Venture according
to accounting principles consistently applied and allocated to
such Member in accordance with the provisions of this
Agreement.
(c) Each Member's Capital Account shall be debited by the
amount of cash distributed to such Member in accordance with
this Agreement, the gross asset value of any other Venture
property distributed to such Member pursuant to any provision
of this Agreement, a portion of the Losses (herein defined) of
Venture equal to such Member's Capital Interest and the amount
of any liabilities of such
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<PAGE> 4
Member that are assumed by Venture or that are secured by any
property contributed by such Member to the Venture.
(d) If the gross asset value of the Venture assets are
adjusted pursuant to this Agreement, the Capital Accounts of
all Members shall be adjusted simultaneously to reflect the
aggregate net adjustment, as if Venture had recognized gain or
loss equal to the amount of such aggregate net adjustment and
the resulting gain or loss had been allocated among the
Members in accordance with their respective Capital Percentage
Interest.
2.3. INTERPRETATION AND CHANGES. The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with the Code and applicable
Regulations and shall be interpreted and applied in a manner consistent
therewith. If, after consultation with Venture counsel, it is
determined that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto are allocated or computed,
in order to comply with such applicable federal law, the Manager shall
make such modifications after notification to and consultations with
the other Members; provided the Manager determines in good faith that
such modification is not likely to have a material adverse effect on
the amounts properly distributable to any Member upon the termination
of this Venture and that such modification will not increase the
liability of any Member to third parties.
3. MANAGEMENT; RIGHTS AND DUTIES OF MANAGER.
3.1. MANAGEMENT. The business and affairs of Venture shall be managed
by Manager in consultation with other Members through the Management
Committee herein provided for. Manager shall direct, manage and control
the business of Venture to the best of its ability in consultation with
such Management Committee as herein provided. No Member alone other
than the Manager or Management Committee shall have the authority to
bind Venture. The expertise to be provided by Century, Media, Maria
Argudin, and Bayside is described in Exhibit "A" attached hereto.
3.2. MANAGEMENT COMMITTEE.
(a) The business of the Venture shall be managed by Manager by
consultation with a Management Committee. The Management
Committee shall consist of three members. GLSI, as Manager,
shall appoint one member of the Management Committee. Century
Duty Free, Inc., Media Consultants, Inc., Maria J. Argudin,
and Bayside Company Store shall elect two (2) other members of
the Management Committee. Each of said Members shall have the
right to propose one (1) nominee for the Management Committee,
and the two (2) nominees receiving the greatest number of
votes shall be appointed to the Management Committee. Within
10 days of the date of this Agreement, each Member shall
advise the other in writing of the identity of its initial
appointee or appointees to the Management Committee. Each
Member shall have the right, by written notice to the Venture
and the other Members, to designate and appoint any Management
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<PAGE> 5
Committee member to replace a Management Committee member
previously appointed by it in the event of the latter's death,
resignation, retirement or removal from office. Such remaining
Members shall also have the right, by written notice to the
Venture and the other Members, to remove any of the Management
Committee members appointed by such Members, or to designate a
substitute for any such Management Committee members, to serve
in the place of such Management Committee member for such
period designated by such Member in the notice referred to
above. No member of the Management Committee shall hold office
for a fixed term; rather, each Management Committee member
shall serve until he or she dies, resigns, retires or is
removed from office by the Members that appointed him or her.
(b) Meetings of the Management Committee for the transaction
of the business of the Venture may be called at such time,
subject to 24 hours prior notice, by the Member provided,
however, that the Management Committee shall meet not less
frequently than once each calendar quarter. Meetings shall
take place at the offices of the Manager or at such other
location as may be agreed upon by the Members. Actions and
decisions of the Management Committee shall be final,
conclusive and binding upon the Venture and the Members with
the same force and effect as if each of the Members had
specifically or affirmatively taken such action or decision,
subject, however to Section 3.2(d) hereof.
(c) The Management Committee from time to time may delegate to
a Member the exclusive authority to act for, or assume an
obligation or create a liability on behalf of, the Venture.
That Member shall act in accordance with the decision of the
Management Committee.
(d) The decisions of the Management Committee shall be
determined whenever possible by consensus. However, if the
members of the Management Committee cannot agree on a
decision, then except in an emergency, the issue for decision
shall be referred by the Management Committee to the Members.
The presidents of each corporate Member, and each individual
Member, shall promptly confer and attempt to make the decision
by consensus. If the Members cannot agree on a decision, then
the issue shall be decided by affirmative vote of a
Majority-In-Interest of the Members. In an emergency, the
decision shall be made by Manager, and the decision shall be
binding on the members of the Management Committee, the
Members and the Venture so long as such decision is consistent
with the terms and conditions of this Agreement. No Member nor
her or its representative on the Management Committee shall
receive compensation from the Venture for his or its services
as a member of the Management Committee.
3.3. NUMBER, TENURE AND QUALIFICATIONS OF MANAGER. GLSI initially shall
be the sole Manager. The number of Managers of Venture shall be fixed
from time to time by the affirmative vote of a Majority-In-Interest of
the Members, but at all times there shall be at
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<PAGE> 6
least one Manager. Each Manager shall hold office until the next annual
meeting of Members or until its successor shall have been elected and
qualified. Managers need not be residents of the State of Florida. As
used herein, Majority-In-Interest means a simple majority of the
Capital Interests of Members stated herein or, in the case described in
Section 8.2 herein, a simple majority of the Capital Interests of
Members excluding that of the Member in default.
3.4. CERTAIN POWERS OF MANAGER. Without limiting the generality of
Section 3.1 hereof, Manager shall have power and authority, on behalf
of Venture, after consultation with the Management Committee, subject
to the limitations of Section 3.5 hereof to exercise the powers and
perform the acts described below. Manager shall disclose to the
Management Committee any dealings which Manager intends to conduct with
affiliates of Manager.
(a) Upon the affirmative vote a Majority-In-Interest, to
acquire property from any person as the Manager may determine,
and the fact that a Member is directly or indirectly
affiliated or connected with any such person shall not
prohibit Manager from dealing with that person;
(b) Upon the affirmative vote of a Majority-In-Interest, to
borrow money for Venture from banks, other lending
institutions, Members, or affiliates of Members on such terms
as they deem appropriate, and in connection therewith, to
hypothecate, encumber and grant security interests in the
assets of Venture to secure repayment of the borrowed sums. No
debt or other obligation shall be contracted or liability
incurred by or on behalf of Venture except by Manager;
(c) To purchase liability and other insurance to protect
Venture's property and business;
(d) To hold and own any Venture real and/or personal
properties in the name of Venture;
(e) To invest any Venture funds temporarily (by way of example
but not limitation) in time deposits, short-term governmental
obligations, commercial paper or other investments;
(f) To execute on behalf of Venture all instruments and
documents, within its authority, including, without
limitation, checks, drafts, note and other negotiable
instruments, mortgage or deeds of trust, security agreements,
financing statements, documents providing for the acquisition,
mortgage or disposition of the Venture's property,
assignments, bills of sale, leases, partnership agreements,
Miami International Airport concession agreement or
agreements, and any other instruments or documents necessary,
in the opinion of Manager, to the ordinary course of business
of Venture;
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(g) To employ accountants, legal counsel, managing agents or
other experts to perform services for Venture and to
compensate them from Venture funds;
(h) To act as "tax matters partner" pursuant to Section 6231
of the Code;
(i) To enter into any and all other agreements on behalf of
Venture in the ordinary course of its business, with any other
person or entity for any purpose, in such forms as Manager may
approve; including the establishment of a procedure and
agreement whereby inventory to be sold by Venture shall be
provided by GLSI on a consignment basis pursuant to which
title to it will remain vested in GLSI, and Venture shall bear
all carrying costs of such consigned inventory and upon sale
thereof will reimburse Manager for Manager's verified cost
thereof and such carrying costs out of sale proceeds; and
(j) To do and perform all other acts as may be necessary or
appropriate to the conduct of Venture's business in its
ordinary course.
3.5. LIMITATIONS.
(a) Unless authorized to do so by this Agreement or by a
Manager, no Member, agent or employee of Venture shall have
any power or authority to bind Venture in any way, to pledge
its credit or to render it liable for any purpose. However, a
Manager may act by or through duly authorized
attorney-in-fact.
(b) It is expressly agreed that the Venture, the Manager, and
none of the Members shall take on behalf of the Venture,
action with respect to any of the following matters unless
approved in writing by all Members acting individually or
through their appointed representatives of the Management
Committee:
(i) The establishment by the Venture of any
concession other than the Concession in the Airport
or elsewhere;
(ii) The amount, terms and conditions of any
long-term debt of the Venture;
(iii) Amending the Concession Agreement or admission
of any new Members to the Venture;
(iv) Selling or disposing of assets having a value in
excess of $10,000;
(v) Any contract, agreement or undertaking, other
than the Concession Agreement, by which any Member
becomes or might become subject to possible claims or
liabilities which are not expressly limited to the
interest of such Member in the Venture;
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(vi) The institution of any legal or administrative
action by or on behalf of the Venture or the
compromise or settlement of any claim of the Venture
of more than $5,000 for less than the face amount of
such claim;
(vii) Except as otherwise provided herein, the
distribution of cash or property by the Venture;
(viii) The lending by Venture of money to or the
guarantee by Venture of the indebtedness of any third
party;
(ix) The making, execution or delivery on behalf of
the Venture of any assignment for the benefit of
creditors or any concession of judgment, guarantee,
indemnity bond or surety bond;
(x) The filing of a complaint or the institution of
any proceeding at law or in equity to have any
property of the Venture partitioned;
(xi) Borrowing any money or the execution or
modification of any mortgage, deed to secure debt,
pledge, encumbrance or other hypothecation or
security agreement affecting the assets of the
Venture or any financing in connection therewith; or
(xii) Any transaction not within the scope of the
Venture business described herein.
3.6. EXCLUSIVE DUTY TO VENTURE. Manager shall not be required to manage
Venture at its sole and exclusive function and it may have other
business interests and may engage in other activities in addition to
those relating to Venture. Neither Venture nor any Member shall have
any right, by virtue of this Agreement, to share or participate in such
other investments or activities of Manager or to the income or proceeds
derived therefrom.
3.7. BANK ACCOUNTS. Manager may from time to time open bank accounts in
the name of Venture, and Manager shall be the sole signatory thereon,
unless the Majority-In-Interest of the Members determines otherwise.
3.8. INDEMNITY OF THE MANAGER. Manager shall be indemnified by Venture
for acts or omissions in its capacity as Manager of the Venture to the
fullest extent permitted by Florida law.
3.9. RESIGNATIONS. Any Member may resign as Manager of Venture at any
time by giving written notice to the Members. The resignation of any
Manager shall take effect upon receipt of notice thereof or at such
later time as shall be specified in such notice thereof or at such
later time as shall be specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Such
resignation shall affect such Manager's rights and liabilities as a
member.
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3.10. REMOVAL. Manager may be removed at any time, with or without
cause, by the affirmative vote of a Majority-In-Interest of the
Members.
3.11. VACANCIES. Any vacancy occurring for any reason in the office of
Manager of Venture may be filled by the affirmative vote of a
Majority-In-Interest of Members. A manager elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office
and shall hold office until the expiration of such term and until his
successor shall be elected and shall qualify or until his earlier
death, resignation or removal. A Manager chosen to fill a position
resulting from an increase in the number of Managers shall hold office
until the next annual meeting of Members and until his successor shall
be elected and shall qualify, or until his earlier death, resignation
or removal.
3.12. COMPENSATION. Compensation for Manager's services and obligations
hereunder shall be established by the Majority-In-Interest of the
Members to provide Manager with a means to be reimbursed for its cost
and expense of management services, including the reimbursement of
direct costs pursuant to Section 3.4(i) hereof and a reimbursement of
indirect costs of not less than 3% of gross receipts of Joint Venture.
3.13. TRAINING PROVIDED BY MANAGER. In connection with managing the
Venture and consulting with the other Members, Manager shall provide
training opportunities to Century, Media, Maria Argudin and Bayside,
which include but are not limited to the opportunities listed in
Exhibit "B".
4. RIGHTS AND OBLIGATIONS OF MEMBERS.
4.1. LIABILITY. Manager and Members shall be liable for the Venture's
obligations under the Concession Agreement and all other obligations of
the Venture.
4.2. LIST OF MEMBERS. Upon written request of any Member, Manager shall
provide a list showing the names, last known addresses and interests of
all Members.
4.3. APPROVAL OF SALE OF ALL ASSETS. Members shall have the right, by
the affirmative vote of a Majority-In-Interest, to approve the sale,
exchange or other disposition of all, or substantially all, of
Venture's assets which is to occur as part of a single transaction or
plan.
4.4. ACCOUNTS. Manager shall maintain and preserve at Venture's
registered office, during the term of the Venture, and as long
thereafter as all years are open by statute or pursuant to waivers in
state or federal tax review of audit, all accounts, books, and other
relevant Venture documents, including, without limitation, copies of
this Agreement together with any supplements, modifications or
amendments hereto, any prior operating agreements no longer in effect,
written agreements by a Member to make a capital contribution to
Venture, copies of Venture's federal, state and local income tax
returns and reports and copies of all financial statements. Upon
reasonable request, each
9
<PAGE> 10
Member shall have the right, during ordinary business hours, to inspect
and copy such Venture documents at the Member's expense.
4.5. PRIORITY AND RETURN OF CAPITAL. Except as otherwise provided
herein, no Member shall have priority over any other Member, either as
to the return of Capital Contributions or as to Profits, Losses or
distributions; provided that this Section shall not apply to loans (as
distinguished from capital contributions) which a Member has made to
Venture.
5. MEETING OF MEMBERS.
5.1. ANNUAL MEETING. An annual meeting of the Members shall be held
prior to the end of May of each year or at such time as shall be
determined by a Majority-In- Interest of the Members, commencing with
the year 1996 for the purpose of the transaction of such business as
may come before such meetings.
5.2. SPECIAL MEETINGS. Special meetings of the Members, for any purpose
or purposes may be called by Manager or by a Majority-In-Interest of
the Members.
5.3. QUARTERLY MEETINGS. Quarterly meetings of the Management Committee
shall be held within 30 days after the end of each calendar quarter.
5.4. PLACE OF MEETINGS. The Members may designate any place, either
within or outside the State of Florida, as the place of meeting for any
meeting of the Members. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be held at 8052
N.W. 14th Street, Miami, Florida 33126-1612.
5.5. NOTICE OF MEETINGS. Except as provided in Section 5.7 hereof,
written notice stating the place, day and hour of the meeting and the
purpose or purposes for which the meeting is called shall be delivered
not less than 1 nor more than 30 days before the date of the meeting,
either personally or by mail, by or at the direction of Manager or
person calling the meeting, to each Member entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered 2
calendar days after being deposited in the United States mail,
addressed to the Member at its address as it appears on the books of
Venture, with postage thereon prepaid. If transmitted by way of
facsimile, such notice shall be deemed to be delivered on the date of
such facsimile transmission to the fax number, if any, for the
respective member which has been supplied by such Member to Manager and
identified as such Member's facsimile number.
5.6. MEETINGS OF ALL MEMBERS. If all Members shall meet at any time and
place, either within or outside of the State of Florida, and consent to
the holding of a meeting at such time and place, such meeting shall be
valid without call or notice, and at such meeting lawful action may be
taken.
5.7. RECORD DATE. For the purpose of determining Members entitled to
notice of or to vote at any meeting of Members or any adjournment
thereof, or Members entitled to
10
<PAGE> 11
receive payment of any distribution, or in order to make a
determination of Members for any other purpose, the date on which
notice of the meeting is mailed or the date on which the resolution
declaring such distribution is adopted, as the case may be, shall be
the record date for such determination of Members. When a determination
of Members entitled to vote at any meeting of Members has been made as
provided in this Section 5.6, such determination shall apply to any
adjournment thereof.
5.8. QUORUM. A Majority-In-Interest of Members represented in person or
by proxy, shall constitute a quorum at any meeting of Members. In the
absence of a quorum at any such meeting, a majority of the Interest so
represented may adjourn the meeting from time to time for a period not
to exceed 60 days without further notice. However, if the adjournment
is for more than 60 days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each Member of record entitled to vote at a meeting.
5.9. MANNER OF ACTING. If a quorum is present, the affirmative vote of
a Majority-In- Interest of Members shall be the act of the Members,
unless the vote of a greater or lesser proportion or number is
otherwise required by this Agreement.
5.10. PROXIES. At all meetings of Members, a Member may vote in person
or by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the Manager before or
at the time of the meeting. No proxy shall be valid after 11 months
from the date of its execution, unless otherwise provided in the proxy.
5.11. ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted
to be taken at a meeting of Members may be taken without a meeting if
the action is evidenced by one or more written consents describing the
action taken, signed by each Member entitled to vote and delivered to
the Manager for inclusion in the minutes or for filing with Venture
records. Action taken under this Section is effective when all Members
entitled to vote have signed the consent, unless the consent specifies
a different effective date. The record date for determining Members
entitled to take action without a meeting shall be the date the first
Member signs a written consent.
5.12. WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the Person entitled to
such notice, whether before, at, or after the time stated therein,
shall be equivalent to the giving of such notice.
6. PROFIT AND LOSSES; DISTRIBUTIONS.
6.1. DEFINITIONS. As used in this Agreement, the terms "Profits" and
"Losses" have the following meanings:
(a) "Profits" means, for the fiscal year of Venture, the
income gains of Venture determined in accordance with
accounting principles consistently applied from year to year
and, as reported, separately or in the aggregate, as
appropriate,
11
<PAGE> 12
on Venture's information tax return filed for federal income
tax purposes, plus any income described in Section
705(a)(1)(B) of the Code.
(b) "Losses" means, for each fiscal year of Venture, the
losses and deductions of Venture determined in accordance with
accounting principles consistently applied from year to year
and, as reported, separately or in the aggregate, as
appropriate, on Venture's information tax return filed for
federal income tax purposes, plus any expenditures described
in Section 705(a)(2)(B) of the Code.
6.2. PROFITS AND LOSSES. Subject to Section 6.4 hereof, each Member
shall share in the Profits and Losses of the Venture in proportion to
their respective Capital Interests.
6.3. DISTRIBUTIONS. Except as otherwise provided herein, all
distributions of cash or other property out of Profits shall be made to
Members in proportion to their respective Capital Interests on the
record date of such distribution. Except as otherwise provided herein,
all distributions shall be made at such time as is determined by
Manager. All amounts withheld pursuant to the Code, Regulations or any
provisions of state or local tax law with respect to any payment or
distribution to Members from Venture shall be treated as amounts
distributed to the relevant Member or Members pursuant to this Section
6.3 hereof.
6.4. LIMITATION UPON DISTRIBUTIONS. No distribution shall be declared
and paid unless, after the distribution is made, the assets of Venture
are in excess of all liabilities of Venture, except liabilities to
Members on account of their contributions.
6.5. ACCOUNTING METHOD. The books and records of account of Venture
shall be maintained in accordance with the accrual method of
accounting.
6.6. INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member shall
be entitled to interest on the Member's capital contributions or to the
return of the Member's capital contribution, except as otherwise
specifically provided for herein.
6.7. LOANS TO VENTURE. Nothing in this Operating Agreement shall
prevent any Member from making secured or unsecured loans to Venture by
agreement with Venture.
6.8. ACCOUNTING PERIOD. Venture's fiscal year shall be the calendar
year.
6.9. RECORDS, AUDITS AND REPORTS. At the expense of Venture, Manager
shall maintain records and accounts of all operations and expenditures
of Venture. At a minimum, Venture shall keep at its principal place of
business the following records:
(a) A current list of the full name and last known business,
residence, or mailing address of each Member and Manager, both
past and present;
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<PAGE> 13
(b) Copies of Venture's federal, state and local income tax
returns and reports, if any, for all years that are open by
statute or pursuant to waivers for state or federal tax review
or audit;
(c) Copies of Venture's currently effective written Joint
Venture Agreement and all amendments thereto, copies of any
prior written agreements no longer in effect, copies of any
writings permitted or required with respect to a Member's
obligation to contribute cash, property or services, and
copies of any financial statements of Venture for the three
most recent years;
(d) Minutes of every annual, special, and court-ordered
meeting of Members;
(e) Any written consents obtained from Members for actions
taken by Members without a meeting.
6.10. TAX RETURNS AND OTHER ELECTIONS. Manager shall cause the
preparation and timely filing of all returns required to be filed by
Venture pursuant to the Code and all other tax returns deemed necessary
and required in each jurisdiction in which Venture does business and
the timely payment or deposit of all taxes due. Copies of such returns,
or pertinent information therefrom, shall be furnished to Members
within a reasonable time after the end of Venture's fiscal year. All
elections permitted to be made by Venture under federal or state tax or
other laws shall be made by Manager in its sole discretion.
7. RESTRICTIONS ON TRANSFERABILITY.
No Member shall have any right to retire or withdraw voluntarily from
the Venture or to sell, transfer or assign a Capital Interest separately or to
sell an Interest, or voluntarily to commit an act that constitutes an event of
withdrawal as a Member under any applicable law ("Withdrawal Event"). Any
voluntary act of a Member that constitutes a withdrawal from Venture shall
constitute a material breach of this Agreement and Venture shall be entitled to
collect damages for such breach. Such damages shall offset any cash or other
property otherwise distributable to such Member by Venture. Admission of a
transferee of an Interest as Member shall not effect the dissolution of Venture.
8. REMOVAL/WITHDRAWAL/ADDITION OF MEMBERS.
8.1. After the formation of Venture pursuant hereto, no person or
entity may become a Member of Venture. No assignee of an Interest of a
Member of Venture may become a Member of Venture without the written
consent of a Majority-In-Interest of the Members; provided, however,
that there shall be no dilution of the aggregate Interest in the
Venture held by Disadvantaged Business Enterprises as defined in PMD
No. 000036 specifications referred to in Section 1.6 hereof. No new
Members by virtue of any such assignment shall be entitled to any
retroactive allocation of Profits, Losses or expense deductions
incurred by Venture. Manager, at the time any new Member is admitted,
may close the Venture books (as though Venture's tax year had ended) or
make pro rata allocations of Profits, Losses, income and expense
deductions to such new Member for that portion of the Venture's tax
year in which such new Member was admitted in
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<PAGE> 14
accordance with the provisions of Section 706(d) of the Code and the
Regulations promulgated thereunder.
8.2. If any Member is in default of any provision hereof and such
default is not cured within 10 days of a written notice of such
default, such Member may be removed by the affirmative vote of the
Majority-In-Interest, excluding the interest of the Member in default.
9. DISSOLUTION AND TERMINATION.
9.1. DISSOLUTION.
(a) Venture shall be dissolved or terminated upon the
occurrence of any of the following events:
(i) By the unanimous written agreement of all
Members;
(ii) Upon the entry of a decree of dissolution by any
court having jurisdiction;
(iii) Upon the acquisition by one Party or entity of
a 100% Capital Interest; or
(iv) Upon any other Withdrawal Event, unless the
business of Venture is continued by the specific
consent of a Majority-In-Interest of the remaining
Members given with 90 days after such event and there
are at least 2 remaining Members.
(v) As soon as possible following the occurrence of
any Withdrawal Event, if Venture is not continued, a
representative of the Venture shall execute and file
such documents as may be required by law to reflect
such dissolution or termination.
9.2. EFFECT OF FILING OF DISSOLVING STATEMENT. Upon the dissolution or
termination of Venture, it shall cease to carry on its business, except
insofar as may be necessary for the winding up of its business, but its
separate existence shall continue until termination documents or
actions have been filed or taken as required by Florida law or until a
decree dissolving or terminating Venture has been entered by a court of
competent jurisdiction.
9.3. WINDING UP. LIQUIDATION AND DISTRIBUTION OF ASSETS.
(a) Upon dissolution of Venture, an accounting shall be made
by Venture's independent accountants of the accounts of
Venture and of Venture's assets, liabilities and operations,
from the date of the last previous accounting until the date
of dissolution. Manager immediately shall proceed to wind up
the affairs of Venture.
14
<PAGE> 15
(b) If Venture is to be dissolved or terminated and its
affairs are to be wound up, Manager shall (1) sell or
otherwise liquidate all of Venture's assets as promptly as
practicable (except to the extent Manager may determine to
distribute any assets to Members in kind); (2) allocate any
Losses resulting from such sales to Members' Capital Accounts
in accordance with their respective Capital Interests; (3)
allocate all Profits resulting from such sales among the
Members Capital Accounts in accordance with their respective
Capital Interests; (4) discharge all liabilities of Members
(other than liabilities to Members), including all costs
relating to the dissolution, winding up, and liquidation and
distribution of assets; (5) establish such reserves as
reasonably may be necessary to provide for contingent
liabilities of Venture (for purposes of determining the
Capital Accounts of Members, the amounts of such reserves
shall be deemed to be an expense of Venture); (6) discharge
any liabilities of Venture to Members other than on account of
their interests in Venture capital or Profits; and (7)
distribute the remaining assets in the following order:
(i) If any assets of the Venture are to be
distributed in kind, the net fair market value of
such assets as of the date of dissolution shall be
determined by independent appraisal or by agreement
of Members. Such assets shall be deemed to have been
sold as of the date of dissolution for their fair
market value, and the Capital Accounts of Members
shall be adjusted pursuant to the provisions of this
Agreement to reflect such deemed sale.
(ii) The positive balance of each Member's Capital
Account as determined after taking into account all
Capital Account adjustments for Venture's taxable
year during which the liquidation occurs, shall be
distributed to Members, either in cash or in kind, as
determined by Manager, with any assets distributed in
kind being valued for this purpose at their fair
market value as determined pursuant to Section
9.3(b)(i) hereof. Any such distributions to Members
in respect of their Capital Accounts shall be made in
accordance with the time requirements set forth in
the Regulations.
(c) Upon completion of the winding up, liquidation and
distribution of assets, Venture shall be deemed terminated.
(d) Manager shall comply with any applicable requirements of
applicable law pertaining to the winding up of the affairs of
Venture and the final distribution of its assets.
9.4. TERMINATION DOCUMENTATION. When all debts, liabilities and
obligations of Venture have been paid and discharged or adequate
provisions have been made therefor and all of the remaining property
and assets have been distributed to Members, an appropriate termination
document shall be executed and filed as required by law.
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<PAGE> 16
9.5. RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except as
provided by law, upon dissolution, each Member shall look solely to the
assets of Venture or the return of its capital contribution. If Venture
property remaining after the payment of discharge of the debts and
liabilities of Venture is insufficient to return the cash or other
property contribution to one or more Members, such Member or Members
shall have no recourse against any other Member.
10. MISCELLANEOUS PROVISIONS.
10.1. NOTICES. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be
deemed to have been sufficiently given or served for all purposes if
delivered personally to the party or to an executive officer of the
party to whom it is directed or, if sent by registered or certified
mail, postage and charges prepaid, addressed to the Member's and/or
Venture's address, as appropriate, which is set forth in this
Agreement. Except as otherwise provided herein, any such notice shall
be deemed to be given 3 business days after the date on which it was
deposited in a regularly maintained receptacle for the deposit of
United States mail, addressed and sent as aforesaid.
10.2. BOOKS OF ACCOUNT AND RECORDS. Proper and complete records and
books of Venture shall be caused to be kept by Manager in which shall
be entered fully and accurately all transactions and other matters
relating to Venture's business in such detail and completeness as is
customary and usual for businesses of the type engaged in by Venture.
Such books and records shall be maintained as provided herein. The
books and records at all times shall be maintained at the principal
executive office of Venture and shall be open to the reasonable
inspection and examination of Members of their duly authorized
representatives during reasonable business hours.
10.3. APPLICATION OF FLORIDA LAW. This Agreement and its application
and interpretation shall be governed exclusively by its terms and by
the laws of the State of Florida.
10.4. WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives
during the term of Venture any right that it may have to maintain any
action for partition with respect to the property of Venture.
10.5. AMENDMENTS. This Agreement may not be amended except by the
unanimous written agreement of all Members.
10.6. EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to
comply with any applicable laws, rules or regulations.
10.7. CONSTRUCTION. Whenever the singular letter is used in this
Agreement and when required by the context, the same shall include the
plural, and the masculine gender shall
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<PAGE> 17
include the feminine and neuter genders and vice versa; and the word
"person" or "party" shall include a corporation, firm, partnership,
proprietorship or other form of association.
10.8. HEADINGS. The headings in this Agreement are inserted for
convenience only and are no way intended to describe, interpret,
define, or limit the scope, extent or intent of this Agreement or any
provision hereof.
10.9. WAIVERS. The failure of any party to seek redress for violation
or to insist upon the strict performance of any covenant or condition
of the Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an
original violation.
10.10. RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided
by this Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and remedies are given in addition to any
other rights the parties may have by law, statute, ordinance or
otherwise.
10.11. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid,
illegal, or unenforceable to any extent, the remainder of this
Agreement and the application thereof shall not be affected and shall
not be enforceable to the fullest extent permitted by law.
10.12. HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon
and inure to the benefit of the parties hereto and, to the extent
permitted by this Agreement, their respective heirs, legal
representatives, successors and assigns.
10.13. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
17
<PAGE> 18
MEMBERS: MANAGER:
GREYHOUND LEISURE SERVICES, GREYHOUND LEISURE SERVICES,
INC. INC.
By: /s/ J.P. Miquel By: /s/ J.P. Miquel
------------------------------- ---------------------------------
Name: J.P. Miquel Name: J.P. Miquel
----------------------------- -------------------------------
Title: President Title: President
---------------------------- ------------------------------
CENTURY DUTY FREE, INC. MEMBERS:
MARIA J. ARGUDIN, INDIVIDUALLY
By: /s/ Sergio Pino
-------------------------------
Name: Sergio Pino /s/ Maria J. Argudin
----------------------------- ------------------------------------
Title: President (Witness) /s/ Peter E. Guston
---------------------------- ------------------------------------
(Witness) /s/
------------------------------------
MEDIA CONSULTANTS, INC. BAYSIDE COMPANY STORE, INC.
d/b/a BAYSIDE TO GO.
By: /s/ J.L. de Cardenas By: /s/ Carole Ann Taylor
-------------------------------- ---------------------------------
Name: J.L. de Cardenas Name: Carole Ann Taylor
------------------------------ -------------------------------
Title: President Title: President
----------------------------- ------------------------------
STATE OF FLORIDA
COUNTY OF DADE
Before me personally appeared J.P. Miquel, Sergio Pino, Maria J. Argudin, Carole
Ann Taylor, and Jorge L. de Cardenas, to me well-known and known to me to be the
persons who executed the foregoing instrument.
Witness my hand and official seal this ___ day of September, 1995.
--------------------------------------
Patricia E. Giurtino
<PAGE> 19
EXHIBIT A
The Function of Minority Joint Venture Members is outlined as follows:
Maria J. Argudin will serve as a resource to assist in the development of
business strategies with emphasis on superior organizational performance and a
proactive employee service philosophy. She will provide technical knowledge of
the operational processes of local government agencies, and will work to enhance
the public image of the Joint Venture in the Hispanic community through
continued participation in local and national Hispanic social and professional
organizations.
Bayside Company Store, Inc. d/b/a Bayside To Go will contribute its sales and
merchandising abilities, providing expertise in the creativity of new lines of
merchandise, store design, and training of African American and Caribbean
employees.
Century Duty Free, Inc. will oversee the design, construction management,
quality control, and construction of all airport facilities. Sergio Pino of
Century Duty Free will be responsible for all improvements made to duty free
airport facilities during the term of the contract.
Media Consultants, Inc. will be responsible for many of the advertising
marketing and public relations programs for the Joint Venture. Under Jorge de
Cardenas' direction the Joint Venture will create programs and profiles to
insure excellent customer penetration locally and elsewhere. In addition, Media,
Inc. will handle public relations as needed with Dade County and its government
organizations.
19
<PAGE> 20
EXHIBIT B
GLSI offers the following training opportunities to DBE Members:
o On the job training combined with executive training
o Sales and customer skills (90 days on the job training)
o Total Quality Management training
o Merchandising, visual merchandising (90 days on the job training)
o Supervisory skills and management (seminars at GLSI and with outside
resources)
o Office skills -- interviewing, hiring, training, motivating
employees, understanding M.I.S., accounting functions (90 days on the
job training plus outside seminars)
o Parent company training program from The Dial Corp
At the end of the training period a participant will have the option of
running one of the duty free stores at MIA.
During the training periods, the trainee will receive, in addition to its
percentage of income from profits, a salary commensurate with the positions
occupied and the pay scales in effect at the time.
20
<PAGE> 21
FIRST ADDENDUM TO THE JOINT VENTURE AGREEMENT
This First Addendum to Joint Venture Agreement ("First Addendum") is
made as of this 25th day of October, 1995, by and among Greyhound Leisure
Services, Inc. ("GLSI"), Century Duty Free, Inc. ("Century"), Media Consultants,
Inc. ("Media"), Maria J. Argudin ("Argudin"), and Bayside Company Store, Inc.
d/b/a Bayside to Go ("Bayside"), as the first addendum to the Joint Venture
Agreement between all parties dated as of August 31, 1995. Any capitalized terms
shall have the same meanings as assigned to them in the Agreement.
1. AMENDMENT OF SECTION 3.2(d). The fourth sentence of subparagraph (d)
is deleted, and the following sentence is inserted in lieu thereof:
"If the Members cannot agree on a decision, then the issue shall be
decided by arbitration in accordance with Section 3.2(e). The decision
of the arbitrator shall be binding on the members of the Management
Committee, the Members and the Venture."
2. ARBITRATION. The following provision is added to the Agreement as
subparagraph (e) of Section 3.2:
"(e) If arbitration is required to resolve an issue which the Members
are unable to decide by consensus pursuant to Section 3.2(d), then any
Member may refer the issue for arbitration. The referral shall be made
to the Miami, Florida office of the American Arbitration Association
("AAA"). The Member(s) requesting arbitration shall request that the
AAA appoint a single arbitrator, within five (5) working days from the
date of the request, who is an individual with at least ten (10) years
of experience in operation of airport retail concessions. The
arbitrator shall exert reasonable efforts to schedule the arbitration
hearing within thirty (30) days after the date of his or her
appointment, and shall act with a view to resolving the matter as
expeditiously as possible. The arbitration shall otherwise be in
accordance with the Commercial Arbitration Rules of the AAA. The costs
of the arbitration shall be paid by the Venture, although each Member
shall be responsible for the fees and costs incurred in retaining
counsel (if any) to represent the Member in the arbitration. An award
rendered in connection with an arbitration pursuant to this Section
shall be final and binding and judgment upon such an award may be
entered and enforced in any court of competent jurisdiction."
IN WITNESS WHEREOF, the Members have caused this First Addendum to be executed
as of the date first set forth above.
<PAGE> 22
MEMBERS: MANAGER:
GREYHOUND LEISURE SERVICES, GREYHOUND LEISURE SERVICES,
INC. INC.
By: /s/ J.P. Miquel By: /s/ J.P. Miquel
------------------------------- ---------------------------------
Name: J.P. Miquel Name: J.P. Miquel
----------------------------- -------------------------------
Title: President & CEO Title: President & CEO
---------------------------- ------------------------------
CENTURY DUTY FREE, INC. MEMBERS:
MARIA J. ARGUDIN, INDIVIDUALLY
By: /s/ Sergio Pino
-------------------------------
Name: Sergio Pino /s/ Maria J. Argudine
----------------------------- ------------------------------------
Title: President (Witness) /s/ Peter E. Guston
---------------------------- ------------------------------------
(Witness) /s/ ??????????????
------------------------------------
MEDIA CONSULTANTS, INC. BAYSIDE COMPANY STORE, INC.
d/b/a BAYSIDE TO GO.
By: /s/ J.L. de Cardenas By: /s/ Carole Ann Taylor
-------------------------------- ---------------------------------
Name: J.L. de Cardenas Name: Carole Ann Taylor
------------------------------ -------------------------------
Title: President Title: President
----------------------------- ------------------------------
STATE OF FLORIDA
COUNTY OF DADE
Before me personally appeared J.P. Miquel, Sergio Pino, Maria J. Argudin, Carole
Ann Taylor, and Jorge L. de Cardenas, to me well-known and known to me to be the
persons who executed the foregoing instrument.
Witness my hand and official seal this 25th day of October, 1995.
/s/ Patricia E. Giurtino
--------------------------------------
Patricia E. Giurtino
[SEAL OF THE NOTARY PUBLIC PATRICIA E. GIURTINO
OF THE STATE OF FLORIDA] My Commission CC393387
Expires Jul. 18, 1998
Bonded by HAI
800-422-1555
<PAGE> 1
Exhibit 10.24
CONCESSION AGREEMENT FOR OPERATION OF
NONEXCLUSIVE DUTY AND TAX FREE CONCESSION,
TERMINAL BUILDING, MIAMI INTERNATIONAL AIRPORT
Miami Airport Duty Free Joint Venture
-----------------------------------------------------
Tenant
-----------------------------------------------------
Effective Date
PMD No. 000036
Reso. No. __________
Cust. No. __________
Lease No. __________
<PAGE> 2
CONCESSION AGREEMENT FOR OPERATION OF
NONEXCLUSIVE DUTY AND TAX FREE CONCESSION,
TERMINAL BUILDING, MIAMI INTERNATIONAL AIRPORT
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ARTICLE 1
Term and Premises.................................................................................... CA-1
1.01 Term............................................................................... CA-1
1.02 Extensions......................................................................... CA-1
1.03 Premises........................................................................... CA-1
1.04 DBE Subconcession.................................................................. CA-4
1.05 Addition or Deletion of Premises................................................... CA-4
1.06 Nonexclusivity..................................................................... CA-5
1.07 Proposal Incorporated.............................................................. CA-5
ARTICLE 2
Use of Premises...................................................................................... CA-5
ARTICLE 3
Rentals, Payments and Reports........................................................................ CA-6
3.01 Annual Rental...................................................................... CA-6
3.02 Rental Rate Adjustment............................................................. CA-10
3.03 Minimum Annual Guarantee........................................................... CA-10
3.04 Recalculations of Minimum Annual Guarantee......................................... CA-10
3.05 Monthly Opportunity Fee............................................................ CA-11
3.06 No Negotiations.................................................................... CA-11
3.07 Late Payment Charge................................................................ CA-11
3.08 Worthless Check or Draft........................................................... CA-11
3.09 Gross Revenues..................................................................... CA-11
3.10 Address for Payments............................................................... CA-12
3.11 Minimum Annual Guarantee Security.................................................. CA-13
3.12 Records and Reports................................................................ CA-13
3.13 Revenue Control Procedures......................................................... CA-13
3.14 Monthly Statement Required......................................................... CA-13
3.15 Annual Audit....................................................................... CA-14
3.16 Right to Audit..................................................................... CA-14
3.17 Utilities.......................................................................... CA-15
3.18 Purchase of In Place Assets........................................................ CA-15
3.19 Assignable Contracts/Agreements.................................................... CA-15
3.20 Joint Marketing or Advertising Programs............................................ CA-15
ARTICLE 4
Improvements to the Premises......................................................................... CA-16
4.01 Improvements to Premises........................................................... CA-16
4.02 Design of Improvements............................................................. CA-16
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4.03 Certain Construction Contract Terms................................................ CA-17
4.04 Improvements Free and Clear........................................................ CA-17
4.05 Construction Bonds and Insurance Required.......................................... CA-17
4.06 Other Requirements................................................................. CA-17
4.07 Review of Construction............................................................. CA-18
4.08 Cost Documentation................................................................. CA-18
4.09 Reimbursement of Improvement Costs................................................. CA-18
ARTICLE 5
Standards of Operation............................................................................... CA-19
5.01 Operating Hours.................................................................... CA-19
5.02 Pricing............................................................................ CA-19
5.03 Change Making...................................................................... CA-20
5.05 Prior Approval Required............................................................ CA-20
5.06 Personnel.......................................................................... CA-20
5.07 Monitoring Services................................................................ CA-20
5.08 Delivery of Goods for Off-Airport Duty Free Permittees............................. CA-21
5.09 Security........................................................................... CA-21
5.10 Security Identification Display Areas Access -- Identification Badges.............. CA-21
5.12 Alcohol and Drug Testing........................................................... CA-22
5.13 Special Programs................................................................... CA-22
5.14 Vehicle Permit and Company Identification.......................................... CA-22
5.15 Federal Agencies Right to Consent.................................................. CA-22
5.16 AOA - Right to Search.............................................................. CA-23
5.17 Control of Employees............................................................... CA-23
ARTICLE 6
Services to be Provided by the County................................................................ CA-23
ARTICLE 7
Equipment Furnishings and Fixtures................................................................... CA-24
7.01 Tenant Responsibilities............................................................ CA-24
7.02 Equipment, Furnishings and Fixtures:............................................... CA-24
7.03 Disposal of Equipment, Furnishings and Fixtures.................................... CA-24
ARTICLE 8
Maintenance and Utilities............................................................................ CA-25
8.01 Cleaning........................................................................... CA-25
8.02 Removal of Trash................................................................... CA-25
8.03 Maintenance and Repair............................................................. CA-25
8.04 Failure to Maintain................................................................ CA-25
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ARTICLE 9
Assignment, Subletting and Ownership................................................................. CA-25
9.01 No Assignment or Subletting........................................................ CA-25
9.02 Ownership of the Tenant............................................................ CA-25
9.03 Subcontracting..................................................................... CA-26
ARTICLE 10
Indemnification...................................................................................... CA-26
ARTICLE 11
Insurance............................................................................................ CA-26
11.01 Insurance Required................................................................. CA-26
11.02 Insurance Certificates Required.................................................... CA-27
11.03 Tenant Liable...................................................................... CA-28
11.04 Right to Examine................................................................... CA-28
11.05 Personal Property.................................................................. CA-28
ARTICLE 12
Termination by County................................................................................ CA-28
12.01 Termination for Abandonment........................................................ CA-28
12.02 Payment Default.................................................................... CA-28
12.03 Other Defaults..................................................................... CA-28
12.04 Habitual Default................................................................... CA-29
12.05 Drug-Free Workplace Default........................................................ CA-29
12.06 Family Leave Program Default....................................................... CA-30
ARTICLE 13
Claims and Termination by Tenant..................................................................... CA-30
13.01 Claims Procedures.................................................................. CA-30
13.02 Penalty............................................................................ CA-30
13.03 Abatement.......................................................................... CA-30
13.04 Termination........................................................................ CA-31
ARTICLE 14
Nondiscrimination.................................................................................... CA-31
14.01 Employment Discrimination:......................................................... CA-31
14.02 Nondiscriminatory Access to Services............................................... CA-31
14.03 Breach of Nondiscrimination Covenants.............................................. CA-32
14.04 Affirmative Action and Disadvantaged Business Enterprise Programs.................. CA-32
14.05 Disadvantaged Business Enterprise Participation Plan............................... CA-32
ARTICLE 15
Rules, Regulations and Permits....................................................................... CA-33
15.01 Rules and Regulations.............................................................. CA-33
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15.02 Violations of Rules and Regulations................................................ CA-33
15.03 Permits and Licenses............................................................... CA-33
15.04 U.S. Customs Penalties............................................................. CA-34
ARTICLE 16
Civil Actions........................................................................................ CA-34
16.01 Governing Law; Venue............................................................... CA-34
16.02 Notice of Commencement of Civil Action............................................. CA-34
16.03 Registered Office/Agent; Jurisdiction:............................................. CA-34
ARTICLE 17
Actions at Termination............................................................................... CA-35
17.01 Surrender of Premises.............................................................. CA-35
17.02 Removal of Personal Property....................................................... CA-35
17.03 Failure to Vacate.................................................................. CA-35
17.04 Right to Show Premises............................................................. CA-35
ARTICLE 18
Trust Agreement...................................................................................... CA-35
18.01 Incorporation of Trust Agreement by Reference...................................... CA-35
18.02 Adjustment of Terms and Conditions:................................................ CA-36
18.03 Tenant Right to Terminate:......................................................... CA-36
ARTICLE 19
Other Provisions..................................................................................... CA-36
19.01 Payment of Taxes................................................................... CA-36
19.02 Alterations by Tenant.............................................................. CA-36
19.04 Security........................................................................... CA-37
19.05 Rights of County at Airport........................................................ CA-37
19.06 Federal Subordination.............................................................. CA-37
19.07 Notices............................................................................ CA-37
19.08 Severability....................................................................... CA-38
19.09 Rights Reserved to County.......................................................... CA-38
19.10 Lien............................................................................... CA-38
19.11 Authorized Uses Only............................................................... CA-38
19.12 No Waiver.......................................................................... CA-38
19.13 Right to Regulate.................................................................. CA-38
19.14 Inspections........................................................................ CA-38
19.15 Radon Disclosure................................................................... CA-38
19.16 Trademarks and Licenses............................................................ CA-39
19.17 Destruction of Premises............................................................ CA-39
19.18 Headings........................................................................... CA-40
19.19 Binding Effect..................................................................... CA-40
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19.20 Entirety of Agreement.............................................................. CA-40
19.21 Addendum to Agreement.............................................................. CA-40
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CONCESSION AGREEMENT FOR OPERATION OF
NONEXCLUSIVE DUTY AND TAX FREE CONCESSION,
TERMINAL BUILDING, MIAMI INTERNATIONAL AIRPORT,
BETWEEN DADE COUNTY, FLORIDA AND
MIAMI AIRPORT DUTY FREE JOINT VENTURE
THIS AGREEMENT ("Agreement") is made and entered into as of the ______
day of ____________, 1995, by and between the BOARD OF COUNTY COMMISSIONERS OF
DADE COUNTY, FLORIDA ("County") and MIAMI AIRPORT DUTY FREE JOINT VENTURE, a
joint venture corporation, authorized to do business in the State of Florida
("Tenant").
W I T N E S S E T H:
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE 1
Term and Premises
1.01 Term: The County hereby leases to the Tenant for a term of five
years, commencing on December 1, 1995 and ending on November 30, 2000, unless
otherwise terminated as provided for herein, certain premises described below
and do hereby grant to the Tenant a nonexclusive Duty Free Concession
("Concession") in the Terminal Building at Miami International Airport
("Airport"), as more fully described in Article 2 hereof.
1.02 Extensions: The County reserves the right, in its sole discretion,
to extend this Agreement for five separate terms of one year each, upon the
terms and conditions contained herein. Such right may be exercised by the
Aviation Department of the County ("Department") on behalf of the County. In the
event the Department elects to extend this Agreement, the Tenant shall be
notified, in writing, at least 300 days prior to the then scheduled termination
date of this Agreement. In the event the Department does not give such notice,
this Agreement shall terminate accordingly. The Tenant shall, within 30 days
following receipt of notice from the Department, have the right to reject any
such extension by written notice to the Department and, if so rejected, this
Agreement shall terminate as provided in Article 1.01 (Term) above or upon the
termination of any extension thereof, as appropriate. Failure of the Tenant to
respond to the Department within the 30-day period shall automatically
constitute acceptance of the extension.
1.03 Premises: The County hereby leases to the Tenant the premises
("Premises") on the first, second and third floors of the Terminal Building, all
as shown on Exhibit A, and
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further identified by Dade County Aviation Department identification number(s)
("ID#") as follows:
2,037 square feet of air-conditioned
Class I space
Exhibit A, Store #1, ID# 6E2180
4,583 square feet of air-conditioned
Class I space
Exhibit A, Store #2/9, ID# 6F2636
3,905 square feet of air-conditioned
Class I space
Exhibit A, Store #3/4, ID# 6B2464
2,075 square feet of air-conditioned
Class II space
Exhibit A, Store #5, ID# 6S3847
367 square feet of air-conditioned
Class II space
Exhibit A, Store #6, ID# 6S2545
1,821 square feet of air-conditioned
Class II space
Exhibit A, Store #7, ID# 6B2848
1,430 square feet of air-conditioned
Class II space
Exhibit A, Store #8, ID# 6D2875
947 square feet of air-conditioned
Class II space
Exhibit A, Store #10, ID# 6E2778
621 square feet of air-conditioned
Class II space
Exhibit A, Store #11, ID# 6F2852
60 square feet of air-conditioned
Class II space
Exhibit A, Cart #12, no ID#
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536 square feet of air-conditioned
Class II space
Exhibit A, Store #14, ID# 6C2769
153 square feet of air-conditioned
Class II space
Exhibit A, Store #15, ID# 6D3601
614 square feet of air-conditioned
Class II space
Exhibit A, Store #16, ID# 6B3872
1,178 square feet of air-conditioned
Class II space
Exhibit A, Store #17, ID# 6C2001
48 square feet of air-conditioned
Class II space
Exhibit A, Store #18, no ID#
227 square feet of air-conditioned
Class II space
Exhibit A, Store #19, ID# 6D2957
176 square feet of air-conditioned
Class II space
Exhibit A, Store #20, ID# 6F3898
4,116 square feet of air-conditioned
Class II space
Exhibit A, Store #21, ID# 6A2141
711 square feet of air-conditioned
Class II space
Exhibit A, Store #22, ID# 6A3154
3,414 square feet of air-conditioned
Class II space
Exhibit A, Store #27, ID# 6G2190
256 square feet of air-conditioned
Class II space
Exhibit A, Store #30 Kiosk
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48 square feet of air-conditioned
Class II space
Exhibit A, Booth #32
48 square feet of air-conditioned
Class II space
Exhibit A, Booth #33
5,795 square feet of air-conditioned
Class III space
Exhibit A, Office, ID# 3E3870
10,327 square feet of air-conditioned
Class III space
Exhibit A, Warehouse, ID# 3E1839
1,930 square feet of air-conditioned
Class III space
Exhibit A, Bulk Warehouse, ID# 3E1775
4,547 square feet of air-conditioned
Class III space
Exhibit A, Warehouse, ID# 6A1157
2,555 square feet of air-conditioned
Class III space
Exhibit A, Storage, ID# 3C1759
TOTAL SQUARE FOOTAGE: 54,269
1.04 DBE Subconcession: One or more stores may be designated by the
Tenant as a disadvantaged business enterprise store and the Tenant may enter
into a sublease agreement with a certified Disadvantaged Business Enterprise
("DBE"), approved by the County, from which such DBE shall operate a duty and
tax free concession. Such sublease arrangement shall be in accordance with the
Proposal submitted by the Tenant, under which this Concession was awarded,
pursuant to Article 1.07 hereof.
1.05 Addition or Deletion of Premises: The Department reserves the
right to delete, relocate or modify any of the Premises at its sole discretion
due to Airport Terminal construction or operational necessity. Relocated space
may not be similar in size or configuration to the Premises leased herein. In
the event of any such Department required deletion, relocation or modification,
the Department shall pay any unamortized construction costs of the Tenant of the
existing premises, pursuant to Article 4.09 (amortized on a 60-month
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straight line basis from the effective date of this Agreement) and the Tenant
shall pay the construction costs for the new or modified premises.
The Department and the Tenant may, by mutual agreement, add other
premises hereunder for such rental rates as set forth in Articles 3.01 and 3.02,
and subject to the Monthly Opportunity Fee payments in accordance with Article
3.05 hereof, and all costs associated therewith shall be paid by the Tenant. The
Department and the Tenant shall agree to the length of the amortization
schedule, but not to exceed 60 months calculated from the date of beneficial
occupancy, of any added premises based on the investment and profitability of
the facility.
This Agreement shall be administratively revised to reflect any
deletions, modifications, relocations, or additions, upon 30 days' written
notice to the Tenant by the Department. Such notification will include a revised
Exhibit A and appropriate changes to premises in Article 1.03 and rentals due in
Articles 3.01 and 3.02. The Department and the Tenant may, by mutual agreement,
adjust the Minimum Annual Guarantee for any deleted premises. Such deletion
shall not affect the Monthly Opportunity Fee payments due hereunder.
1.06 Nonexclusivity: This Agreement is nonexclusive in character and in
no way prevents the County from authorizing the sale or offering of competitive
services, products or items by other tenants or others in other premises at the
Airport. The Tenant shall have no rights to any other concession or concession
space that may be made available by the County.
1.07 Proposal Incorporated: The Tenant acknowledges that it has
submitted to the County a proposal ("Proposal") that was the basis for the award
of this Agreement and upon which the County has relied. IN THE EVENT THERE ARE
ANY CONFLICTS BETWEEN PROVISIONS OF THE PROPOSAL AND THE CONCESSION AGREEMENT,
THE TERMS OF THE CONCESSION AGREEMENT SHALL GOVERN. The Proposal of the Tenant
is hereby incorporated into this Agreement by reference and shall include
incorporation of the DBE participation requirements. The Tenant shall disclose
under oath, and provide executed copies of, all agreements between the Proposer
and any DBE listed by the Proposer as participating in this Agreement prior to
the execution of this Agreement. Any failure, during the term of this Agreement,
of the Tenant to maintain the DBE participation percentage as stated in its
Proposal shall constitute a default in accordance with Articles 12.03 and 14.05
hereof.
ARTICLE 2
Use of Premises
The Tenant shall use the Premises provided herein solely for the
purpose of operating a nonexclusive duty and tax free concession providing the
following services:
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The Tenant shall operate and maintain the stores in a first-class
manner and condition and provide in-bond duty and tax free merchandise
sales as are needed or desirable for departing international
passengers, including intransit. Such merchandise shall include, but is
not necessarily limited to, liquor, perfumes, cosmetics, tobacco
products, photo/electronics, leather goods, fine china, collectibles,
imported gift and fashion items, candies and food products and other
types of merchandise sold typically in world-class international duty
free stores, both in the U.S. and the rest of the world. It is the
intent of this Agreement to provide first class duty free stores
offering at all times the highest level of service for the traveling
public at competitive prices with other stores locally, and duty free
stores domestically and internationally.
The Tenant shall deliver to departing passengers at the passenger
loading bridges, or other location as may be approved by the Department,
merchandise sold by off-airport duty free sales operators in the Off-Airport
Duty Free Sales Permit Program at Miami International Airport, in accordance
with Article 5.08.
The Tenant may offer additional duty free related goods and services in
the manner provided above, with the prior written approval of the Department.
Said Departmental approval may be withheld without stated cause.
ARTICLE 3
Rentals, Payments and Reports
3.01 Annual Rental: As annual rental for the lease of the Premises, the
Tenant shall pay to the County, commencing on December 1, 1995, the sum of
$2,867,152.75* prorated and payable in equal monthly installments of
$238,929.40, in U.S. funds, on the first day of each and every month, in advance
and without billing or demand, at the offices of the Department as set forth in
Article 3.09 (Address for Payments). Said rental is computed as follows:
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DESCRIPTION ANNUAL MONTHLY
- ----------- ----------- ----------
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2,037 square feet of air-conditioned $156,849.00 $13,070.75
Class I space @ $77.00 per sq. ft.
per year - Exhibit A, Store #1,
ID# 6E2180
4,583 square feet of air-conditioned 352,891.00 29,407.58
Class I space @ $77.00 per sq. ft.
per year - Exhibit A, Store #2/9,
ID# 6F2636
</TABLE>
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DESCRIPTION ANNUAL MONTHLY
- ----------- ----------- ----------
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3,905 square feet of air-conditioned 300,685.00 25,057.08
Class I space @ $77.00 per sq. ft.
per year - Exhibit A, Store #3/4,
ID# 6B2464
2,075 square feet of air-conditioned 119,831.25 9,985.94
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #5,
ID# 6S3847
367 square feet of air-conditioned 21,194.25 1,766.19
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #6,
ID# 6S2545
1,821 square feet of air-conditioned 105,162.75 8,763.56
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #7,
ID# 6B2848
1,430 square feet of air-conditioned 82,582.50 6,881.88
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #8,
ID# 6D2875
947 square feet of air-conditioned 54,689.25 4,557.44
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #10,
ID# 6E2778
621 square feet of air-conditioned 35,862.75 2,988.56
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #11,
ID# 6F2852
60 square feet of air-conditioned 3,465.00 288.75
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Cart #12, no ID#
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DESCRIPTION ANNUAL MONTHLY
- ----------- ----------- ----------
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536 square feet of air-conditioned 30,954.00 2,579.50
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #14,
ID# 6C2769
153 square feet of air-conditioned 8,835.75 736.31
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #15,
ID# 6D3601
614 square feet of air-conditioned 35,458.50 2,954.88
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #16,
ID# 6B3872
1,178 square feet of air-conditioned 68,029.50 5,669.13
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #17,
ID# 6C2001
48 square feet of air-conditioned 2,772.00 231.00
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #18, no ID#
227 square feet of air-conditioned 13,109.25 1,092.44
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #19,
ID# 6D2957
176 square feet of air-conditioned 10,164.00 847.00
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #20,
ID# 6F3898
4,116 square feet of air-conditioned 237,641.25 19,803.44
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #21,
ID# 6A2141
</TABLE>
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DESCRIPTION ANNUAL MONTHLY
- ----------- ----------- ----------
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711 square feet of air-conditioned 41,060.25 3,421.69
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #22,
ID# 6A3154
3,414 square feet of air-conditioned 197,158.50 16,429.88
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #27,
ID# 6G2190
256 square feet of air-conditioned 14,784.00 1,232.00
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Store #30, no ID#
48 square feet of air-conditioned 2,772.00 231.00
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Booth #32, no ID#
48 square feet of air-conditioned 2,772.00 231.00
Class II space @ $57.75 per sq. ft.
per year - Exhibit A, Booth #33, no ID#
5,795 square feet of air-conditioned 223,107.50 18,592.29
Class III space @ $38.50 per sq. ft.
per year - Exhibit A, Office,
ID# 3E3870
10,327 square feet of air-conditioned 397,589.50 33,132.46
Class III space @ $38.50 per sq. ft.
per year - Exhibit A, Warehouse,
ID# 3E1839
1,930 square feet of air-conditioned 74,305.00 6,192.08
Class III space @ $38.50 per sq. ft.
per year - Exhibit A, Bulk Warehouse,
ID# 3E1775
4,547 square feet of air-conditioned 175,059.50 14,588.29
Class III space @ $38.50 per sq. ft.
per year - Exhibit A, Warehouse,
ID# 6A1157
</TABLE>
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<TABLE>
<CAPTION>
DESCRIPTION ANNUAL MONTHLY
- ----------- ----------- ----------
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2,555 square feet of air-conditioned 98,367.50 8,197.29
Class III space @ $38.50 per sq. ft.
per year - Exhibit A, Storage,
ID# 3C1759
(Total: 54,525 sq. ft.) $2,867,152.75 $238,929.40
</TABLE>
plus applicable State sales taxes, as required by law.
*NOTE: The rental rates contained in this Article 3.01 are based on
rates in effect as of October 1, 1994. If rates change on October 1,
1995, pursuant to Article 3.02, the rental rates will be adjusted to
the new rates by letter amendment.
3.02 Rental Rate Adjustment: Annually as of October 1 of each year of
the term of this Agreement, the cost-based rental rates, pursuant to Article
3.01 (Annual Rental) above, applicable to the Premises leased hereunder, shall
be subject to recalculation and adjustment in accordance with the policies and
formulae approved in Board of County Commissioners Resolution No. R-1054-90,
adopted on September 27, 1990, as such rates may be amended from time to time.
When such adjusted rental rates are established, this Agreement shall be
considered and deemed to have been administratively amended to incorporate such
adjusted rental rates, effective as of such October 1 date. Such adjusted rental
rates shall be reflected by letter amendment. Payments for any retroactive
rental adjustments shall be due upon billing by the Department and payable
within ten calendar days of same.
3.03 Minimum Annual Guarantee: As consideration for the privilege
granted the Tenant herein to engage in business at Miami International Airport
and not as payment for the use and occupancy of any property or for any lease or
license to use or occupy any property, during the first year of this Agreement,
the Tenant shall pay to the County a Minimum Annual Guarantee of $9.6 million,
in U.S. funds, prorated and payable in equal monthly payments of $800,000.00
("Minimum Monthly Guarantee"), on or before the first day of each month of the
first year, in advance, without billing or demand, plus applicable State taxes
as may be required by law.
3.04 Recalculations of Minimum Annual Guarantee: Prior to the second
year of this Agreement and every subsequent year thereafter, the Minimum Annual
Guarantee shall be recalculated based on a blended average (arithmetic
calculation) of percentage changes in the number of international enplaning
passengers at the Airport and the Consumer Price Index (CPI) for all urban
consumers in the U.S. (an average of these categories: alcoholic beverages,
apparel and upkeep, and other goods and services) for the preceding County
fiscal year. The recalculated Minimum Annual Guarantee shall be paid by the
Tenant as provided in Article 3.03 above.
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<PAGE> 17
3.05 Monthly Opportunity Fee: As additional consideration for the
privilege granted the Tenant herein to engage in business at Miami International
Airport and not as payment for the use and occupancy of any property or for any
lease or license to use or occupy any property, the Tenant shall, for the term
of this Agreement, pay to the County a Monthly Opportunity Fee of 35.1% of the
Monthly Gross Revenues, as defined in Article 3.09, that exceeds the sum of the
monthly rental and the Minimum Monthly Guarantee, in U.S. funds, by the tenth
day of the month following the month during which the Gross Revenues were
received or accrued, plus applicable State taxes, if any, as may be required by
law. The Opportunity Fee payable on any unreported Gross Revenues, determined by
the annual audit required pursuant to Article 3.14 are considered for the
purpose of Article 3.05, as having been due on the tenth day of the month
following the month during which the unreported Gross Revenues were received or
accrued.
3.06 No Negotiations: The Tenant understands and agrees, as a condition
precedent to the County's consideration of the Tenant's Proposal, that the terms
and conditions of Articles 3.01 through 3.05 above are not subject to
negotiation or adjustment for any reason, including, but not necessarily limited
to, Airport construction, airline relocations, airline bankruptcies, change in
airline service, and the like, nor shall the County be liable for any reduction
in sales or disruptions or delays caused in whole or in part by any of the
foregoing, except in the event of an Act of God, at any time during the initial
term of this Agreement.
3.07 Late Payment Charge: In the event the Tenant fails to make any
payments as required to be paid under the provisions of this Agreement within
ten calendar days of the due date, interest at the rates established from time
to time by the Board of County Commissioners of Dade County, Florida (currently
set at 1 1/2% per month) shall accrue against all such delinquent payment(s)
from the original due date until the Department actually receives payment. The
right of the County to require payment of such interest and the obligation of
the Tenant to pay same shall be in addition to and not in lieu of the County's
rights to enforce other provisions herein, including termination of this
Agreement, or to pursue other remedies provided by law.
3.08 Worthless Check or Draft: In the event the Tenant delivers a
worthless check or draft to the County in payment of any obligation arising
under this Agreement, the Tenant shall incur and pay a service charge of $20.00,
or five percent of the face amount of such check(s), whichever is greater
(Florida Statute 68.065), plus a service fee of $20.00 or five percent of the
face value of such check, whichever is greater (Florida Statute 125.0105).
Further, in such event, the Department may require that future payments required
pursuant to this Agreement be made by cashier's checks or other means acceptable
to the Department.
3.09 Gross Revenues: The term "Gross Revenues", as used in this
Agreement, means all monies paid or payable to or consideration of determinable
value received by the Tenant, or its approved DBE Subtenant, in the operation of
the duty and tax free concession, including, but not limited to, all off-airport
sales by the Tenant or any related party of the
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Tenant, advertising revenues less actual media production costs, and retail
display allowances, regardless of when or where the order therefore is received,
or the goods delivered, or services rendered, whether paid or unpaid, whether on
a cash or credit basis or in consideration of any other thing of value;
provided, however, that the term "Gross Revenues" shall not include the
following:
(A) Any refund given to the customer for returning the item or
because of a customer satisfaction issue which must be
documented and auditable.
(B) Any payments by Off-Airport Permittees for delivery charges.
(C) Any promotional rebates received and commission and expense
reimbursements at actual cost.
(D) One-half of the Gross Revenues received from the sale of
"photo/electronics" merchandise, as defined below.
The merchandise category "photo/electronics" includes all photographic,
electronic, and electrically operated equipment and supplies such as, but not
necessarily limited to, cameras; lenses; batteries; film; tapes and cassettes;
mobile phones; cassette, tape, records and compact disk ("CD") recorders and
players; calculators; computers; video recorders and players; and carrying cases
for all of the above. As new products and lines of merchandise are introduced in
the photo and electronics industries, the Department may, in its discretion,
authorize in writing, the inclusion of such products or lines of merchandise in
this "photo/electronics" category.
Any sales made by the Tenant, or any related party of the Tenant, to
international passengers departing from Miami International Airport, regardless
of where the delivery is made, whether such sale is made on Airport,
off-Airport, by catalog or by any other means, shall be considered "Gross
Revenues" hereunder.
3.10 Address for Payments: The Tenant shall pay all monies payable, as
required by this Agreement, to the following:
Dade County Aviation Department
Accounting Division
Post Office Box 592616
Miami, Florida 33159
Payments may be made by hand delivery to the offices of the Department
at Miami International Airport, Building 5A, during normal working hours.
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3.11 Minimum Annual Guarantee Security: The Tenant shall provide the
County, and shall keep in full force and effect during the term of this
Agreement and continues until all debts, reports, or other requirements of this
Agreement are satisfied, a surety bond or an irrevocable letter of credit or
other form of security acceptable to the Department and so endorsed as to be
readily negotiable by the County, for the payments required hereunder, in the
amount of $9,000,000 for the first year of operation, and in subsequent years in
an amount equivalent to the sum of nine times the Minimum Monthly Guarantee and
nine times the monthly rental payment, but not less than $9,000,000. The
Department may draw upon such payment security instrument, if the Tenant fails
to pay the fees and charges required within the time limits specified herein.
Such payment security instrument shall be in a form acceptable to the
Department.
3.12 Records and Reports: The Tenant shall keep in Dade County, during
the term of this Agreement, all books of account, records and reports
customarily used in this type of operation necessary to report Gross Revenues
and to calculate the Opportunity Fee payable hereunder and as may, from time to
time, be required by the Department to document its activities pursuant to this
Agreement. All monies collected hereunder shall be accounted for in accordance
with generally accepted accounting principles. The form of all such books of
account records and reports shall be subject to the approval of the Department
and/or the auditors of the County (one or more of the following: the designated
external auditing firm or other certified public accounting firm selected by the
Department, the Audit and Management Services Department of the County of
auditors of the State of Florida), prior to commencement of operations
hereunder. Subsequent recommendations for changes, additions or deletions to
such books of account, records and reports by the auditors of the County shall
be complied with by the Tenant when requested by the Department. The auditors of
the County shall be permitted, during normal business hours, to audit and
examine all books of account, records and reports relating to the operations of
the Tenant hereunder, including, but not limited to, balance sheets, profit and
loss statements, deposit receipts, Florida state sales tax reports and such
other documents as may be determined by the Department to be necessary and
appropriate, provided that the Tenant shall not be required to retain such
records in Dade County, Florida for more than five years after the end of each
annual period of this Agreement but not more than three years following
termination of this Agreement.
3.13 Revenue Control Procedures: Notwithstanding anything to the
contrary contained herein, the Tenant shall comply with such revenue control
procedures as may be established from time to time by the Department.
3.14 Monthly Statement Required: On or before the 10th day following
the end of each calendar month throughout the term of this Agreement, the Tenant
shall furnish to the Department (along with any Monthly Opportunity Fee payments
due pursuant to Article 3.05), a statement of monthly Gross Revenues for each
store and in total for the operation of the duty and tax free concession, for
the preceding calendar month and certify as to the accuracy of such Gross
Revenues in such form as shall be prescribed by the Department.
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Such monthly report shall contain a breakdown of sales by store by
major merchandise categories (such as the top ten categories -- liquor,
cigarettes, perfumes, cosmetics, leather goods, jewelry, etc.), as well as the
number of transactions and sales per transaction by store and merchandise
category. The Department reserves the right to receive reports on penetration of
sales transactions and other reports produced by the Tenant in the normal course
of its operations. Such reports will not include the Tenant's cost of goods,
operating costs or related data.
Such monthly report shall also contain a breakdown of the Gross
Revenues for any services subcontracted to a Disadvantaged Business Enterprise,
for each such subcontractor, stated separately and included in the reported
total.
3.15 Annual Audit: Within sixty days of each anniversary of the
commencement date of this Agreement and within sixty days following termination
of this Agreement, the Tenant shall, at its sole cost and expense, provide to
the Department an annual (or portion thereof) audit report of monthly Gross
Revenues, containing an unqualified opinion, prepared and attested to by an
independent certified public accounting firm, licensed in the State of Florida.
The audit report shall include a schedule of Gross Revenues, and Monthly
Opportunity Fee payable to the County under this Agreement, prepared in
accordance with generally accepted accounting principles, reported in such
format as shall be prescribed by the Department. The Audit shall be conducted in
accordance with generally accepted auditing standards and shall include the
issuance of a management letter, which will contain the findings discovered
during the course of the examination, such as recommendations to improve
accounting procedures and internal, including specifically revenue controls, and
other significant matters under this Agreement. In addition, the audit shall
also include comprehensive compliance procedures to determine whether the books
of account, records and reports were kept in accordance with the terms of the
Agreement for the period of examination. The auditor shall report such
procedures and findings in a separate letter report to the Department.
Each such audit and examination shall cover a period congruent with the
term(s) of this Agreement. The last such report shall include the last day(s) of
operations. All reports and letters required shall be submitted by the auditor
to and discussed with the Department in draft form, before being issued in final
form. There shall be no changes in the scope of the reports and letters required
hereunder without the specific prior written approval of the Department.
3.16 Right to Audit: The Department and the auditors of the County
shall have the right, without limitation, at any time during normal working
hours, to enter into any premises, on or off the Airport, which the Tenant may
use as administrative, warehouse and operational facilities, in connection with
its operations pursuant to this Agreement, to: (1) verify, check and record data
used in connection with operation of the Concession Agreement; (2) inspect,
review, verify and check all or any portion(s) of the procedures of the Tenant
for recording or compiling Gross Revenues information and (3) audit, check,
inspect and review all books of
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account, records, financial reports, financial statements, operating statements,
inventory records, and State sales tax returns, and work papers relating to
operation of the Concession Agreement, and other pertinent information as may be
determined to be needed or desirable by the Department.
3.17 Utilities: Water, sewer, air conditioning and electrical
utilities, to the extent that they exist in the Terminal, are included in the
rental rates in Article 3.01. In the event that the Department determines, based
on a periodic survey of consumption, that the Tenant is using an excessive
amount of electricity, due to heavy equipment, computer systems or the like, the
Department reserves the right to bill the Tenant for the estimated monthly cost
of the additional incremental electrical usage. The Tenant shall pay for all
other utilities used by it. The County shall have no obligation to provide
additional utilities to the Premises other than those existing as of the
effective date of this Agreement.
3.18 Purchase of In Place Assets: On or before the effective date of
this Agreement, the Tenant shall pay to the County the sum of $3 million for the
in place value of assets of the existing premises and the value of assets of the
new premises (including the store, intransit premises and warehouse at Concourse
A; the Modular at Concourse D and the Boutique at Concourse F). Title to the
personal property contained in the Premises, as well as the Point of Sale
computer system, will transfer to the Tenant by County Bill of Sale on the first
day of operation.
3.19 Assignable Contracts/Agreements: Any and all contracts or
agreements which were in effect as of the commencement date of this Agreement
entered into by the previous operator solely to support operations hereunder
shall be assigned to the Tenant upon review by the Department and shall be
assumed by the Tenant as part of this Agreement. (See Exhibit B for a list of
existing Agreements.)
3.20 Joint Marketing or Advertising Programs: In the event the
Department, or any assignee of the County pursuant to Article 9.01, establishes
a marketing and/or advertising program solely for the purpose of promoting the
retail and/or food and beverage operations in the Terminal Building, the
Department or such assignee shall establish an Advisory Committee of
representatives of Terminal merchants to review and advise on such a program.
Further, once such a program is established, the Department or its assignee
shall have the right to require the Tenant to pay pro rata share of the costs of
the program based on the percentage of retail space leased to the total square
footage involved.
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ARTICLE 4
Improvements to the Premises
4.01 Improvements to Premises:
(A) As authorized pursuant to Section 125.012(24), Florida
Statutes, the Tenant shall design, construct and pay for the
construction of the remodeling of some or all of the existing
retail store Premises ("Improvements"), within the first
eighteen months of this Agreement at a minimum cost of $5.8
million. In addition, the Tenant shall design, construct and
pay for the construction of any new premises added to this
Agreement and any premises which are relocated in accordance
with Article 1.05 hereof. It is the intent of the parties that
such Improvements may include but are not limited to the
decor, remodeling of the wall and floor coverings, ceiling,
lighting, and millwork, or such other Improvements as are
approved by the Department in accordance with Article 4.02
hereof. Such Improvements, which shall be as shown in design
detail in the "Final Plans", defined in Article 4.02, shall
not include the personal property of the Tenant, which shall
be all fixtures owned by the Tenant which are not attached or
connected to the Premises, except by means of electrical
plugs, or which would not require modification of the Premises
for their installation or removal.
(B) In the event the term of this Agreement is extended by the
Department pursuant to Article 1.02 (Extensions) hereof, the
Department, in its sole discretion, shall have the right to
require the Tenant, as a condition precedent to such
extension, to remodel some or all of the then existing
Premises at a mutually agreed upon cost comparable to that
spent in 4.01(a) above, plus inflation. Costs expended by the
Tenant pursuant to this provision will be treated in the
manner specified in Article 4.09(B) (Reimbursement of
Improvements Costs).
(C) On or before the effective date of this Agreement, the Tenant
shall provide to the County an irrevocable Letter of Credit,
in a form acceptable to the Department, in an amount equal to
75% of the projected remodeling costs. The Tenant may reduce
the amount of the Letter of Credit, upon the written approval
of the Department, proportionate to expenditures that are made
during the eighteen-month period, upon presentation of
acceptable proof of such expenditures to the Department.
4.02 Design of Improvements: Plans for the design of Improvements will
be in accordance with "Dade County Aviation Department Terminal Building Design
Guidelines" and Design Standards as may be established for the Terminal Building
Retail Program. As plans for the remodeling of facilities are completed, the
Tenant shall submit to the Department for its review and approval or
modification, detailed final plans ("Final Plans"), specifications
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(including materials, colors, textures and equipment), construction cost
estimates and schedules for the construction of the Improvements. The Department
shall expeditiously review and approve these plans so as not to delay this
process. The Final Plans shall be prepared by an architectural, interior design
and/or engineering firm registered in the State of Florida.
4.03 Certain Construction Contract Terms: All contracts entered into by
the Tenant for the construction of the Improvements shall require completion of
the Improvements within the schedules submitted pursuant to Article 4.02 and
shall contain reasonable and lawful provisions for the payment of actual or
liquidated damages in the event the contractor(s) fails to complete the
construction on time. The Tenant agrees that it will use its best efforts to
take all necessary action available under such construction contract to enforce
the timely completion of the work covered thereby.
4.04 Improvements Free and Clear: The Improvements, upon completion,
shall immediately become the property of the County, free and clear of any liens
or encumbrances whatsoever. The Tenant agrees that any contract for
construction, alteration or repairing of the Improvements or Premises, or for
the purpose of material to be used, or for work and labor to be performed, shall
be in writing and shall contain provisions to protect the County from the claims
of any laborers, subcontractors or materialmen against the Premises or
Improvements.
4.05 Construction Bonds and Insurance Required: All contracts for the
construction of Improvements shall require that the Tenant obtain from
construction contractors certain bonds and evidence of insurance, as follows:
(A) A policy of owner's protective liability insurance issued in
the name of the County and the Tenant, with limits not less
than those as shown in Article 11 of this Agreement. This
policy must be endorsed to indicate that any premium, whether
deposit or final, shall be the sole obligation of the
contractor(s).
(B) Separate performance and payment bonds in the full amount of
the Improvements, to assure completion of the contract work
and payment of the costs thereof, free and clear of all
claims, liens and encumbrances of subcontractors, laborers,
mechanics, suppliers and materialmen, with the County and the
Tenant named as dual obligee thereunder.
4.06 Other Requirements: The Tenant shall apply for and obtain a
Building Permit from Dade County's Building and Zoning Department, all
appropriate inspections and a Certificate of Occupancy upon completion. Within
30 days following the completion of construction of the Improvements, the Tenant
shall furnish to the Department one complete set each of legible prints (black
line), photo mylars and 35 mm aperture card microfilm of construction drawings,
and auto cad files revised to "as built", including all pertinent shop and
working drawings, copies of all releases of contractor liens and a copy of the
Certificate of Occupancy.
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4.07 Review of Construction: The Department or its designee shall have
the right, but not obligation, to periodically inspect the construction to
ensure conformity with the Final Plans, and any changes thereof requested by the
Tenant and approved by the Department.
4.08 Cost Documentation: Within ninety days of completion of
construction of the Improvements, the Tenant shall submit to the Department, a
certified audit of the monies actually expended in the design and construction
of the Improvements by premises in accordance with the Final Plans, prepared by
an independent certified public accounting firm, approved in advance by the
Department ("Auditor"). The Tenant shall be responsible for documenting for the
Auditor that the monies that were expended are true and correct. The costs of
design and construction, in accordance with the Final Plans and any changes
thereto requested by the Tenant and approved by the Department, including the
costs of required bonds, construction insurance and the construction audit,
shall not include the cost of any other consultant or accountant fees, financing
or legal fees, and personal property of the Tenant, as defined in Article 4.01.
In the event of any disputes between the Department and the Tenant as to whether
certain costs are to be included in the audit, said dispute(s) shall be
submitted to the Consulting Engineer named pursuant to the Trust Agreement, as
defined in Article 18.01 hereof. The decision of said Consulting Engineer shall
be final and binding upon the parties hereto.
4.09 Reimbursement of Improvement Costs: The County shall reimburse the
Tenant for the unamortized balance of its Improvements only in the following
circumstances:
(A) For the unamortized cost (amortized on a 60-month straight
line basis from the effective date of this Agreement) of the
initial remodeling of an individual facility pursuant to that
approved by the Department, in the event the Department
requires its deletion or relocation pursuant to Article 1.04.
(B) For the unamortized portion of Department approved design and
construction costs for any new or relocated facilities (length
of amortization schedule, not to exceed 60 months, based on
the investment and profitability of the facility as agreed to
by the Department and the Tenant pursuant to Article 1.05).
This reimbursement of cost applies only to the Improvements as approved
by the Department, or to construction of new stores as defined in Article 4.01,
and does not apply, except as otherwise provided in Article 4.01B (Improvements
to Premises), to any other remodeling or improvements made to the Premises
during the term of this Agreement.
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ARTICLE 5
Standards of Operation
5.01 Operating Hours: The Tenant shall operate Store #1 at Concourse E
(or such substitute store as may be approved by the Department) a minimum of
eighteen hours daily, seven days per week, and from other stores at least one
and one-half hours prior to departing international flights nearest the store
and close not earlier than 20 minutes after the last flight, including any
delayed flights, or at such times as may be approved by the Department, with
sufficient personnel to render a high quality of sales service giving
consideration to periods of peak activity in the Terminal Building (the periods
of time when the greatest number of international flights are operating). The
Department may increase or decrease the required operating hours if, in the
discretion of the Department, such a change is desirable in providing the most
efficient sales service to the traveling public.
5.02 Pricing: The Tenant shall maintain a schedule of prices at least
15% below pricing (including sales tax) at comparable Miami area stores and in
no event shall the schedule of prices be higher than at other duty free stores
operated by the Tenant. The Department reserves the right to grant exceptions to
the "15% below Miami area prices" when the Tenant's purchase price does not
allow a sufficient margin to cover costs. The Department will require the Tenant
to furnish quarterly reports of its schedule of current prices and an analysis
of "comparable" ("Comparable" shall mean not in excess of prices charged by
others, not including sale pricing) prices of the five top sellers in liquor,
tobacco, perfume, chocolates and cosmetics as compared to prices at Houston
Intercontinental Airport, the International Terminal at Chicago O'Hare
International Airport, Terminal 1 of Frankfurt Airport, Terminals 3 and 4 of
Heathrow Airport, and Sao Paulo Guarulhos Airport. If the Tenant's pricing at
the Airport materially exceeds the pricing standards established herein, due to
currency fluctuations at the foreign airports, such fluctuations shall be
explained in the quarterly reports. In addition, the quarterly reports will
include comparable prices of the five top sellers in perfume, cosmetics, and
chocolates as compared to the following Miami area stores: Burdines at Dadeland,
Bloomingdale's at the Falls, Macy's at Adventura and Neiman Marcus at Bal
Harbour. The five top sellers for liquor will be compared to prices at local
Crown Liquors and Flanigan's Liquor stores and the top five sellers for tobacco
will be compared to tobacco prices at Walgreen's and Publix Supermarkets
locally. These quarterly reports shall show actual prices and the average price
for each item, and shall be submitted to the Department within five business
days after the end of each quarter. The Department, in consultation with the
Tenant, shall have the right to approve the best seller lists and to revise,
from time to time, the stores and airports used for comparison purposes.
The Department reserves the right to conduct its own comparative price
analysis using a shopping service or by survey.
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5.03 Change Making: The Tenant shall be required at all times to make
change for any bill in denomination of $20.00 U.S. or less when requested by any
Airport user without charge.
The Tenant shall accept at least a dozen foreign currencies,
representative of the major international destinations served by airlines at the
Airport, in all of its stores and shall prominently post such rates in all of
its stores. The Tenant shall change the rates daily, using the same buy rates as
posted at the Money Exchange at Concourse "E" in the Terminal Building.
5.04 Manager: Throughout the term of this Agreement, the Tenant shall
employ a qualified, full-time locally resident Manager having experience in the
management and merchandising of this type of duty and tax free concession, who
shall be available within the Terminal Building during normal business hours and
available for emergencies at all other times by carrying a pager or cellular
phone. The Manager shall, at all times, be subject to approval by the
Department, and shall be delegated sufficient authority to ensure the competent
performance and fulfillment of the responsibilities of the Tenant under this
Agreement and to accept service of all notices provided for herein.
5.05 Prior Approval Required: The Tenant agrees that it shall obtain
prior written approval from the Department in all of the following matters
pursuant to this Article:
(A) Methods and hours of daily operation.
(B) Uniforms to be used by employees, which shall be consistent
with or better than those normally used by other Airport
tenants.
(C) The decor of the premises and all signs to be installed,
erected or displayed therein, and any changes thereto at
anytime during the term of this Agreement.
5.06 Personnel: The Tenant shall ensure that all its personnel are
knowledgeable of all products sold and are courteous and cooperative and present
a neat, clean and professional appearance at all times. The Tenant shall require
all personnel to wear visibly on their person, at all times while on duty, a
distinctive name tag, identifying the individual by name, title, if appropriate,
foreign languages spoken and as an employee of Tenant. The Tenant shall ensure
that all employees are able to understand and communicate in spoken English, and
as a minimum both English and Spanish must be spoken by at least one employee on
duty at each store.
5.07 Monitoring Services: The Department shall have the right, without
limitation, to monitor and test the quality of services of the Tenant, but shall
not be required to do so. This monitoring shall include, but not be limited to,
personnel and the effectiveness of its cash-
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handling procedures, through the use of a shopping services, closed circuit
T.V., and other reasonable means.
5.08 Delivery of Goods for Off-Airport Duty Free Permittees: As a
specific consideration of the issuance of this Agreement, and in recognition of
the security and congestion problems of the Airport, the Tenant hereby
specifically agrees to:
(A) Deliver the goods of Off-Airport duty free Permittees for a
per parcel fee. Subject to periodic recalculation and the
prior approval of the Department, the Tenant shall establish a
per parcel fee to be paid by the Permittee for each parcel
turned over to the Tenant for delivery. Such fees shall be
based on the actual costs incurred for manifesting,
dispatching and delivering of the Tenant's own duty free
goods, plus an allocation for overhead. The Tenant shall bill
each Permittee at the end of each calendar month for parcel
delivery fees payable hereunder. The Department, the Tenant,
and the Permittees shall meet prior to the commencement date
of this Agreement and periodically thereafter, to discuss and
establish operating standards and procedures, and forms to be
used related to the delivery of parcels hereunder. The
Department and the Tenant shall, from time to time, publish
operating standards and procedures which shall be complied
with by Permittees in the Off-Airport Duty Free Program.
(B) The Department reserves the right to authorize another bonded
cartsman for the delivery of goods of the Off-Airport Duty
Free Program Permittees and, in such event, Article 5.08(A)
shall be cancelled.
5.09 Security: The Tenant acknowledges and accepts full responsibility
for the security and protection of the Premises, any improvements thereon, its
equipment and property on the Airport, and control of access to the Air
Operations Area ("AOA") through the Premises by persons and vehicles. The tenant
fully understands and acknowledges that any security measures deemed necessary
by the Tenant for the protection of said Premises, equipment and property and
access to the AOA through the Premises shall be the sole responsibility of the
Tenant and shall involve no cost to the County.
5.10 Security Identification Display Areas Access -- Identification
Badges: The Tenant shall be responsible for requesting the Department to issue
identification ("ID") badges to all employees who are authorized access to
Security Identification Display Areas ("SIDA") on the Airport, designated in the
Airport's security program and shall be further responsible for the immediate
reporting of all lost or stolen ID badges and the immediate return of the ID
badges of all personnel transferred from Airport assignment or terminated from
the employ of the Tenant or upon termination of this Agreement. Each employee
must complete the SIDA training program conducted by the Department, before an
ID badge is issued. The Tenant shall pay, or cause to be paid, to the Department
such nondiscriminatory charges, as may be established from time to time, for
lost or stolen ID badges and those not returned to the
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Department in accordance with this Article. The Department shall have the right
to require the Tenant to conduct background investigations and to furnish
certain data on such employees before the issuance of such ID badges, which data
may include the fingerprinting of employee applicants for such badges.
5.11 AOA - Driver Training: Before the Tenant shall permit any employee
to operate a motor vehicle of any kind or type on the AOA, the Tenant shall
require such employee to attend and successfully complete the AOA Driver
Training Course conducted from time to time by the Department. The privilege of
a person to operate a motor vehicle on the AOA may be withdrawn by the
Department for any violation of AOA driving rules. Notwithstanding the above,
the Tenant shall be responsible for ensuring that all such vehicle operators
possess current, valid, appropriate Florida driver's licenses.
5.12 Alcohol and Drug Testing: The Tenant acknowledges that the County,
as a public agency sponsor under the provisions of the Airport and Airway
Improvement Act of 1982, as amended (the "Act"), has the obligation to establish
a drug free workplace and to establish policies and programs to ensure airport
safety and security. The Tenant acknowledges that the Department, on behalf of
the County, has the right to require users of the Airport (Tenants, Permittees,
Licensees, etc.) to establish reasonable programs to further the achievement of
the objectives described herein. Accordingly, the Tenant shall establish
programs for pre-employment alcohol and drug screening for all candidates for
employment at the Airport who will as a part of their duties (a) be present on
the AOA; (b) operate a motor vehicle of any type on the AOA; or (c) operate any
equipment, motorized or not, on the AOA and for the same or similar screening
based upon a reasonable suspicion that an employee, while on duty on the AOA,
may be under the influence of alcohol or drugs. Notwithstanding the above, the
Tenant specifically acknowledges that the County, acting through the Department,
has the right and obligation to deny access to the AOA and to withdraw AOA
driving privileges from any person who it has a reasonable suspicion to believe
is under the influence of alcohol or drugs.
5.13 Special Programs: The Tenant shall ensure that all employees so
required participate in such safety, security and other training and
instructional programs, as the Department or appropriate Federal agencies may
from time to time require.
5.14 Vehicle Permit and Company Identification: Motor vehicles and
equipment of the Tenant operating on the AOA must have an official motor vehicle
identification permit issued pursuant to Operational Directives of the
Department. in addition, company identification must be conspicuously displayed
on such motor vehicles and equipment.
5.15 Federal Agencies Right to Consent: The Tenant understands and
agrees that all persons entering and working in or around arriving international
aircraft and facilities used by the various Federal Inspection Services agencies
may be subject to the consent and approval of such agencies. Persons not
approved or consented to by the Federal Inspection Services
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agencies shall not be employed by the Tenant in areas under the jurisdiction or
control of such federal inspection agencies.
5.16 AOA - Right to Search: The Tenant agrees that its vehicles, cargo,
goods and other personal property are subject to being searched when attempting
to enter or leave and while on the AOA. The Tenant further agrees that it shall
not authorize any employee or agent to enter the AOA unless and until such
employee or agent has executed a written consent-to-search form acceptable to
the Department. Persons not executing such consent-to-search form shall not be
employed by the Tenant at the Airport, in any job requiring access to the AOA.
It is further agreed that the Department has the right to prohibit an
individual, agent or employee of the Tenant from entering the AOA based upon
facts which would lead a person of reasonable prudence to believe that such
individual might be inclined to engage in theft, cargo tampering, aircraft
sabotage or other unlawful activities. Any person denied access to the AOA or
whose prior authorization has been revoked or suspended on such grounds shall be
entitled to a hearing before the Director of the Department or his authorized
designee within a reasonable time. prior to such hearing, the person denied
access to the AOA shall be advised, in writing, of the reasons for such denial.
The Tenant acknowledges and understands that these provisions are for
the protection of all users of the AOA and are intended to reduce the incidence
of thefts, cargo tampering, aircraft sabotage and other unlawful activities at
the Airport.
5.17 Control of Employees: The Tenant shall properly control the
actions of its employees at all times that said employees are working on the
Airport, ensuring that they present a neat appearance and discharge their duties
in a courteous and efficient manner and that they maintain a high standard of
service to the public.
ARTICLE 6
Services to be Provided by the County
The County shall provide:
(A) System repair to utilities.
(B) Exterior repairs, except those caused by negligence on the
part of the Tenant or its employees.
(C) Air conditioning and utilities and hook-up as presently
existing.
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ARTICLE 7
Equipment Furnishings and Fixtures
7.01 Tenant Responsibilities: The Tenant shall provide, at its sole
cost and expense:
(A) All equipment, furnishings and fixtures necessary for the
operation of the Concession.
(B) Janitorial service within the premises.
(C) Connection of utilities to operating equipment and any
additional utility service necessary pursuant to Article 4.
(D) All interior maintenance and repair, including replacement of
light bulbs, ballasts and tubes.
7.02 Equipment, Furnishings and Fixtures: Any equipment, furnishings,
fixtures and signs installed in the Premises by the Tenant, shall be in keeping
with the standards of decor which prevail in the Terminal Building and must be
approved in advance by the Department. Any such equipment, furnishings, fixtures
and signs so installed by the Tenant as personal property of the Tenant, as
defined in Article 4.01, shall, except as provided in Article 7.03(B), be
removed from the Premises upon the termination of this Agreement, in accordance
with Articles 7.03 and 17.02 hereof.
7.03 Disposal of Equipment, Furnishings and Fixtures: At least thirty
days prior to the expiration of this Agreement, or upon termination or
cancellation by mutual agreement or pursuant to Article 12 or 13 hereof, the
County shall exercise, at its sole discretion, one of the following options as
to any equipment, furnishings, fixtures, signs, or carts installed in the
Premises by the Tenant:
(A) Require the Tenant to remove such equipment, furnishings,
fixtures, signs, or carts from the Premises; or
(B) Retain any portion of the equipment, furnishings, fixtures,
signs, or carts of the Tenant (personal property of the Tenant
as referred to in Article 4.01) and shall pay the Tenant the
unamortized balance of the cost of such personal property,
calculated in accordance with Article 1.05. The Tenant shall
provide such documentation satisfactory to the Department of
the cost of such personal property, together with proof of
payment thereof.
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ARTICLE 8
Maintenance and Utilities
8.01 Cleaning: The Tenant shall, at its cost and expense, keep the
premises, clean at all times. If the premises are not kept clean in the opinion
of the Department, the Tenant will be so advised and shall take immediate
corrective action.
8.02 Removal of Trash: The Tenant shall, at its cost and expense,
remove from the premises all trash and refuse of any nature whatsoever which
might accumulate and arise from the operations of the Concession hereunder. Such
trash and refuse shall temporarily be stored and disposed of in a manner
approved by the Department.
8.03 Maintenance and Repair: The Tenant shall maintain and repair the
interiors and exteriors of the stores, carts, or modules. Such maintenance and
repairs shall include, but not be limited to, painting, laminating doors,
windows, equipment, furnishings, fixtures, appurtenances, replacement of light
bulbs, ballasts and tubes and the replacement of all broken glass, which repairs
shall be in quality and class equal to or better than the original work to
preserve the same in good order and condition. The Tenant shall repair, at or
before the end of the term of this Agreement, all injury done by the
installation or removal of furniture and personal property so as to restore the
premises to the state they were at the commencement of this Agreement.
8.04 Failure to Maintain: Upon failure of the Tenant to maintain the
premises as provided in this Article 8, the Department may enter upon the
premises and perform all cleaning, maintenance and repairs which may be
necessary and the cost thereof, plus 25% for administrative costs, shall
constitute additional rental(s), and shall be billed to and paid by the Tenant.
ARTICLE 9
Assignment, Subletting and Ownership
9.01 No Assignment or Subletting: The Tenant shall not assign,
transfer, pledge or otherwise encumber this Agreement nor, except as
specifically authorized in Article 1.04 (DBE Subconcession), sublet all or any
portion of the premises. The County reserves the right to assign this Agreement.
9.02 Ownership of the Tenant: Since the ownership, control, and
experience of the Tenant were material considerations to the County in the award
of this Concession and the entering into of this Agreement, the Tenant shall
take no actions which shall serve to transfer or change the management, majority
ownership, or control of the business entity of the Tenant without the prior
written consent of the Department.
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9.03 Subcontracting: The Tenant may, with the advance written approval
of the Department, subcontract some of the services required herein only to
Disadvantaged Business Enterprises ("DBEs"), as defined in Title 49, Part 23,
Code of Federal Regulations. The Tenant shall remain fully liable for the
actions and performance of such subcontractor(s) as if such were employees of
the Tenant. Prompt payments will be made to the subcontractor(s) by the Tenant
in accordance with Ordinance No. 94-40. Any subcontract must be in accordance
with the terms and conditions of this Agreement.
ARTICLE 10
Indemnification
The Tenant shall protect, defend, and hold the County and its officers,
agents and employees completely harmless from and against any and all
liabilities, losses, suits, claims, judgments, fines or demands arising by
reason of injury or death of any person or damage to any property, including all
reasonable costs for investigation and defense thereof (including but not
limited to attorney fees, court costs, and expert fees), of any nature
whatsoever arising out of or incident to this Agreement and/or the use or
occupancy of the premises or the acts or omissions of officers, agents,
employees, contractors, subcontractors, licensees, or invitees of the Tenant
regardless of where the injury, death, or damage may occur, unless such injury,
death or damage is caused by the sole active negligence of the County. The
County shall give the Tenant reasonable notice of any such claims or actions.
The provisions of this section shall survive the expiration or early termination
of this Agreement.
ARTICLE 11
Insurance
11.01 Insurance Required: In addition to such insurance as may be
required by law, the Tenant shall maintain, without lapse or material change,
for so long as it occupies the Premises, the following insurance:
(A) Public Liability Insurance on a comprehensive basis, including
Contractual Liability, to cover the Tenant's Premises and
operations, in any amount not less than $5,000,000 combined
single limit per occurrence for bodily injury and property
damage. The County must be shown as an additional insured with
respect to this coverage.
Coverages shall be for each occurrence, with either no
aggregate or an annual policy aggregate of no less than twice
the amount of coverage required for each occurrence. In the
event that the Tenant's available coverage falls below the per
occurrence amount shown above, the Tenant shall secure a new
certificate of insurance evidencing the required coverage. The
County reserves the right to not accept policies with
aggregate limits or substantial deductibles.
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(B) Automobile Liability Insurance covering all owned, non-owned
and hired vehicles (including ground or mobile equipment) used
by the Tenant in connection with its operations under this
Agreement in an amount not less than:
(1) $5,000,000 combined single limit per occurrence for
bodily injury and property damage covering all
vehicles and ground and mobile equipment used by the
Tenant on the Air Operations Area of the Airport
("AOA");
(2) $300,000 combined single limit per occurrence for
bodily injury and property damage covering such
vehicles and ground and mobile equipment when being
used by the Tenant off of the AOA.
(C) Plate glass, if applicable.
(D) Workers' Compensation Insurance in compliance with Chapter
440, Florida Statutes.
The insurance coverages required shall include those classifications,
as listed in standard liability insurance manuals, which most nearly reflect the
operations of the Tenant under this Agreement. All insurance policies required
pursuant to the terms of this Agreement shall be issued in companies approved to
do business under the laws of the State of Florida. Such companies must be rated
no less than "B" as to management, and no less than "VIII" as to strength in
accordance with the latest edition of "Best's Insurance Guide", published by
A.M. Best Company, Inc., or its equivalent, subject to approval of the County
Risk Management Division.
11.02 Insurance Certificates Required: Prior to the commencement of
operations hereunder and annually thereafter, the Tenant shall furnish or cause
to be furnished certificates of insurance to the Department which certificates
shall clearly indicate that:
(A) The Tenant has obtained insurance in the types, amounts and
classifications as required for strict compliance with this
Article;
(B) The policy cancellation notification provisions specify at
least 30 days advance written notice of cancellation to the
County; and
(C) The County is named as an additional insured with respect to
the Tenant's public liability policies.
On said insurance certificates, unless specifically shown to be
excluded thereon, comprehensive public liability coverage shall include
contractual liability, and notification of cancellation shall include
notification of material changes in the policies.
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The County reserves the right to require the Tenant to provide such
reasonably amended insurance coverage as it deems necessary or desirable, upon
issuance of notice in writing to the Tenant, which notice shall automatically
amend this Agreement effective 30 days after such notice.
11.03 Tenant Liable: Compliance with the requirements of this Article
11 shall not relieve the Tenant of its liability under any other portion of this
Agreement.
11.04 Right to Examine: The Department reserves the right, upon
reasonable notice, to examine the original policies of insurance (including but
not limited to: binders, amendments, exclusions, riders and applications) to
determine the true extent of coverage. The Tenant agrees to permit such
inspection at the offices of the Department.
11.05 Personal Property: Any personal property of the Tenant, or of
others, placed in the premises shall be at the sole risk of the Tenant or the
owners thereof, and the County shall not be liable for any loss or damage
thereto, irrespective of the cause of such loss or damage.
ARTICLE 12
Termination by County
12.01 Termination for Abandonment: This Agreement shall be
automatically terminated upon the abandonment by the Tenant of the Premises or
the voluntary discontinuance of operations at the Airport for any period of time
exceeding 24 hours, unless such abandonment or discontinuance has been caused by
strike, labor disturbance, Act of God, civil disturbance or governmental order
that prevents the Tenant's use of the Premises for the purposes authorized in
Article 2.
12.02 Payment Default: Failure of the Tenant to make all payments of
rentals, fees and charges required to be paid herein when due shall constitute a
default, and the County may, at its option, terminate this Agreement after five
calendar days notice in writing to the Tenant unless the default be cured within
the notice period.
12.03 Other Defaults: The County shall have the right, upon thirty
calendar days written notice to the Tenant, to terminate this Agreement upon the
occurrence of any one or more of the following, unless the same shall have been
corrected within such period:
(A) Failure of the Tenant to comply with covenants of this
Agreement other than those which constitute a default pursuant
to Article 12.02.
(B) The conduct of any business, the performance of any service,
or the merchandising of any product or service not
specifically authorized herein.
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12.04 Habitual Default: Notwithstanding the foregoing, in the event
that the Tenant has frequently, regularly or repetitively defaulted in the
performance of or breached any of the terms, covenants and conditions required
herein to be kept and performed by the Tenant, regardless of whether the Tenant
has cured each individual condition of breach or default as provided in Articles
12.02 and 12.03 hereinabove, the Tenant shall be determined by the Director of
the Department to be an "habitual violator". At the time that such determination
is made the Department shall issue to the Tenant a written notice, advising of
such determination and citing the circumstances therefor. Such notice shall also
advise the Tenant that there shall be no further notice or grace periods to
correct any subsequent breach(s) or default(s) and that any subsequent breach or
default, of whatever nature, taken with all previous breaches and defaults,
shall be considered cumulative and, collectively, shall constitute a condition
of noncurable default and grounds for immediate termination of this Agreement.
In the event of any such subsequent breach or default, the County may terminate
this Agreement upon the giving of written notice of termination to the Tenant,
such termination to be effective upon the seventh day following the date of
receipt thereof and all payments due hereunder shall be payable to said date,
and the Tenant shall have no further rights hereunder. Immediately upon receipt
of said notice of termination, the Tenant shall discontinue its operations at
the Airport, and proceed to remove all its personal property in accordance with
Article 17 hereof.
12.05 Drug-Free Workplace Default: The Tenant acknowledges, that as
part of its Proposal, it provided to the County a Drug-Free Workplace Affidavit
certifying that it is providing a drug-free workplace for its employees, as
required by County Ordinance No. 92- 15, adopted on March 17, 1992, as such may
be amended from time to time ("Ordinance"). Based on the provisions of said
Ordinance, the County shall have the right, upon 30 days written notice to the
Tenant, to terminate this Agreement in the event the Tenant fails to provide, as
of each anniversary of the effective date of this Agreement, the annual
re-certification affidavit as required by the Ordinance; provided, however, that
such termination shall not be effective if the Tenant submits the required
Affidavit within the notice period.
Further, this Agreement shall be terminated upon not less than fifteen
calendar days written notice to the Tenant, and without liability to the County,
if the Department or the County Manager determines any of the following:
(A) That the Tenant has made a false certification in its
execution of the Affidavit submitted with its Proposal or in
its annual re-certification as required by the Ordinance;
(B) That the Tenant has violated its original or renewal
certification by failing to carry out any of the specific
requirements of the Ordinance, other than the annual
re-certification; or
(C) That such a number of employees of the Tenant have been
convicted of violations occurring in its workplace(s) as to
indicate that the Tenant has failed
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to make a good faith effort to provide a drug-free workplace
as required by the Ordinance.
12.06 Family Leave Program Default: The Tenant acknowledges that, as a
part of its Proposal, it provided an Affidavit certifying that it would provide
its employees with a family leave program, providing, as a minimum, the benefits
specified by the Dade County Family Leave Ordinance (Ordinance No. 93-118, as
such may be amended from time to time). The County shall have the right to
terminate this Agreement, upon 30 days advance written notice to the Tenant, in
the event the Tenant fails to provide, the affidavit that it is providing and
will continue to provide such family leave program; provided, however, that such
termination shall not be effective if the Tenant submits the required affidavit
within the notice period. Further, this Agreement shall be terminated, upon not
less than 15 calendar days advance written notice to the Tenant, if it is
determined, following an administrative hearing to be held by the Department,
that the Tenant has failed to provide such program to its employees, contrary to
its sworn affidavit.
ARTICLE 13
Claims and Termination by Tenant
13.01 Claims Procedures: If the Tenant has any claim against the County
arising under this Agreement, it will be made in writing within ten (10) days of
the occurrence of the event to the Aviation Director. The exact nature of the
claim, including sufficient detail to identify the basis for the claim shall be
clearly stated. The dispute will be decided by the Aviation Director (or his
designee), who will mail or otherwise furnish a written copy of the decision to
the Tenant at the address furnished in Article 19.07. The decision of the
Aviation Director will be final and conclusive unless, within thirty (30) days
from the date of receipt of such copy, the Tenant mails or otherwise furnishes
to the County a written appeal addressed to the County Manager. The decision of
the County Manager, or his duly authorized representative for the determination
of such appeals, will be final and conclusive unless within thirty (30) days of
the Tenant's receipt of such decision, the Tenant files an action in a court of
competent jurisdiction. In connection with any appeal proceeding under this
provision, the Tenant shall be afforded an opportunity to be heard and to offer
other evidence in support of the appeal. Pending final decision of a dispute
hereunder, the Tenant shall proceed diligently with the performance of the
Concession Agreement and in accordance with the County's decision. Failure to
perform in accordance with the decision of the Aviation Director or the County
Manager shall be cause for termination of this Agreement in accordance with
Article 12.03.
13.02 Penalty: Failure by the Tenant to comply with this Disputes
Procedure shall be cause for a waiver and an abandonment of any claim arising
out of the event.
13.03 Abatement: The Tenant shall have the right to request the
Department to consider the abatement of all or a portion of the payments due
under Articles 3.01, 3.03 and
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3.05, upon thirty calendar days written notice to the County, without liability
to the County, at any time after the occurrence of one or more of the following
events:
(A) Issuance by any court of competent jurisdiction of any
injunction substantially restricting the use of the Airport
for airport purposes.
(B) The assumption by the United States Government or any
authorized agency thereof, or any other governmental agency,
of the operation, control or use of the Airport premises or
any substantial part, or parts thereof, in such a manner as to
substantially restrict the Tenant's operations at the Airport.
13.04 Termination: In the event of a breach by the County of any of the
material terms, covenants or conditions contained in this Agreement required to
be kept by the County, and the failure of the County to remedy such breach for a
period of ninety calendar days after receipt by the County of written notice
from the Tenant of the existence of such a breach, the Tenant shall have the
right to terminate this Agreement, without liability to the County, upon thirty
calendar days written notice to the Department.
ARTICLE 14
Nondiscrimination
14.01 Employment Discrimination: The Tenant shall not discriminate
against any employee or applicant for employment to be employed in the
performance of this Agreement with respect to hire, tenure, terms, conditions,
or privileges of employment, or any matter directly or indirectly related to
employment because of age, sex, race, color, religion, national origin, ancestry
or disability. The Tenant shall comply with applicable provisions of the
Americans with Disabilities Act, including but not limited to provisions
pertaining to employment (42 U.S.C. 12101).
14.02 Nondiscriminatory Access to Services: The Tenant, for itself, its
personal representatives, successors in interest, and assigns, as a part of the
consideration hereof, does hereby covenant and agree as a covenant of this
Agreement: (1) that no person on the grounds of race, color, age, sex, religion,
national origin, ancestry or disability shall be excluded from participation in,
denied the benefits of, or be otherwise subjected to discrimination in the use
of the Concession; (2) that in the furnishing of services hereunder, no person
on the grounds of race, color, age, sex, religion, national origin, ancestry or
disability shall be excluded from participation in, denied the benefits of, or
otherwise be subjected to discrimination; and (3) that the Tenant shall operate
hereunder in compliance with the Americans with Disabilities Act (42 U.S.C.
12101) and all other requirements imposed by or pursuant to Title 49, Code of
Federal Regulations, Department of Transportation, Subtitle A, Office of the
Secretary, Part 21, Nondiscrimination in Federally-assisted programs of the
Department of Transportation-Effectuation of Title VI of the Civil Rights Act of
1964, and as said Regulations may be amended.
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14.03 Breach of Nondiscrimination Covenants: In the event it has been
determined that the Tenant has breached the nondiscrimination covenants
contained in Articles 14.01 and 14.02 above, pursuant to the complaint
procedures contained in the applicable Federal Regulations, and the Tenant fails
to comply with the sanctions and/or remedies which have been prescribed, the
County shall have the right to terminate this Agreement pursuant to Article
12.03 hereof.
14.04 Affirmative Action and Disadvantaged Business Enterprise
Programs: The Tenant acknowledges that the provisions of 14 CFR Part 152,
Affirmative Action Employment Programs, and 49 CFR Part 23, Disadvantaged
Business Enterprise Programs, are applicable to the activities of the Tenant
under the terms of this Agreement, unless exempted by said regulations, and
hereby agrees to comply with all requirements of the Department, the Federal
Aviation Administration and the U.S. Department of Transportation. These
requirements may include, but not be limited to, the compliance with
Disadvantaged Business Enterprise and/or Employment Affirmative Action
participation goals, the keeping of certain records of good faith compliance
efforts, which would be subject to review by the various agencies, the
submission of various reports, and if directed by the Department, the
contracting of specified percentages of goods and services contracts to
Disadvantaged Business Enterprises. In the event it has been determined, in
accordance with applicable regulations, that the Tenant has defaulted in the
requirement to comply with this section, and the Tenant thereafter fails to
comply with the sanctions and/or remedies then prescribed, the County shall have
the right, upon written notice to Tenant, to terminate this Agreement pursuant
to Article 12.03.
This Agreement is subject to the requirements of the U.S. Department of
Transportation's regulations, 49 CFR Part 23, Subpart F. The Tenant agrees that
it will not discriminate against any business owner because of the owner's race,
color, national origin, or sex in connection with the award or performance of
any concession agreement covered by 49 CFR Part 23, Subpart F.
The Tenant agrees to include the above statements in any subsequent
agreements that it enters and cause those businesses to similarly include the
statements in further agreements.
14.05 Disadvantaged Business Enterprise Participation Plan: The Tenant
shall contract with those firm(s) as are listed on the Tenant's DBE
Participation Plan as presented in its Proposal documents and approved by the
Department of Business and Economic Development (DBED), and shall thereafter
neither terminate such DBE firm(s) nor: (1) reduce the scope of the work to be
performed by; (2) decrease the percentage of participation by; or (3) decrease
the dollar amount of participation by the DBE firm(s) without the prior written
authorization of the Department.
The County shall monitor the compliance of the Tenant with the
requirements of this provision (Article 14.05) during the term of this
Agreement. The County shall have access to
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the necessary records to examine such information as may be appropriate for the
purpose of investigating and determining compliance with this provision,
including, but not limited to records of expenditures, contracts between the
Tenant and the DBE Participant, and other records pertaining to the DBE
Participation Plan.
If at any time the County has reason to believe that the Tenant is in
violation of this provision, the County may, in addition to pursuing any other
available legal remedy, impose sanctions which may include but are not limited
to: (1) the termination or cancellation of the Agreement in whole or in part,
unless the Tenant demonstrates within a reasonable time its compliance with the
terms of this provision; and (2) the denial to the Tenant of the right to
participate in any other contracts awarded by the County for a period of not
longer than three years. No such sanction shall be imposed by the County upon
the Tenant except pursuant to a hearing conducted by the DBED Directors.
ARTICLE 15
Rules, Regulations and Permits
15.01 Rules and Regulations: The Tenant shall comply with the
Ordinances of the County, including the Rules and Regulations of the Department,
Chapter 25, Code of Metropolitan Dade County, Florida, as the same may be
amended from time to time, Operational Directives issued thereunder, all
additional laws, ordinances, regulations and rules of the Federal, State and
County Governments, and any and all plans and programs developed in compliance
therewith, which may be applicable to its operations or activities under this
Agreement.
15.02 Violations of Rules and Regulations: The Tenant agrees to pay on
behalf of the County any penalty, assessment or fine, issued in the name of the
County, or to defend in the name of the County any claim, assessment or civil
action, which may be presented or initiated by any agency or officer of the
Federal, State or County governments, based in whole or substantial part upon a
claim or allegation that the Tenant, its agents, employees or invitees, have
violated any law, ordinance, regulation or rule described in Article 15.01 above
or any plan or program developed in compliance therewith. The Tenant further
agrees that the substance of this Article 15.02 and Article 15.01 above shall be
included in every contract and other agreement, which the Tenant may enter into
related to its operations and activities under this Agreement and that any such
contract and other agreement shall specifically provide that "Dade County,
Florida is a third party beneficiary of this and related provisions." This
provision shall not constitute a waiver of any other conditions of this
Agreement prohibiting or limiting assignments, subletting or subcontracting.
15.03 Permits and Licenses
The Tenant shall obtain, pay for, and maintain on a current basis all
permits and licenses as required for its operation hereunder.
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15.04 U.S. Customs Penalties
The Tenant shall obtain and maintain all necessary licenses from the
U.S. Customs Service, and any other Federal agencies, for the operation of its
business under this Agreement. The Tenant shall be liable for payment of any
penalties levied by any Federal agency provided that the penalties resulted from
actions, errors or failure to act or perform by the Tenant and not by the County
or the Department.
ARTICLE 16
Civil Actions
16.01 Governing Law; Venue: This Agreement shall be governed and
construed in accordance with the laws of the State of Florida. The venue of any
action on this Agreement shall be laid in Dade County, Florida, and any action
to determine the rights or obligations of the parties hereto shall be brought in
the courts of the State of Florida.
16.02 Notice of Commencement of Civil Action: In the event that the
County or the Tenant commence a civil action in the State or Federal courts,
where such action is based in whole or in part on an alleged breach of this
Agreement, the County and the Tenant agree to waive the procedure for initial
service of process mandated by Chapters 48 and 83, Florida Statues, Rule 1.070,
Florida Rules of Civil Procedure and Rule 4(c), Federal Rules of Civil
Procedure. In such event the County and the Tenant agree to submit themselves to
the jurisdiction of the court in which the action has been filed when initial
service has been made in the following manner:
(A) Upon the County: by Certified Mail, Return Receipt Requested,
sent to (i) the party indicated in Article 19.07 on behalf of
the County; and (ii) with a copy of the County Attorney,
Aviation Division, P.O. 592075, Miami, Florida 33159.
(B) Upon the Tenant: by personal service or by Certified Mail,
Return Receipt Requested, upon the party indicated in Article
19.07 on behalf of the Tenant, with a copy to whatever
attorney the Tenant has designed in writing, if any.
In the event that the County and/or the Tenant raise an objection to service of
initial pleadings as provided for herein, and the trial court overrules such
objection, the objecting party shall pay liquidated damages (attorney's fees) in
the amount of $250.00 to plaintiff in such action, prior to answering the
complaint.
16.03 Registered Office/Agent; Jurisdiction: Notwithstanding the
provisions of Article 16.02 above, and in addition thereto: the Tenant, if a
corporation, shall designate a registered office and a registered agent, as
required by Section 48.091, Florida Statutes, such designations to be filed with
the Florida Department of State in accordance with Section 607.034, Florida
Statutes. If the Tenant is a natural person, he and his personal representative
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hereby submit themselves to the jurisdiction of the Courts of this State for any
cause of action based in whole or in part on the alleged breach of this
Agreement.
ARTICLE 17
Actions at Termination
17.01 Surrender of Premises: On or before the termination date of this
Agreement, whether by lapse of time or otherwise, the Tenant shall vacate, quit
and surrender the premises in as good order and condition as the premises were
upon occupancy, reasonable and normal wear and tear excepted.
17.02 Removal of Personal Property: On or before the termination date
of this Agreement, except in instances of termination pursuant to Article 12.01
hereof, in which event the Tenant shall be allowed up to five calendar days, and
provided that the Tenant is current in all the payments required pursuant to
this Agreement, the Tenant shall remove all of its personal property from the
premises hereunder unless the County has exercised its option to acquire same in
accordance with Article 7.03. Any personal property of the Tenant not removed in
accordance with this Article may be removed by the Department for storage at the
cost of the Tenant. Failure on the part of the Tenant to reclaim its personal
property within thirty days from the date of termination shall constitute a
gratuitous transfer of title thereof to the County for whatever use and
disposition is deemed to be in the best interests in the County.
17.03 Failure to Vacate: In the event the Tenant shall refuse or fail
to give up, vacate, quit and surrender possession of the premises hereunder, as
provided for herein, it shall be liable for double rental as provided for in
Section 83.06, Florida Statutes.
17.04 Right to Show Premises: At any time after the Tenant has been
given notice of termination or default, pursuant to Article 12 hereof, or within
six months of the scheduled termination date of this Agreement, the County shall
have the right to enter the premises for the purpose of showing the premises to
prospective tenants, tenants or users.
ARTICLE 18
Trust Agreement
18.01 Incorporation of Trust Agreement by Reference: Notwithstanding
any of the terms, provisions and conditions of this Agreement, it is understood
and agreed by the parties hereto that the provisions of the Trust Agreement,
dated as of the 1st day of October, 1954, as amended, by and between the County
and the Chase Manhattan Bank (now the Chase Manhattan Bank, National
Association), as Trustee, and the First National Bank of Miami (now Southeast
Bank, N.A.), as Co-Trustee of (the "Trust Agreement") which Trust Agreement is
incorporated herein by reference thereto, shall prevail and govern in the event
of any inconsistency with or ambiguity relating to the terms and conditions of
this Agreement, including the rents, fees or charges required herein, and their
modification or adjustment.
CA-35
<PAGE> 42
Copies of the Trust Agreement may be examined by the Tenant at the offices of
the Department during normal working hours.
18.02 Adjustment of Terms and Conditions: If at any time during the
term of this Agreement, a court of competent jurisdiction shall determine that
any of the terms and conditions of this Agreement, including the rentals, fees
and charges required to be paid hereunder to the County by the Tenant or by
other Tenants under other agreements of the County for the lease or use of
premises used for similar purposes, are unjustly discriminatory, the County
shall have the right to modify such terms and conditions and to increase or
otherwise adjust the rentals, fees and charges required to be paid under this
Agreement in such a manner as the County shall determine is necessary and
reasonable so that the terms and conditions and the rentals, fees and charges
payable by the Tenant and others shall not thereafter be unjustly discriminatory
to any user of like premises and shall not result in any violation of the Trust
agreement or in any deficiency in revenues necessary to comply with the
covenants of the Trust Agreement. In the event the County has modified the terms
and conditions of this Agreement, including any adjustment of the rentals, fees
and charges required to be paid to the County, pursuant to this provision, this
Agreement shall be amended to incorporate such modification of the terms and
conditions, upon the issuance of written notice from the Department to the
Tenant.
18.03 Tenant Right to Terminate: In the event the terms and conditions
of this Agreement, including the rentals, fees and charges payable hereunder,
have been substantially modified pursuant to Article 18.02 above, the Tenant, at
any time within one year following the effective date of such modification, may
terminate this Agreement by giving not less than 270 days written notice to the
County, without liability by either party to the other.
ARTICLE 19
Other Provisions
19.01 Payment of Taxes: The Tenant shall pay all taxes lawfully
assessed against its interests in the premises and its operations hereunder;
provided, however, that the Tenant shall not be deemed to be in default of its
obligations under this Agreement for failure to pay such taxes pending the
outcome of any legal proceedings instituted in courts of competent jurisdiction
to determine the validity of such taxes. Failure to pay same after the ultimate
adverse conclusion of such contest shall constitute a default, pursuant to
Article 12.03 hereof.
19.02 Alterations by Tenant: The Tenant shall not alter or modify the
premises, except in accordance with Article 4 herein, without first obtaining
written approval from the Department.
19.03 Rights to be Exercised by Department: Wherever in this Agreement
rights are reserved to the County, such rights may be exercised by the
Department.
CA-36
<PAGE> 43
19.04 Security: The Tenant acknowledges and accepts full responsibility
for the security and protection of the premises leased herein. The Tenant fully
understands and acknowledges that any security measures deemed necessary by the
Tenant for protection of said premises shall be the sole responsibility of the
Tenant and shall involve no cost to the County.
19.05 Rights of County at Airport: The County shall have the absolute
right, without limitation, to make any repairs, alterations and additions to any
structures and facilities at the Airport. The County shall, in the exercise of
such right, be free from any and all liability to the Tenant for business
damages occasioned during the making of such repairs, alterations and additions,
except those occasioned by the sole active negligence of the County, its
employees, or agents.
19.06 Federal Subordination: This Agreement shall be subordinate to the
provisions of any existing or future agreements between the County and the
United States of America relative to the operation and maintenance of the
Airport, the execution of which has been or may be required as a condition
precedent to the expenditure of Federal funds for the development of the
Airport. All provisions of this Agreement shall be subordinate to the right of
the United States of America to lease or otherwise assume control over the
Airport, or any part thereof, during time of war or national emergency for
military or naval use and any provisions of this Agreement inconsistent with the
provisions of such lease to the United States of America shall be suspended.
19.07 Notices: Any notices given under the provisions of this Agreement
shall be in writing and shall be hand delivered or sent by Registered or
Certified Mail, Return Receipt Requested, to:
To the County:
Director
Dade County Aviation Department
Post Office Box 592075
Miami, Florida 33159
To the Tenant:
Miami Airport Duty Free Joint Venture
8052 N.W. 14th Street
Miami, Florida 33126
or to such other respective addressees as the parties may designate to each
other in writing from time to time. Notices by Registered or Certified Mail
shall be deemed given on the delivery date indicated on the Return Receipt from
the U.S. Postal Service. Hand delivered
CA-37
<PAGE> 44
notices shall be deemed received by the Tenant when presented to the local
management representative of the Tenant.
19.08 Severability: If any provision of this Agreement or the
application thereof to either party to this Agreement is held invalid by a court
of competent jurisdiction, such invalidity shall not affect other provisions of
the Agreement which can be given effect without the invalid provision, and to
this end, the provisions of this Agreement shall be severable.
19.09 Rights Reserved to County: All rights not specifically granted
the Tenant by this Agreement are reserved to the County.
19.10 Lien: The County shall have a lien upon all personal property of
the Tenant in the premises to secure the payment to the County of any unpaid
monies accruing to the County under the terms of this Agreement.
19.11 Authorized Uses Only: The Tenant shall not use or permit the use
of the premises or the Airport for any illegal or unauthorized purpose or for
any purpose which would increase the premium rates paid by the County on or
invalidate any insurance policies of the County or any policies of insurance
written on behalf of the Tenant under this Agreement.
19.12 No Waiver: There shall be no waiver of the right of either party
to demand strict performance of any of the provisions, terms and covenants of
this Agreement nor shall there by any waiver of any breach, default or
non-performance hereof by either party unless such waiver is explicitly made in
writing by the non-breaching party. Any previous waiver or course of dealing
shall not affect the right of either party to demand strict performance of the
provisions, terms and covenants of this Agreement with respect to any subsequent
event or occurrence or of any subsequent breach, default or non-performance
hereof by the other party.
19.13 Right to Regulate: Nothing in this Agreement shall be construed
to waive or limit the governmental authority of the County, as a political
subdivision of the State of Florida, to regulate the Tenant or its operations.
19.14 Inspections: The authorized employees and representatives of the
County and of any applicable Federal or State agency having jurisdiction hereof
shall have the right of access to the premises at all reasonable times for the
purposes of inspection to determine compliance with the provisions of this
Agreement. The right of inspection shall impose no duty on the county to inspect
and shall impart no liability on the County should it not make such inspections.
19.15 Radon Disclosure: In accordance with Section 404.056, Florida
Statutes, the following disclosure is hereby made:
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<PAGE> 45
"Radon Gas: Radon is a naturally occurring radioactive gas that, when
it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of
radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit."
19.16 Trademarks and Licenses: The County may, from time to time,
require the Tenant as part of its advertising and marketing program, to utilize
certain patents, copyrights, trademarks, trade names, logos, computer software
and other intellectual property owned by the County in the performance of this
Agreement, which patents, copyrights, trademarks, trade names, logos, computer
software and intellectual property may have been created pursuant to the terms
of this Agreement. Such permission, when granted, shall be evidenced by a
nonexclusive license executed by the Tenant and the Department, on behalf of the
County, granting the Tenant the right, license, and privilege to use a specific
patent, copyright, trademark, trade name, logo, computer software or other
intellectual property without requiring payment of fees therefor. Failure of the
parties to execute a formal license agreement shall not vest title or interest
in such patent, copyright, trademark, trade name, logo, computer software or
intellectual property in the using party.
19.17 Destruction of Premises: In the event the Premises shall be
destroyed or so damaged or injured by fire, windstorm, flood or other casualty
during the life of this Agreement that the Premises or any portion thereof are
rendered untenantable, the County shall have the right, but not the obligation,
to render said Premises or damaged portion thereof tenantable by repairs
completed within a reasonable period of time.
(A) Total Destruction: In the event the County elects not to
render the Premises tenantable, if destroyed or damaged in
their entirety, the Tenant shall be so notified in writing by
the Department, and this Agreement shall be deemed terminated
as of the date of the casualty.
(B) If the damaged portion of the Premises is not rendered
tenantable by the County within a reasonable period of time,
and the Tenant shall determine that: 1) the loss of the
damaged portion of the Premises shall have a materially
adverse impact on the ability of the Tenant to utilize the
Premises for the purposes described in Article 2; or 2) would
require the Tenant to obtain other space off the Premises in
order to substantially conduct the operations of the Tenant
originally conducted within the Premises, then, in either such
event, upon written notice to the County, the Tenant may
cancel this Agreement as of a date which shall be not later
than one year from the giving of such notice, if the repairs
are not completed within 90 days following such written notice
of intent to cancel, or if the repairs cannot be reasonably
completed within such 90-day period the County has not
commenced repairs within such time. In the event of
cancellation, the rent for the untenantable portion of the
Premises shall be paid
CA-39
<PAGE> 46
only to the date of such fire, windstorm, flood, or other
casualty. If the Agreement is not cancelled following any such
casualty, the rent shall be abated as to the portion of the
Premises rendered untenantable.
The remedies provided to Tenant in this Article 19.17 are exclusive,
and Tenant shall be entitled to no other remedies in the event of a complete or
partial destruction of or damage to the Premises.
19.18 Headings: The headings of the various Articles and Sections of
this Agreement, and its Table of Contents, are for convenience and ease of
reference only, and shall not be construed to define, limit, augment or describe
the scope, context or intent of this Agreement or any part or parts of this
Agreement.
19.19 Binding Effect: The terms, conditions and covenants of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their successors and assigns. This provision shall not constitute a waiver
of any conditions prohibiting assignment or subletting.
19.20 Entirety of Agreement: The parties hereto agree that this
Agreement sets forth the entire agreement between the parties, and there are no
promises or understandings other than those stated herein. None of the
provisions, terms and conditions contained in this Agreement may be added to,
modified, superseded or otherwise altered, except as may be specifically
authorized herein or by written instrument executed by the parties hereto.
19.21 Addendum to Agreement: The parties agree that the Addendum to
this Agreement attached hereto, is made a part hereof as if set out in full
herein.
[The next page is the signature page on CA-42]
CA-40
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their appropriate officials as of the date first above written.
CONCESSIONAIRE: (IF JOINT VENTURE) BOARD OF COUNTY COMMISSIONERS
OF DADE COUNTY FLORIDA
A. CORPORATE NAME OF JOINT By:____________________________________
VENTURER: County Manager
_______________________________________ Attest: Harvey Ruvin, Clerk
By:____________________________________ By:____________________________________
President Deputy Clerk
ATTEST:________________________________ (COUNTY SEAL)
Secretary
(CORP. SEAL) CONCESSIONAIRE: (If Corporation)
B. CORPORATE NAME OF JOINT _______________________________________
VENTURER:
____________________________________ By:____________________________________
President
By:____________________________________ _______________________________________
President Print Name
ATTEST:________________________________ ATTEST:________________________________
Secretary Secretary
________________________________
Print Name
(CORP. SEAL) (CORP. SEAL)
C. MANAGING JOINT VENTURER: CONCESSIONAIRE:
(If Partnership/Individual)
__________________________________ By:_____________________________
Name of Joint Venture Signature
__________________________________ ________________________________
Signature of Individual Authorized Print Name
to Bind Joint Venture
__________________________________ By:_____________________________
Witness As to Above Signature Title
__________________________________ Witnesses to above signature:
Witness As to Above Signature
________________________________
________________________________
CA-41
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their appropriate officials as of the date first above written.
CONCESSIONAIRE: (IF JOINT VENTURE) BOARD OF COUNTY COMMISSIONERS
OF DADE COUNTY FLORIDA
By:____________________________________
County Manager
Attest: Harvey Ruvin, Clerk
_______________________________________
By:____________________________________
Deputy Clerk
NAME OF JOINT VENTURE:
Miami Airport Duty Free Joint Venture
________________________________________________________________________________
8052 N.W. 14th Street
________________________________________________________________________________
Miami, Florida 33126
________________________________________________________________________________
A. CORPORATE NAME OF JOINT D. CORPORATE NAME OF JOINT
VENTURER: VENTURER:
Century Duty Free. Inc. Greyhound Leisure Services, Inc.
_______________________________ _______________________________
By: _______________________________
President By: _______________________________
President
ATTEST: ___________________________
Secretary ATTEST: ___________________________
Asst. Secretary
(CORP. SEAL)
B. CORPORATE NAME OF JOINT E. NAME OF JOINT VENTURER:
VENTURER:
Media Consultants, Inc. Maria J. Argudin
_______________________________ _______________________________
By: _______________________________
President
ATTEST: ___________________________
Asst. Secretary
(CORP. SEAL)
C. CORPORATE NAME OF JOINT Witnesses as to Signature:
VENTURER:
_______________________________
Bayside Company Store, Inc.
d/b/a Bayside To Go, Inc. _______________________________
_______________________________
MANAGING JOINT VENTURER:
By: _______________________________
President Greyhound Leisure Services, Inc.
____________________________________
ATTEST: ___________________________ Print Name
Asst. Secretary
CA-42
<PAGE> 49
President
____________________________________
Signature and Title
(Signature and Title of Individual
Authorized to Bind Joint Venture
MUST BE SHOWN ABOVE)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their appropriate officials as of the date first above written.
CONCESSIONAIRE: (IF CORPORATE BOARD OF COUNTY COMMISSIONERS
PARTNERSHIP) OF DADE COUNTY FLORIDA
By:_________________________________
County Manager
Attest: Harvey Ruvin, Clerk
By:_________________________________
Deputy Clerk
(COUNTY SEAL)
NAME OF CORPORATE PARTNERSHIP:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
A. NAME OF CORPORATE PARTNER:
_______________________________
By: _______________________________
President
ATTEST: __________________________
Secretary
(CORP. SEAL)
B. NAME OF CORPORATE PARTNER:
_______________________________
By: _______________________________
President
ATTEST: __________________________
Secretary
(CORP. SEAL)
CA-43
<PAGE> 50
C. MANAGING CORPORATE PARTNER:
_______________________________
By: _______________________________
Signature & Title
(Signature and Title of Individual Authorized
to Bind Partnership MUST BE SHOWN ABOVE)
(CORP. SEAL)
CA-44
<PAGE> 51
EXHIBIT A
SUMMARY OF STORES IN EXHIBIT A
<TABLE>
<CAPTION>
STORE NUMBER SQUARE FOOTAGE
------------ --------------
<S> <C>
1 2,037
2/9 4,583
3/4 3,905
5 2,075
6 367
7 1,821
8 1,430
10 947
11 621
12 60
14 536
15 153
16 614
17 1,178
18 48
19 227
20 176
21 4,116
22 711
27 3,414
30 256
32 48
33 48
Office 5,795
Warehouse 10,327
Bulk Warehouse 1,930
Warehouse (Con "A") 4,547
Display Workshop 2,555
TOTAL 54,525
</TABLE>
CA-45
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES
NAME PLACE OF INCORPORATION
Cruise Management International, Inc. Florida
Cruise Line Holdings Co. Delaware
Greyhound Leisure Services, Inc. Florida
Miami Cruiseline Services Holdings II B.V. The Netherlands
Miami Cruiseline Services Holdings III B.V. The Netherlands
On-Board Media, Inc. Florida
Starboard Holdings Ltd. Barbados
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference of our firm under the caption "Experts" and to the
use of our reports dated March 22, 1999 except as to Note 14 as to which the
date is September __, 1999, and our report dated August 16, 1999 in the
Registration Statement (Form S-1 No. 333-00000) and related Prospectus of Miami
Cruiseline Service Holdings I B.V. for the registration of 000,000 shares of its
common stock.
Miami, Florida
September __, 1999
The foregoing consent is in the form that will be signed upon the restatement
of capital accounts and the name change described in Note 14 to the
consolidated financial statements.
/s/ Ernst & Young LLP
Miami, Florida
August 18, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated May 7, 1999, April 27, 1999 and July 16, 1999 in the
Registration Statement (Form S-1 No. 333-00000) and related Prospectus of Miami
Cruiseline Services Holdings I B.V. for the registration of 000,000 shares of
its common stock.
/s/ Ernst & Young LLP
Miami, Florida
August 18, 1999
<PAGE> 1
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
We consent to the use in this Registration Statement of Miami Cruiseline
Services Holdings I B.V. on Form S-1 of our report dated July 31, 1998 (relating
to the consolidated financial statements of Greyhound Leisure Services, Inc. and
Subsidiaries ["Greyhound Leisure"] as of December 31, 1997 and for the two years
in the period then ended, presented separately herein), appearing in the
Prospectus, which is part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedules of Greyhound Leisure Services
Inc. and Subsidiaries, the "Predecessor" of Miami Cruiseline Service Holdings I
B.V., listed in Schedule II. These financial statement schedules are the
responsibility of Greyhound Leisure's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic 1996 and 1997 financial
statements taken as a whole, present fairly in all material respects the
information set forth herein.
/s/ Deloitte & Touche LLP
Miami, Florida
August 18, 1999
<PAGE> 1
Exhibit 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated May 20, 1998 in this Registration
Statement Form S-1 and related prospectus of Miami Cruiseline Services Holdings
I B.V. and Subsidiaries. We also consent to reference to our firm under the
caption "Experts."
/s/ Goldstein Schechter Price Lucas Horwitz & Co., P.A.
Miami, Florida
August 16, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> SEP-10-1998 JAN-1-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 4,124,191 360,562
<SECURITIES> 0 0
<RECEIVABLES> 14,791,149 15,700,866
<ALLOWANCES> 626,361 557,770
<INVENTORY> 52,021,405 63,981,155
<CURRENT-ASSETS> 76,476,345 84,752,445
<PP&E> 8,801,596 7,394,971
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 191,539,931 197,553,731
<CURRENT-LIABILITIES> 33,599,422 50,684,281
<BONDS> 0 0
0 0
49,920 49,920
<COMMON> 0 0
<OTHER-SE> 45,982,109 42,688,850
<TOTAL-LIABILITY-AND-EQUITY> 191,539,931 197,553,731
<SALES> 71,061,304 138,258,164
<TOTAL-REVENUES> 71,061,304 138,258,164
<CGS> 30,139,145 56,887,519
<TOTAL-COSTS> 30,139,145 56,887,519
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,156,404 6,047,679
<INCOME-PRETAX> 353,140 (3,055,657)
<INCOME-TAX> (359,195) (186,151)
<INCOME-CONTINUING> (187,881) (3,313,259)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (187,881) (3,313,259)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE> 1
Exhibit 99.1
August 18, 1999
Securities and Exchange Commission
Mail Stop 11-3
450 5th Street, N.W.
Washington, D.C. 20459
Dear Sir/Madams:
We have read and agree with the comments concerning the termination of our
relationship with Greyhound Leisure Services, Inc. and Subsidiaries which
appear under the "Change in Accountants" heading of this Registration Statement
on Form S-1 of Miami Cruiseline Services Holding I B.V. dated on or about August
19, 1999.
Yours truly,
/s/ Deloitte & Touche LLP
