<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER: 0-9264
AMERICAN CLASSIC VOYAGES CO.
(Exact name of registrant as specified in its charter)
DELAWARE 31-0303330
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
(312) 258-1890
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant was $132.5 million based upon the last reported sale price of $19.00
per share on March 26, 1999 on The Nasdaq Stock Market. Using beneficial
ownership of stock rules adopted pursuant to Section 13 of the Securities
Exchange Act of 1934, certain persons designated as affiliates for purposes of
this computation may not be held to be affiliates upon judicial determination.
As of March 26, 1999, there were 14,327,509 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
PART III -- Portions of the registrant's definitive Proxy
Statement, which will be filed with the Securities
and Exchange Commission by April 30, 1999.
================================================================================
<PAGE> 2
AMERICAN CLASSIC VOYAGES CO.
INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
---------------- ----
Part I
<S> <C>
Item 1 -- Business........................................................................ 3
Item 2 -- Properties...................................................................... 14
Item 3 -- Legal Proceedings............................................................... 14
Item 4 -- Submission of Matters to a Vote of Security Holders............................. 14
Part II
Item 5 -- Market for Registrant's Common Equity and Related
Stockholder Matters............................................................. 15
Item 6 -- Selected Financial Data......................................................... 15
Item 7 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................. 15
Item 7A -- Quantitative and Qualitative Disclosures About Market Risk...................... 15
Item 8 -- Financial Statements and Supplementary Data..................................... 15
Item 9 -- Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.......................................... 15
Part III
Item 10 -- Directors and Executive Officers of the Registrant.............................. 16
Item 11 -- Executive Compensation.......................................................... 16
Item 12 -- Security Ownership of Certain Beneficial Owners
and Management.................................................................. 16
Item 13 -- Certain Relationships and Related Transactions.................................. 16
Part IV
Item 14 -- Exhibits, Financial Statement Schedules,
and Reports on Form 8-K......................................................... 17
</TABLE>
2
<PAGE> 3
AMERICAN CLASSIC VOYAGES CO.
PART I
ITEM 1. BUSINESS
GENERAL
American Classic Voyages Co. is the leading provider of overnight passenger
cruises among the Hawaiian Islands and on the Mississippi River system. We
operate two cruise lines under the names American Hawaii Cruises and The Delta
Queen Steamboat Co. American Hawaii, acquired in August 1993, operates the S.S.
Independence, a U.S.-flagged ocean liner with 867 total passenger berths.
American Hawaii provides inter-island cruises on a year-round basis among the
Hawaiian Islands. Delta Queen currently operates the Delta Queen, American Queen
and Mississippi Queen, U.S.-flagged paddlewheel steamboats having 1,026 total
passenger berths. Delta Queen provides cruise vacations on the Mississippi,
Ohio, Cumberland, Tennessee, Arkansas, Illinois and Atchafalaya Rivers. We do
not offer gaming on our vessels.
American Classic Voyages Co. is a Delaware corporation incorporated in 1985 as a
holding company that owns and controls The Delta Queen Steamboat Co., which
operates Delta Queen through various subsidiaries, and Great Hawaiian Cruise
Line, Inc., which operates American Hawaii through various subsidiaries.
American Classic Voyages Co.'s principal executive offices are located at Two
North Riverside Plaza, Suite 200, Chicago, Illinois 60606. Delta Queen and
American Hawaii's principal administrative offices are located in New Orleans,
Louisiana.
We are the largest owner and operator of U.S. flag passenger vessels. Under the
Passenger Vessel Act of 1886 and related U.S. laws, only U.S. ships that are (1)
U.S. built, (2) owned by U.S. citizens, (3) operated by U.S. crews and officers,
and (4) U.S.-flagged by the U.S. Coast Guard are permitted to operate
exclusively between U.S. ports, including the islands of Hawaii. We are the only
U.S.-flagged, large scale, overnight cruise line operator providing inter-island
vacations among the Hawaiian Islands. Accordingly, we believe our U.S.-flagged
designation provides us with significant itinerary advantages.
The U.S. Flag Cruise Ship Pilot Project Statute ("Pilot Project Statute") was
enacted in 1997 to develop the U.S.-flagged cruise ship industry and stimulate
commercial construction of cruise ships in U.S. shipyards. In connection with
our execution of a definitive agreement with Ingalls Shipbuilding to construct
at least two new vessels in a U.S. shipyard (see below), we believe that we will
have (1) the exclusive right to operate large U.S.-flagged cruise ships in the
domestic trade among the Hawaiian Islands for the life expectancy of the vessels
and (2) the right to operate a foreign-built cruise ship as a U.S.-flagged ship
in the Hawaiian Islands for a period of two years following delivery of the
final vessel under the contract. We will enjoy the benefits of the Pilot Project
Statute, however, only if we comply with its terms. The Pilot Project Statute
requires, among other things, as a condition to obtaining these rights that the
agreement to construct the new cruise ships provide that (1) the vessels are
built with more than 867 berths each and (2) delivery of the first vessel be
prior to January 1, 2005 and the second vessel prior to January 1, 2008. The
statute does not restrict the activities of small U.S.-flagged cruise ships with
fewer than 275 passengers and less than 10,000 gross tons.
CURRENT OPERATIONS
American Hawaii -- Current Operations
American Hawaii's cruise ship, the S.S. Independence, operates inter-island
cruise vacations among the Hawaiian Islands year round. Built in 1951, the S.S.
Independence has 867 passenger berths. American Hawaii offers primarily seven
day itineraries with ports of call throughout the Hawaiian Islands. In addition,
American Hawaii also offers three and four day itineraries. Many cruise
passengers also choose to extend their stay in Hawaii, purchasing hotel
accommodations through American Hawaii. American Hawaii offers more than 50
optional shore excursion activities to passengers to showcase the spectacular
Hawaiian scenery and local attractions, including the following: helicopter
rides and submarine rides, deep sea fishing, snorkeling, scuba diving and tours
of popular destinations such as Pearl Harbor and the Arizona Memorial, the Fern
Grotto and the historic town of Lahaina. The itinerary also affords an
opportunity to view Mount Kilauea, one of the world's few active volcanoes, and
the soaring sea cliffs of the inaccessible Na Pali coast.
3
<PAGE> 4
American Hawaii offers theme cruises organized around specific activities or
seasons, including: "Whales in the Wild" cruises, in which passengers can
observe whales that make Hawaii their winter playground; "Hawaiian Heritage"
cruises, which emphasize native Hawaiian ceremonies and rituals; and "Big Band"
cruises featuring 1940's Big Band orchestra music and "Golden Age of Movies"
film screenings.
Cruise fares on American Hawaii for a seven-night cruise, as stated in the 1999
cruise brochure, range from luxurious suites at $3,280 per person to interior
cabins with a single sofa bed and fold-away upper berth at $1,230 per person,
based on double occupancy. The fare also includes three full service meals per
day, along with mid-afternoon snacks and a late evening buffet, night
entertainment on the vessel and port charges. American Hawaii also offers
seasonal youth programs to attract passengers with children, as the S.S.
Independence has a large number of cabins that can accommodate three and four
passengers.
American Hawaii offers additional services and products to its passengers,
including bar services, beauty salon services, photography services, shore
excursions and gift shop products. American Hawaii also distributes a line of
specialty products through its onboard gift shops utilizing the "American Hawaii
Cruises" logo. In order to facilitate and simplify passengers' travel planning
process, American Hawaii offers air transportation arrangements to and from the
Hawaiian Islands through agreements with several major commercial airlines as
well as trip cancellation insurance.
American Hawaii is marketed as "the best and most convenient" way to experience
the Hawaiian Islands. We accomplish this by focusing on onboard dining,
entertainment, and offering an extensive package of shore excursions at all
stops along the itinerary, as well as by providing a wide variety of activities,
demonstrations and lectures designed to enhance passengers' overall experience
of the unique Hawaiian culture. Additionally, the Hawaii vacation package is
promoted as a convenient and rewarding alternative to land-based multi-island
vacations.
American Hawaii's marketing efforts target consumers who are interested in
Hawaii, cruise enthusiasts and other consumers who fit certain demographic or
geographic profiles. American Hawaii sends out more than six million pieces of
direct mail annually to reach these potential customers in an effort to develop
cruise sales. These direct mailings are made throughout the year to drive
business during certain specific time frames. American Hawaii also sends out the
Holokai Hui News newsletter, aimed at encouraging passengers to repeat, and
sends cooperative direct mail to travel agents to promote cruise sales. The
travel agency community also receives periodic fax broadcasts and a quarterly
newsletter, the Kuaihelani. American Hawaii also places advertisements in
specialized publications such as Islands, Hawaii, Modern Maturity, Car and
Travel and Endless Vacation magazines, and has been the subject of numerous
feature articles in national travel and leisure magazines and newspaper travel
sections.
Delta Queen -- Current Operations
Delta Queen's three paddlewheel steamboats offer cruise itineraries for trips
along the Mississippi, Ohio, Cumberland, Tennessee, Arkansas, Illinois and
Atchafalaya Rivers, as well as the Intracoastal Waterway. Ports of embarkation
and disembarkation, which are typically locations of historical or cultural
significance, include New Orleans, Memphis, St. Louis, St. Paul, Louisville,
Cincinnati, Pittsburgh, Nashville, Chattanooga, and Galveston. Other ports of
call include such towns as Hannibal, Missouri; Prairie du Chien, Wisconsin;
Vicksburg and Natchez, Mississippi; and Shiloh, Tennessee.
According to the Cruise Industry News 1998 Annual Report, Delta Queen had a 53%
share of available beds within the domestic rivers and waterways segments of the
overnight cruise market. Delta Queen is marketed to mature adult travelers as a
unique vacation experience aboard classic steamboats in which the people,
sights, romance and history of heartland America are explored. We believe
individuals are attracted to our paddlewheel steamboat cruises because of the
quality of our service, dining, accommodations and entertainment as well as the
unique characteristics of the steamboat experience, including the connection to
American history.
Delta Queen promotes special cruise packages revolving around specific themes
which allow passengers to participate in activities, meet special guest
lecturers, and enjoy entertainment relevant to the theme. Seasonal theme cruises
include: "Spring Pilgrimage," "Fall Foliage - Autumn in America" and "Old
Fashioned Holidays" while geographic themes include "Dixie Fest," "Mark Twain
Heartland," "Cajun Culture" and "Gardens of the River." Old standbys and
continuing favorites are "Kentucky Derby" cruises that include attendance at the
Kentucky Derby horse race and "The Great Steamboat Race," a reenactment of the
famous 19th Century race between the Natchez and the Robert E. Lee steamboats.
For nostalgia and history lovers, Delta Queen offers "Big Band," "The Year That
Was...," "Civil War" and "Fabulous 50s" theme cruises. In a continuing effort to
upgrade its cruise product, Delta Queen introduced in 1998
4
<PAGE> 5
enhancements to the onboard dining, entertainment and shore excursions which
highlighted America's heartland. In addition, several new theme cruises were
added, such as "Tramping on the River" cruises featuring impromptu river stops;
and "The History of Steamboatin'," which retraced the 1811 voyage of the first
successful steamboat voyage down the Ohio and Mississippi Rivers to New Orleans.
The Steamboatin'(TM) cruise fare for an average five-night cruise, as stated in
the 1999/2000 cruise brochure, ranges from luxurious suites at $3,410 per person
to interior cabins with lower and upper passenger berths at $1,390 per person,
based on double occupancy. The fare also includes three full service meals per
day, along with mid-afternoon snacks and a late evening buffet, day and night
entertainment on the vessels and port charges.
To attract additional customers, Delta Queen has developed products which
combine its steamboat cruises with escorted tours and overnight stays at
historic port cities. As a convenience to its passengers, Delta Queen will also
arrange hotel accommodations and air and land transportation to and from the
cruise embarkation and disembarkation points.
Delta Queen annually welcomes back a large number of prior passengers through
its relationship marketing program. New passengers are acquired through targeted
direct mail, direct response advertising and other promotional activity. Media
coverage generated by public relations activity is another method of acquiring
new customers and building brand awareness. In 1998, Steamboatin'(TM) vacations
were featured or mentioned in more than 3,000 articles in publications with
national and local circulations. In addition, each year a significant number of
new customers are referred by prior customers. Nearly all Steamboatin'(TM)
vacations are booked via travel agents, who receive frequent communications from
Delta Queen and who are supported with collateral and mailing materials.
Sales and Marketing
We maintain separate field sales and reservation staffs for Delta Queen and
American Hawaii. We sell our cruise products primarily through two major
channels, of which the most significant channel is travel agents operating
throughout the U.S. We have programs which educate travel agents about the
unique nature of our travel experiences, the vessels' itineraries, special
programs, theme cruises and pricing policies. To assist in generating
reservations from travel agents, we engage in both consumer and trade-oriented
advertising, including direct mailings of Delta Queen and American Hawaii
literature to travel agencies. We also maintain contact with travel agents
through each cruise line's field sales personnel who conduct educational
seminars and attend trade shows. Our second major sales channel is group travel
organizers, consisting of clubs, travel agencies and tour operators who arrange
for the sale of cruise vacations at discounted fares. We provide a variety of
incentives to these organizers, including fare discounts and promotional
materials. During fiscal 1998, no single customer accounted for more than 10% of
our consolidated revenues.
Pricing and Advance Reservations
We issue separate full color sales brochures for each of Delta Queen and
American Hawaii, which contain descriptive information, itineraries and fare
schedules, prior to the beginning of each upcoming calendar year. We price our
cruise fares, based on cabin category, using a single pricing schedule for each
cruise line throughout the calendar year. As an inducement for passengers to
book early, we generally offer an early booking discount. In addition, we offer
to group travel organizers and others limited discounts from our published fare
schedules.
We actively market our cruises up to one year prior to the cruise year and the
level of advance reservations at any given date provides us with an indication
of our future fare revenue. A significant portion of such reservations is booked
more than six months in advance of the cruise date. Generally, customers of each
cruise line must pay a $300 refundable deposit within one week of booking a
cruise with the balance of the cruise fare to be remitted 60 days in advance of
the departure date. Cancellations received after a certain date are subject to a
loss of deposit or a cancellation charge ranging from 25% to 100% of the cruise
fare. For a nominal fee, we also offer trip cancellation insurance through a
third-party insurer which allows the customers to reduce their exposure to
cancellation charges. As of January 1, 1999, advance reservations for the 1999
cruise year for both Delta Queen and American Hawaii combined were $81.6
million. However, we cannot specifically determine the amount of revenues to be
derived from advance reservations as we cannot guarantee that any particular
advance reservation will result in any revenue to us.
5
<PAGE> 6
EXPANSION PLANS
We believe that there is significant untapped market potential in the cruise
industry and plan to realize some of this potential by expanding both our Hawaii
and Delta Queen cruise lines. In the Hawaii cruise market, we plan to leverage
our U.S.-flagged designation and the unique competitive advantages offered to us
under the Pilot Project Statute by introducing larger, more modern vessels into
the Hawaii vacation market. To expand Delta Queen's position in the U.S. inland
waterway cruise market, we plan to extend our cruise itineraries into the U.S.
coastal cruise market with up to five new coastal cruisers and to introduce a
fourth riverboat on the West Coast.
Hawaii Expansion Plans
On March 9, 1999, we executed definitive agreements with Ingalls Shipbuilding to
construct at least two new vessels for the Hawaii cruise market. The new Hawaii
cruise ships will have the capacity to accommodate approximately 1,900
passengers each and are currently estimated to cost $440 million each, plus
approximately $30 million for furnishings, fixtures and equipment. The contract
provides that Ingalls Shipbuilding will deliver the first new ship in January
2003 and the second ship in January 2004. In addition, the shipbuilding contract
provides us an option to build up to four additional vessels. The estimated
contract price of the first option vessel is $487 million and the contract price
for the subsequent option vessels will be negotiated between the parties.
Ingalls Shipbuilding will provide a limited warranty for the design, material
and workmanship of each vessel for one year after delivery.
In order to expedite the introduction of a larger, more modern ship into the
Hawaii cruise market, we intend to obtain and operate a foreign-built vessel as
a U.S.-flagged vessel in the Hawaii market. Our ability to operate a
foreign-built vessel in the Hawaiian Islands arises under the terms of the Pilot
Project Statute. We have targeted vessels that were built since 1980 and can
accommodate between 1,200 and 2,000 passengers. If successful in obtaining a
foreign-built vessel, we plan to introduce this vessel into service by the end
of 2000.
We have hired Roderick K. McLeod, a 27-year veteran of the cruise industry, to
manage all aspects of our expansion plans in the Hawaii market. Mr. McLeod will
oversee development of our expanded Hawaii business.
Delta Queen Expansion Plans
In order to capitalize upon its strong market position and brand name
recognition, Delta Queen plans to expand its current business by introducing (1)
a fourth riverboat offering new itineraries and (2) up to five new vessels
capable of offering cruises along U.S. coastal waterways. By extending the Delta
Queen line beyond our country's heartland and inland rivers to underserved
coastal markets, Delta Queen plans to offer its unique cruising experience on
itineraries highlighting historically or culturally interesting or beautiful
U.S. coastal regions.
Coastal Cruises
We believe that there are itineraries along the U.S. coastlines with significant
cruise market potential. As a further extension of Delta Queen's inland waterway
cruise itineraries, we plan to build up to five new ships offering cruises along
the eastern seaboard, in the Pacific Northwest and along the California coast of
the U.S. Possible new destinations identified by Delta Queen include the
following: Eastern seaboard cruise itineraries to explore Halifax, Nova Scotia
and New Brunswick, Maine, and visits to Boston Harbor, Martha's Vineyard and the
Chesapeake Bay, as well as New York City, Baltimore and Annapolis, Maryland,
Washington, D.C., Charleston, South Carolina, Savannah, Georgia and Florida's
beaches. Pacific Northwest itineraries are also planned to feature cruises in
Puget Sound near Seattle, Washington, the Willamette River, Canada's Inside
Passage and along the Alaskan coast. In California, prospective itineraries
include San Francisco and Napa Valley's wine country.
We plan to capture these underserved coastal markets by building up to five new
ships with approximately 226 passenger berths each in the next seven to ten
years to extend the itineraries of the Delta Queen line. We are currently
negotiating with a shipyard to construct the first two new coastal vessels. We
hope that construction on the first vessel can begin as early as mid-1999.
Assuming construction commences at that time, the first ship could be launched
as early as the first half of 2001. Delivery of the second vessel would then be
planned for the second half of 2001.
Each coastal vessel will be approximately 300 feet long, have diesel-electric
propulsion systems and "state-of-the art" safety technology. The total project
cost for each new vessel is estimated at $35 million.
6
<PAGE> 7
Delta Queen coastal cruises also plan to offer shore excursions to highlight the
unique and historically significant destinations in their new itineraries and
may also offer special cruise packages revolving around specific themes, similar
to those offered by Delta Queen's steamboat river cruises. Further, we believe
that this expansion into coastal cruise itineraries will appeal to younger and
more physically active customers. Then, as those customers age, we will have the
opportunity to transition these same customers to Delta Queen river cruises. By
extending the Delta Queen line into coastal cruise itineraries, it will allow
Delta Queen to increase gradually the number and range of itineraries it can
offer and to attract a broader base of passengers.
New Riverboat
We have entered into an agreement to acquire a new vessel and plan to convert it
into an overnight passenger vessel with approximately 150 passenger berths for
use as the fourth Delta Queen riverboat. The purchase price for the vessel is
approximately $8.0 million. We have conducted a due diligence review to ensure
the vessel can be effectively and efficiently renovated for passenger use and
that the cost of outfitting the vessel is consistent with our current estimates.
Based on this due diligence review, we are seeking to amend the terms and
conditions of the agreement. We estimate that the total renovation, relocation,
start-up and marketing costs will require an additional $12 million. We expect
that the conversion project will take between six and nine months and that the
vessel will be able to enter into service in the first half of 2000. The current
plans call for the vessel to be operated by Delta Queen in the Pacific
Northwest, including the Columbia River system near Portland, Oregon.
OTHER
Government Regulation
Federal maritime law prohibits non-U.S.-flagged vessels from receiving and
discharging passengers at any two U.S. ports without stopping at an intervening
non-U.S. port. Periodically there has been debate about the potential amendment
or repeal of this law and the broader cabotage laws encompassed under the
Passenger Vessel Act and related U.S. laws. In August 1995, we joined the
Maritime Cabotage Task Force, a broad national coalition of 415 companies,
associations and unions representing all modes of domestic transportation. The
task force is responsible for monitoring potential adverse changes in
legislation that could affect the U.S. maritime industry and publicizing the
economic and national security issues relevant to maintaining a strong
U.S.-flagged vessel industry. Through the coalition's efforts, numerous
legislators and key Congressional staff members have been made aware of the
substantive issues and positions surrounding any changes to this legislation. In
1997 and 1998, bills were introduced to the Senate to modify the Passenger
Vessel Act, including allowing foreign-flagged ships into a limited number of
itineraries where there was no existing U.S.-flagged ship in service. None of
these bills were approved by the relevant subcommittees or committees of the
Senate or the House of Representatives.
One of the criteria for operating U.S.-flagged vessels in U.S. domestic trade is
that holders of at least 75% of our shares must be U.S. citizens. In order to
preserve the status of our U.S.-flagged vessels, our certificate of
incorporation contains a provision restricting the transfer of shares of our
common stock to non-U.S. citizens. In addition, we have created separate forms
of stock certificates with legends to indicate whether the stockholder is a U.S.
or non-U.S. citizen.
We are subject to various federal and state regulations which affect the
operations of our vessels. Our U.S.-flagged vessels are subject to regulations
promulgated by the U.S. Department of Transportation and enforced by the Coast
Guard. The Coast Guard conducts both scheduled and unannounced inspections to
determine compliance with these regulations and has the authority to delay or
suspend cruises. The Delta Queen vessels must be drydocked for an inspection of
the hulls' exteriors every five years. Previously, American Hawaii was required
to drydock the S.S. Independence approximately every 18 months for a similar
procedure. The Coast Guard is empowered to increase the interval between
inspections and accordingly, we have requested and received permission from the
Coast Guard to lengthen the interval of the drydocking of the S.S. Independence
to 30 months, subject to annual hull surveys. In May 1997, the S.S. Independence
was out of service for a four-week period and the next drydocking is scheduled
for January 2000.
Like other entities that operate vessels on U.S. waterways, we are also subject
to certain federal, state and local health and safety laws, regulations and
ordinances, including environmental laws. Periodically, we incur expenditures to
keep our vessels in compliance with applicable laws, regulations and ordinances.
We do not anticipate making any material expenditures in 1999 with respect to
environmental matters. However, the coverage and attendant compliance costs
associated with such laws, regulations and ordinances may result in future
additional costs to our operations.
7
<PAGE> 8
Federal law requires that vessels for 50 or more overnight passengers be
constructed of fire retardant materials. Since 1968 Congress has granted the
Delta Queen eight consecutive exemptions from the Safety at Sea Act requirement
because of fire prevention and safety enhancements made to the vessel and the
Delta Queen's historic status. The statute exempting the Delta Queen requires us
to notify potential passengers that the Delta Queen does not comply with
applicable fire standards and prohibits us from disclaiming liability for loss
due to fire caused by our negligence. The current exemption has been extended to
November 1, 2008. Our ability to operate the Delta Queen is dependent upon
retaining our current Congressional exemption and obtaining additional
exemptions subsequent to 2008. Ocean-going passenger vessels were required to
make enhancements to life safety systems by October 1, 1997 in order to comply
with federal law. The S.S. Independence was brought into compliance during its
spring 1997 drydock as discussed above.
The Federal Maritime Commission regulates passenger vessels with 50 or more
passenger berths departing from U.S. ports and requires that operators post
security to be used in the event the operator fails to provide cruise services,
or otherwise satisfy certain financial standards. We have been approved as a
self-insurer by the Federal Maritime Commission, and therefore, subject to
continued approval, are not required to post security for passenger cruise
deposits. The Federal Maritime Commission has reviewed its standards and in June
1996 issued proposed regulations to increase significantly the financial
responsibility requirements. We filed our objection to the proposals, as we
believe that the Federal Maritime Commission's current standards provide
passengers with adequate protection in the event of an operator's
non-performance and that further requirements may impose an undue burden on
operators. At this time, we cannot predict if the proposed changes will be
approved as currently constituted, or at all.
Competition
The vacation industry is highly fragmented and characterized by a significant
degree of competition among a large number of participants, including cruise
lines, land-based destination resorts, sightseeing tours and a wide range of
other vacation options. Our vessels compete against all of these vacation
options. Since leisure spending is discretionary, adverse economic conditions
affecting our customer base, including uncertainty over inflation and interest
rate fluctuations, may negatively impact our performance.
Within the cruise industry, we believe that cruise destination, cruise product,
and pricing are the primary methods of competition. We also believe that our
status as an operator of U.S.-flagged vessels provides us with a competitive
advantage.
American Hawaii is the sole U.S.-flagged overnight cruise ship operator and the
largest provider of cruise vacations among the Hawaiian Islands. American Hawaii
competes with operators of foreign-flagged cruise ships which visit the Hawaiian
Islands on voyages greater than seven days. Under U.S. law, foreign-flagged
ships must include a foreign port in each of their itineraries. This means that
foreign-flagged ships visiting Hawaii must spend at least four days sailing
across the Pacific Ocean in order to visit a foreign port. Our cruises can visit
and explore the beauty of the various Hawaiian Islands without having to visit a
foreign port.
Delta Queen is the largest provider of overnight cruises in the domestic
waterways and rivers cruise market. There are several other smaller
U.S.-flagged providers of overnight domestic cruises, including two providers
who primarily operate overnight river cruises. We believe that Delta
Queen's principal competitive strengths include its strong brand recognition,
the distinctive nature of its products, its luxurious accommodations, and its
high level of service.
Insurance
We carry marine liability insurance on our vessels through Steamship Mutual
Underwriting Association (Bermuda) Limited ("Steamship Mutual"), a non-profit,
mutual protection and indemnity association. Our marine liability insurance
arrangements are typical of common marine industry practices and, subject to
certain deductibles, provide coverage for losses, other than hull physical
damage losses, including casualty damage by the vessels and claims by crew
members, passengers and other third parties. The policy has no maximum limit of
liability coverage, except for a $500 million limit, per occurrence, for oil
pollution liability claims. As a member of Steamship Mutual, we pay our annual
premiums based largely on our risk characteristics and loss experience, and the
loss experience of other members. In addition, because Steamship Mutual and
other maritime mutual indemnity associations around the world pool a portion of
their loss experience in risk sharing arrangements, Steamship Mutual also may be
affected by the loss experience of other mutual protection and indemnity
organizations.
8
<PAGE> 9
Our annual protection and indemnity insurance premium consists of an advance
call which recently has approximated 71% of the expected total annual premium,
and a supplemental call determined by Steamship Mutual's managing directors
later in the year. We may be liable for a supplemental call in excess of the
anticipated amount in the event that Steamship Mutual incurs heavy losses or
experiences unusual circumstances.
We also carry hull and machinery coverage with various insurers, which insures
against physical loss and damage to the vessels, subject to a $750,000
deductible and/or co-payment requirements per occurrence. The vessels are
insured for their appraised value. Although we believe the risk of a total loss
of our vessels is remote, in all likelihood the replacement costs would exceed
these coverage limits.
We believe our insurance coverage is adequate based on our assessment of the
risks to be insured, the probabilities of loss and the relative cost of
available coverages.
Employees
We employed 1,418 persons as of December 31, 1998. Of the vessels' onboard
employees, the American Maritime Officers of the AFL-CIO ("American Maritime
Officers") represented approximately 124 individuals, and the Seafarers
International Union of North America, Atlantic, Gulf, Lakes and Inland Waters
District of the AFL-CIO ("Seafarers") represented approximately 677 individuals.
The American Maritime Officers' contracts for Delta Queen and American Hawaii
expire in February 2004 and May 2000, respectively, and the Seafarers' contracts
for Delta Queen and American Hawaii expire in December 2003 and May 2000,
respectively. Since 1986, we have not experienced any work stoppages, and we
believe relations with our employees are good.
Factors Concerning Forward-Looking Statements
Certain statements in "Risk Factors" and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute
"forward-looking statements" that we believe are within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to certain risks,
uncertainties and assumptions.
Words such as "expect," "anticipate," "intend," "plan," "believe," "estimate"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of those risks, uncertainties
and assumptions, the forward-looking events discussed herein might not occur.
RISK FACTORS
Our future financial condition, liquidity and operating results may adversely be
affected by a number of factors, including the following:
CONSTRUCTION DELAYS AND DEVIATIONS FROM SPECIFICATIONS FOR THE NEW HAWAII AND
COASTAL VESSELS MAY ADVERSELY AFFECT EXPANSION PLANS AND FUTURE FINANCIAL
PERFORMANCE
We have entered into a contract to construct at least two new vessels for
our Hawaii cruise business and currently intend to construct up to five new
coastal cruisers for the Delta Queen line. Without these new ships, our future
financial performance may be adversely impacted. Ingalls Shipbuilding has never
built a modern passenger ship and, because no U.S. shipyard has built a
passenger ship in over 40 years, there is a limited base of experienced
subcontractors for portions of the ships. We cannot assure you that we will be
able to successfully complete construction of the Hawaii cruise ships or the
coastal cruisers or that we will be able to complete these projects within
construction budgets or expected time frames. Factors that could impact
construction of the new vessels include:
- construction delays or complications;
- cost overruns;
- labor stoppages, slowdowns or shortages; and
- compliance with U.S. Coast Guard regulations and classification society
requirements.
9
<PAGE> 10
Our business strategy has been developed on the assumption that we will be able
to put the Hawaii cruise ships and coastal cruisers into service on a timely
basis. We have also assumed that the ships will perform according to their
design specifications. A significant delay in delivering the vessels or a
material deviation from the design specifications could have a material
deviation from the design specifications could have a material adverse effect
on our business. Also, events out of the control of the shipyards constructing
the vessels could delay delivery.
IF WE ARE UNABLE TO OBTAIN MARITIME ADMINISTRATION FINANCING GUARANTIES, IT WILL
IMPEDE OUR EXPANSION PLANS AND FUTURE REVENUE GROWTH
We intend to finance a significant portion of the purchase price of the
Hawaiian cruise ships through private financing guarantied by the Maritime
Administration. Without this financing, we may be unable to implement our
current expansion plans and our future revenue growth may be adversely affected.
If granted, guarantied financing through the Maritime Administration would
provide us with favorable financing terms for up to 87.5% of the cost of the
Hawaii cruise ships. While we have filed the formal application with the
Maritime Administration and are currently negotiating terms of the financing
guaranties, we cannot assure you that we will be able to obtain such guarantied
financing for the Hawaii cruise ships. If we do not obtain the Maritime
Administration guaranty, we will have to obtain financing for the Hawaii cruise
ships from other sources. Due to the size of our financing needs, we may be
unable to obtain sufficient financing, regardless of price; and if available,
such alternative financing would likely be at much less favorable rates than
that of the Maritime Administration guarantied financing. If we cannot finance
the construction of the Hawaii cruise ships, then we will have to abandon our
current expansion plans in Hawaii.
IF WE DO NOT OBTAIN SIGNIFICANT AMOUNTS OF CAPITAL TO BUILD, PURCHASE AND
RENOVATE VESSELS, OUR EXPANSION PLANS AND FUTURE OPERATING RESULTS MAY BE
ADVERSELY AFFECTED
Our expansion plans are based in part on the construction of several new
vessels and the acquisition and renovation of existing vessels to be put into
operation in both the Hawaii market and the U.S. coastal and inland waterways
market. Our expansion plans require us to spend significant amounts of capital
in building, purchasing and renovating vessels. The final cost for these vessels
may exceed our initial estimates and we may be required to seek additional
sources of capital in order to complete the vessels. We cannot assure you that
we will be able to obtain additional financing at commercially acceptable levels
to finance this expansion or to pursue strategic business opportunities. We
expect to be able to use our cash on hand and cash generated from our future
operations to provide a significant portion of these funding needs. Our failure
to obtain enough capital may require us to delay or abandon some of our
expansion plans and could have a material adverse effect on our business.
INCREASED LEVERAGE MAY ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE AND CASH FLOW
We will substantially increase our indebtedness as we finance a significant
portion of the construction costs under existing and contemplated agreements to
build new vessels. This higher level of indebtedness will require us to devote
an increased amount of our future cash flow from operations to the payment of
principal and interest on indebtedness. At December 31, 1998, we had outstanding
consolidated total long-term debt of $77.4 million. With construction costs for
each of the two Hawaii cruise ships projected to be approximately $470 million,
and for each of the five planned coastal cruisers expected to be approximately
$35 million, we intend to substantially increase our leverage. We expect that
approximately 87.5% of the cost for the new Hawaii cruise ships will be financed
through Maritime Administration guarantied private financing, and a substantial
portion of Delta Queen's expansion costs will be financed with debt. Under our
current expansion plans for American Hawaii and Delta Queen, and assuming we
build all of the ships contemplated, we could increase our indebtedness by
approximately $1.1 billion by 2007. Our increased leverage could adversely
affect our ability to repay debt and reduce our working capital available for
operations.
IF WE ARE UNABLE TO LOCATE AND INTRODUCE A FOREIGN-BUILT VESSEL IN HAWAII, OUR
GROWTH IN HAWAII WOULD BE DELAYED
The Pilot Project Statute provides that we may operate a foreign-built
cruise ship in Hawaii as a U.S.-flagged vessel after we sign a contract for the
construction of new U.S.-built passenger cruise ships. If we do not operate a
foreign-built cruise ship as permitted, we will not recognize any additional
revenues as a result of the Pilot Project Statute for at least four years. We
currently plan to operate such a ship. However, it is possible that we will not
be able to locate and obtain a suitable ship on commercially reasonable terms.
If we cannot find an acceptable ship, it could take at least four years before
the first of the Hawaii cruise ships we intend to construct is available for
operation. In that case, we would lose the incremental revenue growth gained by
introducing a larger and more modern cruise ship into the Hawaii market until
the new vessels are completed. For a more detailed discussion of the Pilot
Project Statute, see "Business -- General."
10
<PAGE> 11
FAILURE TO ENTER INTO A CONTRACT WITH A SHIPYARD FOR COASTAL CRUISERS WILL
ADVERSELY IMPACT OUR DELTA QUEEN EXPANSION PLANS AND FUTURE REVENUE GROWTH
We currently plan to construct up to five new coastal ships for Delta
Queen. Without these new ships, our future revenue growth may be adversely
impacted. We have not yet entered into a definitive agreement to construct the
coastal ships. We cannot assure you that we will be able to reach agreement with
a shipyard to build the coastal ships on terms acceptable to us. If we cannot
reach such an agreement to build any or all of the five new coastal ships, then
we will not be able to implement our expansion plans or we will have to scale
back our expansion plans.
IF WE ARE UNABLE TO MAINTAIN ADEQUATE MANAGERIAL RESOURCES DURING OUR EXPANSION,
OUR BUSINESS MAY BE ADVERSELY AFFECTED
If we successfully execute our growth strategy, our expansion will place a
significant strain on our managerial resources. Our future performance will
depend upon management's ability to manage our growth effectively, which
includes our ability to:
- expand sales and marketing to fill the passenger berths in our expanded
fleet at profitable rates;
- operate, maintain and support a significantly expanded fleet of vessels;
- hire and train additional personnel to staff our expanded fleet and
support operations; and
- deploy capital efficiently.
The process of expanding our fleet of vessels may result in unforeseen
operating difficulties and may require management attention that would otherwise
be available for the ongoing operation of our existing fleet of vessels. Our
failure to manage our growth effectively may cause us to delay or abandon some
of our expansion plans and may have a material adverse effect on our business.
IF WE ARE UNABLE TO MANAGE OUR FINANCIAL RESOURCES DURING OUR EXPANSION, OUR
FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED
Our plans for expansion call for significant capital expenditures that will
not produce corresponding revenues in the near term which may place a strain on
our capital resources. The process of expanding our fleet of vessels may require
additional financial resources that would otherwise be available for the ongoing
operation of our existing fleet of vessels. Our failure to manage our financial
resources effectively during our expansion could force us to delay or abandon
some of our expansion plans and may have a material adverse effect on our
business.
IF DEMAND FOR OUR NEW CRUISE PRODUCTS FAILS TO DEVELOP AS EXPECTED OR
COMPETITION INCREASES, OUR BUSINESS MAY BE ADVERSELY AFFECTED
The Hawaii and coastal cruise markets where we intend to deploy our new
vessels currently do not have a large supply of cruise operators. If demand for
our new vessels does not develop, our financial performance may suffer. Our
expected deployment of vessels will increase the supply of available cruises in
these markets significantly. We engaged market research firms to assist us in
making our decision to pursue expansion plans. We cannot assure you, however,
that demand for our new cruise products, services and itineraries will develop.
If the market for these new cruise products fails to develop, develops more
slowly than expected or becomes saturated with competitors, our business may be
adversely affected.
INCREASED CAPACITY IN HAWAII MAY REDUCE OCCUPANCY AT THE S.S. INDEPENDENCE,
ADVERSELY AFFECTING REVENUES
The introduction of a larger, more modern foreign-built vessel or our new
cruise ships into the Hawaii cruise market could cause occupancy or revenue
levels on the S.S. Independence to decline. If revenue levels drop so much that
the S.S. Independence generates operating losses, it may reduce our expected
benefits from increased capacity in Hawaii and could have a material adverse
effect on our financial condition.
11
<PAGE> 12
WE MAY HAVE TO SPEND MORE IN THE FUTURE ON THE S.S. INDEPENDENCE, WHICH MAY
ADVERSELY IMPACT OUR OPERATING RESULTS
Older ships such as the S.S. Independence may cost more to maintain and may
be less efficient than more modern cruise vessels. Older ships may be more prone
to mechanical problems and may require more repairs than modern cruise ships. We
may have to spend more in the future to maintain and to operate the S.S.
Independence, which could have an adverse effect on our operating results.
IF WE CANNOT BENEFIT FROM THE EXCLUSIVE RIGHTS OF THE PILOT PROJECT STATUTE, OUR
REVENUE GROWTH IN HAWAII WILL BE ADVERSELY AFFECTED
We believe the Pilot Project Statute provides us with the exclusive right
to operate large U.S.-flagged cruise ships in the Hawaiian Islands for the life
expectancy of our new ships. We will enjoy the benefits of the Pilot Project
Statute, however, only if we comply with its terms. Our competitive advantage
could be eliminated or diminished if the Pilot Project Statute were to be
repealed or amended, if our interpretation of its terms is not upheld or if we
fail to satisfy its requirements. This could have a material adverse effect on
our expansion plans. For a more detailed discussion of the Pilot Project
Statute, see "Business -- General."
MODIFICATION OF THE PASSENGER VESSEL ACT MAY ADVERSELY AFFECT OUR BUSINESS
From time to time, proposals are made which would limit or eliminate the
terms of the Passenger Vessel Act. If the Passenger Vessel Act is repealed or
amended to allow foreign-flagged ships the same rights to transport passengers
between U.S. ports as U.S.-flagged ships, we could face considerable competition
in both our Delta Queen and American Hawaii lines, including competition from
entities with greater financial resources. Under the Passenger Vessel Act and
related laws, only U.S.-flagged ships may transport passengers between U.S.
ports. Consequently, only ships which are U.S. built, owned, operated and
documented may operate between U.S. ports, including the islands of Hawaii.
Foreign-flagged ships may transport passengers between U.S. ports only if their
itineraries include a stop at a foreign port. This increased competition could
have a material adverse effect on our business. For a more detailed discussion
of the Passenger Vessel Act, see "Business -- General."
INCREASED COMPETITION IN THE HAWAII CRUISE MARKET AND FROM OTHER VACATION
ALTERNATIVES MAY ADVERSELY IMPACT OUR FINANCIAL PERFORMANCE
We presently compete against a wide range of vacation alternatives,
including other cruises, destination resorts and sightseeing vacations. Cruise
lines or other entities, including those with greater resources, could introduce
overnight U.S.-flagged vessels in direct competition with our Delta Queen
vessels, which may adversely impact our financial performance. We may also face
additional competition in the Hawaii cruise market from foreign-flagged vessels
as the Hawaii cruise market expands. The entry of direct competition could make
it more difficult for us to maintain or further increase occupancy or prices for
cruise vacations. This could result in lower margins and reduce the
profitability of our business.
AS A MEMBER OF THE VACATION AND LEISURE INDUSTRY, OUR BUSINESS IS SENSITIVE TO
GENERAL ECONOMIC AND BUSINESS CONDITIONS
As a vacation and leisure company providing cruise vacations, we depend on
our customers' leisure spending. Adverse changes in the general economic or
business environment could affect our customers by decreasing the amount of
money they spend on leisure activities such as cruising. A decrease in leisure
spending could affect passenger yields and occupancy rates on our ships, which
could adversely affect our financial performance.
IF WE DO NOT COMPLETE DRYDOCKING ON SCHEDULE OR WITHIN BUDGET, OUR REVENUES MAY
BE ADVERSELY IMPACTED
Operation of our vessels is subject to regulations established by the U. S.
Department of Transportation that are enforced by the U.S. Coast Guard. Among
these regulations is the requirement that the vessels be taken out of operation
and removed from the water for inspection of the exterior of the hull on a
periodic basis, referred to as drydocking. When we drydock one of our vessels as
required, we lose the revenue from that vessel's operations for the period it is
out of service. We also incur the additional cost of the drydock. The S.S.
Independence must be drydocked every 30 months and the Delta Queen vessels must
be drydocked every five years. Drydocks of Delta Queen vessels take place in the
winter months when our customer demand is weakest. For its last regularly
scheduled drydocking, the Mississippi Queen was out of service for 51 days
beginning on December 1, 1995. The Delta Queen was out of service beginning on
December 15, 1996 for 30 days for its last scheduled drydocking. The American
Queen, which first entered service in 1995, will have its first
12
<PAGE> 13
drydocking in January, 2000. The last drydocking for the S.S. Independence
began on May 17, 1997 and lasted 28 days. We cannot assure you that future
drydocks for any of our vessels will be completed on schedule or within their
budgets.
RIVER AND OCEAN CONDITIONS AND WEATHER FACTORS CAN ADVERSELY AFFECT OUR
OPERATIONS AND OUR FINANCIAL PERFORMANCE
River or ocean conditions and weather factors can adversely affect our
operations and the financial performance of the Delta Queen and American Hawaii
lines by disrupting schedules or reducing operating days. As a result of
flooding and restrictions placed upon commercial travel along the inland rivers,
we have, in the past, canceled or re-routed scheduled cruises. We operate the
Hawaii cruise ship in and around the Hawaiian Islands. As a result, its
schedules are subject to ocean and weather conditions, including hurricane
conditions. Weather conditions could cause us to reschedule or cancel cruises.
THE LOSS OF VESSELS FROM SERVICE WOULD ADVERSELY IMPACT OUR BUSINESS
The loss of any vessel from service due to weather, casualty, mechanical
failure, extended or extraordinary maintenance, or otherwise, could adversely
affect our operating results. We believe we have a commercially reasonable level
of insurance coverage. In the event of a permanent or temporary loss of one or
more of the vessels, however, our insurance would not provide the replacement
costs of the vessels nor fully cover the impact of lost business.
ANTI-TAKEOVER AND TRANSFERABILITY LIMITATIONS OF U.S. OWNERSHIP REQUIREMENTS MAY
ADVERSELY AFFECT THE LIQUIDITY OF OUR COMMON STOCK
One of the requirements for having U.S.-flagged vessels operating in U.S.
domestic trade is that 75% of our stockholders must be U.S. citizens. We have
restrictions in our certificate of incorporation limiting the transferability of
our common stock to non-U.S. citizens to preserve our U.S.-flagged status. These
limitations may have the effect of decreasing the liquidity of our common stock,
thereby making it more difficult for investors to dispose of their shares in an
orderly manner. We have also added legends to our stock certificates to indicate
the citizenship of our stockholders. These provisions and the level of ownership
by Equity Group Investments, Inc. and its affiliates, which we refer to as the
"Equity Group," may deter a change in control and limit non-U.S. citizens',
including corporations and individuals, purchases of our common stock.
OUR CONTROLLING STOCKHOLDER MAY TAKE ACTIONS THAT ADVERSELY AFFECT OUR BUSINESS
Affiliates of the Equity Group will own an aggregate of approximately 42.2%
of the outstanding shares of common stock after this offering, or 41.0% if the
underwriter's over-allotment option is exercised in full. The Equity Group's
level of ownership after this offering may permit it to elect the members of our
board of directors who will control our future direction and operations. This
includes decisions regarding the issuance of securities, dividends, acquisitions
and our sale. The Equity Group's stockholders are, directly or indirectly,
trusts created for the benefit of Samuel Zell, Ann Lurie and their respective
families. Mr. Zell is the Chairman of our board of directors.
SALES OF OUR CONTROLLING STOCKHOLDER'S SHARES COULD HAVE AN ADVERSE EFFECT ON
OUR COMMON STOCK PRICE OR OUR ABILITY TO RAISE CAPITAL
The sale of a substantial number of shares of our common stock by the
Equity Group, or the perception that such a sale could occur, could negatively
affect the market price of our common stock. The Equity Group has pledged
4,603,000 of its 7,530,747 shares of our common stock to secure several loans.
If the Equity Group were to default on these loans, the creditors could acquire
the pledged shares. We have been advised by the Equity Group that it is
presently in compliance in all material respects with all covenants and terms of
these loans and has alternative resources with which to service the loans. Any
sale, or the perception that such a sale may occur, could also materially impair
our future ability to raise capital through an offering of equity securities.
13
<PAGE> 14
ITEM 2. PROPERTIES
We currently operate four ships with a total of 1,893 passenger berths. The
following table represents a list of our ships, the year they entered into
service, their estimated passenger capacity based upon double occupancy per
cabin, and their areas of operation:
CURRENT VESSELS
<TABLE>
<CAPTION>
YEAR VESSEL PASSENGER PRIMARY AREAS
ENTERED INTO SERVICE CAPACITY(1) OF OPERATION
-------------------- ----------- ------------
VESSEL
- ------
<S> <C> <C> <C>
S.S. Independence(2) 1951 867 Hawaii
American Queen 1995 436 Mississippi River System
Mississippi Queen 1976 416 Mississippi River System
Delta Queen 1926 174 Mississippi River System
</TABLE>
- --------------------
(1) Based on double occupancy per cabin.
(2) Substantially renovated in 1994.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which we are a party or of which any
of our property is the subject, other than ordinary routine litigation and
claims incidental to the business. We believe we maintain adequate insurance
coverage and reserves for such claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
14
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Our common stock trades on the Nasdaq National Market tier of The Nasdaq
Stock Market under the symbol: "AMCV". On March 26, 1999, the last
reported sale price for our common stock was $19.00 per share. The
following table indicates the high and low sales price information for
shares of our common stock as reported by The Nasdaq Stock Market:
<TABLE>
<CAPTION>
High Low
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
QUARTER ENDED: December 31, 1998................ $ 17.63 $ 11.38
September 30, 1998............... 17.00 12.50
June 30, 1998.................... 24.63 14.75
March 31, 1998................... 23.25 17.25
QUARTER ENDED: December 31, 1997............... $ 19.25 $ 16.00
September 30, 1997............... 18.25 10.25
June 30, 1997.................... 11.88 9.88
March 31, 1997................... 13.00 10.13
</TABLE>
(b) The number of stockholders of record of common stock on March 26, 1999 was
approximately 620.
(c) We did not pay cash dividends on our common stock during 1997 or 1998. We
currently anticipate that all of our earnings will be retained for planned
construction projects and ongoing business requirements. We do not
anticipate paying any cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to our selected financial data is set forth under
"Selected Financial Data" on page 20.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis is set forth under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on page 21.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are principally exposed to market risks from fluctuations in interest rates.
At December 31, 1998, long-term variable rate debt had a carrying value of $24.4
million (See Note 6 to the Consolidated Financial Statements). We do not manage
this risk through derivative financial instruments as we do not expect changes
in interest rates to materially affect our operating results.
Other market risks to which we are exposed relate to food and fuel commodity
prices, which we do not typically manage through the use of financial
instruments. However, we do not expect changes in food and fuel commodity prices
to materially affect our operating results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data are as set forth in
the "Index to Consolidated Financial Statements" on page 19.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE> 16
PART III
ITEMS 10, 11, 12 AND 13 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We will file a definitive proxy statement with the Securities and Exchange
Commission, pursuant to Regulation 14A under the Securities Exchange Act of 1934
(the "Proxy Statement") and relating to the Company's Annual Meeting of
Stockholders to be held on June 24, 1999, not later than April 30, 1999.
Information required by Items 10 through 13 will appear in the Proxy Statement
and is incorporated herein by reference.
16
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
The consolidated financial statements of the Company are set
forth in the "Index to Consolidated Financial Statements" on page
19.
(a)(2) Financial Statement Schedules.
Financial Statement Schedules, except those indicated in the
"Index to Consolidated Financial Statements" on page 19, have
been omitted because they are not applicable, not required under
the instructions, or all the information required is set forth in
the financial statements or the notes to the financial
statements.
(a)(3) Exhibits are as set forth in the "Index to Exhibits" on page 48.
(b) Reports on Form 8-K:
None.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities and
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date March 31, 1999
--------------------------
AMERICAN CLASSIC VOYAGES CO.
By /s/ Philip C. Calian
-----------------------------
Philip C. Calian
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Samuel Zell Chairman of the Board
- ------------------------------
Samuel Zell
/s/ Philip C. Calian President and Chief Executive Officer
- ------------------------------ (Principal Executive Officer), Director
Philip C. Calian
/s/ Randall L. Talcott Vice President-Finance and Treasurer
- ------------------------------ (Principal Financial and Accounting Officer)
Randall L. Talcott
/s/ Arthur A. Greenberg Director
- ------------------------------
Arthur A. Greenberg
/s/ Mark Slezak Director
- ------------------------------
Mark Slezak
/s/ Jeffrey Watanabe Director
- ------------------------------
Jeffrey Watanabe
/s/ Emanual Rouvelas Director
- ------------------------------
Emanual Rouvelas
/s/ Jerry R. Jacob Director
- ------------------------------
Jerry R. Jacob
/s/ Joseph P. Sullivan Director
- ------------------------------
Joseph P. Sullivan
18
<PAGE> 19
AMERICAN CLASSIC VOYAGES CO.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
-------
<S> <C>
Selected Financial Data....................................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of Operations......... 21
Independent Auditors' Report.................................................................. 28
Consolidated Financial Statements
Consolidated Balance Sheets.............................................................. 29
Consolidated Statements of Operations.................................................... 30
Consolidated Statements of Cash Flows.................................................... 31
Consolidated Statements of Changes in Stockholders' Equity............................... 32
Notes to Consolidated Financial Statements............................................... 33
Financial Statement Schedules
Schedule I - Condensed Financial Information of Registrant........................... 44
</TABLE>
19
<PAGE> 20
AMERICAN CLASSIC VOYAGES CO.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996 1995 1994
-------------- ------------- -------------- -------------- --------------
INCOME STATEMENT DATA
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenues............................... $ 192,225 $ 177,884 $ 190,408 $ 188,373 $ 195,197
------------------------------------------------------------------------
Gross profit........................... 66,630 66,589 67,863 51,895 51,569
------------------------------------------------------------------------
One-time charges(1).................... -- -- 38,390 5,900 5,699
------------------------------------------------------------------------
Operating income (loss) ............... 5,486 9,984 (30,465) (14,535) (4,438)
------------------------------------------------------------------------
Other income (2)....................... 300 -- 11,729 -- --
------------------------------------------------------------------------
Net interest (expense) income.......... (5,522) (5,935) (7,199) (4,002) 672
------------------------------------------------------------------------
Net income (loss) .................... $ 157 $ 2,429 $ (17,636) $ (9,671) $ (983)
------------------------------------------------------------------------
PER SHARE INFORMATION
Basic earnings (loss) per share........ $ 0.01 $ 0.17 $ (1.28) $ (0.70) $ (0.07)
Diluted earnings (loss) per share....... $ 0.01 $ 0.17 $ (1.28) $ (0.70) $ (0.07)
Cash dividends per share................ $ -- $ -- $ -- $ 0.08 $ 0.16
OPERATING STATISTICS
Fare revenue per passenger night....... $ 224 $ 228 $ 216 $ 208 $ 202
Total revenue per passenger night...... $ 314 $ 302 $ 287 $ 288 $ 297
Weighted average operating days(3):
DELTA QUEEN....................... 341 337 347 263 339
AMERICAN HAWAII................... 365 337 366 272 303
Vessel capacity per day (berths)(4):
DELTA QUEEN....................... 1,026 1,026 1,024 1,024 588
AMERICAN HAWAII................... 867 844 817 1,594 1,544
Passenger nights(5) ................... 611,624 588,892 643,891 628,660 632,373
Physical occupancy percentage(6) ...... 92% 94% 98% 90% 95%
BALANCE SHEET DATA (at period end)
(In thousands)
Total assets........................... $ 212,792 $ 210,895 $ 211,864 $ 247,473 $ 227,798
Current portion of long-term debt...... 4,100 4,100 4,100 3,746 --
Long-term debt......................... 77,388 81,488 85,898 103,272 65,000
Total stockholders' equity............. 62,014 59,219 54,982 71,413 82,105
</TABLE>
- ---------------------------------
(1) In 1996, we decided not to renovate and return the S.S. Constitution to
service, resulting in write-down costs of $38.4 million ($1.89 per share -
net of tax on both a basic and diluted basis). In 1995, we incurred a $5.9
million ($0.28 per share - net of tax on both a basic and diluted basis)
one-time charge that represented costs associated with the introduction of
the American Queen in June of 1995. In 1994, we incurred $5.7 million
($0.20 per share-net of tax on both a basic and diluted basis) in one-time
charges due to problems related to the renovation of the Independence.
(2) In 1996, we sold the Maison Dupuy Hotel located in New Orleans, Louisiana
for a gain of $11.7 million ($0.57 per share - net of tax on both a basic
and diluted basis). In 1998, we received $0.3 million ($0.01 per share -
net of tax on both a basic and diluted basis) of final proceeds under a
profit participation agreement associated with the 1996 sale.
(3) Weighted average operating days for each cruise line is determined by
dividing capacity passenger nights for each cruise line by the cruise
line's total vessel capacity per day. Capacity passenger nights is
determined by multiplying the actual operating days of the vessel by each
vessel's capacity per day.
(4) Vessel capacity per day represents the number of passengers each cruise
line can carry assuming double occupancy for cabins which accommodate two
or more passengers. Some cabins on the Independence and the American Queen
can accommodate three or four passengers.
(5) A passenger night represents one passenger spending one night on a vessel;
for example, one passenger taking a three-night cruise would generate three
passenger nights.
(6) Physical occupancy percentage is passenger nights divided by capacity
passenger nights.
20
<PAGE> 21
AMERICAN CLASSIC VOYAGES CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
American Classic Voyages Co. is a holding company which owns and controls The
Delta Queen Steamboat Co. and Great Hawaiian Cruise Line, Inc. Through our
various subsidiaries, we operate two cruise lines: Delta Queen, which owns and
operates the American Queen, Mississippi Queen and Delta Queen steamboats; and
American Hawaii, which owns and operates the S.S. Independence steamship.
Our revenues are comprised of:
(1) cruise fares,
(2) onboard revenues, such as those from gift shops and shore excursions, and
(3) trip cancellation insurance and pre- and post-cruise hotel packages.
Additional revenue is also derived from the sale of airplane tickets to and from
points of embarkation or disembarkation. Our cost for air tickets typically
matches the revenue we generate from sales of airline tickets, so we recognize
minimal profits from such sales. Our cost of operations are comprised of:
(1) passenger expenses, such as employee payroll and benefits and the cost of
food and beverages,
(2) vessel operating costs including lay-up and drydocking costs for our
vessels,
(3) insurance costs,
(4) commissions paid to travel agents, and
(5) air ticket and hotel costs.
When we receive deposits from passengers for cruises, we establish a liability
for unearned passenger revenue. We recognize revenue when the passengers take
their cruises and make a corresponding reduction in our unearned passenger
revenues. Our revenues and some of our expenses vary considerably when measured
on a quarterly basis. This is due to the seasonality of our Delta Queen
revenues, the timing of our layups and drydockings, and fluctuations in
airfares. These variations are reflected in our fare revenues per passenger
night, which are commonly referred to as fare per diems, and our occupancy
rates.
Seasonality
Delta Queen's operations are seasonal. Historically, we have had greater
passenger interest and higher yields in the spring and fall months of the year.
The vessels typically undergo their annual lay-ups in December or January. While
American Hawaii has historically experienced greater passenger interest in the
summer and fall months of the year, quarterly variations in its revenues are
much smaller than those of Delta Queen. During the summer months, in particular,
American Hawaii tends to have average occupancies in excess of 100% as the
number of families sharing cabins with children increases significantly during
this period.
21
<PAGE> 22
Selected quarterly data
As a result of seasonality, timing of vessel lay-ups and drydocking and the
factors affecting our revenues, results of operations vary on a quarterly basis.
The following tables set forth selected unaudited quarterly data for 1996, 1997
and 1998. We cannot assure you that our historical quarterly results of
operations will be indicative of our future performance. The figures in the
tables below state dollars in thousands, except per share data, fare revenue and
percentages.
<TABLE>
<CAPTION>
1996 - Quarters Ended
---------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues.................................. $ 41,628 $ 49,021 $ 49,776 $ 49,983
Gross profit.............................. 13,556 17,721 17,950 18,636
Operating (loss) income................... (41,784)(1) 2,323 4,834 4,162
Net (loss) income......................... (43,271)(1) 381 2,851 22,403(2)
Diluted (loss) income per share........... (3.14) 0.03 0.20 1.59
Fare revenue per passenger night.......... 204 218 209 230
Physical occupancy percentage............. 95% 98% 102% 98%
<CAPTION>
1997 - Quarters Ended
---------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues ................................. $ 40,372 $ 42,356 $ 49,746 $ 45,410
Gross profit.............................. 13,233 17,661 19,606 16,089
Operating (loss) income .................. (1,869) 3,451 6,098 2,304
Net (loss) income......................... (1,988) 1,177 2,770 470
Diluted (loss) income..................... (0.14) 0.08 0.19 0.03
Fare revenue per passenger night.......... 221 245 224 223
Physical occupancy percentage............. 91% 94% 96% 93%
<CAPTION>
1996 - Quarters Ended
---------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues ................................. $ 40,668 $ 53,535 $ 50,920 $ 47,102
Gross profit.............................. 11,209 20,562 18,184 16,675
Operating (loss) income .................. (6,143) 4,037 3,798 3,794
Net (loss) income......................... (4,362) 1,574 1,454 1,491
Diluted (loss) income..................... (0.31) 0.11 0.10 0.10
Fare revenue per passenger night.......... 211 231 222 230
Physical occupancy percentage............. 87% 97% 95% 88%
</TABLE>
(1) In the first quarter of 1996, we decided not to renovate and return the
S.S. Independence to service, resulting in write-down costs of $38.4
million, $2.79 per share on a diluted basis before any associated tax
benefit. The tax benefit associated with this write-down was recognized
in the fourth quarter of 1996. Had such tax benefit been recognized in
the first quarter of 1996, the per share write-down costs net of tax on
a diluted basis would have been $1.89.
(2) In the fourth quarter of 1996, we sold the Maison Dupuy hotel located
in New Orleans, Louisiana for a gain of $11.7 million or $0.57 per
share, net of tax on a diluted basis. The fourth quarter also includes
a year-to-date adjustment of the federal tax benefit based on our
review of our tax position.
22
<PAGE> 23
The following discusses our consolidated results of operations and financial
condition for the years ended December 31, 1998, 1997 and 1996 (referred to
herein as 1998, 1997 and 1996).
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Consolidated revenues for 1998 increased $14.3 million to $192.2 million from
$177.9 million for 1997. This represents a $2.7 million increase in fare
revenues combined with an $11.6 million increase in other revenues. American
Hawaii's fare revenues increased $4.1 million on a 14% increase in passenger
nights mainly due to an 11% increase in capacity associated with additional
operating days in 1998. The number of operating days was higher in 1998 than in
1997 because the S.S. Independence was out of service for a four-week drydock in
1997. American Hawaii's fare per diems, however, decreased by 5%. Delta Queen's
fare revenues decreased $1.4 million, attributable to a 5% decrease in
occupancy, offset by a 3% increase in fare per diems. Consolidated fare per
diems for 1998 decreased 2% to $224, as the decrease in fare per diems at
American Hawaii more than offset the increase in fare per diems at Delta Queen.
The $11.6 million increase in other revenues was mainly due to an increase in
passenger nights at American Hawaii and an increase in passengers electing to
purchase air through American Hawaii under various air promotions. As a result,
consolidated total revenue per passenger night increased 4% to $314. As
discussed below, the increase in air revenue was offset by a corresponding
increase in related air expenses.
Consolidated cost of operations for 1998 increased $14.3 million to $125.6
million from $111.3 million for 1997. American Hawaii's operating costs
increased $15.0 million primarily as a result of additional operating days and
an increase in air package expenses. The increase in air package expenses was
directly related to the increase in air revenue, as noted above. Delta Queen's
operating costs decreased by $0.7 million reflecting the decrease in occupancy.
Consolidated selling, general and administrative expenses, before capacity
expansion costs, increased $2.0 million to $41.9 million for 1998 from $39.9
million in 1997. The increase in selling, general and administrative expenses
reflects additional selling and marketing spending at both cruise lines in the
first half of the year. Capacity expansion costs of $2.3 million in 1998 were
$1.2 million higher than in the prior year. Capacity expansion expenses were
incurred for a full year during 1998 for both cruise lines, whereas in 1997,
these expenses were incurred in the second half of the year for American Hawaii
only. The $1.3 million increase in depreciation and amortization expense was
attributable to capital expenditures incurred during the 1997 S.S. Independence
drydock and Delta Queen vessel lay-ups completed earlier in 1998.
As a result of increases in expenses as detailed above, consolidated operating
income for 1998 was $5.5 million as compared to $10.0 million for 1997.
Interest expense decreased slightly due to a lower outstanding debt balance
during 1998 while our effective tax rate remained unchanged from the prior year.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Consolidated revenues for 1997 decreased $12.5 million to $177.9 million from
$190.4 million for 1996 representing a $6.6 million decrease in cruise revenues
combined with a $5.9 million decrease in hotel revenues as a result of the sale
of the Maison Dupuy hotel. Delta Queen owned and operated the hotel, located in
New Orleans, prior to its sale in October 1996. Delta Queen's cruise revenues
increased $7.1 million, reflecting a 12% increase in fare per diems combined
with an 11% increase in revenue from air and land packages. The increase in fare
per diems as compared to 1996 was attributable to a reduction in the use of
discounts to fill open inventory close to a sailing date. American Hawaii's
revenues decreased $13.7 million as a result of an 8% decrease in operating days
due to the S.S. Independence drydock combined with a 3% decrease in fare per
diems and a 9% decrease in occupancy. Consolidated fare per diems for 1997
increased 6% to $228, and consolidated total revenue per passenger night
increased 5% to $302, as the increase in fare per diems at Delta Queen more than
offset the decrease in fare per diems at American Hawaii.
Consolidated cost of operations decreased $11.2 million to $111.3 million for
1997 from $122.5 million for 1996. Hotel-related costs of operations represented
$1.9 million of the 1996 costs. American Hawaii's operating costs decreased $9.2
million primarily as a result of the S.S. Independence drydock while Delta
Queen's cruise operating costs decreased $0.1 million. Savings in Delta Queen's
passenger and vessel expenses were offset by an increase in air and land package
expense corresponding to the increased sales of air and land packages.
23
<PAGE> 24
Consolidated selling, general and administrative expenses decreased $4.4 million
to $41.0 million for 1997 from $45.4 million for 1996. Of the $4.4 million
decrease, $2.3 million was attributable to the hotel, with the remainder of the
decrease primarily due to cost savings at Delta Queen. Also included in selling,
general and administrative expenses for 1997 were $1.6 million of American
Hawaii's office relocation costs and costs incurred for planning for capacity
expansion in Hawaii. The $1.0 million increase in depreciation and amortization
expense was primarily attributable to the S.S. Independence drydock and capital
improvements on Delta Queen vessels during lay-ups earlier in 1997.
In the first quarter of 1996, we recognized an impairment write-down of $38.4
million related to our decision not to renovate or return the S.S. Constitution
to service. As the vessel was sold in November 1997 for net sale proceeds of
$1.8 million, the salvage value of the vessel was written down from $2.5 million
to $1.8 million. This write-down was offset by a reduction in the reserve set-up
for the estimated costs to be incurred on behalf of the vessel until its
eventual disposition.
Consolidated cruise operating income for 1997 was $10.0 million as compared to
cruise operating income of $6.5 million, excluding the S.S. Constitution
write-down and hotel operations in 1996. Hotel operating income in 1996 was $1.4
million.
Interest expense decreased $1.1 million due to a lower outstanding debt balance
in 1997. Our consolidated effective tax rate increased to 40% in 1997 from 32%
in 1996 as we recognized additional state tax expenses in 1997.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Operating Activities
For the year ended December 31, 1998, cash provided by operations was $18.5
million compared to $22.4 million in 1997. The decrease reflected the decline in
operating income as mentioned earlier and changes in other working capital
accounts. Offsetting the decrease was an increase in unearned passenger
revenues, representing passenger cruise deposits, which increased $5.6 million
in 1998 as compared to an increase of $2.0 million in 1997. The increase in
unearned passenger revenues was greater in 1998 than in 1997 due to (1) the
timing of Delta Queen's 1998/1999 lay-ups, as discussed below, which occurred
later than the 1997/1998 lay-ups and (2) deposits received in 1998 for the
millennium charter cruises for both cruise lines.
Investing Activities
During 1998, we made expenditures of $8.8 million on capital projects, of which
$5.6 million related to our existing vessels. $3.8 million of the $5.6 million
related to the Delta Queen and American Queen lay-ups, which were completed in
the first quarter of 1998. The remaining $1.8 million related to vessel
improvement projects and costs incurred for the Mississippi Queen lay-up which
began December 13, 1998. Other significant capital expenditures included $3.0
million related to design fees and costs associated with new shipbuilding
programs at American Hawaii and Delta Queen, as discussed below.
In February 1998, we received $0.3 million of final proceeds from the buyer of
the Maison Dupuy hotel which we sold in October 1996. Additionally, $0.3 million
of cash pledged under a letter of credit became unrestricted during 1998 upon
the cancellation of the letter of credit.
Financing Activities
We made scheduled principal payments of $4.1 million under the American Queen
and S.S. Independence ship financing notes during 1998. We repurchased $0.8
million of our common stock during 1998 under the stock repurchase plan, as
discussed below. We received $2.9 million during 1998 from the issuance of our
common stock, principally from stock options exercised by our employees. We paid
$0.5 million during 1998 for financing efforts related to our new shipbuilding
programs.
24
<PAGE> 25
Capital Expenditures and Debt
On January 21, 1999, the Mississippi Queen completed a 39-day lay-up. The
American Queen also completed a 15-day lay-up on February 10, 1999. The Delta
Queen completed a 54-day lay-up on February 27, 1999. The lay-ups for the three
vessels, including repairs and maintenance, cost approximately $5.5 million and
were funded from working capital.
In October 1997, we announced plans to expand capacity in the Hawaii cruise
market. We intend to construct two new cruise ships over the next five years and
plan to introduce an existing foreign-built cruise ship in the Hawaii market
while awaiting construction of the new vessels. On March 9, 1999, we signed a
definitive agreement with Ingalls Shipbuilding to construct two passenger ships,
each containing approximately 1,900 passengers berths, with options to build up
to four additional vessels. The estimated construction cost of the two initial
ships will be approximately $470 million each. The agreement provides that the
first ship will be delivered in January 2003 and the second ship in January
2004. See "Business - Expansion Plans - Hawaii Expansion Plans" for a discussion
on the material terms of the construction contract with Ingalls Shipbuilding.
In 1999, we expect to spend between $80 million and $100 million on building the
two new Hawaii cruise vessels, which includes anticipated payments to Ingalls
Shipbuilding.
In April 1998, we announced plans to expand capacity at Delta Queen. For the
Delta Queen fleet, we intend to build up to five new small coastal ships over
the next seven to 10 years. The ships will each accommodate approximately 226
passengers and cruise in coastal areas and other itineraries not currently
served by existing Delta Queen vessels. These include such U.S. locations as the
Eastern Coastline and the Pacific Northwest. We have completed naval contract
designs and are presently negotiating with a U.S. shipyard. The estimated
construction cost of the ships will be $35 million each. If we decide to go
forward with the expansion plan and enter into a shipyard contract, construction
of the first new vessel will begin in mid-1999 with a targeted introduction of
the first coastal cruiser into service in mid-2001.
We have entered into an agreement to acquire a new vessel and plan to convert it
into an overnight passenger vessel with approximately 150 passenger berths for
use as the fourth Delta Queen riverboat. The purchase price is approximately
$8.0 million. We have conducted a due diligence review to ensure the vessel can
be effectively and efficiently renovated for passenger use and that the cost of
outfitting the vessel is consistent with our current estimates. Based on this
due diligence review, we are seeking to amend the terms and conditions of the
agreement. We estimate that the total renovation, relocation, start-up and
marketing costs will require an additional $12 million. We expect that the
conversion project will take between six and nine months and that the vessel
will be able to enter into service in the first half of 2000.
Assuming we proceed with our expansion plans for the Delta Queen line, we expect
to spend between $15 million and $20 million in 1999 on building the new coastal
cruise vessels, which also includes anticipated payments to the shipyard. We
estimate that costs to be incurred in 1999 to acquire and outfit the fourth
riverboat will be $18.0 million.
We intend to finance a significant portion of the construction cost of the
Hawaii cruise ships through the Maritime Administration, which provides
guaranties of private financing for new vessel construction projects conducted
in U.S. shipyards. We have applied for financing guaranties for debt for up to
87.5% of the cost of the vessels. The guarantied debt would be accessed during
the construction period, with interest payments during that period capitalized
as part of the cost of construction. In the current market, this type of debt
generally bears interest at a rate of 100 to 150 basis points over the
comparable U.S. government obligations and can have a term of up to 25 years
from the date of delivery of the vessel. The loans generally amortize on a
straight line basis over the term of the loan commencing after the delivery
date. Fees associated with the financing guaranties include a one-time
investigation fee equal to 1/2 of 1% of the indebtedness of $10 million and 1/8
of 1% of the amount in excess of $10 million. In addition, the Maritime
Administration imposes an annual guarantee fee of not less than 1/4 of 1% and
not more than 1% of the indebtedness, reduced by any required escrow, based upon
the obligor's ratio of long-term debt to stockholders' equity. The present value
of the annual guaranty fees is payable at the closing of the Maritime
Administration guarantied financing and capitalized as part of the vessel cost.
See "Risk Factors -- If we are unable to obtain Maritime Administration
financing guaranties, it will impede our expansion plans and future revenue
growth" for more detail regarding the impact on us if we do not obtain Maritime
Administration financing guaranties. We currently have several Maritime
Administration guarantied loans outstanding, secured by the S.S. Independence
and the American Queen.
In June 1997, our board of directors approved a stock repurchase plan. The plan
authorizes us to repurchase up to one million shares of our stock. These shares
may be purchased from time to time in the public market or through privately
negotiated transactions. As of December 31, 1998, we had repurchased 51,000
shares at an average purchase price of $14.84 per share under the plan. We
currently have no intention to repurchase any additional shares of common stock.
25
<PAGE> 26
As of December 31, 1998, we complied with all covenants under our various debt
agreements.
On February 25, 1999, The Delta Queen Steamboat Co. entered into a credit
agreement with a group of lenders, with The Chase Manhattan Bank as agent. This
credit agreement provides for a revolving credit facility of up to $70 million
to fund the expansion of our Delta Queen line. This new $70 million facility
replaced our prior credit facility with Chase Manhattan. Borrowings under the
new credit facility bear interest at either (1) the greater of Chase Manhattan's
prime rate or alternative base rates plus a margin ranging from 0.50% to 1.50%,
or (2) the London Interbank Offered Rate plus a margin ranging from 1.50% to
2.50%. We are also charged a fee of 0.50% per annum on any unused commitment.
The new credit facility is secured by all of the assets of The Delta Queen
Steamboat Co., except for the American Queen. The new credit facility limits the
dividends The Delta Queen Steamboat Co. may pay to between $5 million and $15
million per year when aggregated with investments and other payments.
Subject to Maritime Administration guarantied financing, we believe we will have
adequate access to capital resources, both internally and externally, to meet
our current short-term and long-term capital commitments. Such resources may
include cash on hand and the ability to secure additional financing through the
capital markets. We continually evaluate opportunities to increase capacity at
both Delta Queen and in Hawaii and to strategically grow our business. As
discussed earlier, we announced plans to expand capacity at Delta Queen and in
the Hawaiian market. On February 22, 1999, we filed a Registration Statement on
Form S-3 with the Securities and Exchange Commission relating to a proposed
public offering of up to 3,450,000 shares of our common stock. Although we
believe that we will be able to obtain sufficient equity and debt financing from
the capital markets to construct the new vessels, we cannot assure you that we
will be able to obtain additional financing at commercially acceptable levels to
finance such new construction and, if we so choose, to pursue strategic business
opportunities.
Impact of Year 2000
Many computer programs have been written using two digits rather than four to
define the applicable year. Any of our 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 major system failure, miscalculations
and/or other unanticipated problems.
State of Readiness
We have established internally staffed project teams to address Year 2000
issues. Each team is formulating a plan that focuses on Year 2000 compliance
efforts for information technology systems and non-information technology
systems. This plan addresses (1) information technology systems software and
hardware such as reservations, accounting and associated systems, personal
computers and software and (2) non-information technology systems such as
embedded chip systems in building facilities, shipboard navigation, control,
power generation systems, and communication systems.
Our Year 2000 plan addresses the Year 2000 issues in various phases for both
types of systems including: (1) inventory of our systems, equipment and
suppliers that may be vulnerable to Year 2000 issues; (2) assessment of
inventoried items to determine the risks associated with their possible failure
to be Year 2000 compliant; (3) testing of systems and components to determine if
they are Year 2000 compliant, both prior to and subsequent to remediation; (4)
remediation and implementation of new systems; and (5) contingency planning to
address reasonably likely worst case scenarios.
For information technology systems, inventories and risk assessments have been
substantially completed for all our shoreside software applications, hardware
and operating systems. Most of our reservations systems functions have been
tested and were found to be compliant. The remaining functions will be tested
and remediated, if necessary, by mid-1999. We have also determined that our
shoreside phone system and onboard financial systems on the Delta Queen vessels
are Year 2000 compliant. The S.S. Independence's onboard financial system and
our shoreside accounting system, however, are not Year 2000 compliant. We will
utilize both internal and external resources to continue testing, reprogramming
and replacing our information technology systems that require Year 2000
modifications. We anticipate completing the system improvements and the Year
2000 project no later than September 30, 1999. This is prior to any anticipated
impact on our operating systems. We anticipate that these modifications and
improvements will enable our information systems to function properly with
respect to dates in the Year 2000 and thereafter.
Inventories and risk assessments are currently being performed for all
non-information technology systems and are expected to be finalized by April 30,
1999. The process of testing, remediation and implementation is expected to be
completed by September 30, 1999.
26
<PAGE> 27
Risks of Year 2000 Issues
If any of our suppliers or travel partners do not, or if we do not, successfully
deal with the Year 2000 issue, we could experience delays in scheduled cruises
which could result in lost revenues or increases in costs and could subject us
to claims and damages. To determine the most reasonably likely sources of these
risks, we have been communicating with our major suppliers and travel partners
on their Year 2000 compliance issues. For example, our external air ticketing
and credit card processing software have been determined to be Year 2000
compliant.
Based on these procedures, management believes that the most reasonably likely
sources of risk to us include (1) the disruption of transportation channels
relevant to our operations, including ports and transportation vendors,
primarily airlines, as a result of a general failure of support systems and
necessary infrastructure; (2) the disruption of travel agency and other sales
distribution systems; and (3) the inability of principal product suppliers to
deliver goods and services. The severity of these possible problems would depend
on the nature of these problems and how quickly they could be corrected or
alternatives implemented.
Our major suppliers and travel partners consists of our transportation vendors,
our primary external airline ticketing vendors, and our primary credit card
processing software vendors. Our primary external airline ticketing vendor has
certified that its systems are Year 2000 complaint. Our primary credit card
processing software vendors have also certified that their systems are Year 2000
complaint. We have not received written assurance from our transportation
vendors indicating that they will be Year 2000 complaint before the end of 1999.
Because we have no contingency plan to transport our customers long distance to
and from our embarkation and disembarkation points, failure by our
transportation vendors to provide transportation services could have a material
adverse effect on our operations and our financial condition.
Some risks of the Year 2000 issue are beyond our control and our other travel
partners and suppliers. For example, no preparations or contingency plan will
protect us from a downturn in economic activity caused by the possible ripple
effect throughout the entire economy that could be caused by problems of others
with Year 2000 issues.
Costs
We have estimated our total costs for system improvements and the Year 2000
project to be approximately $1.0 million. These efforts are being funded from
working capital. Of the total project cost, approximately $0.5 million is
attributable to the implementation of a new accounting system. This amount
includes new software, new hardware, and consulting fees, all of which will be
capitalized. Another $0.3 million of capital outlays is attributable to the
upgrading of the S.S. Independence's onboard financial system and to the
replacement of imbedded chip systems in several of our vessels. The remaining
$0.2 million is expected to be expensed as incurred and is not expected to have
a material impact on the results of operations. The Year 2000 project represents
less than 10% of our information systems budget. To date, we have incurred and
expensed approximately $75,000 related to our systems improvements and the Year
2000 project. These costs do not include costs incurred by us as a result of the
failure of any third parties, including suppliers, to become Year 2000 compliant
or costs to implement any contingency plans.
The costs of the project and the date on which we believe we will complete the
Year 2000 modifications are based on our best estimates given presently
available information. These estimates were derived utilizing numerous
assumptions of future events, including the continued availability of the
resources we rely on, third party modification plans and other factors. We
cannot assure you, however, that these estimates will be achieved, and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer code, and similar uncertainties.
Contingency Plans
We are preparing our contingency plans to identify and determine how to handle
our most probable worst case scenarios. Preliminary contingency plans are
currently being reviewed. Comprehensive contingency plans are estimated to be
complete by mid-1999.
27
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
American Classic Voyages Co.
We have audited the consolidated balance sheets of American Classic Voyages Co.
and subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1998. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule. These consolidated financial
statements and financial statement schedule are the responsibility of management
of American Classic Voyages Co. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Classic
Voyages Co. and subsidiaries as of December 31, 1998 and 1997 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG LLP
KPMG LLP
Chicago, Illinois
February 19, 1999
28
<PAGE> 29
AMERICAN CLASSIC VOYAGES CO.
CONSOLIDATED BALANCE SHEETS
(In thousands except shares and par value)
<TABLE>
<CAPTION>
December 31,
1998 1997
----------------------- -----------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................................ $ 27,004 $ 19,187
Restricted short-term investments........................................ 60 325
Accounts receivable...................................................... 1,989 1,299
Inventory................................................................ 2,413 2,274
Prepaid air tickets...................................................... 2,527 1,982
Prepaid expenses and other current assets................................ 4,113 3,557
----------------------- -----------------------
Total current assets................................................ 38,106 28,624
Property and equipment, net.............................................. 162,129 171,105
Deferred income taxes, net............................................... 10,011 9,564
Other assets............................................................. 2,546 1,602
----------------------- -----------------------
Total assets........................................................ $ 212,792 $ 210,895
======================= =======================
LIABILITIES
Accounts payable......................................................... $ 13,493 $ 14,282
Other accrued liabilities................................................ 16,500 18,093
Current portion of long-term debt........................................ 4,100 4,100
Unearned passenger revenues.............................................. 39,297 33,713
----------------------- -----------------------
Total current liabilities........................................... 73,390 70,188
Long-term debt, less current portion..................................... 77,388 81,488
----------------------- -----------------------
Total liabilities................................................... 150,778 151,676
======================= =======================
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value (5,000,000 shares authorized, none
issued and outstanding)............................................... -- --
Common stock, $0.01 par value (20,000,000 shares authorized,
14,293,931 and 14,006,015 shares issued, respectively)................ 143 140
Additional paid-in capital............................................... 80,451 77,059
Accumulated deficit...................................................... (17,823) (17,980)
Common stock in treasury, at cost (51,000 shares)........................ (757) --
----------------------- -----------------------
Total stockholders' equity.......................................... 62,014 59,219
----------------------- -----------------------
$ 212,792 $ 210,895
======================= =======================
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
29
<PAGE> 30
AMERICAN CLASSIC VOYAGES CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Revenues $ 192,225 $ 177,884 $ 190,408
Cost of operations (exclusive of depreciation and
amortization shown below)............................ 125,595 111,295 122,545
--------------------- --------------------- ---------------------
Gross profit............................................ 66,630 66,589 67,863
Selling, general and administrative expenses............ 44,232 41,015 45,367
Depreciation and amortization expense................... 16,912 15,590 14,571
Impairment write-down (Note 4).......................... -- -- 38,390
--------------------- --------------------- ---------------------
Operating income (loss)................................. 5,486 9,984 (30,465)
Interest income......................................... 1,117 1,028 912
Interest expense........................................ 6,639 6,963 8,111
Other income............................................ 300 -- 11,729
--------------------- --------------------- ---------------------
Income (loss) before income taxes ...................... 264 4,049 (25,935)
Income tax (expense) benefit............................ (107) (1,620) 8,299
--------------------- --------------------- ---------------------
Net income (loss)....................................... $ 157 $ 2,429 $ (17,636)
===================== ===================== =====================
PER SHARE INFORMATION
Basic:
Basic weighted average shares outstanding.......... 14,137 13,952 13,802
Earnings (loss) per share.......................... $ 0.01 $ 0.17 $ (1.28)
Diluted:
Diluted weighted average shares outstanding........ 14,777 14,338 13,802
Earnings (loss) per share.......................... $ 0.01 $ 0.17 $ (1.28)
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
30
<PAGE> 31
AMERICAN CLASSIC VOYAGES CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
-------------------- -------------------- ---------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................... $ 157 $ 2,429 $ (17,636)
ADJUSTMENTS TO RECONCILE
NET INCOME (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
Depreciation and amortization expense................ 16,912 15,590 14,571
Impairment write-down (Note 4)....................... -- -- 38,390
Gain on sale of assets............................... (300) -- (11,729)
Changes in certain working
capital accounts and other
Accounts receivable......................... (690) 2,435 (2,600)
Accounts payable............................ (789) 3,599 (2,305)
Other accrued liabilities................... (529) (5,344) (289)
Other assets................................ (258) 1,576 (6,400)
Unearned passenger revenues................. 5,584 2,044 3,137
Prepaid expenses and other.................. (1,563) 85 (123)
-------------------- -------------------- ---------------------
Net cash provided by operating activities............ 18,524 22,414 15,016
-------------------- -------------------- ---------------------
INVESTING ACTIVITIES
Decrease in restricted investments................... 265 2,632 7,724
Capital expenditures................................. (8,789) (22,326) (15,355)
Proceeds from sale of assets......................... 300 1,830 21,522
-------------------- -------------------- ---------------------
Net cash (used in) provided by investing activities.. (8,224) (17,864) 13,891
-------------------- -------------------- ---------------------
FINANCING ACTIVITIES
Proceeds from borrowings............................. -- -- 6,903
Repayments of borrowings............................. (4,100) (4,410) (23,923)
Purchase of common stock............................. (757) -- --
Issuance of common stock............................. 2,907 1,139 368
Deferred financing fees.............................. (533) -- (395)
-------------------- -------------------- ---------------------
Net cash used in financing activities................ (2,483) (3,271) (17,047)
-------------------- -------------------- ---------------------
Increase in cash and cash equivalents................ 7,817 1,279 11,860
Cash and cash equivalents, beginning of period....... 19,187 17,908 6,048
-------------------- -------------------- ---------------------
Cash and cash equivalents, end of period............. $ 27,004 $ 19,187 $ 17,908
==================== ==================== =====================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest ........................................ $ 6,438 $ 6,791 $ 7,952
Income taxes..................................... $ 232 $ 249 $ 450
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
31
<PAGE> 32
AMERICAN CLASSIC VOYAGES CO.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Additional Total
Paid-in Accumulated Treasury Stockholders'
Common Stock Capital Deficit Stock Equity
----------------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995................ $ 138 $ 74,048 $ (2,773) $ -- $ 71,413
Net loss.................................. -- -- (17,636) -- (17,636)
Stock issued under option and
benefit plans......................... 1 1,204 -- 1,205
----------------- ------------ -------------- ------------- ------------
Balance, December 31, 1996................ 139 75,252 (20,409) -- 54,982
Net income................................ -- -- 2,429 -- 2,429
Stock units issued to Directors, net...... -- 219 -- -- 219
Stock issued under option and
benefit plans......................... 1 1,588 -- 1,589
----------------- ------------ -------------- ------------- ------------
Balance, December 31, 1997 140 77,059 (17,980) -- 59,219
Net income................................ -- -- 157 -- 157
Stock units issued to Directors, net...... -- 138 -- -- 138
Stock issued under option and
benefit plans......................... 3 3,254 -- -- 3,257
Purchase of treasury stock................ -- -- -- (757) (757)
----------------- ------------ -------------- ------------- ------------
Balance, December 31, 1998 $ 143 $ 80,451 $ (17,823) $ (757) $ 62,014
================= ============ ============== ============= ============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
32
<PAGE> 33
AMERICAN CLASSIC VOYAGES CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
American Classic Voyages Co., through its subsidiaries, operates two cruise
lines under the names of The Delta Queen Steamboat Co. and American Hawaii
Cruises. The Delta Queen Steamboat Co., through its subsidiaries, owns and
operates the American Queen, Mississippi Queen and Delta Queen steamboats which
conduct overnight cruise operations on certain U.S. inland waterways ("Delta
Queen"). Delta Queen also owned and operated the Maison Dupuy Hotel (the
"Hotel") located in New Orleans, prior to its sale in October 1996. American
Hawaii Cruises, through its subsidiaries owns and operates the S.S. Independence
steamship providing overnight cruises among the Hawaiian Islands. American
Hawaii also owned the S.S. Constitution steamship which was removed from service
in June 1995 and was sold on November 4, 1997.
PRINCIPLES OF CONSOLIDATION
The accompanying Consolidated Financial Statements include the accounts of
American Classic Voyages Co. ("AMCV") and its wholly owned subsidiaries, The
Delta Queen Steamboat Co. ("DQSC"), and Great Hawaiian Cruise Line, Inc.
("GHCL") (collectively with such subsidiaries, the "Company"). The accompanying
Consolidated Financial Statements have been prepared in accordance with
generally accepted accounting principles. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain previously
reported amounts have been reclassified to conform to the 1998 presentation.
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 reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered cash equivalents.
RESTRICTED SHORT-TERM INVESTMENTS
As of December 31, 1998 and 1997, restricted short-term investments reflected
cash pledged as collateral on outstanding letters of credit related to certain
contracts with vendors.
INVENTORIES
Inventories consists of provisions, supplies, fuel and gift shop merchandise
carried at the lower of cost (weighted-average) or market.
PREPAID AIR TICKETS
Prepaid air tickets consists of air tickets purchased by the Company and resold
to passengers in advance of sailings.
PROPERTY AND EQUIPMENT
Property and equipment primarily consists of vessels and leasehold improvements
which are recorded at cost. Construction-in-progress represents expenditures for
the vessels under construction, renovation, lay-up and/or drydock. Depreciation
is computed using the straight-line method based upon the estimated useful lives
of the various classes of assets ranging from 3 to 40 years. Lay-up and drydock
expenditures relating to vessel improvements or betterments are capitalized. In
addition, lay-up and drydock expenditures relating to cleaning, repairs and
maintenance are accrued evenly over the period to the next scheduled lay-up
and/or drydock and are included in other accrued liabilities. Interest costs
incurred during vessel construction periods were capitalized into the cost of
the related vessels. The Company reviews long-lived assets, identifiable
intangibles, goodwill, and reserves for impairment whenever events or changes in
circumstances indicate the carrying amount of the assets may not be fully
recoverable. In 1997, the Company reduced the cost of the S.S. Constitution to
its salvage value as further discussed in Note 4.
33
<PAGE> 34
GOODWILL
In August 1993, the Company acquired substantially all the assets and certain
liabilities of American Global Line Inc. ("the GHCL Acquisition"). The GHCL
Acquisition was accounted for as a purchase. In connection with this purchase,
goodwill was recorded for the excess of purchase price over the fair value of
the net assets acquired and was being amortized over its estimated useful life
of 25 years using the straight-line method. In 1996, in connection with its
decision not to return the S.S. Constitution to service, the Company wrote-off
the remaining goodwill balance (see Note 4). Amortization expense for 1996 was
$52,000.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between carrying amounts and the tax bases
of other assets and liabilities.
REVENUE AND EXPENSE RECOGNITION
The Company generally receives passenger fares up to 60 days prior to the cruise
date. Prepaid passenger fares are deferred and recognized as revenue during the
associated cruise. The Company is self-insured in respect of guaranteeing the
Company's passenger cruise deposits. Advertising costs are expensed as incurred
and are included in selling expense.
EARNINGS PER SHARE INFORMATION
Basic earnings per share is computed by dividing net income by the
weighted-average number of common shares outstanding. Diluted earnings per share
is computed in a similar manner except that the denominator is increased to
include dilutive potential common shares from stock options and stock units. See
Note 2 for a reconciliation of basic and diluted earnings per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include restricted short-term investments,
accounts receivable, accounts payable, other accrued expenses and long-term
debt. At December 31, 1998 and 1997, the fair values of all financial
instruments were not materially different from their carrying or contract
values.
STOCK-BASED COMPENSATION PLANS
The Company has elected to account for employee stock-based compensation plans
in accordance with Accounting Principles Board Opinion No. 25, as permitted
under Statement of Financial Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". See Note 10 for pro forma effect for the fair value
accounting method, as defined in SFAS No. 123.
NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosure about Segments of an Enterprise and Related Information", which
requires the reporting of certain information about operating segments and
related disclosures about products and services, geographic areas, and major
customers. The Company has reviewed SFAS 131 and has determined that the Company
operates as a single business segment.
RISK AND UNCERTAINTIES
The Company is subject to varying degrees of risk and uncertainty. The Company
insures its vessels and other business assets against insurable risks in a
manner it deems appropriate. The Company believes there is no concentration of
risk with any single customer or supplier, or small group of customers or
suppliers, whose failure or non-performance would materially affect the
Company's results.
34
<PAGE> 35
NOTE 2. EARNINGS PER SHARE
The earnings per share reconciliations presented below for the years ended
December 31, 1998 and 1997 have been prepared pursuant to the requirements of
SFAS No. 128 (in thousands, except per share amount):
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997
--------------------------------- ---------------------------------
Per Per
Numerator Denominator Share Numerator Denominator Share
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share...................... $157 14,137 $0.01 $2,429 13,952 $0.17
===== =====
Additional shares assuming exercise of
dilutive stock options and immediate
vesting of stock units........................ -- 640 -- 386
---- ------ ------ ------
Diluted earnings per share.... ............... $157 14,777 $0.01 $2,429 14,338 $0.17
==== ====== ===== ====== ====== =====
</TABLE>
For the years ended December 31, 1998 and 1997, options to purchase 858,000 and
523,000 shares of common stock, respectively, at prices ranging from $15.00 to
$20.00 were outstanding during 1998 and 1997, but were not included in the
computation of diluted earnings per share because the options' exercise prices
were greater than the average market prices of the common shares.
As the Company reported a net loss for the year ended December 31, 1996, diluted
earnings per share was computed in the same manner as basic earnings per share.
Therefore, at December 31, 1996, outstanding options to purchase 1,730,553
shares of common stock at prices ranging from $3.25 to $20.00, were not included
in the computation of diluted earnings per share.
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consisted of (in thousands):
<TABLE>
<CAPTION>
December 31,
1998 1997
------------------- -------------------
<S> <C> <C>
Vessels................................... $ 218,649 $ 211,231
Buildings................................. 7,704 8,590
Construction-in-progress.................. 813 2,674
Other..................................... 10,756 8,003
------------------- ------------------
237,922 230,498
Less accumulated depreciation............. (75,793) (59,393)
------------------- ------------------
$ 162,129 $ 171,105
=================== ==================
</TABLE>
At December 31, 1998, other property and equipment included $3.0 million of
technical consulting and design fees related to capacity expansion at American
Hawaii and Delta Queen. During 1998, $1.4 million of leasehold improvements were
written-off along with $0.5 million of related accumulated depreciation upon the
amendment to the lease covering the Company's Chicago headquarters facilities.
This write-off was offset by a receivable from the landlord for the value of the
undepreciated leasehold improvements (see Note 9 for further information).
During 1997, $0.8 million of fully depreciated assets that were no longer in use
were written-off along with the related accumulated depreciation.
NOTE 4. IMPAIRMENT WRITE-DOWN
The S.S. Constitution was removed from service on June 27, 1995 and was placed
in wet berth at a shipyard in Portland, Oregon. In 1996, after evaluating the
scope and cost of the S.S. Constitution reconstruction project as well as
considering various alternatives, the Company decided not to renovate or return
the S.S. Constitution to service. The Company recognized an impairment
write-down of $38.4 million, composed of (i) $36.1 million directly related to
the write-down of the vessel and its allocated goodwill to an estimated salvage
value of $2.5 million, and (ii) $2.3 million which represented the remaining
goodwill balance from the GHCL Acquisition. The Company reserved for the
estimated costs to be incurred on behalf of the S.S. Constitution until its
eventual disposition.
On November 4, 1997, the Company sold the vessel for net sale proceeds of $1.8
million and as such, the salvage value of the vessel was written down from $2.5
million to $1.8 million. This write-down was offset by a reduction in the
reserve set-up for the estimated costs to be incurred on behalf of the vessel,
as mentioned above.
35
<PAGE> 36
NOTE 5. DISPOSITION OF ASSETS
In October 1996, the Company sold its subsidiary which owned the Hotel in New
Orleans for $22.0 million in cash. In addition, the Company entered into a
Profit Participation Agreement with the buyer which provided for future payments
based on the future performance of the Hotel. The agreement was terminated in
February 1998 when the Company received final proceeds of $0.3 million from the
buyer.
Upon the sale of the Hotel, the Company paid down its then outstanding
borrowings, which were $9.5 million under its prior credit agreement with a
group of financial institutions with The Chase Manhattan Bank, as agent (the
"Credit Agreement"). The balance of the Hotel sale proceeds were used for
general corporate purposes.
NOTE 6. LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
December 31,
1998 1997
--------------- --------------
<S> <C> <C>
U.S. Government Guaranteed Ship Financing Note, American Queen Series,
LIBOR+0.25% floating rate notes due semi-annually beginning February 24,
1996 through August 24, 2005......................................................... $ 16,809 $ 19,233
U.S. Government Guaranteed Ship Financing Bond, American Queen Series, 7.68%
fixed rate, sinking fund bonds due semi-annually beginning February 24, 2006
through June 2, 2020................................................................. 36,198 36,198
U.S. Government Guaranteed Ship Financing Note, Independence Series A,
LIBOR+0.27% floating rate notes due semi-annually beginning June 7, 1996
through December 7, 2005............................................................. 9,248 10,570
U.S. Government Guaranteed Ship Financing Bond, Independence Series A, 6.84%
fixed rate sinking fund bonds due semi-annually beginning June 7, 2006
through December 7, 2015............................................................. 13,215 13,215
U.S. Government Guaranteed Ship Financing Note, Independence Series B,
LIBOR+0.27% floating rate notes due semi-annually beginning December 7, 1996
through December 7, 2005............................................................. 2,478 2,832
U.S. Government Guaranteed Ship Financing Bond, Independence Series B, 7.46%
fixed rate sinking fund bonds due semi-annually beginning June 7, 2006
through December 7, 2015............................................................. 3,540 3,540
------------------------------
81,488 85,588
Less current portion..................................................................... 4,100 4,100
------------------------------
$ 77,388 $ 81,488
==============================
</TABLE>
Required principal payments on long-term debt over the next five years are $4.1
million for each of the years from 1999 to 2003. For the years ended December
31, 1998 and 1997, the weighted-average interest rate on outstanding borrowings
was approximately 7.0% and 6.9%, respectively.
The American Queen Series and the Independence Series A and B debt are
guaranteed by the U.S. Government through the Maritime Administration ("MARAD")
and are secured by first mortgages on the American Queen and the S.S.
Independence, respectively. These Series contain various covenants which, among
other things, require the compliance with certain financial ratios at the end of
each year.
Upon the issuance of the Independence Series A and B debt in 1995 and 1996, $2.2
million was deposited into an account representing six months of debt service.
The debt service deposit was released to the Company in 1997 as GHCL had met the
required cash flow and debt to equity ratios as of December 31, 1996.
As of December 31, 1996, the Company's restricted short-term investments
included an escrow account for remaining American Queen construction costs in
the amount of $0.3 million, which was released to the Company in October 1997
and was used to pay down the principal balance of the American Queen Series.
36
<PAGE> 37
As of December 31, 1998, the Company had a revolving credit facility under the
Credit Agreement which provided for borrowings of up to $15.0 million with a
final maturity on March 31, 1999. In 1998, no borrowings were outstanding at any
time under this facility. Borrowings bear interest, at the option of the
Company, equal to either a LIBOR rate or prime rate basis. The Company is also
required to pay a commitment fee on the unused portion of the facility at a rate
ranging from 0.375% to 0.500% per annum. The Credit Agreement is guaranteed by
AMCV and secured by substantially all the assets of DQSC, excluding the American
Queen. The Credit Agreement contains various limitations, restrictions and
financial covenants which, among other things, requires maintenance of certain
financial ratios, restricts additional indebtedness, limits intercompany
advances to $20.0 million and limits the payment of dividends from DQSC to AMCV
to $2.0 million per annum. See Note 12 for further information.
As of December 31, 1998, the Company complied with all covenants under its
various debt agreements.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under operating leases. The
Company currently leases approximately 21,000 square feet from a partnership
controlled by an affiliated company, at an annual rate of approximately $99,000.
In addition, the DQSC and GHCL headquarters is maintained pursuant to an
assignment from local authorities. The Company paid approximately $165,000 and
$160,000 under this arrangement for the years ended December 31, 1998 and 1997,
respectively. This arrangement may be terminated at any time by the local
authorities upon determination that a superior maritime use is deemed to exist.
Rent expense for the years ended December 31, 1998, 1997 and 1996 was
approximately $842,000, $916,000 and $848,000, respectively.
The future minimum lease commitments for the next five years and thereafter
under all noncancelable operating leases, excluding assignment payments, as of
December 31, 1998, are $322,000, $374,000, $396,000, $348,000, $323,000 and
$243,000.
The Company is subject to litigation in the ordinary course of business. In the
opinion of management, the outcome of such litigation will not have a material
effect on the results of operations or financial position of the Company as most
is covered by insurance, net of a deductible.
37
<PAGE> 38
NOTE 8. INCOME TAXES
The provision (benefit) for income taxes consisted of (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
-------------------------------------------------
<S> <C> <C> <C>
Current tax provision (benefit):
Federal............................... $ -- $ -- $ --
State................................. 213 163 (458)
-------------------------------------------------
213 163 (458)
-------------------------------------------------
Deferred tax provision (benefit):
Federal............................... 89 1,323 (9,073)
State................................. (195) 134 1,232
-------------------------------------------------
(106) 1,457 (7,841)
-------------------------------------------------
Total tax provision (benefit)......... $ 107 $ 1,620 $ (8,299)
=================================================
</TABLE>
The provision (benefit) for income taxes differs from amounts computed by
applying the U.S. statutory Federal income tax rate. The differences are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
------------------------------------------------
<S> <C> <C> <C>
35% 35% 35%
------------------------------------------------
Tax provision (benefit) at statutory rate... $ 93 $ 1,417 $ (9,076)
State income taxes (net of Federal benefit). 12 193 503
Non-deductible expenses..................... 221 313 121
Other....................................... (219) (303) 153
------------------------------------------------
Total tax provision (benefit)............... $ 107 $ 1,620 $ (8,299)
================================================
</TABLE>
The tax effects of temporary differences that gave rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below (in
thousands):
<TABLE>
<CAPTION>
December 31,
Deferred tax assets: 1998 1997
---------------------------------------
<S> <C> <C>
Insurance costs and reserves......................... $ 1,097 $ 1,198
Non-recurring executive compensation................. 490 809
Benefit cost accruals................................ 491 483
Alternative minimum tax
credit carryforwards............................... 2,196 2,196
Drydock accruals..................................... 967 820
Net operating loss carryforward...................... 35,090 33,041
Goodwill, due to basis differences................... 1,270 1,248
---------------------------------------
Total deferred tax assets............................ 41,601 39,795
---------------------------------------
Deferred tax liabilities:
Capital construction fund............................ 1,237 1,472
Property plant and equipment, due to
basis differences and depreciation, net............ 30,353 28,759
---------------------------------------
Total deferred tax liabilities....................... 31,590 30,231
---------------------------------------
Net deferred tax asset............................... $ 10,011 $ 9,564
=======================================
</TABLE>
At December 31, 1998, consolidated net operating losses of approximately $3.0
million, $10.0 million, $36.0 million, $14.0 million, $29.0 million and $5.0
million expiring in 2008, 2009, 2010, 2011, 2012 and 2018, respectively, were
available to offset future taxable income of the Company.
38
<PAGE> 39
In 1993, the Company established a capital construction fund (the "CCF")
pursuant to Section 607 of the Merchant Marine Act of 1936, into which it
deposited approximately $12.0 million. This fund was primarily used to pay
liabilities assumed in the Acquisition and allowed the Company to accelerate
recognition of certain deductions for qualified capital expenditures for income
tax purposes. As a result of the CCF, the Company has approximately a $2.2
million alternative minimum tax credit carryforward available with no expiration
date.
NOTE 9. RELATED PARTIES
As of December 31, 1998, the largest stockholders of the Company's common stock
were certain affiliates of Equity Group Investments ("EGI"), including EGI
Holdings, Inc. and EGIL Investments, Inc., which owned an aggregate of 53% of
the Company's common stock. EGI and its affiliates provided certain
administrative support services for the Company, including but not limited to
legal, accounting, tax, benefit and insurance brokerage services. In addition,
as previously mentioned in Note 7, the Company leases office space from an
affiliate of EGI. In the aggregate, the fees charged by EGI and its affiliates
for such services and rent were approximately $0.4 million, $0.7 million, and
$1.5 million for the years ended December 31, 1998, 1997 and 1996, respectively.
These arrangements with EGI and its affiliates are subject to approval by a
majority of the non-affiliated members of the Company's Board of Directors, and
are conducted on terms no less favorable to the Company than could be obtained
from unaffiliated third parties.
In late 1997, the Company subleased approximately 13,000 square feet of Chicago
office space (the "sublease area") to Equity Office Properties Trust, an
affiliate of EGI. For the years ended December 31, 1998 and 1997, approximately
$78,000 and $23,000, respectively, was received by the Company under the
sublease at a rate which it believes to be competitive for comparable space for
an unaffiliated party. In mid-1998, the Company entered into an amended lease
agreement covering the Chicago office space whereby the subleased area was
removed from the lease. The Company was granted a $0.6 million reduction in
future rent on its remaining office space, representing the value of
undepreciated leasehold improvements of the sublease area.
The Company paid approximately $768,000 for legal services to Preston Gates
Ellis & Rouvelas Meeds ("Preston Gates") during 1998. Mr. Rouvelas, a Director
of the Company, is a partner of Preston Gates. The Company paid approximately
$113,000 for legal services to Watanabe, Ing & Kawashima ("WIK") during 1998.
Mr. Watanabe, a Director of the Company, is a partner of WIK.
NOTE 10. EMPLOYEE BENEFIT PLANS
RETIREMENT PLANS
The Company's non-union employees are eligible to participate in the ADVANTAGE
Retirement Savings Plan (as amended and restated October 1, 1987, "ADVANTAGE
Plan"), a profit-sharing plan with a salary deferral feature that qualifies
under Section 401 of the Internal Revenue Code of 1986, as amended. The
ADVANTAGE Plan allows participants to defer a portion of their eligible
compensation on a pre-tax basis. Participant contributions are 100% vested at
the time the contribution is made. Matching contributions are made by the
Company in an amount equal to 100% of the amount of a participant's contribution
with a maximum of 4% of such participant's annual eligible wages, subject to
Internal Revenue Service maximums. In addition, the Company may make
discretionary profit-sharing contributions which are allocated to eligible
employees based on eligible compensation. Company contributions vest over a
five-year period. Matching and profit-sharing contributions approximated
$497,000, $550,000 and $708,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
The Company also maintains a non-qualified deferred compensation plan (the
"Restoration Plan"), effective August 1, 1998. The purpose of the Restoration
Plan is to provide deferrals for eligible employees that may not be made to the
ADVANTAGE Plan because of certain restrictions and limitations in the Code.
Benefits will be paid from employee contributions. The Company's liability under
the Restoration Plan as of December 31, 1998 was $30,000.
The Company also contributes, under collective bargaining agreements, to funds
designed to provide pension and health benefits for its union employees. The
Company contributed $2,203,000, $2,147,000 and $2,337,000 to such plans for the
years ended December 31, 1998, 1997 and 1996, respectively.
39
<PAGE> 40
EMPLOYEE STOCK PURCHASE PLAN
The American Classic Voyages Co. 1995 Employee Stock Purchase Plan (the "ESP
Plan") allows eligible employees to purchase common stock of the Company,
through payroll deductions, at a discounted price from the market price. The
exercise price under the ESP Plan is deemed to be 85% of the lesser of (i) the
market value of the Company's common stock on the last business day of the
offering period or (ii) the greater of (a) the average market value during the
offering period and (b) the market value on the first business day of the
offering period. There is a maximum of 500,000 shares authorized under the ESP
Plan. There were 11,622, 9,718 and 12,297 shares issued during 1998, 1997 and
1996, respectively, at an average price of $13.38, $10.70 and $7.13 per share
for 1998, 1997 and 1996, respectively. At December 31, 1998, approximately
461,000 shares were available for offering under the ESP Plan.
STOCK-BASED COMPENSATION PLANS
The Company granted, as of January 1, 1992, fully vested options to the
Company's then senior executive officers, to purchase shares of common stock, in
lieu of bonus payments (the "Executive Stock Option Plan"). These options are
exercisable, in whole or in part, at any time prior to January 2, 2002, at an
exercise price of $3.25 per share.
The Company adopted the 1992 Stock Option Plan effective January 2, 1992 (the
"1992 Plan"). Pursuant to the 1992 Plan, certain officers, directors, key
employees, and consultants will be offered the opportunity to acquire shares of
the Company's common stock via stock option grants. In addition, the 1992 Plan
provides for the granting of stock units and stock appreciation rights ("SARs").
The exercise price of options granted under the 1992 Plan cannot be less than
the fair market value of the Company's common stock at the date of grant. As of
December 31, 1998, 2,703,198 shares of the Company's common stock have been
reserved for issuance under the 1992 Plan. Options granted under the 1992 Plan
generally vest over a three-year period and expire 10 years from the date of
grant. The per share weighted-average fair value of stock options granted during
1998, 1997 and 1996 was $7.86, $4.25 and $3.48, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 1998, 1997 and 1996 respectively: expected
volatility of 53%, 52% and 50%, risk-free interest rates of 4.6%, 5.7% and 6.0%,
expected lives of three years and dividend yield of 0% for all years.
In 1998 and 1997, under the terms of the 1992 Plan, the Company paid each
non-employee director stock units as an annual retainer. The stock units in
general vest at a rate of 25% on the first day of each calendar quarter. The
fully vested stock units will be converted into an equal number of common stock
shares at any time as selected by each director prior to each grant.
In 1995, the Company granted SARs to key employees. All of the SARs were
canceled in 1996.
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock Based Compensation," which defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the method of accounting
prescribed by APB No. 25, "Accounting for Stock Issued to Employees." Entities
electing to remain with the accounting in APB No. 25 must make pro forma
disclosures of net income and earnings per share, as if the fair value based
method of accounting defined in this Statement has been applied.
The Company applies APB No. 25 in accounting for its plans and, accordingly, no
compensation cost has been recognized for its stock options in the financial
statements. Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's net
income (loss) and earnings (loss) per share would have been adjusted to the pro
forma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) As reported $ 157 $ 2,429 $ (17,636)
Pro forma (2,487) 1,422 (18,033)
Basic earnings (loss) per share As reported $ 0.01 $ 0.17 $ (1.28)
Pro forma (0.18) 0.10 (1.31)
Diluted earnings (loss) per share As reported $ 0.01 $ 0.17 $ (1.28)
Pro forma (0.18) 0.10 (1.31)
</TABLE>
40
<PAGE> 41
Pro forma net income (loss) and earnings (loss) per share reflect only options
granted since 1995. Therefore, the full impact of calculating compensation cost
for stock options under SFAS No. 123 is not reflected in the pro forma amounts
presented above because compensation cost is reflected over the options' vesting
period which is generally three years and compensation cost for options granted
prior to January 1, 1995 is not considered.
The table below summarizes the activities for 1996, 1997 and 1998:
<TABLE>
<CAPTION>
Executive Stock
Option Plan 1992 Plan Weighted-Average
--------------- ------------------------------------------ Exercise Price
Shares Shares Shares Shares for Options
Subject to Subject to Subject to Subject to and SARs
Options Options Stock Units SARs only
--------------- ------------ -------------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995......... 323,971 1,179,410 -- 280,000 $ 13.04
Granted........................ -- 895,680 -- -- 9.50
Canceled....................... -- (582,668) -- (280,000) 15.36
Exercised...................... (85,840) -- -- -- 3.25
--------------- ------------ -------------- ---------- -----
Balance at December 31, 1996 238,131 1,492,422 -- -- 10.54
Granted........................ -- 62,000 24,500 -- 12.36
Canceled....................... -- (71,753) (1,450) -- 11.43
Exercised...................... (43,006) (60,290) -- -- 7.90
Converted...................... -- -- (2,650) -- --
--------------- ------------ -------------- ---------- ---------
Balance at December 31, 1997 195,125 1,422,379 20,400 -- 10.74
Granted........................ -- 1,618,000 14,000 -- 17.10
Canceled....................... (19,512) (151,236) -- -- 13.44
Exercised...................... (50,000) (215,047) -- -- 9.29
Converted...................... -- -- (7,000) -- --
--------------- ------------ -------------- ---------- --------
Balance at December 31, 1998 125,613 2,674,096 27,400 -- $ 14.39
=============== ============ ============== ========== ========
</TABLE>
The following table summarizes information about options outstanding at December
31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------- ----------------------------------
Weighted-Average Weighted- Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise Price at 12/31/98 Contractual Life Exercise Price at 12/31/98 Exercise Price
- ---------------- ------------ ------------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
$3.25 125,613 3 $ 3.25 125,613 $ 3.25
7.97 - 9.88 441,855 8 8.96 365,997 8.88
10.25 - 15.00 408,451 7 11.65 370,446 11.70
15.32 - 20.00 1,823,790 9 17.08 637,123 17.16
- --------------- ---------- ------------------- ---------------- ---------------- --------------
$ 3.25 - $20.00 2,799,709 8 $ 14.39 1,499,179 $ 12.63
=============== ========== =================== ================ ================ ==============
</TABLE>
41
<PAGE> 42
NOTE 11. UNAUDITED QUARTERLY RESULTS OF OPERATIONS
Summarized unaudited quarterly results of operations for 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1998 March 31, June 30, September 30, December 31,
(In thousands, except per share data) 1998 1998 1998 1998
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues.................................. $ 40,668 $ 53,535 $ 50,920 $ 47,102
Gross profit.............................. 11,209 20,562 18,184 16,675
Operating (loss) income................... (6,143) 4,037 3,798 3,794
Pre-tax (loss) income..................... (7,262) 2,614 2,424 2,488
Net (loss) income......................... (4,362) 1,574 1,454 1,491
Basic (loss) earnings per share........... (0.31) 0.11 0.10 0.10
Diluted (loss) earnings per share......... (0.31) 0.11 0.10 0.10
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997 March 31, June 30, September 30, December 31,
(In thousands, except per share data) 1997 1997 1997 1997
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues ................................. $ 40,372 $ 42,356 $ 49,746 $ 45,410
Gross profit.............................. 13,233 17,661 19,606 16,089
Operating (loss) income .................. (1,869) 3,451 6,098 2,304
Pre-tax (loss) income..................... (3,314) 1,962 4,617 784
Net (loss) income......................... (1,988) 1,177 2,770 470
Basic (loss) earnings per share........... (0.14) 0.08 0.20 0.03
Diluted (loss) earnings per share......... (0.14) 0.08 0.19 0.03
</TABLE>
The sum of quarterly (loss) earnings per common share may differ from full-year
amounts due to changes in the number of shares outstanding during the year.
NOTE 12. SUBSEQUENT EVENTS (UNAUDITED)
REGISTRATION STATEMENT
On February 22, 1999, the Company filed a Registration Statement on Form S-3
with the Securities and Exchange Commission relating to a proposed public
offering of up to 3,450,000 shares of common stock. The expected proceeds of
this issuance will be used to fund capacity expansion in the Hawaiian cruise
market. No assurances can be given, however, that this offering will be
consummated.
CHASE CREDIT AGREEMENT
In the first quarter of 1999, DQSC, as borrower, closed on a new long-term
credit facility with The Chase Manhattan Bank, as agent, and several participant
banks (the "Chase Facility"). The Chase Facility, which is a $70 million
revolving credit facility maturing in February 2004, replaces the Credit
Facility. Borrowings under the new facility bear interest at a rate, at the
option of the Company, equal to either (1) the greater of Chase's prime rate or
certain alternative base rates plus a margin ranging from 0.50% to 1.50%, or (2)
the London Interbank Offered Rate plus a margin ranging from 1.50% to 2.50%. The
Company is also required to pay an unused commitment fee at a rate of 0.50% per
annum.
The Chase Facility will be used to fund the acquisition of the fourth Delta
Queen riverboat, the construction of the first two coastal vessels, and Delta
Queen working capital. The new facility is secured by all of the assets of DQSC
except the American Queen, and has various limitations and restrictions on
investments, additional indebtedness, the construction costs of the new vessels,
and other capital expenditures. The Chase Facility also limits dividends by
DQSC, when aggregated with investments and certain other payments, to amounts
ranging from $5 million to $15 million per annum. DQSC is required to comply
with certain financial covenants, including maintenance of minimum interest
coverage ratios and maximum leverage ratios.
42
<PAGE> 43
CONSTRUCTION CONTRACT
On March 9, 1999, the Company executed definitive agreements with Ingalls
Shipbuilding, Inc. to construct at least two new vessels for the Hawaii cruise
market. The new Hawaii cruise ships will have the capacity to accommodate
approximately 1,900 passengers each and are currently estimated to cost $440
million each, plus approximately $30 million for furnishings, fixtures and
equipment. The contract provides that Ingalls Shipbuilding will deliver the
first new ship in January 2003 and the second ship in January 2004. In addition,
the shipbuilding contract provides the Company an option to build up to four
additional vessels. The estimated contract price of the first option vessel is
$487 million and the contract price for the subsequent option vessels will be
negotiated between the parties. Ingalls Shipbuilding will provide a limited
warranty for the design, material and workmanship of each vessel for one year
after delivery.
43
<PAGE> 44
Schedule I
AMERICAN CLASSIC VOYAGES CO.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
1998 1997
-------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................ $ 458 $ 3,304
Prepaid expenses and other current assets............................ 1,948 301
Property and equipment, net.......................................... 2,771 1,385
Investment in and advances to subsidiaries........................... 60,667 59,850
-------------------------------------------
$ 65,844 $ 64,840
===========================================
LIABILITIES
Other liabilities.................................................... $ 3,830 $ 5,621
-------------------------------------------
STOCKHOLDERS' EQUITY
Common stock......................................................... 143 140
Paid-in capital...................................................... 80,451 77,059
Accumulated deficit.................................................. (17,823) (17,980)
Treasury stock....................................................... (757) --
-------------------------------------------
Total stockholders' equity........................................... 62,014 59,219
-------------------------------------------
$ 65,844 $ 64,840
===========================================
</TABLE>
See accompanying notes to Condensed Financial Statements.
44
<PAGE> 45
Schedule I
AMERICAN CLASSIC VOYAGES CO.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) - (CONTINUED)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
------------------------------------------------------------------
<S> <C> <C> <C>
Miscellaneous (expense) revenues.................... $ (1,700) $ (290) $ 16
Depreciation expense................................ (880) (713) (793)
Income tax benefit ................................. 1,068 547 295
Equity in earnings (losses) of subsidiaries......... 1,669 2,885 (17,154)
------------------------------------------------------------------
Net income (loss)................................... $ 157 $ 2,429 $ (17,636)
==================================================================
</TABLE>
See accompanying notes to Condensed Financial Statements.
45
<PAGE> 46
Schedule I
AMERICAN CLASSIC VOYAGES CO.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) - (CONTINUED)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
-------------------- -------------------- --------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 157 $ 2,429 $ (17,636)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES
Depreciation............................................. 880 713 793
Equity in (earnings) losses of subsidiaries, net......... (1,669) (2,885) 17,154
(Increase) decrease in advances to subsidiaries.......... (570) 438 1,817
(Increase) decrease in prepaid expenses and other........ (514) 168 (128)
(Decrease) increase in other liabilities................. (1,326) (465) (743)
--------------------------------------------------------------
Net cash (used in) provided by operating activities...... (3,042) 398 1,257
--------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures........................................ (1,421) (178) (87)
--------------------------------------------------------------
Net cash used in investing activities....................... (1,421) (178) (87)
--------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of common stock.................................... 2,907 1,139 368
Purchase of common stock.................................... (757) -- --
Deferred financing fees..................................... (533) -- --
--------------------------------------------------------------
Net cash provided by financing activities................... 1,617 1,139 368
--------------------------------------------------------------
(Decrease) increase in cash and cash equivalents............ (2,846) 1,359 1,538
Cash and cash equivalents, beginning of period.............. 3,304 1,945 407
--------------------------------------------------------------
Cash and cash equivalents, end of period.................... $ 458 $ 3,304 $ 1,945
==============================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash investment activities:
Conversion of advances to subsidiaries into
investment in subsidiaries............................. $ -- $ -- $ 30,000
</TABLE>
See accompanying notes to Condensed Financial Statements.
46
<PAGE> 47
Schedule I
AMERICAN CLASSIC VOYAGES CO.
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) -
(CONTINUED)
BASIS OF PRESENTATION
The Condensed Financial Information of American Classic Voyages Co. ("AMCV") has
been prepared pursuant to Securities and Exchange Commission ("SEC") rules and
regulations and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto for the years ended December 31, 1998, 1997 and
1996 included herein this Form 10-K. The balance sheets as of December 31, 1998
and 1997, respectively, and the related statements of operations and cash flows
have been prepared on an unconsolidated basis. AMCV's investment in its
subsidiaries is recorded on the equity basis.
DIVIDENDS FROM SUBSIDIARIES
No dividends were paid to AMCV for the years ended December 31, 1998, 1997 and
1996.
COMMITMENTS
AMCV has guaranteed the credit agreement between one of its subsidiaries and a
group of financial institutions which provides for a borrowing facility to such
subsidiary for general corporate purposes. For information related to this
credit agreement, see Note 6 of "Notes to Consolidated Financial Statements"
included in this Form 10-K.
The Federal Maritime Commission ("FMC") regulates passenger vessels with 50 or
more berths departing from U.S. ports and requires that operators post security
to be used in the event the operator fails to provide cruise services, or
otherwise satisfy certain financial standards. The Company has been approved as
a self-insurer by the FMC, and therefore, subject to continued approval, is not
required to post security for passenger cruise deposits. The FMC has reviewed
its standards and in June 1996 issued proposed regulations to significantly
increase the financial responsibility requirements. The Company filed its
objection on the proposals, as it believes that the FMC's current standards
provide passengers with adequate protection in the event of an operator's
non-performance and that further requirements may impose an undue burden on
operators. At this time, the Company cannot predict if the proposed changes will
be approved as currently constituted, or at all.
INCOME TAXES
AMCV has also entered into tax sharing agreements with its subsidiaries which
require each subsidiary to compute its Federal income tax liability on a
separate company basis and to pay amounts so computed to AMCV. No payments
were made under the tax sharing agreement for the years ended December 31,
1998, 1997 and 1996.
In 1993, AMCV established a capital construction fund ("CCF") pursuant to
section 607 of the Merchant Marine Act of 1936. The CCF allows AMCV to
accelerate recognition of Federal income tax deductions for capital
expenditures related to the American Hawaii vessels. A substantial portion of
the income generated by AMCV is eligible for deposit into the CCF; however;
expenditures for the vessels of DQSC are not qualified for this tax treatment.
As such, on a consolidated tax return basis, AMCV was able to obtain the
accelerated deduction treatment on a substantial portion of its taxable income.
47
<PAGE> 48
AMERICAN CLASSIC VOYAGES CO.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
3.(i) Second Amended and Restated Certificate of Incorporation of
the Company
3.(ii) Second Amended and Restated By-Laws of the Company.
**4.(i) Proof of Common Stock Certificate (filed on February 14, 1992
as Exhibit 4.(i) to Amendment No. 2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-45139)
and incorporated herein by reference).
4.(ii)(a)(1) Credit Agreement, dated as of February 25, 1999, among the
Delta Queen Steamboat Co. (the "Borrower"), the financial
institutions from time to time parties thereto as Lenders (the
"Lenders"), The Chase Manhattan Bank, as Issuing Bank and as
Administrative Agent thereunder (the "Agent"), and Hibernia
National Bank, as Documentation Agent.
4.(ii)(a)(2) Security Agreement, dated as of February 25, 1999, executed by
the Borrower in favor of the Agent for the benefit of the
Agent and the Lenders.
The following entities also have entered into a similar
security agreement with the Agent:
(i) DQSB II, Inc.;
(ii) Great Ocean Cruise Line, L.L.C.;
(iii) Cruise America Travel, Incorporated;
(iv) Great River Cruise Line, L.L.C.; and
(v) DQSC Property Co.
4.(ii)(a)(3) Stock Pledge Agreement, dated as of February 25, 1999,
executed by the Borrower in favor of the Agent, evidencing the
pledge by the Borrower of all of its 100% interest in the
capital stock of each of Cruise America Travel, Incorporated,
DQSC Property Co. and DQSB II, Inc.
4.(ii)(a)(4) Limited Liability Company Pledge Agreement, dated as of
February 25, 1999, executed by the Borrower in favor of the
Agent evidencing the pledge by the Borrower of its 99%
membership interest in each of Great River Cruise Line, L.L.C.
and Great Ocean Cruise Line, L.L.C.
4.(ii)(a)(5) Guaranty executed by Cruise America Travel, Incorporated, DQSC
Property Co., DQSB II, Inc., Great Ocean Cruise Line, L.L.C.
and Great River Cruise Line, L.L.C. in favor of the Agent
evidencing the guarantees of the obligations of the Borrower.
4.(ii)(a)(6) Trust Indenture among the Agent, the Lenders, Great River
Cruise Line, L.L.C. and The Chase Manhattan Bank as trustee
(the "DQ Trustee") covering the Delta Queen (a substantially
identical Trust Indenture covering the Mississippi Queen has
also been executed).
4.(ii)(a)(7) Preferred Ship Mortgage covering the Delta Queen executed by
Great River Cruise Line, L.L.C. in favor of the DQ Trustee for
the benefit of the Agent and the Lenders (a substantially
identical Preferred Ship Mortgage covering the Mississippi
Queen has also been executed).
**4.(ii)(b)(1) Commitment to Guaranty Obligations by the United States of
America accepted by Great AQ Steamboat Co. dated as of August
24, 1995 (filed on November 14, 1995 as Exhibit 4.(ii)(c)(1)
to the Company's Form 10-Q dated September 30, 1995 and
incorporated herein by reference).
**4.(ii)(b)(2) Great AQ Steamboat Co. United States Government Guaranteed
Ship Financing Obligations, American Queen Series Purchase
Agreement dated August 24, 1995 (filed on November 14, 1995 as
Exhibit 4.(ii)(c)(2) to the Company's Form 10-Q dated
September 30, 1995 and incorporated herein by reference).
</TABLE>
48
<PAGE> 49
**4.(ii)(b)(3) Trust Indenture relating to United States Government
Guaranteed Ship Financing Obligations, American Queen Series,
between Great AQ Steamboat Co. and the Bank of New York, dated
as of August 24, 1995 (the "Trust Indenture") along with
Schedule A and Exhibit 1 (filed on November 14, 1995 as
Exhibit 4.(ii)(c)(3) to the Company's Form 10-Q dated
September 30, 1995 and incorporated herein by reference).
**4.(ii)(b)(4) Form of 2005 Note, Guarantee and Trustee's Authentication
Certificate Specimen Note as it relates to the United States
Government Guaranteed Ship Financing Obligation, American
Queen Series (filed on November 14, 1995 as Exhibit
4.(ii)(c)(4) to the Company's Form 10-Q dated September 30,
1995 and incorporated herein by reference).
**4.(ii)(b)(5) Form of 2020 Bond, Guarantee and Trustee's Authentication
Certificate Specimen Bond as it relates to United States
Government Guaranteed Ship Financing Bond, American Queen
Series (filed on November 14, 1995 as Exhibit 4.(ii)(c)(5) to
the Company's Form 10-Q dated September 30, 1995 and
incorporated herein by reference).
**4.(ii)(b)(6) Authorization Agreement between the United States of America
as represented by the Secretary of Transportation and the Bank
of New York as Indenture Trustee under the Trust Indenture
between it and Great AQ Steamboat Co. dated as of August 24,
1995 (filed on November 14, 1995 as Exhibit 4.(ii)(c)(6) to
the Company's Form 10-Q dated September 30, 1995 and
incorporated herein by reference).
**4.(ii)(b)(7) Security Agreement relating to the United States Government
Guaranteed Ship Financing Obligation between Great AQ
Steamboat Co. and the United States of America dated as of
August 24, 1995 (the "Security Agreement") along with Exhibit
1 and the Schedule of Definitions (filed on November 14, 1995
as Exhibit 4.(ii)(c)(7) to the Company's Form 10-Q dated
September 30, 1995 and incorporated herein by reference).
**4.(ii)(b)(8) $60,589,000 Promissory Note dated August 24, 1995 by and
between Great AQ Steamboat Co. and the United States of
America (filed on November 14, 1995 as Exhibit 4.(ii)(c)(8) to
the Company's Form 10-Q dated September 30, 1995 and
incorporated herein by reference).
**4.(ii)(b)(9) Title XI Reserve Fund and Financial Agreement among Great AQ
Steamboat Co. and the United States of America dated as of
August 24, 1995 along with the General Provisions (filed on
November 14, 1995 as Exhibit 4.(ii)(c)(9) to the Company's
Form 10-Q dated September 30, 1995 and incorporated herein by
reference).
**4.(ii)(b)(10) Guaranty Agreement dated August 24, 1995 made by the Delta
Queen Steamboat Co. in favor of the United States of America
(filed on November 14, 1995 as Exhibit 4.(ii)(c)(10) to the
Company's Form 10-Q dated September 30, 1995 and incorporated
herein by reference).
**4.(ii)(b)(11) Assumption and Supplement No. 1 to First Preferred Ship
Mortgage effective as of December 31, 1996 made by and among
Great AQ Steamboat, L.L.C., Great AQ Steamboat Co. and the
United States of America, represented by the Secretary of
Transportation, acting by and through the Maritime
Administrator (filed on May 13, 1997 as Exhibit 4.(ii)(c)(11)
to the Company's Form 10-Q dated March 31, 1997 and
incorporated herein by reference).
**4.(ii)(b)(12) Modification and Assumption Agreement entered into March 25,
1997, effective as of December 31, 1996, among The United
States of America, represented by the Secretary of
Transportation, acting by and through the Maritime
Administrator, Great AQ Steamboat, L.L.C., and The Bank of New
York (filed on May 13, 1997 as Exhibit 4.(ii)(c)(12) to the
Company's Form 10-Q dated March 31, 1997 and incorporated
herein by reference).
**4.(ii)(b)(13) Confirmation of Guaranty Agreement effective as of December
31, 1996 made by The Delta Queen Steamboat Co. in favor of the
United States of America, represented by the Secretary of
Transportation, acting by and through the Maritime
Administrator (filed on May 13, 1997 as Exhibit 4. (ii)(c)(13)
to the Company's Form 10-Q dated March 31, 1997 and
incorporated herein by reference).
49
<PAGE> 50
**4.(ii)(b)(14) Endorsement No. 1 to Secretary's Note from Great AQ Steamboat,
L.L.C. to the United States of America executed on March 25,
1997, effective as of December 31, 1996 (filed on May 13, 1997
as Exhibit 4.(ii)(c)(14) to the Company's Form 10-Q dated
March 31, 1997 and incorporated herein by reference).
**4.(ii)(b)(15) Subordination Agreement dated as of March 25, 1997 made by and
among Great AQ Steamboat, L.L.C., The Delta Queen Steamboat
Co. and DQSB II, Inc. and the United States of America,
represented by the Secretary of Transportation, acting by and
through the Maritime Administrator (filed on May 13, 1997 as
Exhibit 4.(ii)(c)(15) to the Company's Form 10-Q dated March
31, 1997 and incorporated herein by reference).
**4.(ii)(c)(1) Commitment to Guaranty Obligations by the United States of
America Accepted by Great Independence Ship Co. dated as of
December 7, 1995 (filed on April 1, 1996 as Exhibit
4.(ii)(d)(1) to the Company's Form 10-K dated December 31,
1995).
**4.(ii)(c)(2) Great Independence Ship Co. United States Government
Guaranteed Ship Financing Obligations, Independence Series A
Purchase Agreement dated December 7, 1995 (filed on April 1,
1996 as Exhibit 4.(ii)(d)(2) to the Company's Form 10-K dated
December 31, 1995).
**4.(ii)(c)(3) Trust Indenture relating to United States Government
Guaranteed Ship Financing Obligations, Independence Series A,
between Great Independence Ship Co. and the Bank of New York,
dated as of December 7, 1995 (the "Trust Indenture") along
with Schedule A and Exhibit 1 (filed on April 1, 1996 as
Exhibit 4.(ii)(d)(3) to the Company's Form 10-K dated December
31, 1995).
**4.(ii)(c)(4) Forms of 2005 Note, Guarantee and Trustee's Authentication
Certificate Specimen Note as it relates to the United States
Government Guaranteed Ship Financing Obligation, Independence
Series A (filed on April 1, 1996 as Exhibit 4.(ii)(d)(4) to
the Company's Form 10-K dated December 31, 1995).
**4.(ii)(c)(5) Forms of 2015 Bond, Guarantee and Trustee's Authentication
Certificate Specimen Bond as it relates to United States
Government Guaranteed Ship Financing Bond, Independence Series
A (filed on April 1, 1996 as Exhibit 4.(ii)(d)(5) to the
Company's Form 10-K dated December 31, 1995).
**4.(ii)(c)(6) Authorization Agreement between the United States of America
represented by the Secretary of Transportation and the Bank of
New York as Indenture Trustee under the Trust Indenture
between it and Great Independence Ship Co. dated as of
December 7, 1995 (filed on April 1, 1996 as Exhibit
4.(ii)(d)(6) to the Company's Form 10-K dated December 31,
1995).
**4.(ii)(c)(7) Security Agreement relating to the United States Government
Guaranteed Ship Financing Obligation between Great
Independence Ship Co. and the United States of America dated
as of December 7, 1995 (the "Security Agreement") along with
Exhibit 1 and the Schedule of Definitions (filed on April 1,
1996 as Exhibit 4.(ii)(d)(7) to the Company's Form 10-K dated
December 31, 1995).
**4.(ii)(c)(8) $26,429,000 Promissory Note dated December 7, 1995 by and
between Great Independence Ship Co. and the United States of
America (filed on April 1, 1996 as Exhibit 4.(ii)(d)(8) to
the Company's Form 10-K dated December 31, 1995).
**4.(ii)(c)(9) Title XI Reserve Fund and Financial Agreement between Great
Independence Ship Co. and the United States of America dated
as of December 7, 1995 along with the General Provisions
(filed on April 1, 1996 as Exhibit 4.(ii)(d)(9) to the
Company's Form 10-K dated December 31, 1995).
**4.(ii)(c)(10) Guaranty and Security Agreement dated December 7, 1995 made
by the Great Independence Ship Co., Great Hawaiian Cruise
Line, Inc. and Great Hawaiian Properties Corporation in favor
of the United States of America (filed on April 1, 1996 as
Exhibit 4.(ii)(d)(10) to the Company's Form 10-K dated
December 31, 1995).
**4.(ii)(c)(11) Amendment to Commitment to Guarantee Obligations by the
United States of America Accepted by Great Independence Ship
Co. dated as of March 28, 1996 (filed on May 15, 1996 as
Exhibit 4.(ii)(d)(11) to the Company's Form 10-Q dated March
31, 1996).
50
<PAGE> 51
**4.(ii)(c)(12) Great Independence Ship Co. United Stated Government
Guaranteed Ship Financing Obligations, Independence Series B
Purchase Agreement dated March 28, 1996 (filed on May 15, 1996
as Exhibit 4.(ii)(d)(12) to the Company's Form 10-Q dated
March 31, 1996).
**4.(ii)(c)(13) Supplemental Indenture No. 1 relating to United States
Government Guaranteed Ship Financing Obligations, Independence
Series B, between Great Independence Ship Co. and the Bank of
New York, dated as of March 28, 1996 (filed on May 15, 1996 as
Exhibit 4.(ii)(d)(13) to the Company's Form 10-Q dated March
31, 1996).
**4.(ii)(c)(14) Form of 2005 Note, Guarantee and Trustee's Authentication
Certificate Specimen Note as it relates to the United States
Government Guaranteed Ship Financing Obligation, Independence
Series B (filed on May 15, 1996 as Exhibit 4.(ii)(d)(14) to
the Company's Form 10-Q dated March 31, 1996).
**4.(ii)(c)(15) Form of 2015 Bond, Guarantee and Trustee's Authentication
Certificate Specimen Bond as it relates to United States
Government Guaranteed Ship Financing Bond, Independence Series
B (filed on May 15, 1996 as Exhibit 4.(ii)(d)(15) to the
Company's Form 10-Q dated March 31, 1996).
**4.(ii)(c)(16) Amendment No. 1 to Authorization Agreement between the United
States of America represented by the Secretary of
Transportation and the Bank of New York as Indenture Trustee
under the Trust Indenture between it and Great Independence
Ship Co. dated as of March 28, 1996 (filed on May 15, 1996 as
Exhibit 4.(ii)(d)(16) to the Company's Form 10-Q dated March
31, 1996).
**4.(ii)(c)(17) Amendment No. 1 to Security Agreement relating to the United
States Government Guaranteed Ship Financing Obligation between
Great Independence Ship Co. and the United States of America
dated as of March 28, 1996 (the "Security Agreement") (filed
on May 15, 1996 as Exhibit 4.(ii)(d)(17) to the Company's Form
10-Q dated March 31, 1996).
**4.(ii)(c)(18) Endorsement to $6,903,000 Promissory Note dated March 28, 1996
by and between Great Independence Ship Co. and the United
States of America (filed on May 15, 1996 as Exhibit
4.(ii)(d)(18) to the Company's Form 10-Q dated March 31,
1996).
**4.(ii)(c)(19) Amendment No. 1 to Title XI Reserve Fund and Financial
Agreement between Great AQ Steamboat Co. and the United States
of America effective as of January 1, 1996 (filed on August
14, 1996 as Exhibit 4.(ii)(d)(19) to the Company's Form 10-Q
dated June 30, 1996).
9. Not applicable.
**10.(i)(a)(1) Administrative Services Agreement by and between the Company
and Equity Group Investments, Inc. (filed on March 2, 1993 as
Exhibit 10.(i)(A) to Amendment No. 3 to the Company's
Registration Statement on Form S-1 (Registration No. 33-45139)
and incorporated herein by reference).
**10.(ii)(a)(1) Preferential Assignment Agreement dated September 27, 1984, by
and between the Board of Commissioners of the Port of New
Orleans and the Company, including Assignment thereof and
Amendments thereto (filed on January 17, 1992 as Exhibit
10.(ii)(D)(2) to the Company's Registration Statement on Form
S-1 (Registration No. 33-45139) and incorporated herein by
reference).
**10.(ii)(a)(2) Lease dated May 30, 1995 by and between Equity Office
Properties, Inc., as agent for beneficial owner, as Landlord,
and Great Hawaiian Properties Corporation, d/b/a American
Hawaii Cruises, as Tenant (filed on April 1, 1996 as Exhibit
10.(ii)(D)(3) to the Company's Form 10-K dated December 31,
1995).
10.(ii)(a)(3) First Amendment dated March 12, 1997 by and between Equity
Office Properties, Inc., as agent for beneficial owner, as
Landlord, and Great Hawaiian Properties Corporation, d/b/a
American Hawaii Cruises, as Tenant.
10.(ii)(a)(4) Assignment and Assumption of Lease dated January 1, 1998
between Great Hawaiian Properties Corporation, d/b/a American
Hawaii Cruises, as Assignor, and American Classic Voyages Co.,
as Assignee.
10.(ii)(a)(5) Second Amendment dated August 10, 1998 by and between Equity
Office Properties, Inc., as agent for beneficial owner, as
Landlord, and American Classic Voyages Co., as Tenant.
51
<PAGE> 52
10.(ii)(a)(6) Lease dated October 16, 1998 by and between MFD Partners, as
Landlord, and American Hawaii Properties Corporation, as
Tenant.
**10.(iii)(a)(1) Performance Management Objectives Bonus Plan (filed on January
17, 1992 as Exhibit 10.(iii)(A)(2) to the Company's
Registration Statement on Form S-1 (Registration No.
333-44225) and incorporated herein by reference).
**10.(iii)(a)(2) Executive Bonus Plan (filed on January 17, 1992 as Exhibit
10.(iii)(a)(4) to the Company's Registration Statement on Form
S-1 (Registration No. 33-45139) and incorporated herein by
reference).
**10.(iii)(a)(3) American Classic Voyages Co. S. Cody Engle Stock Option
Agreement (filed on January 17, 1992 as Exhibit 10.(iii)(A)(6)
to the Company's Registration Statement on Form S-1
(Registration No. 33-45139) and incorporated herein by
reference).
**10.(iii)(a)(4) American Classic Voyages Co. Dividend Reinvestment and Common
Stock Purchase Plan (filed on June 22, 1994 as part of the
Company's Registration Statement on Form S-3 (Registration No.
33-80614) and incorporated herein by reference).
**10.(iii)(a)(5) American Classic Voyages Co. 1992 Stock Option Plan (filed on
January 14, 1998 as part of the Company's Registration
Statement on Form S-8 (Registration No. 333-44225) and
incorporated herein by reference).
10.(iii)(a)(6) American Classic Voyages Co. Deferred Compensation Plan.
**10.(iv)(a)(1) Asset Purchase and Sale Agreement dated as of November 11,
1998 by and among The Delta Queen Steamboat Co., and Richard
C. Breeden as bankruptcy trustee of bankruptcy estate of the
Bennett Funding Group, Inc., Bennett Receivables Corporation,
Bennett Receivables Corporation II, Bennett Management &
Development Corporation, The Processing Center, Inc., Resort
Service Company, Inc., American Marine International, Ltd. and
Aloha Capital Corporation (filed as Exhibit 1 to the Company's
Form 8-K dated February 22, 1999 and incorporated herein by
reference).
**10.(iv)(a)(2) Master Shipbuilding Contract for Construction of Two Passenger
Vessels by and between Ingalls Shipbuilding, Inc. and Project
America, Inc. for Hulls No. 7671 and 7672, dated March 9,
1999.
Exhibit A - Shipbuilding Contract for Construction of One
Passenger Vessel by and between Ingalls Shipbuilding, Inc. and
Project America, Inc. for Hull No. 7671, dated March 9, 1999
(a substantially identical Shipbuilding Contract has been
entered into for hull no.7672, with a delivery date of January
2004). (filed as Exhibit 10 to the Company's Form 8-K dated
March 26, 1999 and incorporated herein by reference).
11. Not applicable.
12. Not applicable.
13. Not applicable.
16. Not applicable.
18. Not applicable.
21. Subsidiaries of the Company.
22. Not applicable.
23. Consent of KPMG LLP
24. Not applicable.
27. Financial Data Schedule.
28. Not applicable.
52
<PAGE> 53
99.(i) Agreement by certain shareholders with the Company dated
February 22, 1999 regarding amendment of the Company's Amended
and Restated Certificate of Incorporation to increase the
number of authorized shares of common stock of the Company.
99.(ii) American Classic Voyages Amended and Restated 1995 Employee
Stock Purchase Plan financial statements as of and for the
year ended December 31, 1998.
**Previously filed.
53
<PAGE> 1
EXHIBIT 3(i)
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
AMERICAN CLASSIC VOYAGES CO.
American Classic Voyages Co. (the "Corporation"), a corporation
organized and existing under the laws of the State of Delaware, hereby certifies
as follows:
1. The name of the Corporation is American Classic Voyages Co. American
Classic Voyages Co. was originally incorporated under the name DQSC, Inc., and
the original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on June 19, 1985.
2. The Board of Directors of the Corporation, by unanimous written
consent of its members, filed with the minutes of the board, adopted resolutions
proposing and declaring advisable that the Certificate of Incorporation be
amended and restated.
3. In lieu of a meeting and vote of stockholders, the holders of a
majority of the outstanding shares of common stock have given their written
consent to said amended and restated Certificate of Incorporation in accordance
with the provisions of Section 228 of the Delaware General Corporation Law.
4. Pursuant to Sections 242 and 228 of the General Corporation Law of
the State of Delaware, this Second Amended and Restated Certificate of
Incorporation ("Second Amended and Restated Certificate") restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this Corporation.
5. The text of the Certificate of Incorporation as heretofore amended
or supplemented is hereby restated and further amended to read in its entirety
as follows:
FIRST: The name of the Corporation is American Classic Voyages
Co.
SECOND: The registered office of the Corporation is to be
located at 1013 Centre Road, Wilmington, in the County of Kent, the State of
Delaware, 19805-1297. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of Delaware.
FOURTH: The maximum number of shares of capital stock which
the Corporation is authorized to issue or to have outstanding at any time shall
be 45,000,000 shares of which 40,000,000 shall be Common Stock of $.01 (one
cent) par value, and 5,000,000 shall be Preferred Stock of $.01 (one cent) par
value. The Preferred Stock may be issued from time to time in one or more
series, upon resolution or resolutions providing for such series adopted by the
Board of Directors, with such distinctive designations as shall be stated in
such resolution or resolutions. The resolution or resolutions providing for the
issue of shares of a particular series shall fix, subject to the applicable laws
and provisions of this Article FOURTH, the designation, rights, preferences and
limitations of the shares of each such series. The authority of the Board of
Directors with respect to each series shall include, but not be limited to, the
determination of the following:
<PAGE> 2
(a) The number of shares constituting such series,
including the authority to increase or decrease such
number, and the distinctive designation of such
series;
(b) The dividend rate of the shares of such series,
whether the dividends shall be cumulative and, if so,
the date from which they shall be cumulative, and the
relative rights of priority, if any, of payment of
dividends on shares of such series;
(c) The right, if any, of the Corporation to redeem
shares of such series and the terms and conditions of
such redemption including the redemption price;
(d) The rights of the shares in case of a voluntary or
involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority,
if any, of payment of shares of such series;
(e) The voting rights, if any, for such series and the
terms and conditions under which such voting rights
may be exercised;
(f) The obligation, if any, of the Corporation to retire
shares of such series pursuant to a retirement or
sinking fund or fund of a similar nature and the
terms and conditions of such obligation;
(g) The terms and conditions, if any, upon which shares
of such series shall be convertible into or
exchangeable for shares of stock of any other class
or classes or of any other series of preferred stock,
including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment,
if any; and
(h) Any other rights, preferences or limitations of the
shares of such series as may be permitted by law.
FIFTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of the
Corporation, and for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders:
(a) The number of directors of the Corporation shall be
such as from time to time shall be fixed by, or in
the manner provided in, the by-laws. Election of
directors need not be by ballot unless the by-laws so
provide.
(b) The Board of Directors shall have power without the
assent or vote of the stockholders to make, alter,
amend, change, add to or repeal the by-laws of the
Corporation; to fix and vary the amount to be
reserved for any proper purpose; to authorize and
cause to be executed mortgages and liens upon all or
any part of the property of the Corporation; to
determine the use and disposition of any surplus or
net profits; and to fix the times for the declaration
and payment of dividends.
2
<PAGE> 3
(c) The Board of Directors in their discretion may submit
any contract or act for approval or ratification at
any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of
considering any such act or contract, and any
contract or act that shall be approved or be ratified
by the vote of the holders of a majority of the stock
of the Corporation which is represented in person or
by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be
there represented in person or by proxy) shall be as
valid and as binding upon the Corporation and upon
all the stockholders as though it had been approved
or ratified by every stockholder of the Corporation,
whether or not the contract or act would otherwise be
open to legal attack because of the interest of any
member of the Board of Directors, or for any other
reason.
(d) In addition to the powers and authorities
hereinbefore or by statute expressly conferred upon
them, the Board of Directors is hereby empowered to
exercise all such powers and do all such acts and
things as may be exercised or done by the
Corporation; subject, nevertheless, to the provisions
of the statutes of the State of Delaware, of this
Second Amended and Restated Certificate, and to any
by-laws from time to time made by the stockholders;
provided, however, that no by-laws so made shall
invalidate any prior act of the Board of Directors
which would have been valid if such by-law had not
been made.
SIXTH:
(a) The Corporation shall, to the full extent permitted
by Section 145 of the Delaware General Corporation
Law, as amended from time to time, indemnify all
persons whom it may indemnify pursuant thereto;
including, without limitation, (i) any person who was
a party to any threatened, pending or completed
action or suit by or in the right of the Corporation
to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer,
employee or agent of the Corporation or is or was
serving at the request of the Corporation as a
director, officer, employee or agent of another
corporation, partnership, joint venture, trust or
other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or
settlement of such action or suit, and (ii) any
person who was or is party or is threatened to be
made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action
by or in the right of the Corporation) by reason of
the fact that he is or was a director, officer,
employee or agent of the Corporation, partnership,
joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments,
fines and amounts paid in connection with any such
action, suit or proceeding, in each case to the
fullest extent permissible under Section 145 of the
Delaware General Corporation Law, as amended from
time to time, or the indemnification provisions of
any successor statute.
3
<PAGE> 4
(b) The foregoing provisions of this Article SIXTH shall
be deemed to be a contract between the Corporation
and each director, officer, employee or agent of the
Corporation or person who is or was serving at the
request of the Corporation as a director, officer,
employee or agent of another corporation,
partnership, joint venture, trust or other enterprise
and who serves in such capacity at any time while
this Article SIXTH is in effect, and any repeal or
modification thereof shall not affect any rights or
obligations then existing with respect to any state
of facts then or therefore existing or any action,
suit or proceedings theretofore or thereafter brought
based in whole or in part upon any such state of
facts. The foregoing rights of indemnification shall
not be deemed exclusive of any other rights to which
any director or officer may be entitled apart from
the provisions of this Article SIXTH. The Board of
Directors in its discretion shall have power on
behalf of the Corporation to enter into agreements
with respect to the indemnification of any person,
other than a director or officer, made a party to any
action, suit or proceeding by reason of the fact that
he/she, his/her testator or intestate, is or was an
employee, agent or otherwise acting on behalf of the
Corporation or serving at the request of the
Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture,
trust or other enterprise.
SEVENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for beach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after this Second Amended and Restated Certificate of Incorporation becomes
effective to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any repeal or modification of the provisions of this Article SEVENTH by
the stockholders of the Corporation shall be prospective only and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation with respect to any act or omission occurring prior to the effective
date of such appeal or modification. In the event that any of the provisions of
this Article SEVENTH (including any provision within a single sentence) is held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions are severable and shall remain
enforceable to the fullest extent permitted by law.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Second Amended and Restated
Certificate in the manner now or hereafter prescribed by law, and all rights and
powers conferred herein on stockholders, directors and officers are subject to
this reserved power.
NINTH: This Second Amended and Restated Certificate is
effective as of 7:30 A.M., Eastern Standard Time, on March 31, 1999.
4
<PAGE> 5
TENTH:
(A) For purposes of this Article TENTH:
(1) The term "Act" shall mean the Securities Exchange
Act of 1934, as amended.
(2) The terms "Affiliate" and "Associate" shall have
meanings ascribed to them in Rule 12b-2 of the General Rules and
Regulations under the Act.
(3) The terms "acquire", "acquisition" or "acquiring"
with respect to the acquisition of any security of the corporation
shall refer to the acquisition of such security by any means
whatsoever, including, without limitation, an acquisition of such
security by operation of law, by will or by intestacy.
(4) The term "Common Stock" means all common stock of
the Corporation and any other securities issued by the Corporation
which are treated as stock for purposes of Section 2 of the Shipping
Act, 1916.
(5) The term "Excess Shares" shall have the meaning
ascribed to it in Section (C)(1) hereof.
(6) The term "Holder of Excess Shares" shall have the
meaning ascribed to it in Section (B) hereof.
(7) The term "25% Limitation" shall mean the
limitations on ownership of Common Stock imposed by this Article TENTH.
(8) The terms "own", "owned", "ownership" or "owning"
refer to the ownership of stock in a corporation within the meaning of
Section 2 of the Shipping Act, 1916.
(9) The term "Permitted Transferee" shall have the
meaning ascribed to it in Section (C)(1)(a) hereof.
(10) The term "Person" shall mean any individual,
firm, corporation, partnership, joint venture or other entity and shall
include any group comprised of such Person and any other Person with
whom such Person or any Affiliate or Associate of such Person has any
agreement, arrangement or understanding, directly or indirectly, for
the purpose of acquiring, holding, voting or disposing of Common Stock
and any other Person who is a member of such group, but does not
include any underwriter which participates in an underwritten public
offering of the Corporation's Common Stock, provided that such
underwriter shall not own such Common Stock.
(11) The term "Proceeds" shall have the meaning
ascribed to it in Section (C)(1)(d) hereof.
(12) The term "Purported Owner" shall have the
meaning ascribed to it in Section (C)(1) hereof.
5
<PAGE> 6
(13) The term "Purported Owner's Transferor" shall
have the meaning ascribed to it in Section (C)(1)(a) hereof.
(14) The term "Share Trustee" shall mean the trustee
of the Excess Shares nominated and appointed by the Board of Directors
from time to time.
(15) The term "Shipping Act" shall mean the Shipping
Act, 1916, and all amendments thereto as codified in 46 U.S.C. Section
801, et. seq. and all regulations promulgated thereunder.
(16) The term "Transfer Agent" shall mean the
transfer agent with respect to the Common Stock nominated and appointed
by the Board of Directors from time to time.
(B) At no time shall any Person who is not a citizen of
the United States own or purchase Common Stock which, when aggregated with all
other Common Stock of the Corporation owned by Persons who are not citizens of
the United States, would make the ownership of the Common Stock owned by Persons
who are not citizens of the United States exceed twenty-five percent (25%) (the
"25% Limitation") of the total Common Stock.
(C) (1) The transfer, purchase or ownership of any shares
of Common Stock in violation of Section B of this Article TENTH is prohibited
and shall be null and void. If, notwithstanding the foregoing prohibition, a
Person shall, voluntarily or involuntarily, become or attempt to become the
purported owner (the "Purported Owner") of shares of Common Stock, or both, in
excess of such 25% Limitation (the number of shares of Common Stock so exceeding
the 25% Limitation being herein the "Excess Shares"), then:
(a) The Purported Owner shall not obtain any
rights in and to the Excess Shares, and the
purported transfer of the Excess Shares to
the Purported Owner shall not be recognized
by the Transfer Agent. Until the Excess
Shares are transferred to a person whose
acquisition thereof will not violate the 25%
Limitation (a "Permitted Transferee"), the
transferor of the Excess Shares to the
Purported Owner (the "Purported Owner's
Transferor") shall be deemed to have
retained the Excess Shares and shall hold
and be entitled to exercise all rights
incident to ownership of such Excess Shares.
All Excess Shares will continue to be issued
and outstanding.
(b) If the Transfer Agent obtains possession of
a certificate or certificates representing
the Excess Shares, the Transfer Agent shall
deliver such certificate or certificates to
the Share Trustee who shall proceed
forthwith to sell or cause the sale of the
Excess Shares to a Permitted Transferee.
Upon notice from the Corporation of the
existence of Excess Shares and the identity
of the Purported Owner, the Share Trustee
shall take all lawful action to cause the
Purported Owner to deliver or cause delivery
of the Excess Shares and any indicia of
ownership thereof to the Share Trustee and
upon obtaining possession thereof, the Share
Trustee shall proceed forthwith to sell or
cause the sale of the Excess Shares to a
Permitted Transferee. The Share Trustee
shall sell or cause the sale of the
6
<PAGE> 7
Excess Shares in the then existing public
market or in such other commercially
reasonable fashion as the Corporation shall
direct. In performing the duties herein
imposed upon it, the Share Trustee shall act
at all times as the agent for the Purported
Owner's Transferor.
(c) Once the Excess Shares are acquired by a
Permitted Transferee, the Permitted
Transferee shall have and shall be entitled
to exercise all rights incident to the
ownership of such Excess Shares.
(d) The proceeds from the sale of the Excess
Shares to the Permitted Transferee (the
"Proceeds") shall be distributed as follows:
(i) first, to the Share Trustee for any
costs incurred in respect of its
administration of the Excess Shares, (ii)
second, to the Purported Owner, if known, in
an amount up to the amount paid by the
Purported Owner, if determinable, for the
Excess Shares, and (iii) the remaining
Proceeds, if any, shall be distributed to
the Purported Owner's Transferor, if known,
and if not known, such remaining Proceeds
shall be held by the Corporation for the
benefit of the Purported Owner's Transferor
or such other Person as their interests may
appear. Notwithstanding anything in this
Article TENTH to the contrary, the
Corporation shall at all times be entitled
to make application to any court of
equitable jurisdiction within the State of
Delaware for an adjudication of the
respective rights and interest of any Person
in and to the Proceeds pursuant to this
Article TENTH and applicable law and for
leave to pay the Proceeds into such court.
(2) In determining whether any Person has become a
Purported Owner of Excess Shares:
(a) the Corporation is entitled to rely on
Schedule 13D and 13G filings as required by
Rule 13d-1 of the Act to identify the
citizenship of any Person who owns more than
five percent (5%) of the Common Stock; and
(b) in the case of any Person who does not own
more than five percent (5%) of the Common
Stock, without regard to the actual identity
of the ultimate beneficial owners of such
Common Stock, the Corporation may rely on a
statement, signed under oath, or affirmation
by such Person or on the registered address
of such Person to establish the citizenship
of any such Person. The Corporation may not
rely on a statement by such Person or on the
registered address of such Person if the
Corporation knows that the statement is
false.
7
<PAGE> 8
The Board of Directors shall be fully protected in relying in good
faith on the items set forth in subparagraphs (a) and (b) of the
foregoing paragraph (2), together with such other items or sources of
information as may be required from time to time by the Shipping Act,
to determine whether any Person has become a Purported Owner of Excess
Shares.
(D) Immediately upon the purported acquisition of any Excess
Shares, the Purported Owner thereof shall give, or cause to be given, written
notice thereof to the Corporation. Each owner of shares of Common Stock shall
furnish to the Corporation all information reasonably requested with respect to
all shares of Common Stock directly and indirectly owned by such Person.
(E) Upon a determination by the Board of Directors that a
person has attempted or may attempt to transfer or to acquire Excess Shares, the
Board of Directors may take such action as it deems advisable to refuse to give
effect to such transfer or acquisition on the books and records of the
Corporation, including without limitation, to cause the Transfer Agent to record
the Purported Owner's Transferor as the record owner of the Excess Shares and to
institute proceedings to enjoin or rescind any such transfer or acquisition.
(F) If any provision of this Article TENTH or any application
of any such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other application of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
(G) It is the purpose of this Article TENTH to facilitate the
Corporation's ability to preserve its ownership by United States citizens as
required under Section 2 of the Shipping Act and to that end the Board of
Directors is authorized to take such action, to the extent permitted by law and
not inconsistent with this Article TENTH, as it may deem necessary or advisable
to protect the Corporation and the interests of the holders of its equity and
debt securities by preservation of the Corporation's ownership by United States
citizens.
(H) The Board of Directors may, to the extent permitted by
law, from time to time, establish, modify, amend or rescind, by By-law or
otherwise, regulations and procedures not inconsistent with the express
provisions of this Article TENTH for determining whether any acquisition of
Common Stock would jeopardize the Corporation's ability to maintain such
ownership by citizens of the United States for the orderly application,
administration and implementation of the provisions of this Article TENTH. Such
procedures and regulations shall be kept on file with the Secretary of the
Corporation and with its Transfer Agent and shall be made available for
inspection by the public and, upon request, shall be mailed to any holder of
Common Stock of the Corporation.
(I) All certificates evidencing ownership of Common Stock of
the Corporation shall bear a conspicuous legend describing the restriction set
forth in this Article TENTH.
ELEVENTH: The Corporation shall not be governed by Section 203
of Delaware General Corporation Law.
8
<PAGE> 9
IN WITNESS WHEREOF, American Classic Voyages Co. has caused
this Second Amended and Restated Certificate of Incorporation to be signed by
Jordan B. Allen, its Executive Vice President, General Counsel and Secretary,
and attested by Pam Stringer, its Assistant Secretary, this 29th day of March,
1999.
AMERICAN CLASSIC VOYAGES CO.
By: /s/ Jordan B. Allen
------------------------
Jordan B. Allen
Executive Vice President,
General Counsel and
Secretary
Attest: /s/ Pam Stringer
---------------------------------
Pam Stringer, Assistant Secretary
9
<PAGE> 1
3(ii)
SECOND AMENDED AND RESTATED BY-LAWS
OF
AMERICAN CLASSIC VOYAGES CO.
ARTICLE I
OFFICES
The Corporation shall continuously maintain in the State of Delaware a
registered office and a registered agent whose business office is identical with
such registered office, and may have other offices within or without the State.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders shall be
held on the third Wednesday in June of each year or at such time as the Board of
Directors may designate for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. If the election of directors shall not
be held on the day designated herein for any annual meeting, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a meeting of the shareholders as soon thereafter as may be convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called either by the President, by the Board of Directors or by the holders of
not less than a majority of all the outstanding shares of the Corporation
entitled to vote, for the purpose or purposes stated in the call of the meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders may designate any
place, either within or without the State of Delaware, as the place for the
holding of such meeting. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be at Two North Riverside Plaza,
Chicago, Illinois 60606, except as otherwise provided in Section 5 of this
Article II.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date, and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than 10
nor more than 60 days before the date of the meeting, or in the case of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets, not less than 20 nor more than 60 days before the date of the
1
<PAGE> 2
meeting, either personally or by mail, by or at the direction of the President,
or the Secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his or her address as it appears on the records
of the corporation, with postage thereon prepaid. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall
meet at any time and place, either within or without the State of Delaware, 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 any corporate action may be
taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining the shareholders entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than 60 days and, for a meeting of shareholders, not less than 10 days or,
in the case of a merger, consolidation, share exchange, dissolution or sale,
lease or exchange of assets, not less than 20 days before the date of such
meeting. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this Section, such determination shall also apply to any adjournment thereof.
SECTION 7. VOTING LISTS. The officer or agent having charge of the
transfer book for shares of the Corporation shall make, within 20 days after the
record date for a meeting of shareholders or 10 days before such meeting,
whichever is earlier, a complete list of the shareholders entitled to vote at
such meeting, arranged in alphabetical order, with the address of and the number
of shares held by each, which list, for a period of 10 days prior to such
meeting, shall be kept on file at the registered office of the Corporation and
shall be subject to inspection by any shareholder, and to copying at the
shareholder's expense, at any time during usual business hours. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original share ledger or transfer book, or a duplicate thereof kept
in the State of Delaware, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer book or
to vote at any meeting of shareholders.
SECTION 8. QUORUM. The holders of a majority of the outstanding shares of
the Corporation entitled to vote on a matter, represented in person or by proxy,
shall constitute a quorum for consideration of such matter at any meeting of
shareholders, but in no event shall a quorum consist of less than one-third of
the outstanding shares entitled so to vote; provided that if less than a
majority of the outstanding shares are represented at said meeting, a majority
of the shares so represented may adjourn the meeting at any time without further
notice. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting
2
<PAGE> 3
shall be the act of the shareholders, unless the vote of a greater number or
voting by classes is required by the General Corporation Law of Delaware (as now
in effect or as amended from time to time, the "Act"), the certificate of
incorporation or these by-laws. At any adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the original meeting. Withdrawal of shareholders from any meeting shall not
cause failure of a duly constituted quorum at that meeting.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
SECTION 10. VOTING OF SHARES. Unless otherwise provided in the articles of
incorporation, each outstanding share shall be entitled to one (1) vote upon
each matter submitted to vote at a meeting of shareholders.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares held by the
Corporation in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares entitled to vote at any given
time.
Shares registered in the name of another corporation, domestic or foreign,
may be voted by any officer, agent, proxy or other legal representative
authorized to vote such shares under the law of incorporation of such
corporation. The Corporation may treat the president or other person holding the
position of chief executive officer of such other corporation as authorized to
vote such shares, together with any other person indicated and any other holder
of any office indicated by the corporate shareholder to the Corporation as a
person or an officer authorized to vote such shares. Such persons and officers
indicated shall be registered by the Corporation on the transfer books for
shares and included in any voting list prepared in accordance with Section 7 of
this Article II.
Shares registered in the name of a deceased person, a minor ward or a
person under legal disability may be voted by his or her administrator, executor
or court appointed guardian, either in person or by proxy without a transfer of
such shares into the name of such administrator, executor or court appointed
guardian. Shares registered in the name of a trustee may be voted by him or her,
either in person or by proxy.
Shares registered in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his or her name if authority to do so
is contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, for a period not to exceed 10 years, by entering into a written
voting trust agreement specifying the terms and
3
<PAGE> 4
conditions of the voting trust and by transferring their shares to such trustee
or trustees for the purpose of the agreement. Any such trust agreement shall not
become effective until a counterpart of the agreement is deposited with the
Corporation at its registered office. The counterpart of the voting trust
agreement so deposited with the Corporation shall be subject to the same right
of examination by a shareholder of the Corporation, in person or by agent or
attorney, as are the books and records of the Corporation, and shall be subject
to examination by any holder of a beneficial interest in the voting trust,
either in person or by agent or attorney, at any reasonable time for any proper
purpose.
Shares of its own stock belonging to the Corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares at any given time, but shares of its own
stock held by it in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares at any given time.
SECTION 12. INSPECTORS. At any meeting of shareholders, the presiding
officer may, or upon the request of any shareholder shall, appoint one or more
persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or her
or by a majority of them if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting and without a
vote if a consent in writing, setting forth the action so taken, shall be signed
(a) by the holders of outstanding shares having not less than the minimum number
of votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voting or (b) by
all of the shareholders entitled to vote with respect to the subject matter
thereof.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given in writing to those
shareholders who have not consented in writing. In the event that the action
which is consented to is such as would have required the filing of a certificate
under any section of the Act if such action had been voted on by the
shareholders at a meeting thereof, the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of shareholders, that written consent has been given in accordance with the
provisions of SECTION 228 of the Act and that written notice has been given as
provided in such SECTION 228.
4
<PAGE> 5
SECTION 14. VOTING BY BALLOT. Voting on any question or in any election
may be by voice unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business of the Corporation shall be
managed by or under the direction of its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the Corporation shall be not less than two (2) and not more than thirteen (13).
Each director shall hold office until the next annual meeting of shareholders;
or until his successor shall have been elected and qualified. Directors need not
be residents of Delaware or shareholders of the Corporation. The number of
directors may be increased or decreased from time to time by the amendment of
this Section 2. No decrease shall have the effect of shortening the term of any
incumbent director.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held, without other notice than this by-law, immediately after the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for holding of additional regular meetings
without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place as the place for holding any special meeting of the Board of
Directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at least
two business days previous thereto by written notice to each director at his
business address. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegram company. The attendance of a director
at any meeting shall constitute a waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 6. QUORUM. Unless otherwise provided in the articles of
incorporation, a majority of the number of directors fixed by these by-laws
shall constitute a quorum for transaction of business at any meeting of the
Board of Directors, provided that if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting at any time without further notice.
Unless specifically prohibited by the articles of incorporation, members
of the Board of Directors or of any committee of the Board of Directors may
participate in and act at any
5
<PAGE> 6
meeting of the Board or such committee through the use of a conference telephone
or other communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in such meeting shall constitute
attendance and presence in person at the meeting of the person or persons so
participating.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by statute, these
by-laws, or the articles of incorporation.
SECTION 8. VACANCIES. Any vacancy on the Board of Directors and any
directorship to be filled by reason of an increase in the number of directors
may be filled by election at the next annual or special meeting of shareholders.
A majority of the Board of Directors may fill any vacancy prior to such annual
or special meeting of shareholders.
SECTION 9. RESIGNATION OF DIRECTORS. A director may resign at any time
upon written notice to the Board of Directors, its chairman, if any, or to the
chief executive officer or Secretary of the Corporation.
SECTION 10. INFORMAL ACTION BY DIRECTORS. Unless specifically prohibited
by the articles of incorporation or by other provisions of these by-laws, any
action required to be taken at a meeting of the Board of Directors, or any other
action which may be taken at a meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all the directors entitled
to vote with respect to the subject matter thereof or by all the members of such
committee, as the case may be. Any such consent signed by all the directors or
all the members of the committee shall have the same effect as a unanimous vote,
and may be stated as such in any document filed with the Secretary of State or
with anyone else.
SECTION 11. COMMITTEES. A majority of the directors fixed by these by-laws
may, by resolution, create one or more committees and appoint members of the
Board to serve on any one or more of such committees. Each committee shall have
two or more members who shall serve at the pleasure of the Board. A majority of
any committee shall constitute a quorum and a majority of a quorum is necessary
for committee action. Each committee, to the extent provided by the Board of
Directors in such resolution, shall have and exercise all of the authority of
the Board of Directors in the management of the Corporation, except that a
committee may not: authorize distributions; approve or recommend to shareholders
any act required by statute to be approved by shareholders; fill vacancies on
the Board or on any of its committees; elect or remove officers or fix the
compensation of any member of the committee; adopt, amend or repeal the by-laws;
approve a plan of merger not requiring shareholder approval; authorize or
approve the reacquisition of shares, except according to a general formula or
method prescribed by the Board; authorize or approve the issuance or sale, or
contract for sale, of shares or determine the designation and relative rights,
preferences, and limitations of a series of shares, except that the Board may
direct a committee to fix the specific terms of issuance or sale or contract for
sale or the number of shares to be allocated to particular employees under an
employee benefit plan; or, amend, alter, repeal, or take action inconsistent
with any resolution or action of the Board of Directors when the resolution or
action of the Board of Directors provides by its terms that it shall not be
amended, altered or repealed by action of a committee. Vacancies in the
membership of any committee shall be filled by the Board of Directors. Each
committee shall keep regular minutes of its proceedings and report
6
<PAGE> 7
the same to the Board when required. A committee may act by unanimous consent in
writing without a meeting and, subject to action by the Board of Directors, each
committee, by a majority vote of its members, shall determine the time and place
of meetings and the notice therefor.
SECTION 12. COMPENSATION. The Board of Directors, by the affirmative vote
of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the Corporation as directors,
officers or otherwise notwithstanding any director conflict of interest. By
resolution of the Board of Directors, the directors may be paid their expenses,
if any, of attendance at each meeting of the Board. No such payment previously
mentioned in this Section shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 13. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his or her dissent shall be entered in the minutes of the meeting
or unless he or she shall file his or her written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered or certified mail to the Secretary
of the Corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
SECTION 14. REMOVAL OF DIRECTORS. One or more of the directors may be
removed, with or without cause, at a meeting of shareholders by the affirmative
vote of the holders of a majority of the outstanding shares then entitled to
vote at an election of directors, except that no director shall be removed at a
meeting of shareholders unless the notice of such meeting shall state that a
purpose of the meeting is to vote upon the removal of one or more directors
named in the notice, and then only the named director or directors may be
removed at such meeting. If a director has been elected by a class or series of
shares, he may be removed only by the shareholders of that class or series.
SECTION 15. DISINTERESTED DIRECTORS; VOTING. A majority of the
Corporation's disinterested directors shall be required to approve any business
dealing between the Corporation and (i) any one or more of the directors of the
Corporation or (ii) any person affiliated with or under common control with any
one or more of the directors of the Corporation. Any such person described in
clauses (i) or (ii) of this Section 15 who enters into or intends to enter into
a business dealing with the Corporation shall, for purposes of this Section 15,
be referred to as an "interested person." For the purposes of this Section 15,
the terms "affiliate," "control," "under common control with," "disinterested
directors" and "business dealing" shall have the following meanings:
(a) an "affiliate" of, or person "affiliated" with, a specified person
shall mean a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with the person specified;
(b) the word "control" (the meaning of which hereunder shall also be
applicable to the term "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or
7
<PAGE> 8
policies of the person, whether through board representation, the
ownership of voting securities, by contract or otherwise;
(c) the word "person" shall mean any natural person, corporation, firm,
association, trust, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity;
(d) the term "disinterested directors" shall mean any director of the
Corporation who is not (i) an employee, officer, director,
trustee, partner, 5% shareholder (through beneficial ownership or
otherwise) or fiduciary of a person (other than the Corporation)
who is affiliated with or under common control with an interested
person; or (ii) an employee, officer, director, trustee, partner
or fiduciary of any of the persons described in subsection d(i)
above; and
(e) the term "business dealing" shall mean any transaction providing
for the sale, lease or exchange of property or the rendering of
any service, other than the sale, lease or exchange of property
or the rendering of any service made or undertaken pursuant to
and in accordance with an Administrative Services Agreement to be
executed between Equity Group Investments, Inc., an Illinois
corporation, and the Corporation in such form as the Board of
Directors shall approve.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a President, a
Treasurer and a Secretary and may include a Chairman of the Board (or one or
more Co-Chairmen of the Board), Chief Executive Officer, one or more Vice
Presidents, a Chief Operating Officer, a Chief Financial Officer, one or more
Assistant Treasurers, and one or more Assistant Secretaries. In addition, the
Board of Directors may, from time to time, appoint such other officers with such
powers and duties as they shall deem necessary or desirable. Any two or more
offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the Board of Directors. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. Election of an officer shall
not of itself create contract rights.
SECTION 3. REMOVAL AND RESIGNATION. Any officer elected or appointed by
the Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interest of the Corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Any officer of the Corporation may resign at any time by giving
written notice thereof to the Board of Directors, the Chairman of the Board,
8
<PAGE> 9
the President or the Secretary. Any resignation shall take effect at the time
specified in the notice, or, if the time when it shall become effective is not
specified therein, immediately upon its receipt. The acceptance of a resignation
shall not be necessary to make it effective unless otherwise stated in the
resignation.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. CHAIRMAN OF THE BOARD. The Board of Directors may designate a
Chairman of the Board (or one or more Co-Chairmen of the Board). The Chairman of
the Board shall preside over the meetings of the Board of Directors and of the
stockholders at which he shall be present. If there be more than one, the
Co-Chairmen designated by the Board of Directors will perform such duties. The
Chairman of the Board shall perform such other duties as may be assigned to him
or them by the Board of Directors.
SECTION 6. CHIEF EXECUTIVE OFFICER. The Board of Directors shall designate
a Chief Executive Officer. In the absence of such designation, the Chairman of
the Board (or, if more than one, the Co-Chairmen of the Board in the order
designated at the time of their election or, in the absence of any designation,
then in the order of their election) shall be the Chief Executive Officer of the
Corporation. The Chief Executive Officer shall have general responsibility for
implementing the policies of the Corporation, as determined by the Board of
Directors, and for the management of the business and affairs of the
Corporation.
SECTION 7. PRESIDENT. The President or the Chief Executive Officer, as the
case may be, shall be the principal executive officer of the Corporation and
shall in general supervise and control all of the business and affairs of the
Corporation. In the absence of a designation of a Chief Operating Officer by the
Board of Directors, the President shall be the Chief Operating Officer. Subject
to the direction and control of the Board of Directors, he/she shall, in
general: supervise and control the business and affairs of the Corporation; see
that the resolutions and directions of the Board of Directors are carried into
effect except in those instances in which that responsibility is specifically
assigned to some other person by the Board of Directors; and discharge all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time. Except in those
instances in which the authority to execute is expressly delegated to another
officer or agent of the Corporation or a different mode of execution is
expressly prescribed by the Board of Directors or these by-laws, he/she may
execute for the Corporation certificates for its shares and any contracts,
deeds, mortgages, bonds, or other instruments which the Board of Directors has
authorized to be executed, and he/she may accomplish such execution either under
or without the seal of the Corporation and either individually or with the
Secretary, any Assistant Secretary, or any other officer thereunto authorized by
the Board of Directors, according to the requirements of the form of the
instrument. He/she may vote all securities which the Corporation is entitled to
vote except as and to the extent such authority shall be vested in a different
officer or agent of the Corporation by the Board of Directors.
SECTION 8. CHIEF OPERATING OFFICER. The Board of Directors may designate a
Chief Operating Officer. The Chief Operating Officer shall have the
responsibilities and duties as set forth by the Board of Directors or the Chief
Executive Officer or President, as the case may be.
9
<PAGE> 10
SECTION 9. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a
Chief Financial Officer. The Chief Financial Officer shall have the
responsibilities and duties as set forth by the Board of Directors or the Chief
Executive Officer or President, as the case may be.
SECTION 10. THE VICE PRESIDENTS. The Vice President (or in the event there
be more than one Vice President, each of the Vice Presidents) shall assist the
President in the discharge of his/her duties as the President may direct and
shall perform such other duties as from time to time may be assigned to him/her
by the President or by the Board of Directors. In the absence of the President
or in the event of his/her inability or refusal to act, the Vice President (or
in the event there be more than one Vice President, the Vice Presidents in the
order designated by the Board of Directors or by the President if the Board of
Directors has not made such a designation or, in the absence of any designation,
then in the order of seniority of tenure as Vice President) shall perform the
duties of the President and, when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Except in those instances in
which the authority to execute is expressly delegated to another officer or
agent of the Corporation or a different mode of execution is expressly
prescribed by the Board of Directors or these by-laws, the Vice President (or
each of them if there are more than one) may execute for the Corporation
certificates for its shares and any contracts, deeds, mortgages, bonds or other
instruments which the Board of Directors has authorized to be executed, and
he/she may accomplish such execution either under or without the seal of the
Corporation and either individually or with the Secretary, any Assistant
Secretary, or any other officer thereunto authorized by the Board of Directors,
according to the requirements of the form of the instrument, except when a
different mode of execution is expressly prescribed by the Board of Directors or
these by-laws.
SECTION 11. THE TREASURER. The Treasurer shall: (a) have charge of and be
responsible for the maintenance of adequate books of account for the
Corporation; (b) have charge and custody of all funds and securities of the
Corporation and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform all the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him/her by the
President or by the Board of Directors. If required by the Board of Directors,
the Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors may determine.
SECTION 12. THE SECRETARY. The Secretary shall: (a) record the minutes of
the shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws; (c) be custodian of the corporate records
and of the seal of the Corporation; (d) keep a register of the post office
address of each shareholder which shall be furnished to the Secretary by such
shareholder; (e) sign, with the President or a Vice President or any other
officer thereunto authorized by the Board of Directors, certificates for shares
of the Corporation, the issue of which shall have been authorized by the Board
of Directors, and any contracts, deeds, mortgages, bonds, or other instruments
which the Board of Directors has authorized to be executed, according to the
requirements of the form of the instrument, except when a different mode of
execution is expressly prescribed by the Board of Directors or these by-laws;
(f) have general charge of the stock transfer books of the Corporation; (g) have
authority to certify the by-laws, resolutions of the shareholders and Board of
Directors and committees thereof, and other documents of the Corporation as true
and correct copies thereof; and (h) perform all duties
10
<PAGE> 11
incident to the office of secretary and such other duties as from time to time
may be assigned to him/her by the President or by the Board of Directors.
SECTION 13. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
Treasurers and Assistant Secretaries shall perform such duties as shall be
assigned to them by the Treasurer or the Secretary, respectively, or by the
President or the Board of Directors. The Assistant Secretaries may sign with the
President or a Vice President, or any other officer thereunto authorized by the
Board of Directors, certificates for shares of the Corporation, the issue of
which shall have been authorized by the Board of Directors, and any contracts,
deeds, mortgages, bonds, or other instruments which the Board of Directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed by
the Board of Directors or these by-laws. The Assistant Treasurers shall, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the board of directors shall
determine.
SECTION 14. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
11
<PAGE> 12
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 1. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED SHARES.
The issued shares of the Corporation shall be represented by certificates or
shall be uncertificated shares.
Certificates representing shares of the Corporation shall be signed by the
appropriate officers and may be sealed with the seal or a facsimile of the seal
of the Corporation. If a certificate is countersigned by a transfer agent or
registrar, other than the Corporation or its employee, any other signatures may
be facsimile. Each certificate representing shares shall be consecutively
numbered or otherwise identified and shall also state the name of the person to
whom issued, the number and class of shares (with designation of series, if
any), the date of issue, and that the Corporation is organized under Delaware
law. If the Corporation is authorized to issue shares of more than one class or
of series within a class, the certificate shall also contain such information or
statement as may be required by law.
Unless prohibited by the articles of incorporation, the Board of Directors
may provide by resolution that some or all of any class or series of shares
shall be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until the certificate has been surrendered to the
Corporation. Within a reasonable time after the issuance or transfer of
uncertificated shares, the Corporation shall send the registered owner thereof a
written notice of all information that would appear on a certificate. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of uncertificated shares shall be as identical to those of the holders of
certificates representing shares of the same class and series.
The name and address of each shareholder, the number and class of shares
held and the date on which the shares were issued shall be entered on the books
of the Corporation. The person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation.
SECTION 2. LOST CERTIFICATES. If a certificate representing shares has
allegedly been lost or destroyed, the Board of Directors may, in its discretion,
except as may be required by law, direct that a new certificate be issued upon
such indemnification and other reasonable requirements as it may impose.
SECTION 3. TRANSFER OF SHARES. Transfer of shares of the Corporation shall
be recorded on the books of the Corporation. Transfer of shares represented by a
certificate, except in the case of a lost or destroyed certificate, shall be
made on surrender for cancellation of the certificate for such shares. A
certificate presented for transfer must be duly endorsed and accompanied by
proper guaranty of signature and other appropriate assurances that the
endorsement is effective. Transfer of an uncertificated share shall be made on
receipt by the Corporation of an instruction from the registered owner or other
appropriate person. The instruction shall be in writing or a communication in
such form as may be agreed upon in writing by the Corporation.
12
<PAGE> 13
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE VIII
DISTRIBUTIONS
The Board of Directors may authorize, and the Corporation may make,
distributions to its shareholders, subject to any restrictions in its articles
of incorporation or provided by law.
ARTICLE IX
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced, provided that the affixing of the corporate seal to an
instrument shall not give the instrument additional force or effect, or change
the construction thereof, and the use of the corporate seal is not mandatory.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of these
by-laws or under the provisions of the articles of incorporation or under the
provisions of the Act, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Attendance at
any meeting shall constitute waiver of notice thereof unless the person at the
meeting objects to the holding of the meeting because proper notice was not
given.
ARTICLE XI
INDEMNIFICATION
Each person who at any time is or shall have been a director, officer,
employee or agent of this Corporation, or is or shall have been serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by this Corporation in accordance with and to the full extent
permitted by the Act. The foregoing right of indemnification shall not be deemed
exclusive of any other rights to which a person seeking indemnification may be
entitled under
13
<PAGE> 14
any by-law, agreement, vote of shareholders or disinterested directors or
otherwise. If authorized by the Board of Directors, the Corporation may purchase
and maintain insurance on behalf of any person to the full extent permitted by
the Act. If the Corporation pays indemnity or makes an advance of expenses to a
director, officer, employee or agent, the Corporation shall report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting.
ARTICLE XII
AMENDMENTS
Unless otherwise provided in the articles of incorporation, these by-laws
may be made, altered, amended or repealed by the shareholders or the Board of
Directors, but no by-law adopted by the shareholders may be altered, amended or
repealed by the Board of Directors.
14
<PAGE> 1
4(ii)(a)(l)
EXECUTION COPY
CREDIT AGREEMENT
Dated as of February 25, 1999
among
THE DELTA QUEEN STEAMBOAT CO.,
as Borrower,
THE FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTY HERETO,
as Lenders,
THE CHASE MANHATTAN BANK,
as Issuing Bank
and as Administrative Agent,
and
HIBERNIA NATIONAL BANK,
as Documentation Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
Definitions..............................................................................................1
1.01. Certain Defined Terms.............................................................................1
1.02. Computation of Time Periods......................................................................23
1.03. Accounting Terms.................................................................................23
1.04. Other Definitional Provisions....................................................................23
ARTICLE II
Amounts and Terms of Revolving Credit Facility..........................................................23
2.01. The Revolving Loans..............................................................................23
2.02. Loan Facility Mechanics..........................................................................24
2.03. Interest on the Loans............................................................................26
2.05. Fees.............................................................................................34
2.06. Prepayments......................................................................................35
2.07. Payments.........................................................................................35
2.08. Interest Periods.................................................................................38
2.09. Special Provisions Governing Eurodollar Rate Loans...............................................38
2.10. Taxes............................................................................................41
2.11. Capital Adequacy; Increased Costs................................................................44
2.12. Use of Proceeds of the Loans and the Letters of Credit...........................................45
2.13. Authorized Officers of Borrower..................................................................45
2.14. Replacement of Certain Lenders...................................................................46
ARTICLE III
Conditions to Loans ....................................................................................47
3.01. Conditions Precedent to Effectiveness............................................................47
3.02. Conditions Precedent to all Loans................................................................48
ARTICLE IV
Representations and Warranties..........................................................................49
4.01. Representations and Warranties on the Initial Funding Date.......................................49
4.02. Subsequent Funding Representations and Warranties................................................57
ARTICLE V
Reporting Covenants.....................................................................................57
5.01. Financial Statements.............................................................................57
5.02. Environmental Notices............................................................................62
ARTICLE VI
Affirmative Covenants...................................................................................63
6.01. Corporate Existence, Etc.........................................................................63
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
6.02. Corporate Powers, Etc............................................................................63
6.03. Compliance with Laws.............................................................................63
6.04. Payment of Taxes and Claims......................................................................63
6.05. Maintenance of Properties; Insurance.............................................................64
6.06. Inspection of Property; Books and Records; Discussions...........................................64
6.07. Labor Matters....................................................................................64
6.08. Maintenance of Permits...........................................................................65
6.09. Employee Benefit Matters.........................................................................65
6.10. Formation of Subsidiaries........................................................................65
6.11. Acquisition or Construction of New Vessels.......................................................66
6.12. Hedging Contracts................................................................................66
ARTICLE VII
Negative Covenants......................................................................................66
7.01. Indebtedness.....................................................................................67
7.02. Sales of Assets; Liens...........................................................................67
7.03. Investments......................................................................................68
7.04. Accommodation Obligations........................................................................69
7.05. Restricted Junior Payments.......................................................................70
7.06. Conduct of Business..............................................................................70
7.07. Transactions with Affiliates.....................................................................70
7.08. Restriction on Fundamental Changes...............................................................70
7.09. Employee Benefit Matters.........................................................................71
7.10. Environmental Liabilities........................................................................71
7.11. Margin Regulations...............................................................................72
7.12. Change of Fiscal Year............................................................................72
7.13. Amendment of Certain Documents...................................................................72
ARTICLE VIII
Financial Covenants.....................................................................................72
8.01. Maximum Bank Indebtedness Leverage Ratio.........................................................72
8.02. Maximum Total Indebtedness Leverage Ratio........................................................73
8.03. Minimum Interest Coverage Ratio..................................................................73
8.04. Capital Expenditures.............................................................................73
ARTICLE IX
Events of Default; Rights and Remedies..................................................................74
9.01. Events of Default................................................................................74
9.02. Rights and Remedies..............................................................................77
ARTICLE X
The Agent...............................................................................................77
10.01. Appointment.....................................................................................77
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
10.02. Nature of Duties................................................................................78
10.03. Rights, Exculpation, Etc........................................................................78
10.04. Reliance........................................................................................79
10.05. Indemnification.................................................................................79
10.06. The Agent Individually..........................................................................80
10.07. Successor Agent; Resignation of Agent...........................................................80
10.08. Collateral Matters..............................................................................81
10.09. Relations Among Lenders.........................................................................83
ARTICLE XI
Miscellaneous...........................................................................................83
11.01. Survival of Warranties and Agreements...........................................................83
11.02. Assignments and Participations..................................................................83
11.03. Expenses........................................................................................87
11.04. Indemnification and Waiver......................................................................88
11.05. Limitation of Liability.........................................................................88
11.06. Ratable Sharing.................................................................................89
11.07. Amendments and Waivers..........................................................................89
11.08. Notices.........................................................................................90
11.09. Failure or Indulgence Not Waiver; Remedies Cumulative...........................................90
11.10. Termination.....................................................................................91
11.11. Marshalling; Recourse to Security; Payments Set Aside...........................................91
11.12. Severability....................................................................................91
11.13. Headings........................................................................................91
11.14. GOVERNING LAW...................................................................................91
11.15. Successors and Assigns; Subsequent Holders of Notes.............................................92
11.16. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.........................................92
11.17. Counterparts; Effectiveness; Inconsistencies....................................................93
11.18. Performance of Obligations......................................................................94
11.19. ENTIRE AGREEMENT................................................................................94
11.20. Confidentiality.................................................................................95
</TABLE>
iii
<PAGE> 5
EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit 1 -- Assignment and Acceptance (Sections 1.01, 11.02(d))
Exhibit 2 -- Compliance Certificate (Sections 1.01, 5.01(e))
Exhibit 3 -- Notice of Borrowing (Sections 1.01, 2.02)
Exhibit 4 -- Notice of Conversion/Continuation (Sections 1.01, 2.03(c))
Exhibit 5 -- Form of Revolving Loan Note (Section 2.02)
Exhibit 6 -- List of Closing Documents (Section 3.01(a))
Exhibit 7 -- Form of Loss Payable Endorsement (Section 6.05)
</TABLE>
iv
<PAGE> 6
SCHEDULES
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule A -- List of Lenders, Domestic and Eurodollar Lending Offices and
Commitments (Sections 1.01, 11.02(c), 11.10)
Schedule 1.01-A -- Existing Indebtedness (Section 1.01)
Schedule 1.01-B -- Permitted Existing Liens (Section 1.01)
Schedule 1.01-C -- Vessels
Schedule 4.01(c) -- Subsidiaries (Sections 4.01(c), 6.01)
Schedule 4.01(d) -- Violation of Requirements of Law (Section 4.01(d))
Schedule 4.01(i) -- Capitalization (Section 4.01(i))
Schedule 4.01(j) -- Pending or Threatened Litigation (Section 4.01(j))
Schedule 4.01(l) -- Tax Assessments (Section 4.01(l))
Schedule 4.01(t) -- ERISA Matters (Section 4.01(t))
Schedule 4.01(w) -- Joint Ventures (Section 4.01(w))
Schedule 4.01(x) -- Labor Matters (Section 4.01(x))
Schedule 6.05 -- Insurance (Section 6.05)
Schedule 7.02(a) -- Intercompany Leases (Section 7.02(a))
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
This Credit Agreement dated as of February 25, 1999 (as
amended, supplemented, modified or restated from time to time, the "Agreement")
is entered into among THE DELTA QUEEN STEAMBOAT CO., a Delaware corporation
("Borrower"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
and each other financial institution which from time to time becomes a party
hereto in accordance with Section 11.02(a) (together with their respective
successors and assigns, individually, a "Lender" and, collectively, the
"Lenders"), THE CHASE MANHATTAN BANK, a New York banking corporation, in its
separate capacities as Issuing Bank and as Administrative Agent for the Lenders
hereunder (in such latter capacity, the "Agent"), and HIBERNIA NATIONAL BANK, as
Documentation Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms.
The following terms used in this Agreement shall have the
following meanings (such meanings to be applicable, except to the extent
otherwise indicated in a definition of a particular term, both to the singular
and the plural forms of the terms defined):
"Accommodation Obligation," as applied to any Person, shall
mean any contractual obligation, contingent or otherwise, of that Person with
respect to any Indebtedness or other obligation or liability of another,
including, without limitation, any such Indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase, or otherwise
acquire such Indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received. For purposes of interpreting any
provision of this Agreement which refers to the Dollar amount of Accommodation
Obligations of any Person, such provision shall be deemed to mean the maximum
amount of such
<PAGE> 8
Accommodation Obligations or, in the case of an Accommodation Obligation to
maintain solvency, assets, level of income or other financial condition, the
amount of Indebtedness to which such Accommodation Obligation relates, or if
less, the stated maximum, if any, in the documents evidencing such Accommodation
Obligation.
"Adjusted LIBO Rate" means, with respect to any Borrowing of
Eurodollar Rate Loans for any Interest Period, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO
Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
"Affiliate," as applied to any Person, shall mean any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting Securities or by contract or otherwise.
"Agent" shall have the meaning ascribed to such term in the
preamble hereto and shall include any successor Agent appointed pursuant to
Section 10.07.
"Agreement" shall have the meaning ascribed to such term in
the preamble hereto.
"Agreement Accounting Principles" shall mean GAAP as of the
date of this Agreement together with any changes in GAAP after the date hereof
which are not "Material Accounting Changes" (as defined below). If any changes
in GAAP are hereafter required or permitted and are adopted by the Borrower with
the agreement of its independent certified public accountants and such changes
result in a material change in the calculation of any of the financial
covenants, restrictions or standards herein or in the related definitions or
terms used therein ("Material Accounting Changes"), the parties hereto agree to
enter into negotiations, in good faith, in order to amend such provisions in a
credit neutral manner so as to reflect equitably such changes with the desired
result that the criteria for evaluating the Borrower's financial condition shall
be the same after such changes as if such changes had not been made; provided,
however, that no Material Accounting Change shall be given effect in such
calculations until such provisions are amended, in a manner reasonably satis-
factory to the Requisite Lenders. In the event such amendment is entered into,
all references in this Agreement to Agreement Accounting Principles shall mean
GAAP as of the date of such amendment together with any changes in GAAP after
the date of such amendment which are not Material Accounting Changes.
"Agreement Obligations" shall mean all Obligations other than
with respect to Eligible Hedging Contracts.
"Alternate Base Rate" shall mean, for any day, a rate per
annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the
Base CD Rate in effect on such day plus 1% and
2
<PAGE> 9
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any
change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD
Rate or the Federal Funds Effective Rate shall be effective from and including
the effective date of such change in the Prime Rate, the Base CD Rate or the
Federal Funds Effective Rate, respectively.
"American Queen" shall mean the vessel of the same name
identified on Schedule 1.01-C.
"Applicable Base Rate Margin" as at any date of determination,
shall be the rate per annum then applicable to Base Rate Loans determined in
accordance with the provisions of Section 2.03(e).
"Applicable Eurodollar Rate Margin" as at any date of
determination, shall be the rate per annum then applicable to Eurodollar Rate
Loans determined in accordance with the provisions of Section 2.03(e).
"Applicable Lending Office" shall mean, with respect to each
Lender, such Lender's Domestic Lending Office, in the case of a Base Rate Loan
and such Lender's Eurodollar Lending Office, in the case of a Eurodollar Rate
Loan.
"Applicable Margin" shall mean the Applicable Base Rate Margin
and/or the Applicable Eurodollar Rate Margin, as the case may be.
"Assessment Rate" shall mean, for any day, the annual
assessment rate in effect on such day that is payable by a member of the Bank
Insurance Fund classified as "well-capitalized" and within supervisory subgroup
"B" (or a comparable successor risk classification) within the meaning of 12
C.F.R. Part 327 (or any successor provision) to the FDIC for insurance by the
FDIC of time deposits made in dollars at the offices of such member in the
United States; provided that if, as a result of any change in any law, rule or
regulation, it is no longer possible to determine the Assessment Rate as
aforesaid, then the Assessment Rate shall be such annual rate as shall be
determined by the Agent to be representative of the cost of such insurance to
the Lenders.
"Assignment and Acceptance" shall mean an Assignment and
Acceptance in the form of Exhibit 1 (with blanks appropriately filled in)
delivered to the Agent in connection with an assignment of a Lender's interest
under this Agreement pursuant to Section 11.02.
"Bank Indebtedness Leverage Ratio" shall mean, for any fiscal
quarter, the ratio of (a) the total Revolving Credit Exposures on the last day
of such fiscal quarter to (b) DQSC EBITDA less GAQSC EBITDA, in each case for
the four fiscal quarter period ending on the last day of such fiscal quarter,
determined in accordance with Agreement Accounting Principles consistently
applied.
"Base CD Rate" shall mean the sum of (a) the Three-Month
Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the
Assessment Rate.
3
<PAGE> 10
"Base Rate Loans" shall mean all Loans outstanding which bear
interest at a rate determined by reference to the Alternate Base Rate, as
provided in Section 2.03(a)(i).
"Benefit Plan" shall mean a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which
Borrower or any ERISA Affiliate is, or within the immediately preceding six (6)
years was, an "employer" as defined in Section 3(5) of ERISA.
"Borrower" shall have the meaning ascribed to such term in the
preamble hereto.
"Borrower Subsidiaries" shall mean any Subsidiary of the
Borrower.
"Borrowing" shall mean a borrowing consisting of Loans of the
same Type, having the same Interest Period, in the case of Eurodollar Rate
Loans, and made on the same day by the Lenders.
"Business Day" shall mean (i) for all purposes other than as
described by clause (ii) below, any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York, or is a day on
which banking institutions located in New York are required or authorized by law
or other governmental action to close and (ii) with respect to all notices,
determinations, fundings and payments in connection with Eurodollar Rate Loans,
any day which is a Business Day described in clause (i) and which is also a day
for trading in dollar deposits by and between banks in the London interbank
Eurodollar market.
"Capital Lease," as applied to any Person, shall mean any
lease of any property (whether real, personal, or mixed) by that Person as
lessee which, in conformity with Agreement Accounting Principles, is or should
be accounted for as a capital lease on the balance sheet of that Person.
"Carryover Amount" shall have the meaning ascribed to such
term in Section 8.04.
"Cash Equivalents" shall mean (i) marketable direct
obligations issued or unconditionally guaranteed by the United States Government
or issued by an agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one year after the date
of acquisition thereof; (ii) marketable direct obligations issued by any state
or municipality of the United States of America maturing or puttable within six
months after the date of acquisition thereof and, at the time of acquisition,
having one of the two highest short-term ratings obtainable from either Standard
& Poor's Rating Services ("S&P") or Moody's Investors Service, Inc. ("Moody's")
(or, if at any time neither S&P nor Moody's shall be rating such obligations,
then from such other nationally recognized rating services acceptable to the
Agent); and (iii) commercial paper (other than commercial paper issued by
Parent, Borrower or any of their respective Subsidiaries or any of their
Affiliates), domestic and Eurodollar certificates of deposit, time deposits or
bankers' acceptances, in any such case maturing no more than 180 days after the
date of acquisition thereof and, at the time of the acquisition thereof, the
issuer's rating on its commercial
4
<PAGE> 11
paper is at least A-1 or P-1 from either S&P or Moody's (or, if at any time
neither S&P nor Moody's shall be rating such obligations, then the highest
rating from other nationally recognized rating services acceptable to the
Agent).
"Cash Interest Expense" shall mean, with respect to any Person
on a consolidated basis for any period, the sum of (a) interest expense of such
Person for such period (excluding the amortization of all fees payable in
connection with the incurrence of the Obligations) and (b) capitalized interest
of such Person for such period, determined in accordance with Agreement
Accounting Principles consistently applied.
"Change of Control" shall mean that either (a) the Zell Group
shall cease to own, directly or indirectly, more than 10% of the combined voting
power of the Parent's outstanding securities ordinarily having the right to vote
at elections of directors (excluding any such securities which Ann Lurie has the
right to vote, or to direct or control the right to vote, at elections of
directors without the consent or approval of any other person), (b) Sam Zell
shall cease to be a director of the Parent or (c) the Parent shall cease to
directly own 100% of the Borrower's outstanding securities ordinarily having the
right to vote at elections of directors.
"Coastal Cruiser One" shall mean the first of two new coastal
cruise ships to be constructed by the Borrower (or a Subsidiary of the Borrower)
for passenger use in the Borrower's cruise business.
"Coastal Cruiser Two" shall mean the second of two new coastal
cruise ships to be constructed by the Borrower (or a Subsidiary of the Borrower)
for passenger use in the Borrower's cruise business.
"Collateral" shall mean all property and interests in property
now owned or hereafter acquired by the Borrower or any of its Subsidiaries in or
upon which a security interest, pledge, lien or mortgage is intended to be
granted, or of which a collateral assignment is intended to be made, under the
Collateral Documents.
"Collateral Documents" shall mean the Security Agreement, the
Subsidiary Security Agreements, the Subsidiary Guaranties, the Intellectual
Property Agreements, the Pledge Agreements, the Ship Mortgages, and all other
security agreements, mortgages, deeds of trust, collateral assignments,
financing statements and other agreements, conveyances or documents at any time
delivered to the Agent by the Borrower or any Borrower Subsidiary which intend
to create or evidence Liens to secure or to guarantee the Obligations.
"Commission" shall mean the Securities and Exchange Commission
or any Governmental Authority succeeding to the functions thereof.
"Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and to acquire participations
in Letters of Credit hereunder,
5
<PAGE> 12
expressed as an amount representing the maximum aggregate amount of such
Lender's Revolving Credit Exposure hereunder, as such commitment may be (a)
reduced from time to time pursuant to Section 2.02(d) and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 11.02. The initial amount of each Lender's Commitment is set
forth on Schedule A, or in the Assignment and Acceptance pursuant to which such
Lender shall have assumed its Commitment, as applicable. The initial aggregate
amount of the Lenders' Commitments is $70,000,000. "Commitments" shall mean the
aggregate amount of the Commitments of all Lenders.
"Commitment Fee" shall have the meaning ascribed to that term
in Section 2.05(a).
"Compliance Certificate" shall mean an Officer's Certificate
in substantially the form of Exhibit 2 delivered to the Agent and each Lender by
Borrower pursuant to Section 5.01(d) and covering Borrower's compliance with the
covenants contained in Article VIII and certain other provisions of this
Agreement.
"Consolidated Borrower Group" shall mean the Borrower and all
of its Subsidiaries on a consolidated basis.
"Consolidated Net Income" shall mean, with respect to any
Person on a consolidated basis for any period, net income for such period
including, without duplication, the proceeds of business interruption insurance
in respect of cruise revenues but excluding from the definition of Consolidated
Net Income the effect of any extraordinary or non-recurring gains or losses, all
computed on a consolidated basis in accordance with Agreement Accounting
Principles consistently applied.
"Contaminant" shall mean any pollutant, hazardous substance,
hazardous chemical, toxic substance, hazardous waste or special waste, as those
terms are defined in federal, state or local laws and regulations, radioactive
material, petroleum, including crude oil or any petroleum-derived substance, or
breakdown or decomposition product thereof, or any constituent of any such
substance or waste, including but not limited to polychlorinated biphenyls and
asbestos.
"Contractual Obligation", as applied to any Person, shall mean
any provision of any Securities issued by that Person or any indenture,
mortgage, deed of trust, contract, undertaking, document, instrument or other
agreement or instrument to which that Person is a party or by which it or any of
its properties is bound, or to which it or any of its properties is subject
(including, without limitation, any restrictive covenant affecting such Person
or any of its properties).
"Contribution Agreement" shall mean that certain Contribution
Agreement executed by each of the Subsidiaries of the Borrower (other than
GAQSC) of even date herewith, as the same may be amended, restated, supplemented
or otherwise modified from time to time with the consent of the Requisite
Lenders.
6
<PAGE> 13
"Customary Permitted Liens" shall mean (i) Liens (other than
Environmental Liens, Liens imposed under ERISA or Enforceable Judgments) for
claims, taxes, assessments or charges of any Governmental Authority not yet due
or which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with Agreement Accounting Principles, (ii) statutory
Liens of landlords, bankers, carriers, warehousemen, mechanics, materialmen, and
other Liens (other than Environmental Liens, Liens imposed under ERISA or
Enforceable Judgments) imposed by law including without limitation preferred
maritime liens, arising in the ordinary course of business and for amounts which
(A) are not yet due, (B) are not more than thirty (30) days past due as long as
no notice of default has been given or other action taken to enforce such Liens,
or (C) (1) are not more than thirty (30) days past due and a notice of default
has been given or other action taken to enforce such Liens, or (2) are more than
thirty (30) days past due, and, in the case of clause (1) or (2), are being
contested in good faith by appropriate proceedings which are sufficient to
prevent imminent foreclosure of such Liens and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance with
Agreement Accounting Principles, (iii) Liens (other than Environmental Liens,
Liens imposed under ERISA or Enforceable Judgments) incurred or deposits made in
the ordinary course of business (including, without limitation, surety bonds and
appeal bonds) in connection with workers' compensation, unemployment insurance
and other types of employment benefits or to secure the performance of tenders,
bids, leases, contracts (other than for the repayment of Indebtedness),
statutory obligations and other similar obligations or arising as a result of
progress payments under government contracts, (iv) easements (including, without
limitation, reciprocal easement agreements and utility agreements),
rights-of-way, covenants, consents, rights of landlords, reservations,
encroachments, variations and other restrictions, charges or encumbrances
(whether or not recorded) affecting the use of real property, which do not
materially interfere with the ordinary conduct of the business of Borrower or
any of its Subsidiaries, (v) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; and (vi) precautionary filings of financing
statements in connection with Operating Leases entered into in the ordinary
course of business.
"Default Rate" shall have the meaning ascribed to that term in
Section 2.03(d).
"Delta Queen" shall mean the vessel of the same name
identified on Schedule 1.01-C.
"DOL" shall mean the United States Department of Labor and any
successor department or agency.
"Dollars" and "$" shall mean the lawful money of the United
States of America.
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" under its
name on Schedule A or on the Assignment and Acceptance by which it became a
Lender or such other office of such Lender as such Lender may from time to time
specify by written notice to Borrower and the Agent.
7
<PAGE> 14
"DQSC EBITDA" shall mean EBITDA for the Consolidated Borrower
Group.
"EBITDA" shall mean, with respect to any Person on a
consolidated basis for any period, the sum for such Person for such period of
Consolidated Net Income plus, to the extent reflected in the income statement of
such Person for such period from which Consolidated Net Income is determined,
without duplication, (i) interest expense, (ii) federal, state and local income
and franchise tax expense, (iii) depreciation expense, (iv) amortization
expense, and (v) any other noncash items which had the effect of reducing
Consolidated Net Income for such period, but minus any noncash items which had
the effect of increasing Consolidated Net Income for such period.
"Effective Date" shall mean the date on which the conditions
specified in Section 3.01 are satisfied (or waived in accordance with Section
11.07).
"Eligible Hedging Contract" shall mean Hedging Contracts with
any Lender or any Affiliate of any Lender as the counterparty.
"Enforceable Judgment" means a judgment or order as to which
(a) the Borrower has not demonstrated to the reasonable satisfaction of the
Agent that the Borrower is covered by third-party insurance (other than
retro-premium insurance that determines retro-premiums solely on the basis of
losses of the Borrower) therefor or that the Borrower has adequate reserves
therefor and (b) the period, if any, during which the enforcement of such
judgment or order is stayed shall have expired, it being understood that a
judgment or order which is under appeal or as to which the time in which to
perfect an appeal has not expired shall not be deemed an "Enforceable Judgment"
so long as enforcement thereof is effectively stayed pending the outcome of such
appeal or the expiration of such period, as the case may be; provided that if
enforcement of a judgment or order has been stayed on condition that a bond or
collateral equal to or greater than $2,500,000 be posted or provided, such
judgment or order shall be an "Enforceable Judgment."
"Environmental Lien" shall mean a Lien in favor of any
Governmental Authority for (i) any liability of the Borrower or any of its
Subsidiaries under federal or state environmental laws or regulations, or (ii)
damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the IRC) as Borrower or any of its Subsidiaries, (ii)
partnership or other trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the IRC) with Borrower
or any of its Subsidiaries, and (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the IRC) as Borrower or any of
its Subsidiaries, any corporation described in clause (i) above or any
partnership or trade or business described in clause (ii) above.
8
<PAGE> 15
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office" under its
name on Schedule A or on the Assignment and Acceptance by which it became a
Lender (or, if no such office is specified, its Domestic Lending Office) or such
other office of such Lender as such Lender may from time to time specify by
written notice to Borrower and the Agent.
"Eurodollar Rate Loans" shall mean those Loans outstanding
which bear interest at a rate determined by reference to the Adjusted LIBO Rate
as provided in Section 2.03(a)(ii).
"Event of Default" shall mean any of the occurrences set forth
in Section 9.01 after the expiration of any applicable grace period expressly
provided therein.
"Existing Indebtedness" shall mean the Indebtedness of the
Borrower or any of its Subsidiaries reflected on Schedule 1.01-A.
"FDIC" shall mean the Federal Deposit Insurance Corporation or
any Governmental Authority succeeding to its functions.
"Federal Funds Effective Rate" shall mean, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System or any Governmental Authority succeeding to its
functions.
"Fee Letter" shall have the meaning ascribed to that term in
Section 2.05(c).
"Fiscal Year" shall mean the fiscal year of the Borrower,
which shall be each twelve (12) month period ending on December 31 of each
calendar year or such other period as the Borrower may designate and the
Requisite Lenders may approve in writing.
"Funding Date" shall mean, with respect to any Loan, the date
of the funding of such Loan, and with respect to any Letter of Credit, the date
of the issuance of such Letter of Credit..
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant
9
<PAGE> 16
segments of the accounting profession, which are applicable to the circumstances
as of the date of determination.
"GAQSC" shall mean Great AQ Steamboat, L.L.C., a Delaware
limited liability company (successor by merger to Great AQ Steamboat Co., a
Delaware corporation).
"GAQSC Depository Agreement" shall mean the Depository
Agreement dated as of August 24, 1995, among GAQSC, the Secretary and The Bank
of New York, as Depository-Bailee.
"GAQSC EBITDA" shall mean EBITDA for GAQSC.
"GAQSC Financial Agreement" shall mean the Title XI Reserve
Fund and Financial Agreement dated as of August 24, 1995, between GAQSC and the
Secretary.
"GAQSC Guaranty" shall mean the Guaranty Agreement dated as of
August 24, 1995, executed by the Borrower in favor of the Secretary guaranteeing
the payment and performance by GAQSC of the Secretary's Note.
"GAQSC Obligations" shall mean the United States Government
Guaranteed Ship Financing Obligations, American Queen Series, issued by GAQSC in
the aggregate original principal amount of $60,589,000 under the GAQSC Trust
Indenture.
"GAQSC Security Agreement" shall mean the Security Agreement
dated as of August 24, 1995, between GAQSC and the Secretary, securing payment
of the Secretary's Note.
"GAQSC Ship Mortgage" shall mean the First Preferred Ship
Mortgage dated as of August 24, 1995, executed by GAQSC, as shipowner and
mortgagor, in favor of the Secretary, as mortgagee, covering the American Queen
and securing payment of the Secretary's Note.
"GAQSC Trust Indenture" shall mean the Trust Indenture dated
as of August 24, 1995, between GAQSC and The Bank of New York, as Indenture
Trustee.
"Governmental Authority" shall mean any nation, state,
sovereign, or government, any federal, regional, state, local or political
subdivision and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government including
without limitation, any central bank.
"Hedging Contract" shall mean (i) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, or (ii) any agreements, devices or
arrangements providing for payments related to fluctuations of interest rates,
exchange rates, forward rates or commodity prices, including, but not limited
to, interest rate swap or exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options.
10
<PAGE> 17
"Holders of Secured Obligations" shall mean the holders of the
Obligations from time to time and shall refer to (i) each Lender in respect of
its Revolving Credit Exposure, (ii) the Issuing Bank in respect of Letters of
Credit and LC Disbursements, (iii) the Agent and the Lenders in respect of all
other present and future obligations and liabilities of Borrower of every type
and description arising under or in connection with this Agreement or any other
Loan Document, (iv) each other Person entitled to indemnification pursuant to
Section 11.04, in respect of the obligations and liabilities of Borrower to such
Person thereunder, (v) each Lender and each Affiliate of each Lender, in respect
of all obligations and liabilities of Borrower to such Lender or such Affiliate
as exchange party or counterparty under any Eligible Hedging Contract, and (vi)
their respective successors, transferees and assigns.
"Indebtedness" of any Person shall mean, without duplication,
(i) all indebtedness, obligations or other liabilities of such Person for
borrowed money or under any debt Securities, whether or not subordinated, (ii)
all obligations with respect to redeemable stock and redemption or repurchase
obligations under any equity securities or profit payment agreements, (iii) all
reimbursement obligations (absolute or contingent) and other liabilities of such
Person with respect to letters of credit issued for such Person's account or for
which such party is a co-applicant, (iv) all obligations of such Person to pay
the purchase price of property or services, except trade payables and accrued
expenses incurred by such Person in the ordinary course of business, (v) all
obligations in respect of Capital Leases of such Person, (vi) all Accommodation
Obligations of such Person, (vii) all indebtedness, obligations or other
liabilities, contingent or otherwise, of such Person or others secured, by a
Lien on any asset of such Person, whether or not such indebtedness, obligations
or liabilities are assumed by or are a personal liability of such Person, (viii)
all obligations upon which interest charges are customarily paid (including zero
coupon instruments) and (ix) all obligations under conditional sale or other
title retention agreements relating to property purchased by such Person.
"Initial Funding" shall mean the first funding of any Loans
hereunder.
"Initial Funding Date" shall mean the date, if any, on which
the Initial Funding occurs.
"Intellectual Property Agreements" shall mean any and all
patent and/or trademark security agreements executed by the Borrower and certain
of its Subsidiaries in favor of the Agent on behalf of itself and the Holders of
Secured Obligations as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Intercompany Receivables" shall mean the aggregate
outstanding balance of all receivables owed to the Borrower by the Parent.
"Interest Coverage Ratio" shall mean, for any period, the
ratio of (a) DQSC EBITDA for such period to (b) Cash Interest Expense for the
Consolidated Borrower Group for such period, determined in accordance with
Agreement Accounting Principles consistently applied.
11
<PAGE> 18
"Interest Payment Date" shall mean with respect to any
Eurodollar Rate Loan, (i) the last day of each Interest Period applicable to
such Loan and (ii) with respect to any Eurodollar Rate Loan having an Interest
Period in excess of three (3) calendar months, the last day of each three (3)
calendar month interval during such Interest Period and, in addition, the date
of any refinancing or conversion of such Borrowing with or to a Borrowing of a
different Type.
"Interest Period" shall have the meaning ascribed to such term
in Section 2.08.
"Interest Rate Determination Date" shall mean the date on
which the Agent determines the LIBO Rate applicable to a Borrowing, continuation
or conversion of Eurodollar Rate Loans. The Interest Rate Determination Date
shall be the second (2nd) Business Day prior to the first day of the Interest
Period applicable to such Borrowing, continuation or conversion.
"Investment" shall have the meaning ascribed to that term in
Section 7.03.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time hereafter, and any successor statute.
"IRS" shall mean the Internal Revenue Service of the United
States or any Governmental Authority succeeding to the functions thereof.
"Issuing Bank" shall mean The Chase Manhattan Bank, in its
capacity as the issuer of Letters of Credit hereunder, and its successors in
such capacity as provided in Section 2.04(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of the Issuing Bank, in which case the term "Issuing Bank" shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.
"LC Disbursement" shall mean a payment made by the Issuing
Bank pursuant to a Letter of Credit.
"LC Exposure" shall mean, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any
Lender at any time shall be its Pro Rata Share of the total LC Exposure at such
time.
"Lender" shall have the meaning ascribed to such term in the
preamble and shall include The Chase Manhattan Bank, in its individual capacity,
and each Person which at any time becomes a Lender pursuant to Section 11.02(a).
"Letter of Credit" shall mean any letter of credit issued
pursuant to this Agreement.
12
<PAGE> 19
"Liabilities and Costs" shall mean all liabilities, claims,
obligations, responsibilities, losses, damages, punitive damages, consequential
damages, treble damages, charges, costs and expenses (including, without
limitation, attorneys', experts' and consulting fees and costs of investigation
and feasibility studies), fines, penalties and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future.
"LIBO Rate" shall mean, with respect to any Borrowing of
Eurodollar Rate Loans for any Interest Period, the rate appearing on Page 3750
of the Telerate Service (or on any successor or substitute page of such Service,
or any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Agent from time to time for purposes of providing quotations
of interest rates applicable to dollar deposits in the London interbank market)
at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Borrowing for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights of way and the like),
judgment, lien (statutory or other), Environmental Lien, Enforceable Judgment,
charge, security agreement or transfer intended as security, including, without
limitation, any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease, any financing lease having
substantially the same economic effect as any of the foregoing and, in the case
of securities, any purchase option, call or similar right of a third party with
respect to such securities.
"Loan" shall mean any Revolving Loan.
"Loan Account" shall have the meaning ascribed to such term in
Section 2.07(d).
"Loan Documents" shall mean this Agreement, the Notes, the Fee
Letter, the Collateral Documents and all other agreements delivered to the
Agent, the Issuing Bank or any Lender by or on behalf of the Borrower or any of
its Subsidiaries in satisfaction or furtherance of the requirements of this
Agreement or any other Loan Document.
"Maintenance Capital Expenditures" shall mean, with respect to
any Person on a consolidated basis for any period, the aggregate of all
expenditures incurred by such Person during such period that, in accordance with
Agreement Accounting Principles, are or should be included in "additions to
property, plant or equipment" or similar items reflected in the statement of
cash flows of such Person, including maintenance, renovation and layup
expenditures but excluding
13
<PAGE> 20
interest and start-up expenses that otherwise would be included; provided,
however, that Maintenance Capital Expenditures shall not include (i)
expenditures of proceeds of insurance settlements in respect of lost, destroyed
or damaged assets, equipment or other property to the extent such expenditures
are made to replace or repair such lost, destroyed or damaged assets, equipment
or other property within 6 months of the receipt of any such insurance proceeds
related to such destruction or damage, or (ii) expenditures in connection with
the purchasing, outfitting or construction of the New Vessels.
"MARAD Financing" shall mean the long-term mortgage financing
of the American Queen guaranteed by the Secretary in an initial amount of
$60,589,000 as evidenced by the GAQSC Trust Indenture.
"Margin Stock" shall have the meaning ascribed to such term in
Regulation U.
"Material Adverse Effect" shall mean a material adverse effect
(a) upon the business, assets or other properties, liabilities or condition
(financial or otherwise) or results of operations of Borrower, individually, or
the Consolidated Borrower Group taken as a whole or (b) upon the ability of any
of the Borrower or any of its Subsidiaries to perform any of their respective
Obligations under any Loan Document in any material respects to which it is or
will be a party, including, without limitation, payment of the Obligations.
"Mississippi Queen" shall mean the vessel of the same name
identified on Schedule 1.01-C.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001 (a)(3) of ERISA which is, or within the immediately
preceding six (6) years was, contributed to by either Borrower or any ERISA
Affiliate.
"Net Interest Expense" shall mean, with respect to any Person
on a consolidated basis for any period, Cash Interest Expense of such Person for
such period minus interest income of such Person for such period calculated in
accordance with Agreement Accounting Principles.
"Net Proceeds" shall mean with respect to any Prepayment Event
(a) the gross amount of cash proceeds (including in each Fiscal Year the amount
of insurance settlements and condemnation awards in such fiscal year in excess
of Set Aside Amounts (it being understood that Set Aside Amounts shall not be
included in "Net Proceeds," and may be retained by the Borrower or a Subsidiary
of Borrower, as applicable, for the purposes described in clause (a) of the
definition of the term "Set Aside Amount", unless and until any such amount
shall cease to be a "Set Aside Amount" as a result of any failure to meet any of
the criteria set forth in clause (a) or (b) of such definition)) paid to or
received by the Borrower or any Subsidiary of Borrower in respect of such
Prepayment Event (including cash proceeds subsequently received in respect of
such Prepayment Event in respect of non-cash consideration initially received or
otherwise), less (b) the amount, if any, of all taxes (other than income taxes)
and the Borrower's good-faith best estimate of all income
14
<PAGE> 21
taxes (to the extent that such amount shall have been set aside for the purpose
of paying such taxes when due), and customary fees, commissions, costs and other
expenses (other than those payable to the Borrower, any Affiliate of the
Borrower or any Subsidiary of Borrower) that are incurred in connection with
such Prepayment Event and are payable by the seller or the transferor of the
assets or property or issuer of the securities, as the case may be, to which
such Prepayment Event relates, and, in the case of any Prepayment Event
described in clause (i) of the definition of "Prepayment Event," the amount of
all Indebtedness secured by a Lien on the assets to which such Prepayment Event
relates which is repaid in connection with such Prepayment Event, but in any
case under this clause (b) only to the extent such amount was not already
deducted in arriving at the amount referred to in clause (a).
"New Vessel" shall mean any new vessel purchased or built or
otherwise acquired by the Borrower or any of its Subsidiaries for operation in
its cruise business, including, without limitation, the Western Riverboat,
Coastal Cruiser One and Coastal Cruiser Two.
"New Vessel Capital Expenditures" shall mean, with respect to
any Person on a consolidated basis for any period, all expenditures incurred by
such Person during such period that would be Maintenance Capital Expenditures
but for the exclusion in clause (ii) of the definition of "Maintenance Capital
Expenditures" of expenditures in connection with the purchasing, outfitting or
construction of the New Vessels.
"Notes" shall mean the amended and restated revolving loan
notes executed by the Borrower and delivered to each Lender pursuant to Section
2.02 or Section 11.02.
"Notice of Borrowing" shall mean, with respect to a proposed
Borrowing pursuant to Section 2.02(a), a notice substantially in the form of
Exhibit 3.
"Notice of Conversion/Continuation" shall mean, with respect
to a proposed conversion or continuation of a Loan pursuant to Section 2.03(c),
a notice substantially in the form of Exhibit 4.
"Obligations" shall mean the principal of and all interest on
all Loans, all reimbursement obligations with respect to Letters of Credit, all
fees, expense reimbursements, taxes, compensation and indemnities payable by
Borrower to the Agent or any Lender pursuant to this Agreement and all other
present and future Indebtedness and other liabilities of Borrower owing to the
Agent, any Lender, any Affiliate of any Lender (in connection with any Eligible
Hedging Contract) or any Person entitled to indemnification pursuant to Section
11.04, or any of their respective successors, permitted transferees or assigns,
of every type and description, whether or not evidenced by any note, guaranty or
other instrument, arising under or in connection with this Agreement, any Note,
the Fee Letter, any other Loan Document or any Eligible Hedging Contract whether
or not for the payment of money, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however arising.
15
<PAGE> 22
"Officer's Certificate" shall mean, as to any corporation, a
certificate executed on behalf of such corporation by its chairman or vice
chairman of the board (if an officer), its president or any vice president, its
chief financial officer, its controller or its treasurer.
"Operating Lease" shall mean, as applied to any Person, any
lease of any Property by that Person as lessee which is not a Capital Lease.
"Other Indebtedness" shall mean all Indebtedness of Borrower
and its Subsidiaries other than the Obligations.
"Parent" shall mean American Classic Voyages Co., a Delaware
corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any Person succeeding to the functions thereof.
"Permits" shall mean any permit, approval, consent,
authorization, license, variance, or permission required from a Governmental
Authority under an applicable Requirement of Law.
"Permitted Amount" shall mean $5,000,000; provided that (i)
such amount shall increase to $7,000,000 if the Borrower's Total Indebtedness
Leverage Ratio is not greater than 3.25 to 1; (ii) such amount shall increase to
$10,000,000 if the Borrower's Total Indebtedness Leverage Ratio is not greater
than 3.00 to 1; and (iii) such amount shall increase to $15,000,000 if the
Borrower's Total Indebtedness Leverage Ratio is not greater than 2.50 to 1. The
Borrower's Total Indebtedness Leverage Ratio shall be determined for this
purpose as of the end of the most recently completed fiscal quarter for which
the Borrower has delivered financial statements and a Compliance Certificate in
accordance with Section 5.01, but giving effect to any Indebtedness incurred in
connection with the applicable Investment and/or Restricted Junior Payment.
"Permitted Existing Liens" shall mean the Liens on any
property of the Borrower or its Subsidiaries, in each case reflected on Schedule
1.01-B.
"Person" shall mean any natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust or
other organization, whether or not a legal entity, or any other non-governmental
entity, or any Governmental Authority.
"Plan" shall mean an employee benefit plan defined in Section
3(3) of ERISA in respect of which either the Borrower or any ERISA Affiliate is,
or within the immediately preceding six (6) years was, an "employer" as defined
in Section 3(5) of ERISA.
"Pledge Agreements" shall mean the Stock Pledge Agreements and
Limited Liability Company Pledge Agreements, as applicable, executed by (i) the
Borrower in connection with the pledge of the stock of, or its membership
interest in, each of the Borrower Subsidiaries (other than
16
<PAGE> 23
GAQSC), and (ii) DQSB II, Inc., a Delaware corporation, in connection with the
pledge of its membership interests in each of the other Borrower Subsidiaries
(other than GAQSC), as any of the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Potential Event of Default" shall mean an event, condition or
circumstance which, with the giving of notice or the lapse of time, or both,
would constitute an Event of Default.
"Prepayment Event" shall mean (i) any sale, lease, transfer,
assignment, loss, damage or destruction (in the case of loss, damage or
destruction, to the extent covered by insurance) or other disposition of assets
(including trademarks and other intangibles), business units, individual
business assets or property of the Borrower or any of its Subsidiaries,
including the sale, transfer or disposition of any capital stock thereof or (ii)
the incurrence, creation or assumption by the Borrower or its Subsidiaries of
any Indebtedness (other than Indebtedness that is permitted to be incurred
pursuant to Section 7.01) or the issuance or sale by the Borrower or any
Subsidiaries of the Borrower of any debt securities or any obligations
convertible into or exchangeable for, or giving any person or entity any right,
option or warrant to acquire from the Borrower or any of the Subsidiaries of
Borrower any Indebtedness or any such debt securities or any such convertible or
exchangeable obligations; provided, however, that none of the following shall be
deemed to be a "Prepayment Event": (a) the sale of inventory in the ordinary
course of business, (b) the sale, lease, transfer, assignment or other
disposition of assets of the Borrower or any Subsidiary of the Borrower to the
Borrower or any other Wholly-Owned Subsidiary of the Borrower, (c) the sale,
lease, transfer, assignment or other disposition of assets of the Borrower or
any of its Subsidiaries (other than dispositions described in clauses (a) or (b)
of this proviso) to the extent that the Net Proceeds of any such disposition of
assets received since the Effective Date do not in the aggregate exceed
$5,000,000, and (d) the loss, damage or destruction of assets of the Borrower or
any of its Subsidiaries (to the extent covered by insurance) to the extent that
the Net Proceeds of any single loss do not exceed $1,000,000.
"Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by The Chase Manhattan Bank as its prime
rate in effect at its principal office in New York City; each change in the
Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.
"Property" shall mean with respect to any Person, any real or
personal property, plant, building, facility, structure, equipment or unit, or
other asset (tangible or intangible) owned, leased or operated by such Person.
"Pro Rata Share" shall mean, at any particular time and with
respect to any Lender, a fraction (expressed as a percentage), the numerator of
which shall be the then amount of such Lender's Commitment and the denominator
of which shall be the then aggregate amount of all Commitments, as adjusted from
time to time pursuant to the terms of this Agreement.
17
<PAGE> 24
"RCRA" shall mean the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., and any successor statute, and regulations
promulgated thereunder.
"Regulation D," "Regulation T," "Regulation U" and "Regulation
X" shall mean Regulation D, Regulation T, Regulation U and Regulation X,
respectively, of the Federal Reserve Board as in effect from time to time.
"Related Parties" shall mean, with respect to any specified
Person, such Person's Affiliates and the respective directors, officers,
employees, agents and advisors of such Person and such Person's Affiliates.
"Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration from any Property into the indoor or outdoor environment, including
the movement of Contaminants through or in the air, soil, surface water,
groundwater or Property.
"Remedial Action" shall mean any action required to (i) clean
up, remove, treat or in any other way address Contaminants in the indoor or
outdoor environment; (ii) prevent a Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment; or
(iii) perform pre-remedial studies and investigations or post-remedial
monitoring and care.
"Reportable Event" shall mean the events described in Section
4043 of ERISA or the regulations thereunder other than a Reportable Event
described in subsections (3), (4) or (8) of Section 4043(c).
"Requirements of Law" shall mean, as to any Person, the
charter and by-laws or other organizational or governing documents of such
Person, and any law, rule or regulation, Permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its property is subject, including, without limitation, the Securities
Act, the Securities Exchange Act, Regulation T, Regulation U and Regulation X,
and any certificate of occupancy, zoning ordinance, building, environmental or
land use, law, rule, regulation, ordinance or Permit or occupational safety or
health law, rule or regulation.
"Requisite Lenders" shall mean Lenders whose Pro Rata Shares,
in the aggregate, are greater than fifty percent (50%); provided, however, that,
in the event that the Commitments have been terminated pursuant to the terms of
this Agreement, "Requisite Lenders" means Lenders (without regard to such
Lenders' performance of their respective obligations hereunder) having Revolving
Credit Exposures representing more than fifty percent (50%) of the total
Revolving Credit Exposures.
18
<PAGE> 25
"Restricted Junior Payment" shall mean (i) any dividend or
other distribution, direct or indirect, on account of any shares of any class of
capital stock of or membership interests in Borrower or any of its Subsidiaries,
except a distribution of stock as part of a stock split and except a dividend or
distribution payable solely in shares of that class of stock or membership
interests or in any junior class of stock or membership interests to the holders
of that class, provided that the issuance of such stock or membership interests
or junior class of stock or membership interests is not an incurrence of
Indebtedness, (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of capital stock of or membership interests in Borrower or any of its
Subsidiaries now or hereafter outstanding, (iii) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of capital stock of or membership interests in
Borrower or any of its Subsidiaries now or hereafter outstanding, (iv) any
payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of, any shares of the capital
stock of or membership interests in Borrower or any of its Subsidiaries or of a
claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission, (v) any payment of
tax-sharing payments, allocated corporate overhead, guaranty fees or management
fees to Parent or any of its Affiliates (other than Borrower and its
Subsidiaries) and (vi) any payment in the nature of a loan from Borrower or any
of its Subsidiaries to Parent or any of Parent's Subsidiaries (other than
Borrower and its Subsidiaries).
"Revolving Credit Availability" shall mean, as at any
particular date of determination, the amount by which the Commitments exceed the
total Revolving Credit Exposures.
"Revolving Credit Exposure" shall mean, with respect to any
Lender at any time, the sum of the outstanding principal amount of such Lender's
Revolving Loans and its LC Exposure at such time.
"Revolving Credit Facility" shall mean the revolving credit
facility established for Revolving Loans and Letters of Credit pursuant to
Article II.
"Revolving Loan" shall have the meaning ascribed to such term
in Section 2.01(a).
"Secretary" shall mean the United States of America,
represented by the Secretary of Transportation, acting by and through the
Maritime Administrator.
"Secretary's Note" shall mean the Promissory Note to United
States of America dated August 24, 1995, made by GAQSC to the Secretary in the
original principal amount of $60,589,000.
"Securities" shall mean any stock, shares, voting trust
certificates, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities", or any certificates of interest,
shares, or participations in temporary or interim certificates for the purchase
or acquisition
19
<PAGE> 26
of, or any right to subscribe to, purchase or acquire any of the foregoing, but
shall not include any evidence of the Obligations.
"Securities Act" shall mean the Securities Act of 1933, as
amended to the date hereof and from time to time hereafter, and any successor
statute.
"Securities Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended to the date hereof and from time to time hereafter, and
any successor statute.
"Security Agreement" shall mean that certain Security
Agreement executed by the Borrower in favor of the Agent for the benefit of
itself and the Holders of Secured Obligations of even date herewith, as the same
may be amended, restated, supplemented or otherwise modified from time to time.
"Set Aside Amount" shall mean, in respect of any insurance
settlement or condemnation award which does not in the aggregate exceed
$5,000,000 received by the Borrower or any Subsidiary of Borrower, the portion
thereof, if any, (a) (i) set aside by the Borrower or the applicable Subsidiary
for the replacement or repair of any lost, destroyed or damaged assets,
equipment or other property that were the subject of an insurable loss,
destruction or damage and for which an insurance settlement was made or (ii) set
aside by the Borrower or the applicable Subsidiary for the replacement of any
real property that was the subject of a taking and in respect of which a
condemnation award was made and (b) used within 6 months of the receipt of any
such condemnation award or insurance proceeds related to such loss, destruction
or damage or such taking, as applicable.
"Ship Mortgages" shall mean the preferred ship mortgages of
even date herewith covering the Delta Queen and the Mississippi Queen, executed
by the Borrower or the Subsidiary of the Borrower, as applicable, in favor of
the Agent as trustee for the benefit of itself and the Holders of Secured
Obligations, as the same may be amended, supplemented or otherwise modified from
time to time.
"Solvent" shall mean, when used with respect to any Person,
that at the time of determination:
(i) the fair value of its assets (both at fair valuation and
at present fair saleable value) is equal to or in excess of the total
amount of its liabilities, including, without limitation, contingent
liabilities; and
(ii) it is then able and expects to be able to pay its debts
as they mature; and
(iii) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
20
<PAGE> 27
With respect to contingent liabilities (such as litigation, guarantees and
pension plan liabilities), such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represent the amount which can reasonably be expected to become an actual or
matured liability.
"Statutory Reserve Rate" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum applicable reserve
percentages (including any marginal, special, emergency or supplemental
reserves) expressed as a decimal established by the Federal Reserve Board and
any other banking authority to which the Agent or any Lender is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D). Such reserve
percentages shall include those imposed pursuant to Regulation D. Eurodollar
Rate Loans shall be deemed to constitute eurocurrency funding and to be subject
to such reserve requirements without benefit of or credit for proration,
exceptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"Subsidiary" of a Person shall mean (i) any corporation more
than 50% of the outstanding securities having ordinary voting power of which
shall at the time be owned or controlled, 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, or (ii) any company, partnership, limited liability company,
association, joint venture or similar business organization more than 50% of the
ownership or membership interests having ordinary voting power of which shall at
the time be so owned or controlled.
"Subsidiary Guaranties" shall mean each guaranty executed by
each of the Borrower Subsidiaries (other than GAQSC) in favor of the Agent, for
the benefit of itself and the Holders of Secured Obligations, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"Subsidiary Security Agreements" shall mean each security
agreement executed by each of the Subsidiaries (other than GAQSC) of the
Borrower in favor of the Agent, for the benefit of itself and the Holders of
Secured Obligations as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Taxes" shall have the meaning ascribed to such term in
Section 2.10(a).
"Termination Date" shall mean the earlier of (a) February 25,
2004 and (b) the date of termination of the Commitments pursuant to Section
2.02(d) or Section 9.02(a).
21
<PAGE> 28
"Termination Event" shall mean (i) a Reportable Event with
respect to any Benefit Plan; (ii) the withdrawal of Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which Borrower or such ERISA
Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (iii) the imposition of an obligation on Borrower or any ERISA Affiliate
under Section 4041 of ERISA to provide affected parties written notice of intent
to terminate a Benefit Plan in a distress termination described in Section
4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a
Benefit Plan; (v) any event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan; or (vi) the partial or complete withdrawal of
Borrower or any ERISA Affiliate from a Multiemployer Plan if such withdrawal
would result in the imposition of withdrawal liability under Section 4219 of
ERISA.
"Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next preceding
Business Day) by the Federal Reserve Board through the public information
telephone line of the Federal Reserve Bank of New York (which rate will, under
the current practices of the Federal Reserve Board, be published in Federal
Reserve Statistical Release H.15(519) during the week following such day) or, if
such rate is not so reported on such day or such next preceding Business Day,
the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately
10:00 a.m., New York City time, on such day (or, if such day is not a Business
Day, on the next preceding Business Day) by the Agent from three negotiable
certificate of deposit dealers of recognized standing selected by it.
"Total Indebtedness" shall mean, with respect to the
Consolidated Borrower Group, the total Revolving Credit Exposures and all Other
Indebtedness.
"Total Indebtedness Leverage Ratio" shall mean, for any fiscal
quarter, the ratio of (a) the Total Indebtedness of the Consolidated Borrower
Group on the last day of such fiscal quarter to (b) DQSC EBITDA for the four
fiscal quarter period ending on the last day of such fiscal quarter, determined
in accordance with Agreement Accounting Principles consistently applied.
"Transaction Costs" shall mean the fees, costs and expenses
payable by the Borrower or any of its Subsidiaries pursuant hereto or in
connection herewith or in respect hereof or of the other Loan Documents.
"Transaction Documents" shall mean the Loan Documents and the
Contribution Agreement.
"Type" when used in respect of any Loan or Borrowing, shall
refer to the rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined.
22
<PAGE> 29
"Western Riverboat" shall mean the newly-built riverboat to be
acquired and outfitted by the Borrower (or a Subsidiary of the Borrower) for
passenger use in the Borrower's cruise business.
"Wholly-Owned Subsidiary" of a Person shall mean any
subsidiary of such Person 100% of the capital stock of each class of such
Subsidiary, in the case of a corporation, or 100% of the membership or other
equity interests of such Subsidiary, in the case of a limited liability company,
in each case at the time as of which any determination is being made, is owned
and controlled, beneficially and of record, by such Person, or by one or more
other Wholly-Owned Subsidiaries, or both.
"Zell Group" shall mean Samuel Zell or any of his affiliates
(as such term is defined in Rule 12b-2 of the Securities Exchange Act) or
associates (as such term is defined in Rule 12b-2 of the Securities Exchange
Act).
1.02. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed.
1.03. Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with Agreement Accounting Principles.
1.04. Other Definitional Provisions. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) the words "herein", "hereof" and "hereunder", and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any
particular provision hereof, (c) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement and (d) the words "asset" and
"property" shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.
23
<PAGE> 30
ARTICLE II
AMOUNTS AND TERMS OF REVOLVING CREDIT FACILITY
2.01. The Revolving Loans.
(a) Revolving Credit Availability. Subject to the terms and
conditions set forth in this Agreement, each Lender hereby severally and not
jointly agrees to make revolving loans, in Dollars (each individually, a
"Revolving Loan" and, collectively, the "Revolving Loans") to Borrower from time
to time during the period from the Effective Date to the Business Day
immediately preceding the Termination Date, in an amount which shall not exceed
such Lender's Pro Rata Share of the Revolving Credit Availability at such time.
(b) Several Commitments. All Revolving Loans comprising the
same Borrowing under this Agreement shall be made by the Lenders simultaneously
and proportionately to their respective Pro Rata Shares, it being understood
that no Lender shall be responsible for any failure by any other Lender to
perform its obligation to make a Revolving Loan hereunder and that the
Commitment of any Lender shall not be increased or decreased without the prior
written consent of such Lender as a result of the failure by any other Lender to
perform its obligation to make a Revolving Loan. The failure of any Lender to
make available to the Agent its Pro Rata Share of any Borrowing shall not
relieve any other Lender of its obligation hereunder to make available to the
Agent such other Lender's Pro Rata Share of such Borrowing on the date such
funds are to be made available pursuant to the terms of this Agreement.
(c) Repayments and Prepayments. Loans may be voluntarily
repaid at any time, shall be mandatorily prepaid pursuant to Section 2.05 and,
subject to the provisions of this Agreement, any amounts voluntarily repaid in
respect of Revolving Loans may be reborrowed, up to the amount available under
Section 2.01 at the time of such Borrowing, until the Business Day immediately
preceding the Termination Date.
(d) Minimum Amounts. Loans made on any Funding Date shall be
in integral multiples of $100,000 and in the aggregate minimum amount of
$500,000, in the case of Loans constituting Base Rate Loans, and in integral
multiples of $500,000 and in the aggregate minimum amount of $1,500,000, in the
case of Loans constituting Eurodollar Rate Loans; provided that a Borrowing of
Base Rate Loans may be in an aggregate amount that is equal to the entire unused
balance of the Commitments or that is required to finance the reimbursement of
an LC Disbursement as contemplated by Section 2.04(e).
2.02. Loan Facility Mechanics.
(a) Notice of Borrowing. Whenever Borrower desires to borrow
under Section 2.01(a), Borrower shall deliver to the Agent a Notice of Borrowing
no later than 11:00 a.m (New York City time) (i) on the proposed Funding Date,
in the case of a Borrowing of Base Rate Loans, and (ii) at least three (3)
Business Days in advance of the proposed Funding Date, in the case
24
<PAGE> 31
of a Borrowing of Eurodollar Rate Loans. The Notice of Borrowing shall specify
(A) the Funding Date (which shall be a Business Day) in respect of the Revolving
Loan, (B) the amount of the proposed Borrowing, (C) whether the proposed
Borrowing will be of Base Rate Loans or Eurodollar Rate Loans, (D) in the case
of Eurodollar Rate Loans, the requested Interest Period, and (E) the Borrower's
account to which funds are to be disbursed. In lieu of delivering the
above-described Notice of Borrowing, and only with the consent of the Agent in
its sole discretion at such time, Borrower may give the Agent telephonic notice
of any proposed Borrowing by the time required under this Section 2.02(a);
provided that, in the event the Agent so consents, such notice shall be
confirmed in writing by delivery to the Agent promptly (but in no event later
than 2:00 p.m. (New York City time) on the Funding Date of the requested Loan)
of a Notice of Borrowing. Any Notice of Borrowing (or telephonic notice in lieu
thereof) pursuant to this Section 2.02(a) shall be irrevocable.
(b) Making of Loans. Promptly after receipt of a Notice of
Borrowing under Section 2.02(a) (or telephonic notice in lieu thereof if the
Agent consents to such telephonic notice), the Agent shall notify each Lender by
telex or telecopy or other similar form of teletransmission, of the proposed
Borrowing. Each Lender shall make the amount of its Revolving Loan available to
the Agent in Dollars and in immediately available funds, not later than 2:00
p.m. (New York City time) on the Funding Date. After the Agent's receipt of the
proceeds of such Revolving Loans, the Agent shall (unless it has not received
the Notice of Borrowing in satisfaction of the requirements of Section 2.02(a)
or has been notified in writing that any of the conditions precedent set forth
in Section 3.02(a) have not been satisfied) make the proceeds of such Revolving
Loans available to Borrower on such Funding Date and shall disburse such funds
in Dollars and in immediately available funds to the account of Borrower
designated in the Notice of Borrowing; provided that a Borrowing of Base Rate
Loans made to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.04(e) shall be remitted by the Agent to the Issuing Bank.
(c) Failure to Fund by Lender. Unless the Agent shall have
been notified by any Lender prior to any Funding Date in respect of any
Borrowing of Revolving Loans that such Lender does not intend to make available
to the Agent such Lender's Revolving Loan on such Funding Date, the Agent may
assume that such Lender has made such amount available to the Agent on such
Funding Date and the Agent in its sole discretion may, but shall not be
obligated to, make available to Borrower a corresponding amount on such Funding
Date. If such corresponding amount is not in fact made available to the Agent by
such Lender on or prior to 2:00 p.m. (New York City time) on a Funding Date,
such Lender agrees to pay, and Borrower agrees to repay, to the Agent forthwith
on demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to Borrower until the date such
amount is paid or repaid to the Agent, at (i) in the case of such Lender, the
Federal Funds Effective Rate for the first three (3) Business Days and
thereafter at the Alternate Base Rate, and (ii) in the case of Borrower, the
interest rate which would be applicable at the time to a Borrowing of Base Rate
Loans. If such Lender shall pay to the Agent such corresponding amount, such
amount so paid shall constitute such Lender's Revolving Loan, and if both such
Lender and Borrower shall have paid and repaid, respectively, such corresponding
amount, the Agent shall promptly pay over to Borrower such corresponding amount
in same day funds, but Borrower shall remain obligated for all interest thereon.
Nothing in
25
<PAGE> 32
this Section 2.02(c) shall be deemed to relieve any Lender of its obligation
hereunder to make its Revolving Loan on any Funding Date.
(d) Voluntary Reduction of Commitments. Borrower shall have
the right, at any time and from time to time, (i) to terminate the Commitments
in whole, without premium or penalty, if no Revolving Loans or Letters of Credit
are then outstanding, no Revolving Loans have been requested but not yet
advanced and no Letters of Credit have been requested but not yet issued, or
(ii) subject to the second to last sentence of this Section 2.02(d), permanently
to reduce in part, without premium or penalty, the Commitments up to the amount
by which the Commitments exceed the sum of (A) the total Revolving Credit
Exposures, (B) the aggregate principal amount of all Revolving Loans requested
hereunder but not yet advanced and (C) the aggregate face amount of all Letters
of Credit requested hereunder but not yet issued. Borrower shall give not fewer
than five (5) Business Days' prior written notice to the Agent designating the
date (which shall be a Business Day) of such termination or reduction and the
amount of any partial reduction. Promptly after receipt of a notice of such
termination or reduction, the Agent shall notify each Lender of the proposed
termination or reduction. Such termination or partial reduction of the
Commitments shall be effective on the date specified in the Borrower's notice
and shall reduce the Commitment of each Lender proportionately in accordance
with its Pro Rata Share. Any such partial reduction of the Commitments shall be
in an aggregate minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount. Any notice of reduction or termination
pursuant to this Section 2.02(d) shall be irrevocable.
(e) Notes. The Borrower shall execute and deliver to each
Lender (or to the Agent on behalf of each Lender) on or before the Effective
Date a revolving loan note substantially in the form of Exhibit 5 to evidence
the aggregate amount of that Lender's Loans and with other appropriate
insertions. The Note delivered to each Lender shall be dated the Effective Date
and shall be stated to mature on the Termination Date. Each Lender is hereby
authorized to, and prior to any transfer of the Note issued to it each Lender
shall, endorse the date and amount of the Loans made by such Lender, as
applicable, and each payment or prepayment of principal of the Loans evidenced
thereby on the schedule annexed to and constituting a part of such Note, which
endorsement shall constitute prima facie evidence, absent manifest error, of the
accuracy of the information so endorsed, provided that failure by any such
Lender to make such endorsement shall not affect the obligations of the Borrower
hereunder or under such Note. In lieu of endorsing such schedule as hereinabove
provided, prior to any transfer of a Note, each Lender is hereby authorized, at
its option, to record such Loans and such payments or prepayments in its books
and records, such books and records constituting prima facie evidence, absent
manifest error, of the accuracy of the information contained therein; provided,
however, that if the Loan Account differs from the information endorsed by a
Lender on such Lender's Note, the Loan Account, absent manifest error, shall
govern.
2.03. Interest on the Loans.
(a) Rate of Interest. All Loans shall bear interest on the
unpaid principal amount thereof from the date made until paid in full at a
fluctuating rate determined from time to time by
26
<PAGE> 33
reference to the Alternate Base Rate or the Adjusted LIBO Rate. The applicable
basis for determining the rate of interest shall be selected by Borrower at the
time a Notice of Borrowing is given by the Borrower pursuant to Section 2.02(a)
or at the time a Notice of Conversion/Continuation is delivered by Borrower
pursuant to Section 2.03(c); provided, however, that Borrower may not select the
Adjusted LIBO Rate as the applicable basis for determining the rate of interest
on a Loan (1) if at the time of such selection a Potential Event of Default or
Event of Default exists or (2) if such a selection would be otherwise prohibited
by the terms of this Agreement. If the Borrower fails to deliver a Notice of
Conversion/Continuation to the Agent in accordance with the terms of this
Agreement specifying the basis for determining the rate of interest for all or
any portion of any Eurodollar Rate Loans then having the same Interest Period,
then such Loans, or the portion thereof for which no Notice of
Conversion/Continuation shall have been delivered, shall be automatically
converted to Base Rate Loans on the last day of such Interest Period. Loans
shall bear interest, subject to Section 2.03(d), at the following rates:
(i) if a Base Rate Loan, then at a rate per annum equal to the
sum of (A) the Applicable Base Rate Margin and (B) the Alternate Base
Rate as in effect from time to time as interest accrues; and
(ii) if a Eurodollar Rate Loan, then at a rate per annum equal
to the sum of (A) the Applicable Eurodollar Rate Margin and (B) the
Adjusted LIBO Rate determined for the applicable Interest Period.
(b) Interest Payments. Subject to Section 2.03(d), (i)
interest accrued on each Base Rate Loan shall be payable in arrears (A) on the
last calendar day of each calendar quarter occurring after the Effective Date,
(B) upon the prepayment in full of the Loans and the termination of all
Commitments under this Agreement, (C) upon the date any principal of the Loan is
due, with respect to the principal amount then due and (D) on the Termination
Date, and (ii) interest accrued on each Eurodollar Rate Loan shall be payable in
arrears (A) on each Interest Payment Date applicable to such Eurodollar Rate
Loan, (B) upon the prepayment in full of the Loans and the termination of all
Commitments under this Agreement, (C) upon the prepayment thereof upon the date
any principal of the Loan is due, with respect to the principal then due and (D)
on the Termination Date.
(c) Conversion or Continuation. (i) Subject to the provisions
of Sections 2.08 and 2.09, Borrower shall have the option (A) to convert at any
time all or any part of outstanding Base Rate Loans which, in the aggregate,
equal or exceed $2,500,000 from Base Rate Loans to Eurodollar Rate Loans; or (B)
to convert all or any part of outstanding Eurodollar Rate Loans which, in the
aggregate, equal or exceed $1,000,000 from Eurodollar Rate Loans to Base Rate
Loans on the expiration date of any Interest Period applicable thereto or upon
the payment of compensation payable pursuant to Section 2.09(d); or (C) upon the
expiration of any Interest Period applicable to any Eurodollar Rate Loans having
the same Interest Period, to continue all or any portion of such Loans equal to
or in excess of $2,500,000 as Eurodollar Rate Loans, and the succeeding Interest
Period of such continued Loans shall commence on the expiration date of the
Interest Period applicable thereto; provided that no outstanding Loan may be
continued as, or be converted into, a
27
<PAGE> 34
Eurodollar Rate Loan if any Potential Event of Default or Event of Default
exists or if such a continuation or conversion would otherwise be prohibited by
the terms of this Agreement. Any conversion or continuation of Loans pursuant to
this Section 2.03(c) shall apply to the applicable Loans of the Lenders on a pro
rata basis.
(ii) In the event Borrower shall elect to convert or continue
a Loan under this Section 2.03(c), Borrower shall deliver a Notice of
Conversion/Continuation to the Agent no later than 11:00 a.m. (New York City
time) (A) at least one (1) Business Day in advance of the proposed conversion
date in the case of a conversion to a Base Rate Loan and (B) at least three (3)
Business Days in advance of the proposed conversion or continuation date in the
case of a conversion to, or a continuation of, a Eurodollar Rate Loan. A Notice
of Conversion/Continuation shall specify (1) the proposed conversion or
continuation date (which shall be a Business Day), (2) the amount of the Loan to
be converted or continued, (3) the nature of the proposed conversion or
continuation, and (4) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, the requested Interest Period. If no Interest Period is
specified in any such Notice of Conversion/Continuation with respect to a
Eurodollar Rate Loan, the Borrower shall be deemed to have selected an Interest
Period of one month's duration. In lieu of delivering the above-described Notice
of Conversion/Continuation, Borrower may give the Agent telephonic notice of any
proposed conversion or continuation by the time required under this Section
2.03(c); provided that such notice shall be confirmed in writing by delivery to
the Agent promptly (but in no event later than 11:00 a.m. (New York City time)
on the proposed conversion or continuation date) of a Notice of
Conversion/Continuation. Promptly after receipt of a Notice of
Conversion/Continuation under this Section 2.03(c) (or telephonic notice in lieu
thereof), the Agent shall notify each Lender by telex, telecopy, telephone or
other similar form of transmission, of the proposed conversion or continuation.
(iii) Any Notice of Conversion/Continuation for conversion to,
or continuation of, a Loan (or telephonic notice in lieu thereof) shall be
irrevocable and the Borrower shall be bound to convert or continue in accordance
therewith.
(d) Default Interest. Notwithstanding the rates of interest
specified in Section 2.03(a) and the payment dates specified in Section 2.03(b),
(i) from and after the occurrence of a payment default constituting an Event of
Default under Section 9.01(a), until the past-due amount is paid, such amount
not paid when due shall bear interest payable upon demand at a rate per annum
equal to the sum of (A) two percent (2.0%) and (B) the interest rate otherwise
in effect from time to time (the "Default Rate"), and (ii) (x) from and after
the occurrence of any Event of Default described in Sections 9.01(f) or 9.01(g)
with respect to the Borrower or any of its Subsidiaries and (y) from and after
the occurrence of any other Event of Default set forth in a notice from the
Agent or Requisite Lenders to the Borrower, and for so long thereafter as such
Event of Default is continuing, the principal balance of all Loans and other
Agreement Obligations then outstanding (including, without limitation, all
amounts due and payable pursuant to Section 9.02(a)) and, to the extent
permitted by applicable law, any interest payments on the Loans not paid when
due, shall bear interest payable upon demand at the Default Rate.
28
<PAGE> 35
(e) Determination of Applicable Margins; Computation of
Interest.
(i) Determination of Applicable Margins.
(A) The Applicable Margin in respect of any Loan shall be
determined by reference to the table set forth below on the basis of the
Borrower's Total Indebtedness Leverage Ratio (calculated on a rolling four
quarter basis) determined by reference to the most recent financial statements
delivered pursuant to Section 5.01(a) or 5.01(b).
<TABLE>
<CAPTION>
Total Applicable Applicable
Indebtedness Eurodollar Base Rate
Leverage Ratio Rate Margin Margin
-------------- ----------- ------
<S> <C> <C> <C>
Greater than or
equal to 4.00 to 1 2.50% 1.50%
Less than 4.00 to 1
and greater than or
equal to 3.50 to 1 2.00% 1.00%
Less than 3.50 to 1
and greater than or
equal to 3.00 to 1 1.75% 0.75%
Less than 3.00 to 1 1.50% 0.50%
</TABLE>
(B) Upon receipt of the financial statements delivered
pursuant to Section 5.01(a) or Section 5.01(b), as applicable, the Applicable
Margins for all outstanding Loans shall be adjusted, such adjustment being
effective on the first Business Day after receipt of such financial statements
and the Compliance Certificate to be delivered in connection therewith;
provided, however, if the Borrower shall not have timely delivered its financial
statements in accordance with Section 5.01(a) or Section 5.01(b), as applicable,
beginning with the date upon which such financial statements should have been
delivered and continuing until such financial statements are delivered together
with the Compliance Certificate, it shall be assumed for purposes of determining
the Applicable Margins that the Borrower's Total Indebtedness Leverage Ratio was
greater than 4.00 to 1.0.
(C) Notwithstanding anything herein to the contrary, from the
Effective Date through the date of receipt of the financial statements for the
period ended June 30, 1999 pursuant to Section 5.01(b), the Applicable
Eurodollar Rate Margin and Applicable Base Rate Margin shall be 1.75% and 0.75%,
respectively.
29
<PAGE> 36
(ii) Computation of Interest. Interest on all Agreement
Obligations (other than those on which the interest rate is determined by
reference to the Prime Rate) shall be computed on the basis of the actual number
of days elapsed in the period during which interest accrues and a year of 360
days. Interest on all Agreement Obligations with respect to which the interest
rate is determined by reference to the Prime Rate shall be computed on the basis
of the actual number of days elapsed in the period during which interest accrues
and a year of 365 or 366 days, as applicable. In computing interest on any Loan,
the date of the making of the Loan or the first day of an Interest Period, as
the case may be, shall be included and the date of payment or the expiration
date of an Interest Period, as the case may be, shall be excluded; provided that
if a Loan is repaid on the same day on which it is made, one (1) day's interest
shall be paid on that Loan.
2.04. Letters of Credit.
(a) General. Subject to the terms and conditions set forth
herein, the Borrower may request the issuance of Letters of Credit for its own
account, in a form reasonably acceptable to the Agent and the Issuing Bank, at
any time and from time to time during the period from the Effective Date until
the date that is thirty days prior to the Termination Date. In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the Issuing
Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
the date of issuance, amendment, renewal or extension, the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this
Section), the amount of such Letter of Credit, the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. If requested by the Issuing Bank,
the Borrower also shall submit a letter of credit application on the Issuing
Bank's standard form in connection with any request for a Letter of Credit, with
such modifications as may be necessary to ensure that such application imposes
no additional material burdens or obligations on the Borrower and provides no
additional material rights, remedies or benefits (including exculpations) to the
Issuing Bank not otherwise provided in this Agreement. A Letter of Credit shall
be issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit the Borrower shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the LC Exposure shall not exceed $5,000,000 and (ii)
the total Revolving Credit Exposures shall not exceed the total Commitments.
30
<PAGE> 37
(c) Expiration Date. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Termination Date.
(d) Participations. By the issuance of a Letter of Credit (or
an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Lender, and each Lender hereby acquires from the
Issuing Bank, a participation in such Letter of Credit equal to such Lender's
Pro Rata Share of the aggregate amount available to be drawn under such Letter
of Credit. In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Agent, for the
account of the Issuing Bank, such Lender's Pro Rata Share of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in paragraph (e) of this Section, or of any reimbursement
payment required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of an Event of Default or Potential Event of Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Agent an amount equal to such LC Disbursement
not later than 12:00 noon, New York City time, on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such
notice has not been received by the Borrower prior to such time on such date,
then not later than 12:00 noon, New York City time, on (i) the Business Day that
the Borrower receives such notice, if such notice is received prior to 10:00
a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.02 that such payment be financed with a
Borrowing of Base Rate Loans in the amount of such LC Disbursement and, to the
extent so financed, the Borrower's obligation to reimburse the Issuing Bank for
such LC Disbursement shall be discharged and replaced by the resulting
Borrowing. If the Borrower fails to make such payment when due, the Agent shall
notify each Lender of the applicable LC Disbursement, the payment then due from
the Borrower in respect thereof and such Lender's Pro Rata Share thereof.
Promptly following receipt of such notice, each Lender shall pay to the Agent
its Pro Rata Share of the payment then due from the Borrower, in the same manner
as provided in Section 2.02 with respect to Loans made by such Lender (and
Section 2.02 shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Agent shall promptly pay to the Issuing Bank the amounts so
received by it from the Lenders. Promptly following receipt by the Agent of any
payment from the Borrower pursuant to this paragraph (including the proceeds of
any such Base Rate Loans), the
31
<PAGE> 38
Agent shall distribute such payment to the Issuing Bank or, to the extent that
Lenders have made payments pursuant to this paragraph to reimburse the Issuing
Bank, then to such Lenders and the Issuing Bank as their interests may appear.
Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing
Bank for any LC Disbursement (other than the funding of Base Rate Loans as
contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to
reimburse LC Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. Neither
the Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties,
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication
under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or
any consequence arising from causes beyond the control of the Issuing Bank;
provided that nothing in this paragraph (f) shall be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by (x) the Issuing Bank's grossly negligent or
wilful failure to pay under a Letter of Credit against presentation of a draft
and other documents that strictly comply with the terms of such Letter of Credit
or (y) the Issuing Bank's failure to exercise care when determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree that, in the absence of gross
negligence or wilful misconduct on the part of the Issuing Bank (as finally
determined by a court of competent jurisdiction), the Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
32
<PAGE> 39
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Agent and the Borrower by telephone (confirmed by telecopy) of such
demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the
Issuing Bank and the Lenders with respect to any such LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to Base Rate Loans; provided
that, if the Borrower fails to reimburse such LC Disbursement when due pursuant
to paragraph (e) of this Section, then Section 2.03(d) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be
for the account of such Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Agent shall notify the
Lenders of any such replacement of the Issuing Bank. At the time any such
replacement shall become effective, the Borrower shall pay all unpaid fees
accrued for the account of the replaced Issuing Bank pursuant to Section
2.04(b). From and after the effective date of any such replacement, (i) the
successor Issuing Bank shall have all the rights and obligations of the Issuing
Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.
(j) Cash Collateralization. If any Event of Default shall
occur and be continuing, on the Business Day that the Borrower receives notice
from the Agent or the Requisite Lenders demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Agent, in the name of the Agent and for the benefit of the Lenders, an amount in
cash equal to the LC Exposure as of such date plus any accrued and unpaid
interest thereon; provided that the obligation to deposit such cash collateral
shall become effective immediately, and such deposit shall become immediately
due and payable, without demand or other notice of any kind, upon the occurrence
of any Event of Default with respect to the Borrower described in clause (f) or
(g) of Section 9.01. Such deposit shall be held by the Agent as collateral for
the payment and performance of the obligations of the Borrower under this
Agreement. The Agent shall
33
<PAGE> 40
have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on the investment
of such deposits, which investments shall be made at the option and sole
discretion of the Agent and at the Borrower's risk and expense, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall be applied by the Agent
to reimburse the Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrower for the LC Exposure at such
time or, if the maturity of the Loans has been accelerated, be applied to
satisfy other obligations of the Borrower under this Agreement. If the Borrower
is required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
2.05. Fees.
(a) Commitment Fee. The Borrower shall pay to the Agent, for
the account of the Lenders in accordance with their respective Pro Rata Shares,
a fee (the "Commitment Fee"), accruing at the rate of 0.50% per annum on the
average daily amount by which the Commitments exceed the total Revolving Credit
Exposures for the period commencing on the Effective Date and ending on the
Termination Date, such Commitment Fee being payable quarterly, in arrears, on
the last calendar day of each calendar quarter occurring after the Effective
Date and on the Termination Date.
(b) Letter of Credit Fees. The Borrower agrees to pay (i) to
the Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a per annum rate
equal to the Applicable Eurodollar Rate Margin in effect from time to time on
the average daily amount of such Lender's LC Exposure (excluding any portion
thereof attributable to unreimbursed LC Disbursements) during the period from
and including the Effective Date to but excluding the later of the date on which
such Lender's Commitment terminates and the date on which such Lender ceases to
have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall
accrue at the rate of 0.25% per annum on the average daily amount of the LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the Effective Date to but
excluding the later of the date of termination of the Commitments and the date
on which there ceases to be any LC Exposure, as well as the Issuing Bank's
standard fees with respect to the issuance, amendment, renewal or extension of
any Letter of Credit or processing of drawings thereunder. Participation fees
and fronting fees accrued through and including the last day of March, June,
September and December of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the
Effective Date; provided that all such fees shall be payable on the date on
which the Commitments terminate and any such fees accruing after the date on
which the Commitments terminate shall be payable on demand. Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable within
10 days after demand.
34
<PAGE> 41
(c) Payment of Fees. The fees described in this Section 2.05
represent compensation for services rendered and to be rendered separate and
apart from the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of Borrower to pay each fee described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. Fees and expenses shall be payable when
due in immediately available funds. All fees and expenses shall be nonrefundable
when paid. All fees and expenses specified or referred to in this Agreement or
in the letter agreement dated January 26, 1999, between The Chase Manhattan Bank
and the Borrower (the "Fee Letter") due to the Agent, the Issuing Bank or any
Lender, including, without limitation, amounts referred to in this Section 2.05
and in Section 11.03, shall constitute Obligations and shall be secured by all
the Collateral. All fees described in this Section 2.05 which are expressed as a
per annum charge shall be calculated on the basis of the actual number of days
elapsed in a 360 day year.
2.06. Prepayments. (a) Borrower shall not at any time cause or
permit the total Revolving Credit Exposures to exceed the Commitments. If at any
time the total Revolving Credit Exposures exceed the Commitments at such time,
Borrower shall, without demand or notice, promptly pay to the Agent such amount
as may be necessary to eliminate such excess, which prepayment shall be applied
as set forth in Section 2.07(b).
(b) (i) In the event and on each occasion after the Effective
Date that a Prepayment Event described in clause (ii) of the definition of the
term Prepayment Event occurs, the Borrower shall, promptly upon (and in any
event not later than the third Business Day next following) the occurrence of
such Prepayment Event subject to the provisions of subsection (b)(iii) below,
pay to the Agent 100% of the amount of Net Proceeds of such Prepayment Event to
the Agent. All such prepayments under this subsection (b)(i) shall be applied as
set forth in Section 2.07(b).
(ii) In the event and on each occasion after the Effective
Date that a Prepayment Event that is an event described in clause (i) of the
definition of the term "Prepayment Event" and is not excluded from the
definition of such term pursuant to the proviso in such definition (an "Asset
Sale Prepayment Event") occurs, the Borrower shall, promptly upon (and in any
event not later than the third Business Day next following) receipt by or on
behalf of the Borrower or any Subsidiary thereof of the Net Proceeds from such
Prepayment Event, pay 100% of the aggregate amount of Net Proceeds of all such
Asset Sale Prepayment Events to the Agent, which amount, in the case of any
Asset Sale Prepayment Event with respect to the American Queen, shall be reduced
by any amounts required to be paid in connection with the MARAD Financing. All
such prepayments under this subsection (b)(ii) shall be applied as set forth in
Section 2.07(b).
(iii) In the event that the calculation of the Net Proceeds
relating to any Prepayment Event included an estimate for income taxes that was
at least $100,000 greater than the income taxes actually payable in respect
thereof, the Borrower shall, promptly after determining the amount of income
taxes actually payable, pay the amount by which such estimate exceeded the
amount of taxes actually payable to the Agent, which prepayment shall be applied
as set forth in Section 2.07(b).
35
<PAGE> 42
(c) Any payment required by this Section 2.06 shall be payable
without penalty or premium, except as may be required by Section 2.09(d) with
respect to any Eurodollar Rate Loan prepaid as a result thereof.
2.07. Payments.
(a) Manner and Time of Payment. Except as otherwise expressly
set forth herein, all payments of principal of and interest on the Loans and
other Agreement Obligations (including without limitation, fees and expenses)
payable to the Agent, the Issuing Bank or the Lenders (or any of them) shall be
made without setoff, counterclaim, defense, condition or reservation of right,
in Dollars and in immediately available funds, delivered to the Agent not later
than 11:00 a.m.(New York City time) on the date and at the place due, to such
account of the Agent as it may designate, for the account of the Agent, the
Issuing Bank or the Lenders as the case may be; and funds received by the Agent
after that time and date shall be deemed to have been paid and received by the
Agent on the next succeeding Business Day. Payments actually received by the
Agent for the account of the Agent, the Issuing Bank or the Lenders or any of
them, shall be paid to them promptly after receipt thereof by the Agent.
(b) Apportionment of Payments and Prepayments. (i) All
payments and prepayments of principal and interest in respect of outstanding
Loans and all payments of fees and all other payments in respect of any other
Agreement Obligations, shall be allocated among the Issuing Bank and such of the
Lenders as are entitled thereto, in proportion to their respective Pro Rata
Shares or otherwise as provided herein. Subject to the provisions of Section
2.07(b)(ii), all such payments and prepayments and any other amounts received by
the Agent from or for the benefit of the Borrower shall be applied first, to pay
principal of and interest on any portion of the Loans which the Agent may have
advanced on behalf of any Lender for which the Agent has not then been
reimbursed by such Lender or the Borrower, second, to pay principal of and
interest on any advance made under Section 11.18 for which the Agent has not
then been paid by the Borrower or reimbursed by the Lenders, third, to pay all
other Agreement Obligations (other than as those referred to in clauses fourth
and fifth) then due and payable, fourth, to pay interest in respect of the
Revolving Loans and unreimbursed LC Disbursements then due and payable, and
fifth, to pay the principal of the Revolving Loans and unreimbursed LC
Disbursements. All principal payments and prepayments in respect of Loans shall
be applied first, to the Eurodollar Rate Loans maturing on the date of such
payment, second, to repay outstanding Base Rate Loans, and then to repay
outstanding Eurodollar Rate Loans with those Eurodollar Rate Loans which have
earlier expiring Interest Periods being repaid prior to those which have later
expiring Interest Periods.
(ii) After the occurrence of an Event of Default and while the
same is continuing, the Agent shall, unless otherwise specified at the direction
of the Requisite Lenders, which direction shall be consistent with the last
sentence of this clause (ii), apply all payments and prepayments in respect of
any Obligations and all proceeds of Collateral in the following order:
36
<PAGE> 43
(A) first, to pay interest on and then principal of any
portion of the Loans which the Agent may have advanced on behalf of any
Lender for which the Agent has not then been reimbursed by such Lender
or the Borrower;
(B) second, to pay interest on and then principal of any
advance made under Section 11.18 for which the Agent has not then been
paid by the Borrower or reimbursed by the Lenders;
(C) third, to pay Agreement Obligations in respect of any
fees, expense reimbursements or indemnities then due to the Agent;
(D) fourth, to pay Agreement Obligations in respect of any
fees, expense reimbursements or indemnities then due to the Lenders;
(E) fifth, to pay interest due in respect of Revolving Loans
and unreimbursed LC Disbursements;
(F) sixth, to the ratable payment or prepayment of principal
outstanding on Loans and unreimbursed LC Disbursements in such order as
the Agent may determine in its sole discretion;
(G) seventh, to the ratable payment of all other Agreement
Obligations; and
(H) eighth, to the ratable payment of all Obligations in
respect of Eligible Hedging Contracts.
The order of priority set forth in this Section 2.07(b)(ii) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Agent, the Issuing Bank, the Lenders and the other Holders of
Secured Obligations as among themselves. The order of priority set forth in
clauses (D) through (H) of this Section 2.07(b)(ii) may at any time and from
time to time be changed by the Requisite Lenders without necessity of notice to
or consent of or approval by the Borrower, or any other Person. The order of
priority set forth in clauses (A) through (C) of this Section 2.07(b)(ii) may be
changed only with the prior written consent of the Agent.
(iii) The Agent shall promptly distribute to the Issuing Bank
and to each Lender at its primary address set forth on the appropriate signature
page hereof or the signature page to the Assignment and Acceptance by which it
became a Lender, or at such other address as the Issuing Bank, a Lender or other
Holder of Secured Obligations may request in writing, such funds as such Person
may be entitled to receive; provided that the Agent shall under no circumstances
be bound to inquire into or determine the validity, scope or priority of any
interest or entitlement of the Issuing Bank, any Lender or any other Holder of
Secured Obligations and may suspend all payments or seek appropriate relief
(including, without limitation, instructions from the Requisite Lenders or an
action
37
<PAGE> 44
in the nature of interpleader) in the event of any doubt or dispute as to any
apportionment or distribution contemplated hereby.
(c) Payments on Non-Business Days. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payments shall be made on the next succeeding Business Day, unless
such Business Day occurs in the succeeding month in which case such payment
shall be made on the immediately preceding Business Day, and such extension of
time, if any, shall be included in the computation of the payment of interest
hereunder and of any of the fees specified in Section 2.05, as the case may be.
(d) Agent's Accounting. The Agent shall maintain such
accounts, books and records (a "Loan Account") in which it shall record (i) the
names and addresses of the Issuing Bank and the Lenders and the respective
Commitments of, and principal amount of Loans owing to, each Lender from time to
time; (ii) other appropriate debits and credits as provided in this Agreement,
including, without limitation, all interest and fees constituting Obligations;
and (iii) all payments of such Obligations made by Borrower or for Borrower's
account. Each Lender shall maintain in accordance with its usual practices an
account or accounts evidencing the indebtedness of Borrower to such Lender
resulting from each Loan owing to such Lender from time to time, including the
amount of principal and interest payable and paid to such Lender from time to
time hereunder. Entries in any Loan Account made in accordance with the Agent's
or any Lender's customary accounting practices as in effect from time to time
shall constitute prima facie evidence of the matters reflected therein.
2.08. Interest Periods. By giving notice as set forth in
Section 2.02(a) or 2.03(c) with respect to a Borrowing of, conversion into or
continuation of Loans consisting of Eurodollar Rate Loans, Borrower shall have
the option, subject to the other provisions of this Section 2.08 and Section
2.09, to specify an interest period (each an "Interest Period") to apply to the
Borrowing described in such notice, which Interest Period shall be either a one
(1), two (2), three (3) or six (6) month period. The determination of Interest
Periods shall be subject to the following provisions:
(a) In the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;
(b) If any Interest Period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to expire on
the next succeeding Business Day; provided that if any such Interest Period
would otherwise expire on a day which is not a Business Day and no further
Business Day occurs in that calendar month, that Interest Period shall expire on
the immediately preceding Business Day;
(c) Borrower may not select an Interest Period which
terminates later than the Termination Date; and
(d) Without the prior written consent of the Agent, there
shall be no more than eight (8) Interest Periods under this Agreement in effect
at any one time.
38
<PAGE> 45
2.09. Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding other provisions of this Agreement, the following provisions
shall govern with respect to Eurodollar Rate Loans as to the matters covered:
(a) Determination of Interest Rate. As soon as practicable
after 11:00 a.m. (New York City time) on the Interest Rate Determination Date,
the Agent shall determine (which determination shall, absent manifest error, be
presumptively correct) the interest rate which shall apply to the Eurodollar
Rate Loans for which an interest rate is then being determined for the
applicable Interest Period and shall promptly give notice thereof (in writing or
by telephone confirmed in writing) to Borrower and to each Lender.
(b) Interest Rate Unascertainable, Inadequate or Unfair. If
prior to the commencement of any Interest Period for a Borrowing of Eurodollar
Rate Loans:
(i) the Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate for such Interest
Period; or
(ii) the Agent is advised by the Requisite Lenders that the
Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders of making or maintaining their
Loans included in such Borrowing for such Interest Period;
then the Agent shall forthwith give notice thereof to Borrower and each Lender,
whereupon until the Agent has determined that the circumstances giving rise to
such suspension no longer exist, (a) the right of Borrower to elect to have
Loans bear interest based upon the Adjusted LIBO Rate shall be suspended, and
(b) each outstanding Eurodollar Rate Loan shall be converted into a Base Rate
Loan on the last day of the then current Interest Period therefor,
notwithstanding any prior election by the Borrower to the contrary.
(c) Illegality. (i) In the event that on any date any Lender
shall have determined (which determination shall, in the absence of manifest
error, be final and conclusive and binding upon all parties) that the making or
continuation of any Eurodollar Rate Loan has become unlawful by reason of (i) on
or after the date of this Agreement, the adoption of any law, rule or regulation
applicable to such Lender, or any change in any law, rule or regulation
applicable to such Lender, or any change in the interpretation or administration
thereof by any Governmental Authority charged with the interpretation or
administration thereof, or (ii) compliance in good faith by such Lender with any
request or directive (whether or not having the force of law) made after the
date of this Agreement of any such Governmental Authority, then, and in any such
event, such Lender shall promptly give notice (by teletransmission or by
telephone promptly confirmed in writing) to Borrower and the Agent of that
determination and the reasons therefor. Before giving any notice to Borrower or
the Agent pursuant to this Section 2.09(c)(i), such Lender shall use reasonable
efforts to make, fund and maintain its Eurodollar Rate Loans through another
Applicable Lending Office if such change will avoid the need for giving such
notice and will not, in the reasonable judgment
39
<PAGE> 46
of such Lender, be disadvantageous to such Lender. The Agent shall promptly
forward any such notice it receives to the other Lenders.
(ii) Upon the giving of the notice referred to in Section
2.09(c)(i), (A) Borrower's right to request of such Lender and such Lender's
obligation to make Eurodollar Rate Loans with respect to any requested Borrowing
or to convert Base Rate Loans to Eurodollar Rate Loans shall be immediately
suspended, and such Lender shall make Loans with respect to such requested
Borrowing of Eurodollar Rate Loans as Base Rate Loans, and (B) if such Lender
shall have determined that it may not lawfully continue to maintain any of its
outstanding Eurodollar Rate Loans to the end of the Interest Period applicable
thereto and shall so specify in such notice, the Borrower shall be deemed to
have delivered (and is hereby permitted to so deliver) a Notice of
Conversion/Continuance solely with respect to such Lender's Eurodollar Rate
Loans and such Eurodollar Rate Loans shall be converted as of such date to Base
Rate Loans on which interest and principal shall be payable contemporaneously
with the related Eurodollar Rate Loans of the other Lenders.
(iii) In the event that a Lender determines at any time
following its giving of a notice referred to in Section 2.09(c)(i) that the
circumstances giving rise to such suspension no longer exist, such Lender shall
promptly give notice (by teletransmission or by telephone promptly confirmed in
writing) to Borrower and the Agent of that determination, whereupon Borrower's
right to request of such Lender and such Lender's obligation to make, or convert
Base Rate Loans to, Eurodollar Rate Loans shall be restored. The Agent shall
promptly forward any such notice it receives to the other Lenders.
(d) Compensation. In addition to such amounts as are required
to be paid by Borrower pursuant to Sections 2.03(a), 2.03(d), 2.05 and each
other provision of this Agreement requiring payment by Borrower, Borrower shall
compensate each Lender, upon demand, for all losses (but not including lost
profits or loss of margin), expenses and liabilities (including, without
limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain such Lender's Eurodollar Rate Loans to the Borrower) which such Lender
may sustain (i) if for any reason a Borrowing of, conversion into or
continuation of Eurodollar Rate Loans does not occur on a date specified
therefor in a Notice of Borrowing or a Notice of Conversion/Continuation or in a
telephonic request for borrowing or conversion or continuation or a successive
Interest Period does not commence after notice therefor is given pursuant to
Section 2.03(c)(ii), (ii) if any principal payment of any Eurodollar Rate Loan
(including, without limitation, any prepayment pursuant to Section 2.06 but
excluding any prepayment of any Eurodollar Rate Loan in connection with the
replacement of any Lender under clause (i) of Section 2.14) occurs for any
reason on a date which is not the last day of the applicable Interest Period,
(iii) as a consequence of any required conversion of a Eurodollar Rate Loan to
a Base Rate Loan as a result of any of the events indicated in Section 2.09(c)
or (iv) as a consequence of an acceleration of the Obligations pursuant to
Section 9.02(a). Such Lender shall deliver to Borrower, as a condition of
Borrower's obligation to compensate such Lender, a written statement as to such
40
<PAGE> 47
losses, expenses and liabilities which statement, in the absence of manifest
error, shall be conclusive as to such amounts.
(e) Booking of Eurodollar Rate Loans. Any Lender may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of
its branch offices, agencies or the office of an Affiliate of that Lender;
provided that no such Lender shall be entitled to receive any greater amount
under Section 2.10 or Section 2.11(b) as a result of the transfer of any such
Loan than such Lender would be entitled to immediately prior thereto unless (i)
such transfer occurred at a time when circumstances giving rise to the claim for
such greater amount did not exist and were not reasonably foreseeable by such
Lender, or (ii) such claim would have arisen even if such transfer had not
occurred.
2.10. Taxes. (a) Any and all payments by Borrower hereunder
shall be made, in accordance with Section 2.07, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges, or withholdings, and all liabilities with respect thereto including
those arising after the date hereof as a result of the adoption of or any change
in any law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or application
thereof by a Governmental Authority but excluding, in the case of each Lender,
the Issuing Bank and the Agent, such taxes (including income taxes, franchise
taxes and branch profit taxes) as are imposed on or measured by such Lender's,
the Issuing Bank's or the Agent's, as the case may be, net income by the United
States of America or any Governmental Authority of the jurisdiction under the
laws of which such Lender, the Issuing Bank or Agent, as the case may be, is
organized, maintains an Applicable Lending Office or is deemed to be engaged in
trade or business other than by reason of this Agreement or the transaction
contemplated hereby (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings, and liabilities which the Agent, the Issuing Bank or a
Lender determines to be applicable to this Agreement, the other Loan Documents,
the Commitments, the Loans or the Letters of Credit being hereinafter referred
to as "Taxes"). If Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under the other Loan Documents to any
Lender, the Issuing Bank or the Agent, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.10) such
Lender, the Issuing Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
Borrower shall make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law. If a withholding tax of the United States of
America or any other Governmental Authority shall be or become applicable (y)
after the date of this Agreement, to such payments by Borrower made to the
Applicable Lending Office or any other office that a Lender may claim as its
Applicable Lending Office, or (z) after such Lender's selection and designation
of any other Applicable Lending Office, to such payments made to such other
Applicable Lending Office, such Lender shall use reasonable efforts to make,
fund and maintain its Loans through another Applicable Lending Office of such
Lender in another jurisdiction so as to reduce such Borrower's liability
hereunder, if the making, funding or maintenance of such Loans through such
other Applicable Lending Office of such Lender does not, in the reasonable
41
<PAGE> 48
judgment of such Lender, otherwise materially adversely affect such Loans,
obligations under the Commitments or such Lender.
(b) In addition, Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges, or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the other Loan Documents, the Commitments, the Loans or the Letters
of Credit (hereinafter referred to as "Other Taxes").
(c) Borrower will indemnify each Lender, the Issuing Bank and
the Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any Governmental Authority on
amounts payable under this Section 2.10) paid by such Lender, the Issuing Bank
or the Agent (as the case may be) and, so long as such Lender, the Issuing Bank
or the Agent (as the case may be) shall not have unreasonably delayed making
such payment, any additional liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall
be made within thirty (30) days after the date such Lender, the Issuing Bank or
the Agent (as the case may be) makes written demand therefor. A certificate as
to any such amount payable to any Lender, the Issuing Bank or the Agent under
this Section 2.10 submitted to Borrower and the Agent (if a Lender or the
Issuing Bank is so submitting) by such Lender, the Issuing Bank or the Agent
shall show in reasonable detail the amount payable and the calculations used to
determine such amount and shall, absent manifest error, be final, conclusive and
binding upon all parties hereto. With respect to such deduction or withholding
for or on account of any Taxes and to confirm that all such Taxes have been paid
to the appropriate Governmental Authorities, Borrower shall promptly (and in any
event not later than thirty (30) days after receipt) furnish to each Lender, the
Issuing Bank and the Agent such certificates, receipts and other documents as
may be required (in the reasonable judgment of such Lender, the Issuing Bank or
the Agent) to establish any tax credit to which such Lender, the Issuing Bank or
the Agent may be entitled, and, to the extent that the Borrower shall have paid,
or reimbursed any Lender, the Issuing Bank or the Agent for, any such Taxes,
such Lender, the Issuing Bank or the Agent, as applicable, shall promptly refund
such amount to the Borrower to the extent that such Lender, the Issuing Bank or
the Agent, as applicable, receives a permanent tax benefit as a result of any
such credit.
(d) Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by Borrower, Borrower will furnish to the Agent, at its
address referred to in Section 11.08, the original or a certified copy of a
receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of Borrower contained in
this Section 2.10 shall survive the payment in full of principal and interest
hereunder and the termination of this Agreement.
(f) Each Lender that is not created or organized under the
laws of the United States of America or a political subdivision thereof shall
deliver to Borrower and the Agent on or before
42
<PAGE> 49
the Effective Date, or, if later, the date on which such Lender becomes a Lender
pursuant to Section 11.02 hereof, a true and accurate certificate executed in
duplicate by a duly authorized officer of such Lender, in a form satisfactory to
Borrower and the Agent, to the effect that such Lender is capable under the
provisions of an applicable tax treaty concluded by the United States of America
(in which case the certificate shall be accompanied by two executed copies of
Form 1001 of the IRS) or under Section 1442 of the IRC (in which case the
certificate shall be accompanied by two copies of Form 4224 of the IRS) of
receiving payments of interest hereunder without deduction or withholding of
United States federal income tax. Each such Lender further agrees to deliver to
Borrower and the Agent from time to time a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender substantially
in a form satisfactory to Borrower and the Agent, before or promptly upon the
occurrence of any event requiring a change in the most recent certificate
previously delivered by it to Borrower and the Agent pursuant to this Section
2.10(f). Further, each Lender which delivers a certificate accompanied by Form
1001 of the IRS covenants and agrees to deliver to Borrower and the Agent within
fifteen (15) days prior to January 1, 2002, and every third (3rd) anniversary of
such date thereafter, on which this Agreement is still in effect, another such
certificate and two accurate and complete original signed copies of Form 1001
(or any successor form or forms required under the IRC or the applicable
regulations promulgated there under), and each Lender that delivers a
certificate accompanied by Form 4224 of the IRS covenants and agrees to deliver
to Borrower and the Agent within fifteen (15) days prior to the beginning of
each subsequent taxable year of such Lender during which this Agreement is still
in effect, another such certificate and two accurate and complete original
signed copies of IRS Form 4224 (or any successor form or forms required under
the IRC or the applicable regulations promulgated thereunder). Each such
certificate shall certify as to one of the following:
(i) that such Lender is capable of receiving payments of
interest hereunder without deduction or withholding of United States of
America federal income tax;
(ii) that such Lender is not capable of receiving payments of
interest hereunder without deduction or withholding of United States of
America federal income tax as specified therein but is capable of
recovering the full amount of any such deduction or withholding from a
source other than the Borrower and will not seek any such recovery from
Borrower; or
(iii) that, as a result of the adoption of or any change in
any law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or
application thereof by a Governmental Authority after the date such
Lender became a party hereto, such Lender is not capable of receiving
payments of interest hereunder without deduction or withholding of
United States of America federal income tax as specified therein and
that it is not capable of recovering the full amount of the same from a
source other than the Borrower.
43
<PAGE> 50
If the form provided by any Lender at the time such Lender first becomes a party
to this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded from
"Taxes" as defined in Section 2.10(a).
Each Lender shall promptly furnish to Borrower and the Agent
such additional documents as may be reasonably required by Borrower or the Agent
to establish any exemption from or reduction of any Taxes or Other Taxes
required to be deducted or withheld and which may be obtained without undue
expense to such Lender.
(g) For any period with respect to which a Lender has failed
to provide Borrower with the appropriate form pursuant to Section 2.10(f)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under Section 2.10(c), and
Borrower shall not be required to comply with Section 2.10(a), with respect to
Taxes imposed by the United States; provided, however, that should a Lender,
which is otherwise exempt from or subject to a reduced rate of withholding tax,
become subject to Taxes because of its failure to deliver a form required
hereunder, Borrower shall take such steps as such Lender shall reasonably
request to assist such Lender to recover such Taxes so long as Borrower shall
incur no costs or liability as a result thereof.
2.11. Capital Adequacy; Increased Costs. (a) If any Lender or
the Issuing Bank determines that (i) the introduction of or any change in any
law, order or regulation or in the interpretation or administration of any law,
order or regulation by any Governmental Authority charged with the
interpretation or administration thereof after the date hereof or (ii)
compliance with any guideline or request issued or made after the date hereof
from any central bank or other Governmental Authority (whether or not having the
force of law) has or would have the effect of reducing the rate of return on the
capital of such Lender or the Issuing Bank or any corporation controlling such
Lender or the Issuing Bank, as a consequence of or with reference to this
Agreement, such Lender's Commitment or its making or maintaining Loans, or the
Issuing Bank's issuing or maintaining, or such Lenders participating in, Letters
of Credit, below the rate which such Lender or the Issuing Bank or such other
corporation could have achieved but for such compliance (taking into account the
policies of such Lender or the Issuing Bank or such corporation with regard to
capital) by an amount deemed by such Lender or the Issuing Bank, as applicable,
to be material, then Borrower shall from time to time, upon demand by such
Lender or the Issuing Bank (with a copy of such demand to the Agent), pay to
such Lender or the Issuing Bank, as applicable, additional amounts sufficient to
compensate such Lender or the Issuing Bank, as applicable, for such reduction,
upon receipt by Borrower (with a copy to the Agent) of a certificate as to such
amounts, by such Lender or the Issuing Bank, as applicable, setting forth in
reasonable detail the basis for, and the calculations used by such Lender or the
Issuing Bank, as applicable, in determining, any such amounts. Such certificate,
in the absence of manifest error, shall be conclusive and binding for all
purposes.
(b) In the event that after the date hereof (i) the adoption
of or any change in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or any change in the
44
<PAGE> 51
interpretation or application thereof by a Governmental Authority, or (ii)
compliance by any Lender or the Issuing Bank with any request or directive
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) from any central bank or other Governmental
Authority or quasi-governmental authority exercising jurisdiction, power or
control over banks or financial institutions generally, does impose, modify, or
hold applicable, in the determination of a Lender, any reserve, special deposit,
compulsory loan, FDIC insurance, capital allocation or similar requirement
against assets held by, or deposits or other liabilities in or for the account
of, advances or loans by, commitments made, letters of credit issued or
participated in, or other credit extended by, or any other acquisition of funds
by, a Lender or any Applicable Lending Office of such Lender (except with
respect to Base Rate Loans, so long as the Alternate Base Rate in effect at the
time is determined by reference to the Prime Rate) or the Issuing Bank which is
not otherwise taken into account in the calculation of the Adjusted LIBO Rate or
the Alternate Base Rate, and the result of any of the foregoing is to increase
the cost to such Lender or the Issuing Bank of making, renewing or maintaining
the Loans or its Commitment or issuing, maintaining or participating in any
Letter of Credit or to reduce any amount receivable hereunder or thereunder;
then, in any such case, Borrower shall upon written notice from and demand by
that Lender or the Issuing Bank pay to such Lender or the Issuing Bank, as
applicable, within fifteen (15) Business Days of the date specified in such
notice and demand, such amount or amounts (based upon a reasonable allocation
thereof by such Lender or the Issuing Bank, as applicable, to the financing
transactions contemplated by this Agreement and affected by this Section
2.11(b)) as may be necessary to compensate that Lender or the Issuing Bank, as
applicable, for any such additional cost incurred or reduced amount received.
Such Lender or the Issuing Bank, as applicable, shall deliver to the Borrower
with any such notice and demand a certificate setting forth in reasonable detail
the basis for, and the calculations used by such Lender or the Issuing Bank, as
applicable, in determining, the costs or reductions so claimed and the
allocation made by such Lender or the Issuing Bank, as applicable, of such costs
and reductions. Such certificate, in the absence of manifest error, shall be
conclusive and binding for all purposes. If a Lender or the Issuing Bank, as
applicable, subsequently recovers from another Person any amount previously paid
by Borrower pursuant to this Section 2.11(b), such Lender or the Issuing Bank,
as applicable, shall, within thirty (30) days after receipt of such refund and
to the extent permitted by applicable law, pay to the Borrower, without
interest, the amount of any such recovery.
(c) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this Section 2.11 shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender or the
Issuing Bank pursuant to this Section 2.11 for any increased costs or reduction
incurred more than 180 days prior to the date that such Lender or the Issuing
Bank, as the case may be, notifies the Borrower of the circumstances giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the change
or compliance giving rise to such increased costs or reductions is retroactive,
then the 180-day period referred to above shall be extended to include the
period of retroactive effect thereof.
45
<PAGE> 52
(d) If any Lender requests compensation under this Section
2.11, then such Lender shall use reasonable efforts to designate a different
Applicable Lending Office for funding or booking its Loans hereunder, if, in the
reasonable judgment of such Lender, such designation (i) would eliminate or
reduce amounts payable pursuant to this Section 2.11 in the future and (ii)
would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender.
2.12. Use of Proceeds of the Loans and the Letters of Credit.
The proceeds of the Loans and the Letters of Credit shall be used for general
corporate purposes.
2.13. Authorized Officers of Borrower. Borrower shall notify
the Agent in writing of the names of the officers and employees authorized to
request Loans and Letters of Credit and to request a conversion or continuation
of any Loan and shall provide the Agent with a specimen signature of each such
officer or employee. The Agent shall be entitled to rely conclusively on such
officer's or employee's authority to request such Loan or Letter of Credit or
such conversion or continuation until the Agent receives written notice to the
contrary. The Agent shall have no duty to verify the authenticity of the
signature appearing on any written Notice of Borrowing, notice of request for
the issuance of a Letter of Credit or Notice of Conversion/Continuation and,
with respect to an oral request for such a Loan or such conversion or
continuation, the Agent shall have no duty to verify the identity of any person
representing himself as one of the officers or employees authorized to make such
request on behalf of Borrower. Neither the Agent nor any Lender shall incur any
liability to Borrower in acting upon any telephonic notice referred to above
which the Agent believes to have been given by a duly authorized officer or
other person authorized to borrow on behalf of Borrower.
2.14. Replacement of Certain Lenders. In the event a Lender
("Affected Lender") shall have: (i) failed to fund its Pro Rata Share of any
Borrowing requested by the Borrower which such Lender is obligated to fund under
the terms of this Agreement and which such failure has not been cured, (ii) has
requested compensation from the Borrower under Section 2.10 or 2.11 to recover
additional costs incurred by such Lender which are not being incurred generally
by the other Lenders, or (iii) delivered a notice pursuant to Section 2.09(c)(i)
claiming that such Lender is unable to extend Eurodollar Rate Loans to the
Borrower for reasons not generally applicable to the other Lenders, then, in any
such case, the Borrower or the Agent may make written demand on such Affected
Lender (with a copy to the Agent in the case of a demand by the Borrower and a
copy to the Borrower in the case of a demand by the Agent) for the Affected
Lender to assign, and such Affected Lender shall assign pursuant to one or more
duly executed Assignment and Acceptances five (5) Business Days after the date
of such demand, to one or more financial institutions which complies with the
provisions of Section 11.02) (and, if selected by the Borrower is reasonably
acceptable to the Agent) which the Borrower or the Agent, as the case may be,
shall have engaged for such purpose ("Replacement Lender"), all of such Affected
Lender's rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, its Commitment and Revolving Credit
Exposure) in accordance with Section 11.02. Further, with respect to such
assignment, the Affected Lender shall have concurrently received, in cash, all
amounts due and
46
<PAGE> 53
owing to the Affected Lender hereunder or under any other Loan Document,
including, without limitation, the aggregate outstanding principal amount of the
Loans and unreimbursed LC Disbursements owed to such Lender, together with
accrued interest thereon through the date of such assignment, amounts payable
under Sections 2.10 and 2.11, and compensation payable under Section 2.09(d) in
the event of any replacement of any Affected Lender under clause (ii) or clause
(iii) of this Section 2.14; provided, upon such Affected Lender's replacement,
such Affected Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.09, 2.10, 2.11, 11.03 and 11.04, as well
as to any fees accrued for its account hereunder and not yet paid. Upon the
replacement of any Affected Lender pursuant to this Section 2.14, each such
Affected Lender shall cease to have any participation in, entitlement to, or
other right to share in the security interests and liens of the Agent and the
Holders of Secured Obligations in the Collateral except with respect to Eligible
Hedging Contracts.
ARTICLE III
CONDITIONS TO LOANS
3.01. Conditions Precedent to Effectiveness. The effectiveness
of this Agreement, and the obligation of each Lender to make Revolving Loans and
of the Issuing Bank to issue Letters of Credit hereunder, shall be subject to
the satisfaction of all of the following conditions precedent:
(a) Documents. The Agent and the Lenders shall have received
on or before the Effective Date (i) this Agreement, the Notes, the other
Transaction Documents and all other agreements, documents and instruments
described in the List of Closing Documents attached hereto as Exhibit 6 and made
a part hereof, each duly executed where appropriate and in form and substance
satisfactory to the Agent and the Lenders and (ii) such additional documentation
as the Agent or any Lender may reasonably request.
(b) No Legal Impediments. No law, regulation, order, judgment
or decree of any Governmental Authority shall, and the Agent shall not have
received any notice that litigation is pending or threatened which is likely to
(i) enjoin, prohibit or restrain the making of the Loans on the Effective Date
or (ii) impose or result in the imposition of a Material Adverse Effect.
(c) No Change in Condition. No change in the business, assets,
management, operations or financial condition of the Borrower or the
Consolidated Borrower Group taken as a whole shall have occurred since December
31, 1997, which change, in the judgment of the Lenders, could reasonably be
expected to have a Material Adverse Effect.
(d) No Default. No Event of Default or Potential Event of
Default shall have occurred and be continuing or would result from the making of
the Loans.
47
<PAGE> 54
(e) Representations and Warranties. All of the representations
and warranties contained in Section 4.01 and in any of the other Loan Documents
shall be true and correct in all material respects on and as of the Effective
Date.
(f) Payment of Fees and Expenses. On the Effective Date, the
Borrower shall have paid to the Agent, for the accounts of the Lenders and the
Agent, as applicable, an amount equal to the sum of (i) all fees due and payable
on or before the Effective Date (including, without limitation, all fees
described in the Fee Letter) and (ii) all expenses due and payable on or before
the Effective Date (including the expenses and fees of Sidley & Austin then due
and payable).
(g) Legal Matters. All legal and regulatory matters shall be
satisfactory to the Agent and its counsel and to each Lender and their
respective counsel.
(h) Termination of Existing Credit Agreement. The Third
Amended and Restated Credit Agreement dated as of April 22, 1996, as amended,
among the Borrower, Parent, the financial institutions party thereto and The
Chase Manhattan Bank, as Agent, shall have been terminated, all obligations of
the Borrower thereunder shall have been paid in full, or will be paid in full
from the proceeds of the Initial Funding hereunder on the Effective Date, and
all Liens on the Property of the Borrower and its Subsidiaries securing such
obligations shall have been terminated..
3.02. Conditions Precedent to all Loans. The obligation of
each Lender to make any Revolving Loan on any date, and of the Issuing Bank to
issue, amend, renew or extend any Letter of Credit on any date, is subject to
the following conditions precedent as of such date:
(a) Representations and Warranties. All of the representations
and warranties of Borrower contained in or repeated pursuant to Section 4.02 and
of Borrower or its Subsidiaries contained in any other Loan Document (other than
representations and warranties which expressly speak only as of a different
date) shall be true and complete in all respects on and as of such date as
though made on and as of such date both before and after taking into account the
requested Revolving Loan to be made or the requested Letter of Credit to be
issued.
(b) No Default. No Event of Default or Potential Event of
Default shall have occurred and be continuing or would result from the making of
the requested Revolving Loan or the issuance of the requested Letter of Credit.
(c) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority shall have
been issued, and no litigation shall be pending or threatened (other than as a
result of any condition described in Section 2.09(d), 2.10 or 2.11), which in
the reasonable judgment of the Requisite Lenders, would enjoin, prohibit or
restrain any Lender from making the requested Revolving Loan or the Issuing Bank
from issuing the requested Letter of Credit or as a result of making any such
Loan or issuing any such Letter of Credit impose or result in the imposition of
any material adverse condition upon any Lender.
48
<PAGE> 55
(d) No Material Adverse Change. No event shall have occurred
after December 31, 1997 which, in the reasonable judgment of the Requisite
Lenders, could reasonably be expected to have a Material Adverse Effect.
(e) No Forfeiture Proceedings. Neither the Borrower nor any of
its Subsidiaries shall have been named as a defendant in a criminal indictment
under the Racketeering Influenced and Corrupt Organizations Act or any similar
federal or state statute which provides for forfeiture of assets as a potential
criminal penalty unless such proceeding shall not be adverse to the interests of
the Lenders.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall constitute a representation and warranty by Borrower as of the date
thereof that all the conditions contained in this Section 3.02 have been
satisfied or waived in writing pursuant to Section 11.07.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties on the Initial Funding
Date. To induce each Lender, the Issuing Bank and the Agent to enter into this
Agreement and to make the Loans and to issue and participate in Letters of
Credit hereunder, the Borrower hereby represents and warrants to each Lender,
the Issuing Bank and the Agent that the following statements are true and
correct:
(a) Organization; Corporate Powers. The Borrower and
each of its Subsidiaries (i) is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) is duly qualified to do business as a
foreign corporation or limited liability company and is in good standing under
the laws of each jurisdiction in which it owns or leases real property or in
which the nature of its business requires it to be so qualified, except those
jurisdictions where the failure to be in good standing or to so qualify could
not reasonably be expected to have a Material Adverse Effect, and (iii) has all
requisite power and authority to own, operate and encumber its property and
assets and to conduct its business as presently conducted and as proposed to be
conducted in connection with and following the consummation of the transactions
contemplated by the Transaction Documents.
(b) Authority. (i) The Borrower and each of its Subsidiaries
has the requisite power and authority to execute, deliver and perform its
obligations under each of the Transaction Documents executed by it, or to be
executed by it.
(ii) The execution, delivery and performance (or
filing or recording, as the case may be) of each of the Transaction Documents to
which the Borrower or any of its Subsidiaries is a party, and the consummation
of the transactions contemplated thereby, have been duly authorized by all
necessary corporate or company action on the part of each such Person, the
respective boards of directors or managers, as applicable, of each such Person,
and, if necessary, the
49
<PAGE> 56
stockholders or members, as applicable, of each such Person, and no other
corporate or company proceedings on the part of any such Person are necessary to
consummate such transactions.
(iii) Each of the Transaction Documents to which the
Borrower or any of its Subsidiaries is a party has been duly executed and
delivered (or filed or recorded, as the case may be) by each such Person and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles),
is in full force and effect (unless terminated in accordance with the terms
thereof) and no term or condition thereof has been amended, modified or waived
from the terms and conditions contained therein without the prior written
consent of the Agent and the Requisite Lenders or, where so required, all of the
Lenders, and the Borrower and each of its Subsidiaries have performed and
complied in all material respects with all the material terms, provisions,
agreements and conditions set forth therein and required to be performed or
complied with by such parties on or before the effective date thereof, and no
default by any such party exists thereunder.
(c) Subsidiaries. The Borrower has no Subsidiaries other than
those described in Schedule 4.01(c) and those, if any, which are permitted by
Section 7.03 to be created or acquired after the Effective Date.
(d) No Conflict. The execution, delivery and performance by
the Borrower and each of its Subsidiaries of each Transaction Document to which
it is a party and each of the transactions contemplated thereby do not and will
not (i) conflict with any Contractual Obligation of any such Person, any
liability resulting from which could reasonably be expected to have a Material
Adverse Effect, or (ii) conflict with the documents of organization or
governance of any such Person, or (iii) except as set forth on Schedule 4.01(d),
conflict with, result in a breach of or constitute (with or without notice or
lapse of time or both) a default under any Requirement of Law or Contractual
Obligation of any such Person, or (iv) result in or require the creation or
imposition of any Lien whatsoever upon any of the properties or assets of any
such Person (other than Liens in favor of the Agent, for the benefit of itself
and the Holders of Secured Obligations, arising pursuant to the Loan Documents
or Liens permitted pursuant to Section 7.02(b)), or (v) require any approval of
stock holders or members of any such Person, unless such approval has been
obtained.
(e) Governmental Consents. The execution, delivery and
performance by the Borrower and each of its Subsidiaries of each Transaction
Document to which it is a party and the transactions contemplated thereby do not
and will not require any registration with, consent or approval of, or notice
to, or other action with or by, any Governmental Authority.
(f) Governmental Regulation. Neither the Borrower nor any of
its Subsidiaries is subject to regulation under the Public Utility Holdings
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, the
Investment Company Act of 1940 or any other statute or regulation of any
Governmental Authority such that its ability to incur indebtedness is limited or
its
50
<PAGE> 57
ability to consummate the transactions contemplated hereby or by the other
Transaction Documents is materially impaired.
(g) Financial Position. (i) As of the Effective Date, all
quarterly and annual financial statements of Borrower or of the Consolidated
Borrower Group delivered to the Agent were prepared in conformity with Agreement
Accounting Principles (except as otherwise noted therein) and fairly present the
financial position of Borrower or the consolidated financial position of the
Consolidated Borrower Group, as the case may be, as at the respective dates
thereof and the results of operations and changes in cash flows for each of the
periods covered thereby, subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments.
(ii) All quarterly and annual financial statements of
the Borrower or of the Consolidated Borrower Group delivered to the Agent after
the Effective Date were prepared in conformity with Agreement Accounting
Principles (except as otherwise noted therein) and fairly present the financial
position of Borrower or the consolidated financial position of the Consolidated
Borrower Group, as the case may be, as at the respective dates thereof and the
results of operations and changes in cash flows for each of the periods covered
thereby, subject, in the case of any unaudited interim financial statements, to
normal year-end adjustments. Except as contemplated in the Transaction
Documents, neither the Borrower nor any of its Subsidiaries has any material
obligations, contingent liabilities or liabilities for taxes, long term leases
or material or unusual forward or long term commitments which are not reflected
in such financial statements and the notes thereto as at the respective dates
thereof.
(h) Financial Projections. As of the Effective Date, the
financial statement projections for the Consolidated Borrower Group contained in
the Confidential Information Memorandum dated January 1999 delivered to the
Lenders reflect the Borrower's best estimate of future performance based upon
the past operations of its business, current conditions and other information
available to the Borrower at the time, and the assumptions and methodology used
in such projections were reasonable.
(i) Capitalization.
(i) As of the Effective Date, Schedule 4.01(i) sets forth the
number of shares and the relevant percentages of capital stock held by each
shareholder of the Parent that holds in excess of 5% of the Capital Stock of the
Parent of which the Borrower has knowledge.
(ii) As of the Effective Date, there are outstanding no shares
of any class of capital stock and no membership interests of any class (or any
securities, instruments, warrants, option or purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock or membership interests) of:
(A) Borrower other than capital stock described on Schedule
4.01(i); and
51
<PAGE> 58
(B) any Subsidiary of the Borrower other than the capital
stock of DQSB II, Inc., of DQSC Property Co. and of Cruise America
Travel, Incorporated held by Borrower and the membership interests in
Great River Cruse Line, L.L.C., in Great Ocean Cruise Line, L.L.C and
in GAQSC owned by Borrower and by DQSB II, Inc. and in each case, other
than with respect to GAQSC pursuant to the MARAD Financing, pledged to
the Agent for the benefit of itself and Holders of Secured Obligations
pursuant to the Pledge Agreements.
(iii) None of the capital stock or membership interests of any
Subsidiary of the Borrower, other than with respect to GAQSC pursuant to the
MARAD Financing, is subject to any security, instrument, warrant, option or
purchase rights, agreement, conversion or exchange rights, call, commitment or
claim of any right, title or interest therein or thereto other than pursuant to
the Pledge Agreements. The outstanding capital stock of each Subsidiary of the
Borrower that is a corporation is duly authorized, validly issued, fully paid
and nonassessable. Neither the Borrower nor any of its Subsidiaries that is a
member of any other Subsidiary that is a limited liability company has any
further liability to such other Subsidiary for contribution or otherwise in its
capacity as such a member.
(j) Litigation; Adverse Effects. (i) Except as set forth in
Schedule 4.01(j), there is no action, suit, proceeding, investigation of any
Governmental Authority or arbitration, at law or in equity, or before or by any
Governmental Authority, pending, or, to the best knowledge of Borrower,
threatened against the Borrower or any of its Subsidiaries or any Property of
any of them, as to which there is a reasonable possibility of an adverse
determination and which if adversely determined could reasonably be expected to
have a Material Adverse Effect.
(ii) Neither the Borrower nor any of its Subsidiaries
is (A) to the knowledge of Borrower, in violation of any applicable law which
violation could reasonably be expected to have a Material Adverse Effect, or (B)
subject to or in default with respect to any final judgment, writ, injunction,
decree, order, rule or regulation of any court or Governmental Authority which
could reasonably be expected to have a Material Adverse Effect. Except as set
forth in Schedule 4.01(j), there is no action, suit, proceeding or investigation
pending or, to the knowledge of Borrower, threatened against or affecting the
Borrower or any of its Subsidiaries (1) which challenges the validity or the
enforceability of any of the Transaction Documents or (2) which will or would
reasonably be expected to result in (y) any liability in the aggregate in the
amount of greater than $1,000,000 with respect to any such Person (in each case
net of applicable third-party insurance coverage other than retro-premium
insurance that determines retro-premiums solely on the basis of losses of the
insured person) or (z) which involves a claim under the Racketeering Influenced
and Corrupt Organizations Act or any similar federal or state statute where such
Person is a defendant in a criminal indictment that provides for the forfeiture
of assets to any Governmental Authority as a potential criminal penalty.
(k) No Material Adverse Change. With respect to Borrower or
the Consolidated Borrower Group taken as a whole, there has occurred no event
since December 31, 1997 which could reasonably be expected to have a Material
Adverse Effect.
52
<PAGE> 59
(l) Payment of Taxes. All tax returns and reports of Borrower
and its Subsidiaries required to be filed (including extensions), have been
timely filed, and all taxes, assessments, fees and other charges of Governmental
Authorities thereupon and upon their respective properties, assets, income and
franchises which are shown on such returns as being due and payable, have been
paid when due and payable, except (i) taxes being contested in good faith by
appropriate proceedings and that are reserved against in accordance with
Agreement Accounting Principles, (ii) taxes which are not yet delinquent, (iii)
taxes which are payable in installments so long as paid before any penalty
accrues with respect thereto and (iv) other taxes, assessments, fees and other
charges of Governmental Authorities the failure of which to pay could not be
reasonably expected to have a Material Adverse Effect in the aggregate and tax
returns and reports with respect to taxes that are reserved against in
accordance with Agreement Accounting Principles. On the Effective Date, except
as set forth in clause (iv) above or on Schedule 4.01(l), and after the
Effective Date, except as set forth in clauses (i) through (iv) above or on
Schedule 4.01(l), Borrower has no knowledge of any proposed tax assessment
against Borrower or any Borrower Subsidiary. All tax assessments referred to in
Schedule 4.01(l) are being contested in good faith by Borrower or such
Subsidiary or a settlement with respect to any such assessment is being
negotiated in good faith by such Person and appropriate reserves have been
established in accordance with Agreement Accounting Principles.
(m) Material Adverse Agreements. Neither the Borrower nor any
of its Subsidiaries is a party to or subject to any Contractual Obligation or
other restriction contained in its charter or By-laws which could reasonably be
expected to have a Material Adverse Effect after giving effect to the
consummation of the transactions contemplated in the Transaction Documents or
otherwise.
(n) Performance. Neither the Borrower nor any of its
Subsidiaries is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any Contractual
Obligation applicable to it under any agreement or instrument the absence or
termination of which Contractual Obligations could reasonably be expected to
have a Material Adverse Effect, and no condition exists which, with the giving
of notice or the lapse of time, or both, would constitute a default under such
Contractual Obligation, except where the consequences, direct or indirect, of
such default or defaults, if any, could not reasonably be expected to have a
Material Adverse Effect.
(o) Securities Activities. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying any Margin Stock.
(p) Disclosure. Subject to changes in facts or conditions
which are required or permitted under this Agreement, the representations and
warranties of the Borrower and its Subsidiaries contained in the Transaction
Documents, and all certificates and other documents delivered to the Agent in
connection therewith, taken as a whole do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
53
<PAGE> 60
(q) Requirements of Law. The Borrower and each of its
Subsidiaries is in compliance with all Requirements of Law (including, without
limitation, the Securities Act and the Securities Exchange Act, the applicable
rules and regulations thereunder, and state securities laws) applicable to it
and its business, where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect.
(r) Patents, Trademarks, Permits, Etc. The Borrower and each
of its Subsidiaries owns, is licensed or otherwise has the lawful right to use,
or has all permits and other approvals of Governmental Authorities, patents,
trademarks, service marks, trade names, copyrights, technology, know-how and
processes used in or necessary for the conduct of its business except to the
extent that the absence of which could not reasonably be expected to have
Material Adverse Effect. The use of such permits and other approvals of
Governmental Authorities, patents, trademarks, service marks, trade names,
copyrights, technology, know-how and processes by the Borrower or any of its
Subsidiaries does not infringe on the rights of any Person, subject to such
claims and infringements the existence of which could not reasonably be expected
to have a Material Adverse Effect. The consummation of the transactions
contemplated by the Transaction Documents will not impair the ownership of or
rights under (or the license or other right to use, as the case may be) any
permits and governmental approvals, patents, trademarks, service marks, trade
names, copyrights, technology, know-how or processes by the Borrower or any of
its Subsidiaries in any manner which could reasonably be expected to have a
Material Adverse Effect.
(s) Environmental Matters. Except where the failure of which
could not reasonably be expected to have a Material Adverse Effect, (i) each of
the operations of the Borrower and its Subsidiaries comply in all material
respects with all applicable environmental, health and safety Requirements of
Law; (ii) the Borrower and each of its Subsidiaries has obtained all
environmental, health and safety Permits necessary for its operations, all such
Permits are in good standing and the Borrower and each of its Subsidiaries is in
compliance with all terms and conditions of such Permits; (iii) (A) neither the
Borrower nor any of its Subsidiaries, any of their present Property or
operations and (B) to the knowledge of the Borrower, none of the Borrower's nor
any of its Subsidiaries' previously owned Property or past operations is subject
to any order from or agreement with any Governmental Authority or private party
or any judicial or administrative proceeding or investigations respecting any
environmental, health or safety Requirements of Law or is the subject of any
investigation by any Governmental Authority evaluating the need for Remedial
Action to respond to a material Release or threatened Release of a Contaminant
into the environment, or is subject to any Remedial Action or other Liabilities
and Costs arising from the Release or threatened Release of a Contaminant into
the environment; (iv) none of the operations of the Borrower or any of its
Subsidiaries is subject to any judicial or administrative proceeding alleging a
violation of any environmental, health or safety Requirement of Law; (v) none of
the present or, to the knowledge of the Borrower, past operations of the
Borrower or its Subsidiaries is the subject of any investigation by any
Governmental Authority evaluating whether any Remedial Action is needed to
respond to a Release or threatened Release of a Contaminant into the
environment; (vi) to the knowledge of the Borrower, no past or present property
of the Borrower or any of its Subsidiaries is now or has ever been a storage,
treatment or disposal facility for hazardous waste, as those terms
54
<PAGE> 61
are defined under 40 CFR Part 261 or any state equivalent; (vii) neither the
Borrower nor any of its Subsidiaries has filed any notice under any applicable
Requirement of Law reporting a Release of a Contaminant into the environment;
(viii) there is not now, nor has there ever been, on or in the Property of the
Borrower or any of its Subsidiaries: (A) any underground storage tanks or
surface impoundments or (B) any polychlorinated biphenyls used in hydraulic
oils, electrical transformers or other equipment; (ix) neither the Borrower nor
any of its Subsidiaries has received any notice or claim to the effect that it
is or might be liable to any Person as a result of the Release or threatened
Release of a Contaminant into the environment, or as a result of exposure to
asbestos or to any other hazardous substance, which might result in liability in
excess of workers compensation; (x) no Environmental Lien has attached to any
Property of the Borrower or any of its Subsidiaries; or (xi) within the last
eighteen months, the Borrower has inspected its Property and the Property of its
Subsidiaries which the Borrower knows contains asbestos containing material or
which was acquired during such eighteen-month period and which the Borrower has
reason to believe could contain asbestos containing material, and all asbestos
containing material, if any, which is on or part of such Property (excluding any
raw materials which are used in the manufacture of products or products
themselves) is in good repair according to the current standards and practices
governing such material, and its presence or condition does not violate any
currently applicable or proposed Requirement of Law; and (xii) none of the
products which the Borrower or any of its Subsidiaries manufactures, distributes
or sells, or ever has manufactured, distributed or sold, contains asbestos
material.
(t) ERISA. Neither Borrower nor any ERISA Affiliate maintains
or contributes to any Plan other than those listed on Schedule 4.01(t). Each
Plan which is intended to be qualified under Section 401(a) of the IRC as
currently in effect has been determined by the IRS to be so qualified (or will
be submitted to the IRS for a determination as to its qualified status within
the applicable remedial amendment period for such Plan), and each trust related
to any such Plan has been determined to be exempt from Federal income tax under
Section 501(a) of the IRC as currently in effect. Except as disclosed in
Schedule 4.01(t), neither Borrower nor any ERISA Affiliate maintains or
contributes to any employee welfare benefit plan within the meaning of Section
3(1) of ERISA which provides benefits to employees after termination of
employment other than as required by Section 601 of ERISA. The Borrower and all
of its ERISA Affiliates are in compliance in all material respects with all of
the responsibilities, obligations or duties imposed on them by ERISA or
regulations promulgated thereunder with respect to all Plans. No Benefit Plan
has incurred any accumulated funding deficiency (as defined in Sections
302(a)(2) of ERISA and 412(a) of the IRC) whether or not waived. Neither the
Borrower nor any ERISA Affiliate or any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in a nonexempt prohibited transaction
described in Section 406 of ERISA or 4975 of the IRC which could result in the
imposition of a penalty or fine, the payment of which could reasonably be
expected to have a Material Adverse Effect, or (ii) has taken or failed to take
any action which would constitute or result in a Termination Event that could
subject either the Borrower or an ERISA Affiliate to a material liability to pay
money. Except as disclosed on Schedule 4.01(t), neither the Borrower nor any
ERISA Affiliate has any potential liability of a material amount under Section
4063, 4064, 4069, 4204 or 4212(c) of ERISA. Neither the Borrower nor any ERISA
Affiliate has incurred any liability to the PBGC which
55
<PAGE> 62
remains outstanding other than the payment of premiums, and there are no premium
payments which have become due which are unpaid. Neither Borrower nor any ERISA
Affiliate has (i) failed to make a required contribution or payment to a
Multiemployer Plan or (ii) made a complete or partial withdrawal under Section
4203 or 4205 of ERISA from a Multiemployer Plan. Neither Borrower nor any ERISA
Affiliate has failed to make a required installment or any other required
payment under Section 412 of the IRC on or before the due date for such
installment or other payment. Neither Borrower nor any ERISA Affiliate is
required to provide security to a Benefit Plan under Section 401(a)(29) of the
IRC due to a Plan amendment that results in an increase in current liability for
the plan year. Neither the Borrower nor any ERISA Affiliate has by reason of the
transactions contemplated hereby any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement.
(u) Solvency. The Borrower, individually, and the Consolidated
Borrower Group, considered as one enterprise, are each Solvent after giving
effect to the transactions contemplated by this Agreement and the other
Transaction Documents and the payment and accrual of all Transaction Costs with
respect to any of the foregoing.
(v) Assets and Properties. The Borrower and each of its
Subsidiaries has good title to all of the assets (tangible and intangible) owned
by it, except for imperfections of title (including Liens to the extent
permitted under Section 7.02(b)) which in the aggregate could not reasonably be
expected to have a Material Adverse Effect; and all such assets are free and
clear of all Liens, except as otherwise specifically permitted by the terms and
provisions of this Agreement and the other Loan Documents. Other than the New
Vessels during any period in which such New Vessels are being purchased,
outfitted or constructed or assets or properties damaged or destroyed by
casualty or condemnation during the period of any repair or reconstruction,
substantially all of the assets and properties owned by, leased to or used by
Borrower or any of its Subsidiaries are in good repair, working order and
condition, excepting ordinary wear and tear, are free and clear of any known
defects except such defects as do not substantially interfere with the continued
use thereof in the conduct of normal operations.
(w) Joint Venture; Partnership. Except as set forth in
Schedule 4.01(w) or permitted under Section 7.03, neither the Borrower nor any
of its Subsidiaries is engaged in any joint venture or partnership with any
other Person.
(x) Labor Matters. Except as listed on Schedule 4.01(x), there
are no collective bargaining agreements, other labor agreements or Multiemployer
Plans covering any of the employees of Borrower or any of its Subsidiaries. No
attempt to organize the employees of Borrower or any of its Subsidiaries, and no
labor disputes, strikes or walkouts affecting the operations of Borrower or any
of its Subsidiaries is pending or, to Borrower's knowledge, threatened, planned
or contemplated.
(y) No Default. No Potential Event of Default or Event of
Default exists.
56
<PAGE> 63
(z) Restricted Junior Payments. On or after the Effective
Date, neither Borrower nor any Subsidiary of Borrower has directly or indirectly
declared, ordered, paid or made or set apart any sum or property for any
Restricted Junior Payment or agreed to do so, except to the extent permitted
pursuant to Section 7.05.
(aa) Advances to Parent. All Investments of the Borrower in
the Parent as of the Effective Date constitute Indebtedness of the Parent
extended by the Borrower on open account and none are evidenced by any
promissory note or other instrument.
(bb) Year 2000. Borrower has established a plan to address
"Year 2000 issues" (that is, the risk that computer systems or other equipment
may not be able to properly perform date- sensitive functions after December 31,
1999), including an inventory, risk assessment, testing and remediation or
replacement of the Borrower's and any of its Subsidiaries' (i) computer systems
and (ii) equipment containing embedded microchips that may be vulnerable to Year
2000 issues. Borrower anticipates completing its such Year 2000 project,
including the testing of all such computer systems and equipment which must be
reprogrammed or replaced, no later than September 30, 1999, and that all such
modifications and improvements will enable its information systems to function
properly with respect to dates in the Year 2000 and thereafter. Based upon its
current assessment efforts, Borrower does not believe that Year 2000 issues with
respect to its computer systems and equipment, or the computer systems and
equipment of other companies on which Borrower's or its Subsidiaries' systems or
operations rely, including, without limitation, their major suppliers and travel
partners, could reasonably be expected to have a Material Adverse Effect;
however, Borrower's and its Subsidiaries' Year 2000 issues and any potential
business interruptions, costs, damages or losses related thereto are dependent,
to a significant degree, upon the Year 2000 compliance of third parties. There
can be no guarantee that the systems of other companies on which Borrower's or
its Subsidiaries' systems or operations rely, including, without limitation,
their major suppliers and travel partners, will be Year 2000 compliant and would
not have an adverse effect on Borrower's or its Subsidiaries' business,
financial condition or operations. In addition, some risks of year 2000 issues
are beyond the control of Borrower and its suppliers and travel partners.
4.02. Subsequent Funding Representations and Warranties. To
induce each Lender, the Issuing Bank and the Agent to enter into this Agreement
and to make the Loans and issue Letters of Credit, Borrower hereby represents
and warrants to each Lender, the Issuing Bank and the Agent that the statements
set forth in Section 4.01 (except to the extent that such statements expressly
are made only as of the Effective Date or another earlier date) are true,
correct and complete in all material respects on and as of the Funding Date in
respect of each Borrowing and each issuance of a Letter of Credit after the
Effective Date, except that the representations and warranties need not be true
and correct to the extent that changes in the facts and conditions on which such
representations and warranties are based are required or permitted under this
Agreement.
ARTICLE V
REPORTING COVENANTS
57
<PAGE> 64
So long as Borrower shall have any outstanding Agreement
Obligations or any Lender shall have any Commitment hereunder:
5.01. Financial Statements. Borrower shall maintain or cause
to be maintained a system of accounting established and administered in
accordance with sound business practices and consistent with past practice to
permit preparation of financial statements in conformity with GAAP, and, if
required by the terms of this Agreement, in conformity with Agreement Accounting
Principles, and each of the financial statements described below shall be
prepared from such system and records. Borrower shall deliver or cause to be
delivered to the Agent and each Lender:
(a) Quarterly Reports. As soon as practicable, and in any
event within fifty-five (55) days after the end of each of Borrower's first
three fiscal quarters of any Fiscal Year, on a consolidated basis for the
Consolidated Borrower Group, each of the following:
(A) a balance sheet as of the end of such fiscal
quarter, and as of the end of the previous Fiscal Year;
(B) an income statement for such fiscal quarter and
for the period from the beginning of the current Fiscal Year
to the end of such fiscal quarter, setting forth in each case
in comparative form and in reasonable detail the figures for
the corresponding periods of the previous Fiscal Year; and
(C) a cash flow statement for the period from the
beginning of the current Fiscal Year to the end of such fiscal
quarter, setting forth in each case in comparative form and in
reasonable detail the figures for the corresponding period of
the previous Fiscal Year;
together with an Officer's Certificate of the Borrower stating that such
financial statements fairly represent the financial condition, results of
operations and cash flows of the Persons covered thereby as at the dates and for
the periods indicated in accordance with Agreement Accounting Principles,
subject to normal year-end adjustments.
(b) Annual Reports. As soon as practicable, and in any event
within one hundred (100) days after the end of each Fiscal Year, on a
consolidated basis for the Consolidated Borrower Group, annual financial
statements consisting of a balance sheet, income statement and cash flow
statement, setting forth in comparative form in each case the consolidated
figures for the corresponding periods of the previous Fiscal Year and for the
Fiscal Year of the current financial statement, all in reasonable detail, and
accompanied by an opinion (unqualified as to scope or going concern and which is
not adverse) thereon of the firm of independent certified public accountants of
recognized national standing regularly retained by the Borrower and acceptable
to the Requisite Lenders (it being understood that any of the five largest
accounting firms in the United States shall be deemed acceptable), which report
shall state that such financial statements present fairly in all material
respects the financial position of the Persons covered thereby as at the dates
indicated and
58
<PAGE> 65
the results of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years (or, in the
event of a change in accounting principles, such accountants' concurrence with
such change) and that such firm's audit has been conducted in accordance with
generally accepted auditing standards.
(c) Budget and Business Plan. Promptly upon completion, but in
any event not later than one hundred twenty (120) days after the end of each
Fiscal Year (commencing with Fiscal Year 1999), a copy of the operating budget
and projections by the Borrower of the income statement, balance sheet and cash
flow of the Consolidated Borrower Group, taken as a whole, for the next
succeeding Fiscal Year (commencing with Fiscal Year 2000) of the Consolidated
Borrower Group, all in form customarily prepared by the Borrower's management,
such operating budget and projected financial statements to be accompanied by an
Officer's Certificate of Borrower stating that such operating budget and
projected financial statements have been prepared on the basis of sound
financial planning practice and that such officer has no reason to believe they
are incorrect or misleading in any material respect.
(d) Compliance Certificate. Together with each delivery of (i)
the financial statements pursuant to subsections (a) and (b) above, (A) an
Officer's Certificate of Borrower stating that such officer has reviewed the
terms of this Agreement and the Loan Documents and has made, or caused to be
made under such officer's supervision, a review in reasonable detail of the
transactions and condition of Borrower and its Subsidiaries during the
accounting period covered by such financial statements, and that such review has
not disclosed the existence during or at the end of such accounting period, and
that such officer does not have knowledge of the existence, as at the date of
the Officer's Certificate, of any condition or event which constitutes an Event
of Default or Potential Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof and
what action Borrower has taken, is taking and proposes to take with respect
thereto; and (B) a Compliance Certificate (1) demonstrating in reasonable detail
compliance during and at the end of such accounting periods, as applicable, with
the provisions set forth in Sections 2.06, 7.01, 7.03 and 7.05 and Article VIII,
(2) setting forth Borrower's calculation, in detail, of the Borrower's Total
Indebtedness Leverage Ratio and based upon its calculations the Applicable
Margins and (3) stating that such financial statements present fairly in all
material respects the financial position of the Consolidated Borrower Group, as
at the dates indicated and the results of their operations and changes in their
cash flow for the periods indicated in conformity with Agreement Accounting
Principles (except as otherwise noted therein) consistently applied and (ii) the
financial statements pursuant to subsection (b) above, a written discussion and
analysis by the management of the Borrower of such financial statements.
(e) Accountant's Compliance Certificate. Simultaneously with
the delivery of the financial statements referred to in subsection (b) above, a
statement of the firm of independent certified public accountants which reported
on such financial statements (i) whether anything has come to their attention to
cause them to believe that there existed on the date of such statements any
Event of Default or Potential Event of Default and (ii) confirming the
calculations set forth in the Compliance Certificate delivered simultaneously
therewith pursuant to subsection (d) above.
59
<PAGE> 66
(f) Report of Material Events. Promptly upon Borrower
obtaining knowledge (A) of any condition or event which constitutes an Event of
Default or Potential Event of Default, or (B) of any condition or event which
has had or could reasonably be expected to have a Material Adverse Effect, an
Officer's Certificate specifying the nature and period of existence of any such
condition or event and what action Borrower has taken, is taking and proposes to
take with respect thereto.
(g) Notice of Claims and Proceedings. (i) Promptly after
learning thereof, notice of the institution of, or threat of, any action, suit,
proceeding, governmental investigation or arbitration against or affecting
Borrower or any of its Subsidiaries (or any Property of such Person) involving
claims in an aggregate amount in excess of $5,000,000 or in excess of $1,000,000
with respect to any such Person or any Property of such Person except where the
same is fully covered (other than any applicable deductible) by insurance (other
than insurance in the nature of retro-premium insurance or other self insurance
programs) and of any material adverse change in any existing action, suit,
proceeding, governmental investigation or arbitration; and (ii) promptly upon
learning thereof, notice of any investigation or proceeding before or by any
Governmental Authority, the effect of which might limit, prohibit or restrict
materially the manner in which Borrower or any of its Subsidiaries currently
conducts its business or to declare any substance contained in the products
manufactured or distributed by it to be dangerous, if such declaration has had
or could reasonably be expected to have a Material Adverse Effect.
(h) ERISA Matters.
(i) As soon as possible, and in any event within thirty (30)
Business Days after Borrower or any ERISA Affiliate knows or has reason
to know that a Termination Event has occurred, a written statement of
the chief financial officer of Borrower describing such Termination
Event and the action, if any, which Borrower or such ERISA Affiliate
has taken, is taking or proposes to take with respect thereto, and when
known, any action taken or threatened by the IRS, DOL or PBGC with
respect thereto;
(ii) As soon as possible, and in any event within thirty (30)
Business Days, after Borrower or any ERISA Affiliate knows or has
reason to know that a prohibited transaction (as defined in Section 406
of ERISA and Section 4975 of the IRC) involving Borrower or any ERISA
Affiliate has occurred, a statement of the chief financial officer of
Borrower describing such transaction and the action which Borrower or
such ERISA Affiliate has taken, is taking or proposes to take with
respect thereto;
(iii) Within ten (10) Business Days after receipt by the
Borrower or any ERISA Affiliate of a written request from the Agent
(which shall make such request at the request of any Lender), a copy of
each annual report (Form 5500 series), including Schedule B thereto,
filed after the Effective Date with respect to each Benefit Plan;
(iv) Within ten (10) Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and within ten (10)
60
<PAGE> 67
Business Days after receipt, a copy of any communications received by
Borrower or any ERISA Affiliate with respect to such request;
(v) Within (30) Business Days after receipt by the Borrower or
any ERISA Affiliate of a written request from the Agent (which shall
make such request at the request of any Lender), a copy of each
actuarial report for any Benefit Plan or Multiemployer Plan and each
annual report for any Multiemployer Plan; provided that neither
Borrower nor any ERISA Affiliate shall have an obligation to provide a
copy of any actuarial report or annual report for any Multiemployer
Plan if it is unable to obtain such documents after good faith efforts
to do so;
(vi) Within thirty (30) Business Days after the occurrence
thereof, notification of any material increases in the benefits of any
existing Benefit Plan or the establishment of any new Plan or the
commencement of contributions to any Multiemployer Plan to which
Borrower or any ERISA Affiliate was not previously contributing;
(vii) Within ten (10) Business Days after receipt by Borrower
or an ERISA Affiliate of notice of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, a copy of each such notice;
(viii) Within ten (10) Business Days after receipt by Borrower
or any ERISA Affiliate of any unfavorable determination letter from the
IRS regarding the qualification of a Plan under Section 401(a) of the
IRC which could reasonably be expected to result in a liability to the
Borrower or an ERISA Affiliate in excess of $500,000, a copy of such
letter;
(ix) Within ten (10) Business Days after receipt by Borrower
or an ERISA Affiliate of a notice from a Multiemployer Plan regarding
the imposition of withdrawal liability which could reasonably be
expected to result in a liability to the Borrower or an ERISA Affiliate
in excess of $500,000, copies of each such notice;
(x) Within ten (10) Business Days after the failure by
Borrower or any ERISA Affiliate to make a required installment or any
other payment required under Section 412 of the IRC on or before the
due date for such installment or payment if such failure could
reasonably be expected to result in a lien under Section 412(n) of the
IRC, a notification of such failure; and
(xi) Within seven (7) Business Days after Borrower or any
ERISA Affiliate knows or has reason to know (A) a Multiemployer Plan
has been terminated, (B) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (C)
the PBGC has instituted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan if such event could
reasonably be expected to result in liability to the Borrower or an
ERISA Affiliate in excess of $500,000, a notification of such
information.
61
<PAGE> 68
For purposes of this Section 5.01, Borrower and any ERISA Affiliate shall be
deemed to know all facts known by the administrator of any Plan of which
Borrower or any ERISA Affiliate is the plan sponsor.
(i) Other Information. Such other information respecting the
financial condition of Borrower or its business, operations, assets, performance
or prospects as the Agent or any Lender may, from time to time, reasonably
request.
(j) Publicly Distributed Information. On a timely basis,
copies of all financial statements, reports and notices, sent or made available
generally by Parent to the holders of its publicly-held securities, if any, or
filed with the Commission, and of all press releases made available generally by
Parent to the public, if any, concerning material developments in the business
of Borrower.
(k) Property Damage or Condemnation. Promptly after the
occurrence thereof, written notification (or telephonic notice promptly
confirmed in writing) of and a description of any Property of Borrower or any of
its Subsidiaries with an aggregate value in excess of $2,500,000 damaged, lost
or taken and the anticipated amount of any insurance or condemnation proceeds in
connection therewith.
(l) Loss of Right to Self-Insure. Promptly upon Borrower
obtaining knowledge thereof, notice of the loss of the permission of the Federal
Maritime Commission for any member of the Consolidated Borrower Group to
self-insure with respect to the obligation to indemnify passengers with respect
to ticket deposits with any such Person in the event of nonperformance of water
transportation pursuant to Subpart A of Part 540 of Title 46, Code of Federal
Regulations.
5.02. Environmental Notices. Borrower shall notify the Agent
and each Lender in writing, promptly upon Borrower's learning thereof, of any:
(a) Notice or claim to the effect that the Borrower or any of
its Subsidiaries is or may be liable to any Person as a result of the Release or
threatened Release of any Contaminant into the environment, which liability
could reasonably be expected to be in excess of $500,000;
(b) Notice that the Borrower or any of its Subsidiaries is
subject to investigation by any Governmental Authority evaluating whether any
Remedial Action is needed to respond to the Release or threatened Release of any
Contaminant into the environment which could reasonably be expected to result in
a liability to the Borrower or such Subsidiary in excess of $500,000;
(c) Notice that any Property of Borrower or any of its
Subsidiaries is subject to an Environmental Lien;
(d) Notice of violation to the Borrower or any of its
Subsidiaries or awareness by the Borrower or any of its Subsidiaries of a
condition which might reasonably be expected to result in
62
<PAGE> 69
a notice of violation of any environmental, health or safety Requirement of Law
which has had or could reasonably be expected to have a Material Adverse Effect;
(e) Commencement or threat of any judicial or administrative
proceeding alleging a violation by Borrower or any of its Subsidiaries of any
environmental, health or safety Requirement of Law which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;
(f) New or proposed changes to any existing environmental,
health or safety Requirement of Law that have had or could reasonably be
expected to have a Material Adverse Effect; or
(g) Any proposed acquisition of stock, assets, real estate, or
leasing of property, or any other action by Borrower or any of its Subsidiaries
that would be reasonably likely to subject Borrower or any such Subsidiary to
environmental, health or safety Liabilities and Costs in excess of $1,000,000.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, on and after the date
hereof and so long as Borrower shall have any outstanding Agreement Obligations
or any Lender shall have any Commitment hereunder:
6.01. Corporate Existence, Etc. Except as permitted in Section
7.08, Borrower shall, and shall cause each of its Subsidiaries to, at all times,
maintain its existence as a corporation or limited liability company, as
applicable, and, except as permitted by Section 6.08, preserve and keep in full
force and effect its rights and franchises. Borrower shall promptly provide the
Agent and each of the Lenders with a complete list of its Subsidiaries upon the
occurrence of any change in the list set forth on Schedule 4.01(c) hereto.
6.02. Corporate Powers, Etc. Borrower shall, and shall cause
each of its Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its business requires it to be so qualified,
except in those jurisdictions where the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect.
6.03. Compliance with Laws. Borrower shall, and shall cause
each of its Subsidiaries to, comply with all Requirements of Law, and all
Contractual Obligations affecting it or its business, properties, assets or
operations, except where the failure so to comply could not reasonably be
expected to have a Material Adverse Effect.
63
<PAGE> 70
6.04. Payment of Taxes and Claims. Borrower shall, and shall
cause each of its Subsidiaries to, pay (a) all taxes, assessments and other
governmental charges imposed upon it or on any of its properties or assets or in
respect of any of its franchises, business, income or property before any
penalty or interest accrues thereon, and (b) all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien (other
than a Customary Permitted Lien) upon any of its properties or assets, prior to
the time when any penalty or fine shall be incurred with respect thereto;
provided that no such taxes, assessments and governmental charges referred to in
clause (a) above or claims referred to in clause (b) above need be paid (i) if
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required in conformity with Agreement Accounting Principles shall
have been made therefor or (ii) if adequate reserves in the absence of a
contested claim are maintained therefor in accordance with Agreement Accounting
Principles.
6.05. Maintenance of Properties; Insurance. Borrower shall,
and shall cause each of the Borrower Subsidiaries to, maintain or cause to be
maintained in good repair, working order and condition, excepting ordinary wear
and tear and damage, due to casualty or condemnation, all Property material to
its operations (which shall in any event include each vessel, whether subject to
a Ship Mortgage or otherwise) and will make or cause to be made all appropriate
repairs, renewals and replacements thereof. Borrower shall, and shall cause each
of the Borrower Subsidiaries to, maintain with financially sound insurance
companies the insurance policies and programs, including, self-insurance
retention levels, listed on Schedule 6.05 hereto (or substantially similar
programs or policies and amounts or other programs, policies and amounts
acceptable to the Requisite Lenders) insuring all Property and other assets
material to the operations of Borrower and the Borrower Subsidiaries (which
shall in any event include each vessel, whether subject to a Ship Mortgage or
otherwise) against loss or damage by fire, theft, burglary, pilferage and loss
in transit and business interruption, together with such other hazards as are
reasonably consistent with prudent industry practice, and maintain liability
insurance consistent with prudent industry practice with financially sound
insurance companies. Not later than thirty (30) days after the renewal,
replacement or material modification of any policy or program, the Borrower
shall deliver or cause to be delivered to the Agent (in sufficient quantity for
each of the Lenders, which the Agent shall promptly distribute to each Lender) a
detailed schedule setting forth for each such policy or program: (a) the amount
of such policy, (b) the risks insured against by such policy, (c) the name of
the insurer and each insured party under such policy, and (d) the policy number
of such policy. All casualty and business interruption insurance covering
Borrower or any Subsidiary of the Borrower or any Property of Borrower or any
Subsidiary of the Borrower shall contain an endorsement in the form of Exhibit
7.
6.06. Inspection of Property; Books and Records; Discussions.
Borrower shall permit, and shall cause each of its Subsidiaries to permit, any
authorized representative(s) designated by Agent or any Lender to visit and
inspect any of its properties and to discuss its affairs, finances and accounts
with its officers and independent certified public accountants, all upon
reasonable notice to the president, chief financial officer, treasurer or
general counsel of the Borrower and at
64
<PAGE> 71
such reasonable time and as often as may be reasonably requested. The Borrower
shall have the right to attend or otherwise participate in any discussion with
its independent accountants. Each such visitation and inspection made by or on
behalf of the Agent or any Lender shall be at the Agent's or such Lender's
expense if no Event of Default shall have occurred and be continuing and at all
other times at Borrower's expense.
6.07. Labor Matters. Borrower shall notify the Agent and each
Lender in writing, promptly, but in any event within five (5) Business Days
after learning thereof, of any material labor dispute to which it or any of its
Subsidiaries may become a party, any strikes or walkouts relating to any of its
or its Subsidiaries' facilities and the expiration of any material labor
contract to which it or any of its Subsidiaries is a party or by which it or any
of its Subsidiaries is bound.
6.08. Maintenance of Permits. Borrower shall obtain and
maintain, and shall cause each of its Subsidiaries to obtain and maintain, in
full force and effect all licenses, franchises, Permits or other rights
necessary for the operation of its business, except where the failure to obtain
or maintain such licenses, franchises, Permits or rights could not reasonably be
expected to have a Material Adverse Effect.
6.09. Employee Benefit Matters. Borrower shall establish,
maintain and operate, and cause each of its Subsidiaries and other ERISA
Affiliates to establish, maintain and operate, all Plans in all material
respects in compliance with the applicable provisions of ERISA, the IRC, and all
other applicable laws, and the regulations and interpretations thereunder, and
the respective requirements of the governing documents for such Plans.
6.10. Formation of Subsidiaries. The Borrower may form or
acquire additional Wholly-Owned Subsidiaries organized as corporations or
limited liability companies under the laws of one of the states of the United
States provided each of the following conditions is met in connection therewith
within fifteen (15) Business Days after the Borrower or any Borrower Subsidiary
has made an aggregate Investment in such additional Subsidiary in excess of
$50,000:
(i) such Subsidiary shall have executed and delivered a
Subsidiary Guaranty, a Subsidiary Security Agreement, and if requested
by the Agent, an Intellectual Property Agreement;
(ii) such Subsidiary shall have executed and become a party to
the Contribution Agreement;
(iii) to the extent such Subsidiary has an interest of record
in real property or in a vessel, such Subsidiary shall execute and
deliver such ship mortgages and/or real property mortgages in
connection therewith as shall be requested by the Agent (with Schedule
1.01-C being automatically amended as of the execution thereof);
65
<PAGE> 72
(iv) all financing statements and mortgages relating to the
Collateral of such Subsidiary shall have been filed or recorded and
the Agent shall have received in form and substance reasonably
satisfactory to the Agent, such assurances, including, without
limitation, insurance policies, as the Agent may deem appropriate to
establish such Subsidiary's title, the due creation, perfection and
priority of the Agent's Liens for the benefit of itself and the Holders
of Secured Obligations on such Collateral and the absence of any Liens
which are not specifically permitted hereunder;
(v) Borrower shall have executed and/or shall have caused its
appropriate Subsidiary to execute a Pledge Agreement in respect of all
of the stock or membership interests, as applicable, of such new
Subsidiary and Borrower and any other pledgor Subsidiary shall have
executed and delivered all financing statements and other documents
reasonably requested by the Agent in connection therewith;
(vi) the Agent shall have received an opinion of counsel, in
form and substance reasonably satisfactory to the Agent, covering such
matters relating to the proposed Subsidiary and the Transaction
Documents executed and delivered to the Agent pursuant to this Section
6.10 as the Agent deems necessary;
(vii) the Agent shall have received a compliance certificate
from an executive officer of the Borrower certifying that after the
formation of such Subsidiary, no Event of Default or Potential Event of
Default exists; and
(viii) the Lenders shall have received such other documents,
instruments or agreements as are reasonably requested by the Agent or
the Requisite Lenders in order to ensure that the documentation with
respect to such Subsidiary is substantially the same as that received
with respect to the Subsidiaries of the Borrower existing on the date
hereof.
6.11. Acquisition or Construction of New Vessels. At such time
as the Borrower or any of its Subsidiaries acquires or commences construction of
any New Vessel, the Borrower or such Subsidiary, as applicable, shall promptly
execute and deliver to the Agent all preferred ship mortgages, construction
mortgages, assignments of ship-building or construction contracts, consents and
agreements of the shipbuilder, financing statements and other appropriate
Collateral Documents with respect thereto as the Agent reasonably requests, all
in form and substance reasonably satisfactory to the Agent, together with all
title assurances, governmental certificates and Permits, insurance certificates,
endorsements and assignments and other documents as the Agent may reasonably
request to establish and perfect the Borrower's or such Subsidiary's title
thereto and the due creation, perfection, priority and protection of the Agent's
Liens thereon for the benefit of itself and the other Holders of Secured
Obligations.
6.12. Hedging Contracts. The Borrower shall not, and shall not
permit any Subsidiary to, enter into any Hedging Contract other than Hedging
Contracts pursuant to which the
66
<PAGE> 73
Borrower or such Subsidiary has hedged its reasonably estimated interest rate,
foreign currency or commodity exposure, and not for speculative purposes.
ARTICLE VII
NEGATIVE COVENANTS
Borrower covenants and agrees that, on and after the date
hereof and so long as Borrower shall have any outstanding Agreement Obligations
or any Lender shall have any Commitment hereunder:
7.01. Indebtedness. Borrower shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly create, incur, assume or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness, except:
(i) the Obligations;
(ii) the Existing Indebtedness;
(iii) Indebtedness in respect of Accommodation Obligations
permitted by Section 7.04;
(iv) Indebtedness incurred by any Subsidiary of the Borrower
with respect to which the Borrower or any other Subsidiary of the
Borrower is the obligee;
(v) Indebtedness incurred by the Borrower with respect to
which any Subsidiary of the Borrower is the obligee;
(vi) other Indebtedness of the Borrower and its Subsidiaries
not exceeding in the aggregate $5,000,000 at any one time outstanding;
(vii) any refinancing of the Indebtedness described in clauses
(i) through (vii), provided that any such refinancing is on terms no
less favorable in any material respect to the obligor than the
Indebtedness being refinanced and provided, further, that the new
Indebtedness incurred in connection with such refinancing does not
exceed the principal amount (together with any premium or penalty) of
the Indebtedness refinanced; and
(viii) the GAQSC Obligations;
provided, however, in each case after taking such Indebtedness into account the
Consolidated Borrower Group is in full compliance with the provisions of Article
VIII.
67
<PAGE> 74
7.02. Sales of Assets; Liens.
(a) Limitation on Sales. Borrower shall not, and shall not
permit any of its Subsidiaries to, sell, assign, transfer, lease (other than
pursuant to the intercompany leases set forth on Schedule 7.02(a)), convey or
otherwise dispose of any properties or assets, including, without limitation,
any capital stock or membership interests of any of its Subsidiaries, whether
now owned or hereafter acquired, or any income or profits therefrom to the
extent such disposition constitutes a Prepayment Event, unless the Net Proceeds
of such disposition are paid to the Agent in accordance with Section 2.06(b);
provided, however, that the Borrower shall not, and shall not permit any of its
Subsidiaries to sell, assign, transfer, lease, convey or otherwise dispose of
the American Queen, the Delta Queen, the Mississippi Queen or any New Vessel or
any of the capital stock or membership interests of any Subsidiary which owns
any of the foregoing except for fair market value and with the prior written
approval of all of the Lenders, and provided all of the Net Proceeds of any such
disposition are paid to the Agent in accordance with Section 2.06(b) (subject,
in the case of dispositions with respect to the American Queen to payment of
amounts required to be paid in connection with the MARAD Financing).
(b) Liens. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of its Property (including all capital stock
or membership interests, as applicable, of any Subsidiary of Borrower and all
Collateral) except:
(i) Liens granted to the Agent for the benefit of itself and
the Holders of Secured Obligations, securing the Obligations;
(ii) Customary Permitted Liens;
(iii) Permitted Existing Liens;
(iv) Liens on property existing at the time of acquisition
thereof by Borrower or any of its Subsidiaries and not created in
contemplation of such acquisition and Liens securing purchase money
Indebtedness for equipment to the extent the aggregate outstanding
principal amount of such Indebtedness does not exceed $2,500,000, is
permitted under Section 7.01 and such Indebtedness does not exceed the
purchase price of such equipment securing such Indebtedness, provided
that in each case such Liens do not apply to other property or assets
of such Person;
(v) Liens with respect to judgments or attachments which do
not result in an Event of Default or Potential Event of Default
hereunder;
(vi) Liens on the American Queen and other property of GAQSC
created pursuant to the GAQSC Security Agreement, the GAQSC Financial
Agreement, the GAQSC Trust
68
<PAGE> 75
Indenture, the GAQSC Ship Mortgage and the GAQSC Depository Agreement
to secure the GAQSC Obligations; and
(vii) Liens granted on cash collateral securing letters of
credit permitted pursuant to Section 7.01(vi) in favor of the issuer of
such letter of credit.
7.03. Investments. Borrower shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly make or commit to make any
advance, loan, extension of credit or capital contribution to, or purchase of
any stock, bonds, notes, debentures or other securities of, or make any other
investment in, any Person, including, without limitation, any Affiliate of the
Borrower (all such transactions being referred to as "Investments"), except:
(i) Investments by Borrower or any of its Subsidiaries in Cash
Equivalents; and Investments by the Borrower in commercial paper that
would qualify as a Cash Equivalent but for the fact that the issuer's
rating on such commercial paper is not at least A-1 from S&P or P-1
from Moody's, provided that (i) such rating is at least A-2 from S&P or
P-2 from Moody's and (ii) the aggregate amount of such Investments at
any time shall not exceed $10,000,000;
(ii) Investments constituting Intercompany Receivables as of
the Effective Date;
(iii) Investments by the Borrower in its Wholly-Owned
Subsidiaries (including, without limitation, Investments in any Person
which, as a result of such Investment, becomes a Wholly-Owned
Subsidiary pursuant to and in compliance with Section 6.10); provided,
however, that such Investments by the Borrower in GAQSC may not exceed
an aggregate amount of $10,000,000 and provided, further, that no such
Investment shall be permitted to be made if before or after making such
Investment an Event of Default has occurred and is continuing or would
result therefrom;
(iv) loans to employees in the ordinary course of business not
in excess of an aggregate amount of $500,000 outstanding at any one
time;
(v) other Investments by Borrower and the Borrower
Subsidiaries not in excess of an aggregate amount during any Fiscal
Year which, when added to the aggregate amount of all Restricted Junior
Payments during such Fiscal Year pursuant to Section 7.05, does not
exceed the Permitted Amount; provided that no such Investment shall be
permitted to be made if before or after making such Investment an Event
of Default has occurred and is continuing or would result therefrom;
and
(vi) Investments by GAQSC in accordance with the GAQSC
Security Agreement, the GAQSC Financial Agreement and the GAQSC
Depository Agreement.
69
<PAGE> 76
Notwithstanding anything herein to the contrary, (a) there shall be excluded
from the calculation of Investments the accrual of intercompany charges incurred
in the ordinary course and (b) there shall be included in the calculation of
investments all transfers of cash or assets (other than the purchase of
inventory in the ordinary course of business and upon terms that would be
obtained in an arms-length transaction).
7.04. Accommodation Obligations. Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create or become
or be liable with respect to any Accommodation Obligation, except:
(i) guaranties resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(ii) Accommodation Obligations arising in connection with the
Transaction Documents;
(iii) Accommodation Obligations of the Borrower pursuant to
the GAQSC Guaranty;
(iv) Accommodation Obligations with respect to any
Indebtedness permitted by Section 7.01; and
(v) Accommodation Obligations with respect to any Contractual
Obligation of the Borrower or any Subsidiary (other than GAQSC, except
as permitted by clause (iii) above) if such Contractual Obligation is
not otherwise prohibited under this Agreement.
7.05. Restricted Junior Payments. Borrower shall not, and
shall not permit any Subsidiary of Borrower to, declare or make any Restricted
Junior Payment, except:
(i) Restricted Junior Payments by the Borrower or any of its
Subsidiaries to Parent or any Affiliate of Parent (other than the
Borrower and its Subsidiaries) not in excess of an aggregate amount
during any Fiscal Year which, when added to the aggregate amount of all
Investments during such Fiscal Year pursuant to Section 7.03(v), does
not exceed the Permitted Amount; provided that no such Restricted
Junior Payment shall be permitted to be made if before or after making
such Restricted Junior Payment an Event of Default has occurred and is
continuing or would result therefrom; and
(ii) any Subsidiary of Borrower may pay dividends,
distributions or other payments (including loan payments) to Borrower
or another Wholly-Owned Subsidiary of Borrower.
7.06. Conduct of Business. Borrower shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
business engaged in by the Borrower and its Subsidiaries on the date hereof and
any business activities substantially similar or related thereto, including
without limitation, the operation of any New Vessel in its cruise business.
70
<PAGE> 77
7.07. Transactions with Affiliates. Except as expressly
permitted by Section 7.03 or 7.05, Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any of its
Affiliates (other than a member of the Consolidated Borrower Group) on terms
that are less favorable to it than those fair and reasonable terms that might be
obtained in a comparable arms-length transaction at the time.
7.08. Restriction on Fundamental Changes.
(a) Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution) or discontinue its
business, except that any Subsidiary of Borrower may merge into or convey, sell,
lease or transfer all or substantially all of its assets to Borrower or any
other Subsidiary of Borrower (other than GAQSC).
(b) Borrower shall not, and shall not permit its Subsidiaries
to, acquire by purchase or otherwise any property or assets of any other Person,
except in the ordinary course of its business (including, without limitation,
the acquisition of New Vessels for operation in its cruise business) or to the
extent permitted pursuant to Section 7.03.
7.09. Employee Benefit Matters. Borrower shall not, and shall
not permit any of its ERISA Affiliates to:
(i) Engage in any prohibited transaction described in Section
406 of ERISA or 4975 of the IRC for which a statutory or class
exemption is not available or a private exemption has not been
previously obtained from the DOL and for which a civil penalty pursuant
to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the
IRC, in excess of $1,000,000 is imposed.
(ii) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the IRC), which has not
been waived;
(iii) fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any
Benefit Plan;
(iv) terminate any Benefit Plan in a distress termination
under Section 4041(c) of ERISA which would result in any material
liability to Borrower or any ERISA Affiliate;
(v) fail to make any contribution or payment to any
Multiemployer Plan which Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto which could reasonably be expected
to result in a liability in excess of $1,000,000;
71
<PAGE> 78
(vi) fail to pay any required installment or any other payment
required under Section 412 of the IRC on or before the due date for
such installment or other payment which could reasonably be expected to
result in a lien under Section 412(n) of the IRC; or
(vii) amend a Plan resulting in an increase in current
liability for the plan year such that Borrower or any ERISA Affiliate
is required to provide security to such Plan under Section 401(a)(29)
of the IRC.
7.10. Environmental Liabilities. Borrower shall not, and shall
not permit any of its Subsidiaries to, become subject to any Liabilities and
Costs, which could reasonably be expected to have a Material Adverse Effect,
arising out of or related to (a) the Release or threatened Release at any
location of any Contaminant into the environment, or any Remedial Action in
response thereto, or (b) any violation of any environmental, health and safety
Requirements of Law.
7.11. Margin Regulations. No portion of the proceeds of any
credit extended under this Agreement shall be used in any manner which might
cause the extension of credit or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X or any other regulation of the
Federal Reserve Board or to violate the Securities Exchange Act or the
Securities Act, in each case as in effect on the date or dates of such Borrowing
and the use of such proceeds.
7.12. Change of Fiscal Year. Borrower shall not change its
Fiscal Year.
7.13. Amendment of Certain Documents. Borrower and its
Subsidiaries shall not permit any termination of, or any modification or
amendment that is adverse in any respect to the Lenders to be made to the
certificate of incorporation or by-laws or the certificate of formation or
limited liability company agreement, or other comparable organizational or
governing documents, as applicable, of Borrower or any of its Subsidiaries.
Except for modification, assumption and supplemental documents effective as of
December 31, 1996, in connection with the merger of Great AQ Steamboat Co. into
Great AQ Steamboat, L.L.C., Borrower and GAQSC shall not modify or amend the
GAQSC Obligations, the GAQSC Trust Indenture, the GAQSC Security Agreement, the
GAQSC Financial Agreement, the GAQSC Ship Mortgage, the GAQSC Depository
Agreement or the GAQSC Guaranty without the prior written consent of the Agent.
ARTICLE VIII
FINANCIAL COVENANTS
Borrower covenants and agrees that, on and after the date
hereof and so long as Borrower shall have any outstanding Agreement Obligations
or any Lender shall have any Commitment hereunder:
72
<PAGE> 79
8.01. Maximum Bank Indebtedness Leverage Ratio. Borrower shall
not permit the Bank Indebtedness Leverage Ratio calculated at the end of each
fiscal quarter set forth below to be greater than the ratio set forth below with
respect to such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Maximum Ratio
--------------------- -------------
<S> <C> <C>
Prior to December 31, 2001 3.75 to 1
On or after December 31, 2001
and prior to
December 31, 2002 3.25 to 1
On or after December 31, 2002 2.25 to 1
</TABLE>
8.02. Maximum Total Indebtedness Leverage Ratio. Borrower
shall not permit the Total Indebtedness Leverage Ratio calculated at the end of
each fiscal quarter set forth below to be greater than the ratio set forth below
with respect to such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Maximum Ratio
--------------------- -------------
<S> <C> <C>
Prior to December 31, 2001 4.50 to 1
On or after December 31, 2001
and prior to
December 31, 2002 4.00 to 1
On or after December 31, 2002 3.00 to 1
</TABLE>
8.03. Minimum Interest Coverage Ratio. Borrower shall not
permit the Interest Coverage Ratio calculated at the end of each fiscal quarter
set forth below for the period of the immediately preceding four fiscal quarters
to be less than the ratio set forth below with respect to such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Minimum Ratio
--------------------- -------------
<S> <C> <C>
Prior to December 31, 2001 2.75 to 1
On or after December 31, 2001 3.00 to 1
</TABLE>
8.04. Capital Expenditures. (a) Borrower shall not, and shall
not permit any of its Subsidiaries to, incur Maintenance Capital Expenditures
which exceed, in the aggregate, $7,000,000 in Fiscal Year 1999, $8,000,000 in
Fiscal Year 2000 and $10,000,000 in each Fiscal Year thereafter, plus for each
Fiscal Year after Fiscal Year 1999, the difference (the "Carryover Amount"), if
73
<PAGE> 80
positive, between (1) the maximum aggregate amount of Maintenance Capital
Expenditures permitted pursuant to this Section 8.04(a) for the immediately
preceding Fiscal Year and (2) the aggregate amount of actual Maintenance Capital
Expenses for such preceding Fiscal Year; provided, however, that the Carryover
Amount shall not exceed $6,000,000 for any Fiscal Year.
(b) Borrower shall not, and shall not permit any of its
Subsidiaries to, incur New Vessel Capital Expenditures which exceed, in the
aggregate for each New Vessel, the amount set forth below corresponding to such
New Vessel:
<TABLE>
<CAPTION>
Vessel Amount
------ ------
<S> <C>
Western Riverboat $18,500,000
Coastal Cruiser One $37,000,000
Coastal Cruiser Two $38,000,000
</TABLE>
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.01. Events of Default. Each of the following occurrences
shall constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. Borrower shall fail (i)
to pay when due any principal of any Loan or LC Disbursement or (ii) to pay when
due any interest on any Loan or any fee or other amount payable under this
Agreement or any of the other Loan Documents and such failure under this clause
(ii) shall continue for three (3) Business Days.
(b) Breach of Certain Covenants. Borrower or any of its
Subsidiaries shall fail duly and punctually to perform or observe any agreement,
covenant or obligation under Section 5.01 or under Article VII (other than
Sections 7.07 and 7.09) or VIII.
(c) Breach of Representation or Warranty. Any representation
or warranty made or deemed made by Borrower to the Agent or any Lender herein or
by Borrower or any of its Subsidiaries in any of the other Loan Documents or in
any written statement or certificate at any time given by Borrower or any of its
Subsidiaries pursuant to any of the Loan Documents shall be false or misleading
in any material respect on the date as of which made or deemed made.
(d) Other Defaults. Borrower or any of its Subsidiaries shall
fail duly and punctually to perform or observe any agreement, covenant or
obligation arising under this Agreement (except those described in Sections
9.01(a), (b) and (c)) or under any of the other Loan Documents, and such
74
<PAGE> 81
failure shall continue for thirty (30) days (or, in the case of Loan Documents
other than this Agreement, any longer period of grace expressly set forth
therein).
(e) Default as to Other Indebtedness. Borrower or any of its
Subsidiaries shall fail to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) on any Other
Indebtedness of Borrower or any such Subsidiary, if the aggregate outstanding
amount of all such Indebtedness is $2,500,000 or more, or any breach, default or
event of default shall occur, or any other event shall occur or condition shall
exist, under any instrument, agreement or indenture pertaining thereto, if the
effect thereof is to accelerate, or permit the holder(s) of such Indebtedness to
accelerate, the maturity of any such Indebtedness; or any such Indebtedness
shall be declared to be due and payable or required to be prepaid or mandatorily
redeemed (other than by a regularly scheduled required prepayment prior to the
stated maturity there of); or the holder of any Lien, in any amount, shall
commence foreclosure of such Lien upon property of Borrower or any of its
Subsidiaries having a book or fair market value in excess of $1,000,000 in the
aggregate.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc. (i)
An involuntary case shall be commenced against Borrower or any of its
Subsidiaries and the petition shall not be dismissed within sixty (60) days
after commencement of the case, or a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of Borrower or any of its
Subsidiaries in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereinafter in effect; or any other
similar relief shall be granted under any applicable federal, state or foreign
law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Borrower or any of its
Subsidiaries or over all or a substantial part of the property of Borrower or
any of its Subsidiaries shall be entered; or an interim receiver, trustee or
other custodian of Borrower or any of its Subsidiaries or of all or a
substantial part of the property of Borrower or any of its Subsidiaries shall be
appointed or a warrant of attachment, execution or similar process against any
substantial part of the property of Borrower or any of its Subsidiaries, shall
be issued and any such event shall not be stayed, vacated, dismissed, bonded or
discharged within sixty (60) days of entry, appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc.
Borrower or any of its Subsidiaries shall have an order for relief entered with
respect to it or commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking of possession by a receiver, trustee or other
custodian for all or a substantial part of its property; Borrower or any of its
Subsidiaries shall make any assignment for the benefit of creditors or shall be
unable or generally fail, or admit in writing its inability, to pay its debts as
such debts become due; or the board of directors (or any committee thereof) or
the managing members of
75
<PAGE> 82
Borrower or any of its Subsidiaries adopts any resolution to authorize or
approve any of the foregoing.
(h) Judgments. (i) Enforceable Judgments (other than an
Enforceable Judgment described in the proviso contained in the definition of
Enforceable Judgment) for the payment of money in an aggregate amount in excess
of $5,000,000 shall be rendered against Borrower or any of its Subsidiaries and
such Enforceable Judgments shall continue unsatisfied or unstayed for a period
of thirty (30) days or action shall have been commenced to foreclose on such
Enforceable Judgments, or (ii) Enforceable Judgments described in the proviso
contained in the definition of Enforceable Judgments shall be rendered against
Borrower or any of its Subsidiaries.
(i) Dissolution. Any order, judgment or decree shall be
entered against Borrower or any of its Subsidiaries decreeing its involuntary
dissolution or split-up and such order shall remain undischarged and unstayed
for a period in excess of thirty (30) days; or Borrower or any of its
Subsidiaries shall otherwise dissolve or cease to exist except as expressly
permitted pursuant to Section 7.08.
(j) Collateral Documents; Failure of Security. For any reason
other than a release of Liens in accordance with the terms of the Loan Documents
or the failure of the Agent and the Lenders to take any action available to them
to maintain the perfection of the Liens created in favor of the Agent, for the
benefit of itself and the Holders of Secured Obligations, pursuant to this
Agreement and the Collateral Documents, any Collateral Document ceases to be in
full force and effect in any material respect or any Lien intended to be created
thereby ceases to be or is not valid and perfected or the Borrower or any of its
Subsidiaries asserts that any such Lien is not valid and perfected.
(k) Change in Control. (i) Any Change of Control occurs; or
(ii) Borrower shall cease to own directly or indirectly all of the capital stock
or membership interests of its Subsidiaries.
(l) Employee Benefit Related Liabilities. (i) Any Termination
Event occurs which the Agent believes could subject Borrower or an ERISA
Affiliate to a material liability to pay money if the payment of such liability
could reasonably be expected to have a Material Adverse Effect, (ii) the plan
administrator of any Plan applies under Section 412(d) of the IRC for a waiver
of the minimum funding standards of Section 412(a) of the IRC and the Agent
believes that the substantial business hardship upon which the application for
the waiver is based could subject either the Borrower or any ERISA Affiliate to
a material liability to pay money if the payment of such liability could
reasonably be expected to have a Material Adverse Effect.
(m) Contribution Agreement Default. Any party to the
Contribution Agreement shall terminate or revoke any of its obligations under
the Contribution Agreement or breach any of the material terms of the
Contribution Agreement.
76
<PAGE> 83
(n) Subsidiary Guaranty Default. Any Borrower Subsidiary party
to any Subsidiary Guaranty shall terminate or revoke any of its obligations
under its Subsidiary Guaranty, breach any of the terms of its Subsidiary
Guaranty, or any Subsidiary Guaranty shall otherwise become unenforceable for
any reason.
For purposes of this Agreement and each of the other Loan
Documents, an Event of Default shall be deemed "continuing" until cured or
waived in writing in accordance with Section 11.08.
9.02. Rights and Remedies.
(a) Acceleration and Termination of Commitments. Upon the
occurrence of any Event of Default described in Section 9.01(f) or 9.01(g) with
respect to Borrower or any of its Subsidiaries, the Commitments shall
automatically and immediately terminate and the unpaid principal amount of and
any and all accrued interest on the Loans and all other Agreement Obligations
shall automatically become immediately due and payable, with all additional
interest from time to time accrued thereon and without presentment, demand, or
protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to demand
or accelerate and of acceleration), all of which are hereby expressly waived by
Borrower, and the obligation of each Lender to make any Loan and of the Issuing
Bank to issue any Letter of Credit hereunder shall thereupon terminate; and upon
the occurrence and during the continuance of any other Event of Default, the
Agent shall at the request, or may with the consent, of the Requisite Lenders,
by written notice to Borrower, (i) declare that the Commitments are terminated,
whereupon the Commitments and the obligation of each Lender to make any Loan and
of the Issuing Bank to issue any Letter of Credit hereunder shall immediately
terminate, and (ii) declare the unpaid principal amount of and any and all
accrued and unpaid interest on the Loans and all other Agreement Obligations to
be, and the same shall thereupon be, immediately due and payable with all
additional interest from time to time accrued thereon and without presentment,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of intent
to demand or accelerate and of acceleration), all of which are hereby expressly
waived by Borrower.
(b) Rescission. If at any time after acceleration of the
maturity of the Loans, Borrower shall pay all arrears of interest and all
payments on account of principal of the Loans which shall have become due
otherwise than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Potential Events of Default (other than nonpayment
of principal of and accrued interest on the Loans due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to Section 11.08,
then by written notice to Borrower, the Requisite Lenders may elect, in the sole
discretion of such Requisite Lenders, to rescind and annul the acceleration and
its consequences; but such action shall not affect any subsequent Event of
Default or Potential Event of Default or impair any right or remedy consequent
thereon. The provisions of the preceding sentence are intended merely to bind
the Lenders to a decision which may be made at the election of the
77
<PAGE> 84
Requisite Lenders; they are not intended to benefit Borrower and do not give
Borrower the right to require the Lenders to rescind or annul any acceleration
hereunder, even if the conditions set forth herein are met.
ARTICLE X
THE AGENT
10.01. Appointment. (a) Each of the Lenders and the Issuing
Bank hereby designates and appoints The Chase Manhattan Bank as the Agent of
such Lender under this Agreement and the Loan Documents, and each of the Lenders
and the Issuing Bank hereby irrevocably authorizes the Agent to take such action
on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are incidental thereto. The Agent agrees to
act as such on the express conditions contained in this Article X.
(b) The provisions of this Article X (other than Sections
10.07, 10.08 and 10.09(c)) are solely for the benefit of the Agent and the
Holders of Secured Obligations and Borrower shall have no right to rely on or
enforce any of the provisions hereof (other than Sections 10.07, 10.08 and
10.09(c)). In performing its functions and duties under this Agreement, the
Agent shall act solely as agent for the Lenders and the Issuing Bank and does
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for Borrower or any of its Affiliates.
10.02. Nature of Duties. The Agent shall not have any duties
or responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Holder of Secured Obligations. Nothing
in this Agreement or any of the other Loan Documents, expressed or implied, is
intended to or shall be construed to impose upon the Agent any obligations in
respect of this Agreement or any of the other Loan Documents except as expressly
set forth herein or therein. Each Holder of Secured Obligations shall make its
own independent investigation of the financial condition and affairs of Borrower
and its Subsidiaries in connection with the making and the continuance of the
Loans and the issuance of Letters of Credit hereunder and the entering into any
Eligible Hedging Contract and shall make its own appraisal of the
creditworthiness of Borrower and its Subsidiaries, and the Agent shall not have
any duty or responsibility, either initially or on a continuing basis, to
provide any Holder of Secured Obligations with any credit or other information
with respect thereto, whether coming into its possession on or before the
Effective Date or at any time or times thereafter. Each Lender and the Issuing
Bank acknowledges that neither the Agent nor counsel to the Agent nor any other
Lender is providing any assurances, or shall have any responsibility, with
respect to the ownership of the Property or the absence of any prior Liens or
defects of title, or the legality, sufficiency or effect of any mortgage,
certificate or notice, or any other document, or the validity, creation,
perfection or priority of any Lien, or as to any decision to request, take,
defer, omit or
78
<PAGE> 85
release any Collateral or to investigate or not to investigate any of those
matters, and each Lender agrees to look solely to its rights as one of the
Lenders with respect to any of the foregoing. If the Agent seeks the consent or
approval of the Requisite Lenders to the taking or refraining from taking any
action hereunder, the Agent shall send notice thereof to each Lender. The Agent
shall promptly notify each Lender at any time that the Requisite Lenders or,
where expressly required, all of the Lenders, have instructed the Agent to act
or refrain from acting pursuant hereto.
10.03. Rights, Exculpation, Etc. Neither the Agent nor any of
its Affiliates nor any of its officers, directors, employees, agents, attorneys
or consultants shall be liable to any Holder of Secured Obligations for any
action taken or omitted by it or such Person hereunder or under any of the Loan
Documents, or in connection herewith or therewith, except that (i) the Agent
shall be obligated on the terms set forth herein for performance of its express
obligations hereunder, and (ii) no Person shall be relieved of any liability
imposed by law for its gross negligence or willful misconduct (as determined by
the final judgment of a court of competent jurisdiction). The Agent shall not be
liable for any apportionment or distribution of payments made by it in good
faith pursuant to the terms of this Agreement and if any such apportionment or
distribution is subsequently determined to have been made in error the sole
recourse of any Holder of Secured Obligations to whom payment was due, but not
made, shall be to recover from other Holders of Secured Obligations any payment
in excess of the amount to which they are determined to have been entitled. The
Agent shall not be responsible to any Holder of Secured Obligations for any
recitals, statements, representations or warranties herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility, or
sufficiency of this Agreement, any of the Collateral Documents or any of the
other Loan Documents, or any of the transactions contemplated hereby and
thereby, or of any of the Transaction Documents or any of the transactions
contemplated thereby, or for the financial condition of Borrower or any of its
Subsidiaries. The Agent shall not be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement or any of the Loan Documents or the financial
condition of Borrower or any of Subsidiaries or the existence or possible
existence of any Potential Event of Default or Event of Default. The Agent may
at any time request instructions from the Lenders with respect to any actions or
approvals which by the terms of this Agreement or of any of the other Loan
Documents the Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, the Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from the Requisite Lenders or, where expressly
required, all of the Lenders. Without limiting the foregoing, no Holder of
Secured Obligations shall have any right of action whatsoever against the Agent
as a result of the Agent acting or refraining from acting under this Agreement,
the Collateral Documents or any of the other Loan Documents in accordance with
the instructions of the Requisite Lenders or, where expressly required, all of
the Lenders.
10.04. Reliance. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, or made by the proper Person, and with
79
<PAGE> 86
respect to all matters pertaining to this Agreement, the Collateral Documents or
any of the other Loan Documents and its duties hereunder or thereunder, upon
advice of legal counsel (including counsel for Borrower), independent public
accountants and other experts selected by it in good faith.
10.05. Indemnification. To the extent that the Agent is not
reimbursed and indemnified by Borrower or Borrower fails upon demand by the
Agent to perform its obligations to reimburse or indemnify the Agent, the
Lenders will reimburse and indemnify the Agent for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Agent in any way relating to or
arising out of this Agreement, the Collateral Documents or any of the other
Transaction Documents or any action taken or omitted by the Agent under this
Agreement, the Collateral Documents or any of the other Transaction Documents,
in proportion to each Lender's Pro Rata Share; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct, as determined by the
final judgment of a court of competent jurisdiction. The obligations of the
Lenders under this Section 10.05 shall survive the payment in full of the Loans
and the termination of this Agreement.
10.06. The Agent Individually. With respect to its Pro Rata
Share hereunder and the Loans made by it, the Agent shall have and may exercise
the same rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender. The
terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include the Agent in its individual
capacity as a Lender or one of the Requisite Lenders. The Agent may accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other business with Borrower as if it were not acting as Agent pursuant
hereto.
10.07. Successor Agent; Resignation of Agent. (a) The Agent
may resign from the performance of its functions and duties hereunder at any
time by giving at least thirty (30) days prior written notice to the Lenders,
the Issuing Bank and Borrower. In the event that the Agent gives notice of its
desire to resign from the performance of its functions and duties as Agent, any
such resignation shall take effect only upon the acceptance by a successor Agent
of appointment pursuant to clauses (b) and (c) below.
(b) The Requisite Lenders shall appoint a successor Agent who
shall be reasonably satisfactory to Borrower provided no such approval of the
Borrower shall be required after the occurrence and during the continuance of an
Event of Default.
(c) If a successor Agent shall not have been so appointed
within said thirty (30) day period, the retiring Agent, with the consent of
Borrower (which may not be withheld unreasonably), shall then appoint a
successor Agent who shall serve as Agent until such time, if any, as the
Requisite Lenders, with the consent of Borrower (which may not be withheld
unreasonably), appoint
80
<PAGE> 87
a successor Agent as provided above. No consent of the Borrower shall be
required after the occurrence and during the continuance of an Event of Default.
(d) Upon the appointment of a successor Agent, the term
"Agent" shall, for all purposes of this Agreement, thereafter include such
successor, except that the retiring Agent shall reserve all rights as to
Obligations accrued or due to it, in its capacity as such, at the time of such
succession and all rights (whenever arising) under Section 11.04.
(e) Notwithstanding anything in this Section 10.07 to the
contrary, no Person shall serve as an Agent unless such Person is a Lender.
10.08. Collateral Matters. (a) Each of the Lenders authorizes
and directs the Agent to enter into the Loan Documents relating to the
Collateral for the benefit of itself and the Holders of Secured Obligations.
Each of the Lenders agrees that any action taken by the Agent or the Requisite
Lenders (or, where required by the express terms of this Agreement or any other
Loan Document, a greater proportion of the Lenders) in accordance with the
provisions of this Agreement or the other Loan Documents, and the exercise by
the Agent or the Requisite Lenders (or, where so required, such greater
proportion) of the powers set forth herein or therein, together with such other
powers as are reasonably incidental thereto, shall be authorized and binding
upon all of the Lenders. Without limiting the generality of the foregoing, the
Agent shall have the sole and exclusive right and authority to (i) act as the
disbursing and collecting agent for the Lenders with respect to all payments and
collections arising in connection with this Agreement and the other Loan
Documents relating to the Loans or Collateral; (ii) execute and deliver each
Loan Document relating to the Collateral and accept delivery of each such
agreement delivered by the Borrower or any of its Subsidiaries; (iii) act as
collateral agent for the Lenders for purposes of the perfection of all security
interests and Liens created by such agreements and all other purposes stated
therein, provided, however, the Agent hereby appoints, authorizes and directs
the Lenders to act as collateral sub-agent for the Agent and the Lenders for
purposes of the perfection of all security interests and Liens with respect to
the Borrower's and the Borrower's Subsidiaries' respective deposit accounts
maintained with, and cash and Cash Equivalents held by, such Lender; (iv)
manage, supervise and otherwise deal with the Collateral in accordance with the
terms of this Agreement and the other Loan Documents; (v) take such action as is
necessary or desirable to maintain the perfection and priority of the security
interests and Liens created or purported to be created by the Loan Documents;
and (vi) except as may be otherwise specifically restricted by the terms of this
Agreement or any other Loan Document, exercise all remedies given to the Agent
or the Lenders with respect to the Collateral under the Loan Documents relating
thereto, under applicable law or otherwise.
(b) The Holders of Secured Obligations hereby irrevocably
authorize the Agent, at the option and in the discretion of the Agent, to
release any Lien granted to or held by the Agent upon any Collateral (i) upon
termination of the Commitments and payment and satisfaction of all Loans and all
other Agreement Obligations which have matured and which the Agent has been
notified in writing are then due and payable; or (ii) constituting property
being sold or disposed of if Borrower certifies to the Agent that the sale or
disposition is made in compliance with
81
<PAGE> 88
Section 7.02 (and the Agent may rely conclusively on any such certificate,
without further inquiry); or (iii) constituting property in which neither the
Borrower nor any Subsidiary of the Borrower owned any interest at the time the
Lien was granted or at any time thereafter; or (iv) if approved or consented to
by the Requisite Lenders (or, where so required, all of the Lenders). Upon
request by the Agent at any time, the Lenders will confirm in writing the
Agent's authority to release particular types or items of Collateral pursuant to
this Section 10.08(b).
(c) Without in any manner limiting the Agent's authority to
act without any specific or further authorization or consent by the Requisite
Lenders (as set forth in Section 10.08(b)), each Lender agrees to confirm in
writing, upon request by Borrower, the authority to release Collateral conferred
upon the Agent under clauses (i) through (iv) of Section 10.08(b). So long as no
Event of Default is then continuing, upon receipt by the Agent of the net cash
proceeds of any sale and transfer of Collateral which is expressly permitted
pursuant to the terms of this Agreement, to the extent such proceeds are
required to be paid to the Lenders, and upon at least five (5) Business Days'
prior written request by Borrower, the Agent shall (and is hereby irrevocably
authorized by the Holders of Secured Obligations to) execute such documents as
may be necessary to evidence the release of the Liens granted to the Agent for
the benefit of the Holders of Secured Obligations herein or pursuant hereto upon
such Collateral; provided, that (i) the Agent shall not be required to execute
any such document on terms which, in the Agent's opinion, would expose the Agent
to liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) such release shall
not in any manner discharge, affect or impair the Obligations or any Liens upon
(or obligations of Borrower in respect of) all interests retained by Borrower,
including, without limitation, the proceeds of any sale, all of which shall
continue to constitute part of the Collateral.
(d) The benefit of the Collateral Documents and of the
provisions of this Agreement relating to the Collateral shall extend to and be
available in respect of any Obligations ("Related Obligations") which arise
under any Eligible Hedging Contracts or which are otherwise owed to Persons
entitled to indemnification pursuant to Section 11.04; provided that (i) the
Related Obligations shall be entitled to the benefit of the Collateral to the
extent and with the priority expressly set forth in this Agreement and the
Collateral Documents, and to such extent the Agent shall hold, and have the
right and power to act with respect to, the Collateral on behalf of and as agent
for the holders of the Related Obligations; but the Agent is otherwise acting
solely as agent for the Lenders and shall have no separate fiduciary duty, duty
of loyalty, duty of care, duty of disclosure or other obligation whatsoever to
any holder of Related Obligations; and (ii) all matters, acts and omissions
relating in any manner to the Collateral, or the omission, creation, perfection,
priority, abandonment or release of any Lien, shall be governed solely by the
provisions of this Agreement and the Collateral Documents, and no separate Lien,
right, power or remedy shall arise or exist in favor of any Holder of Secured
Obligations under any separate instrument or agreement or in respect of any
Related Obligations; and (iii) each Holder of Secured Obligations shall be bound
by all actions taken or omitted, in accordance with the provisions of this
Agreement and the Collateral Documents, by the Agent and the Requisite Lenders
or, where expressly required, all of the Lenders, each of whom shall be entitled
to act at its sole discretion and exclusively in its own
82
<PAGE> 89
interest given its own Commitments and its own interest in the Loans, and its
other Agreement Obligations, without any duty or liability to any other Holder
of Secured Obligations or as to any Related Obligations and without regard to
whether any Related Obligations remain outstanding or are deprived of the
benefit of the Collateral or become unsecured or are otherwise affected or put
in jeopardy thereby; and (iv) no holder of Related Obligations and no other
Holder of Secured Obligations (except the Agent and the Lenders, to the extent
set forth in this Agreement) shall have any right to be notified of, or to
direct, require or be heard with respect to, any action taken or omitted in
respect of the Collateral or under this Agreement or the Collateral Documents;
and (v) no holder of any Related Obligations shall exercise any right of setoff,
banker's lien or similar right.
10.09. Relations Among Lenders.
(a) Except as set forth in the following clause (b) of this
section, each Lender agrees that it will not take any action, nor institute any
actions or proceedings, against Borrower or any other obligor hereunder or with
respect to any Collateral or Loan Document, without the prior written consent of
the Requisite Lenders or, as may be provided in this Agreement or the other Loan
Documents, at the direction of the Agent.
(b) The Lenders are not partners or co-venturers, and no
Lender shall be liable for the acts or omissions of, or (except as otherwise set
forth herein in case of the Agent) authorized to act for, any other Lender.
(c) Hibernia National Bank, as Documentation Agent, shall have
no right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, Hibernia National Bank shall not have by reason of this Agreement
a fiduciary relationship in respect of any Lender.
ARTICLE XI
MISCELLANEOUS
11.01. Survival of Warranties and Agreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the other Loan Documents and the making of the
Loans and the issuance of Letters of Credit hereunder.
11.02. Assignments and Participations.
(a) At any time after the Effective Date, each Lender may
assign to one or more banks or financial institutions all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment and Revolving Credit Exposure) in conformity with
the following provisions:
83
<PAGE> 90
(i) each such assignment shall be of a constant, and not a
varying, percentage of the assigning Lender's rights and obligations under this
Agreement and the assignment shall transfer the same percentage of such Lender's
Commitment, Revolving Credit Exposure and other interests hereunder;
(ii) unless the Agent and the Borrower otherwise consent, the
amount of the Commitment of the assigning Lender being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $5,000,000 or, if
less, the entire amount of such assigning Lender's Commitment, Revolving Credit
Exposure and other interests hereunder (provided that assignments between
Lenders shall have no minimum amount and assignments after the occurrence and
during the continuance of an Event of Default shall not require Borrower's
consent regardless of the size of such assignment);
(iii) the Agent shall have consented (which consent shall not
unreasonably be withheld) to each such assignment and the parties to each such
assignment shall execute and deliver to the Agent an Assignment and Acceptance,
together with a processing and recordation fee of $3,500; provided that such
consent of the Agent shall not be required for any assignment made by a Lender
to an Affiliate of such Lender; and
(iv) With respect to any assignment made at a time when no
Event of Default exists, the Borrower shall have consented to such assignment,
which consent shall not unreasonably be withheld; provided that such consent of
the Borrower shall not be required for any assignment made by a Lender to an
Affiliate of such Lender.
Upon such execution, delivery, approval, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution date
thereof, (x) the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned or negotiated to it
pursuant to such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder (including, in respect of the Collateral, all the rights and
obligations of a Holder of Secured Obligations, as fully as if such assignee had
been named as a Lender in accordance with the terms of this Agreement) and (y)
the Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned or negotiated by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.09, 2.10, 2.11, 11.03 and 11.04, as well
as to any fees accrued for its account hereunder and not yet paid.
(b) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) the assignment made
under such Assignment and Acceptance is made
84
<PAGE> 91
without recourse and, other than as provided in such Assignment or and
Acceptance, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any other Loan
Document or any other document, instrument or agreement executed or delivered in
connection herewith or therewith or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Transaction Document or any other instrument or document furnished pursuant
hereto or thereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrower or any of its Subsidiaries or the performance or observance by
Borrower or any of its Subsidiaries of any of its obligations under any
Transaction Document or any other instrument or document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements most recently
delivered pursuant to Article V and such other Loan Documents and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such assigning
Lender or any other Lender or the Issuing Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes the Agent to take such action as an Agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Agent shall maintain at its address referred to on
Schedule A, a copy of each Assignment and Acceptance delivered to and accepted
by it and shall record in the Agent's Loan Account the names and addresses of
each Lender and the Commitment of, and principal amount of the Loans owing to,
such Lender from time to time. Borrower, the Agent, the Issuing Bank and the
Lenders may treat each Person whose name is recorded in the Loan Account as a
Lender, and all of such Persons as the only Lenders, hereunder for all purposes
of this Agreement.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and the assignee, the Agent shall, if such Assignment and
Acceptance has been properly completed and is in substantially the form of
Exhibit 1 and if the conditions for the assignment referred to in the Assignment
and Acceptance and set forth in Section 11.02(a) have been met, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Agent's Loan Account and (iii) give prompt notice thereof to Borrower.
(e) Each Lender may sell participations to one or more banks
or other entities as to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and Revolving Credit Exposure; provided that (i) notice thereof is
given to the Borrower and the Agent, (ii) such Lender's obligations under this
Agreement (including, without limitation, its Commitment to Borrower hereunder)
shall remain unchanged, (iii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such
85
<PAGE> 92
obligations, (iv) the participating banks or other entities shall be entitled to
the benefit of the cost protection provisions contained in Sections 2.09, 2.10
and 2.11 to the same extent as if they were Lenders; provided, however, that no
such participating bank or entity shall be entitled to receive any greater
amount pursuant to such Sections than the Lender from which it purchased its
participation would have been entitled to receive in respect of the amount of
the participation transferred by such Lender to such participating bank or
entity had no transfer occurred, (v) Borrower, the Agent, the Issuing Bank and
the other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
with regard to any and all payments to be made under this Agreement, and (vi)
the holder of any such participation shall not be entitled to voting rights
under this Agreement; provided that the participation agreement between a Lender
and its participants may provide that such Lender will obtain the approval of
such participant prior to any amendment or waiver of any provisions of this
Agreement which would (A) extend the Termination Date or the time of payment of
interest thereon or fees, (B) reduce the interest rate or any fees here under,
or the principal amount of the Loans or LC Disbursements, (C) increase the
aggregate amount of the Commitment or the Revolving Credit Exposure of the
Lender granting the participation, or increase such Lender's Pro Rata Share, (D)
release all or substantially all of the Collateral, or (E) release any of the
Subsidiary Guaranties.
(f) Upon the acceptance by the Agent of any Assignment and
Acceptance, the parties to such Assignment and Acceptance may at any time
request that new Notes be issued to the Lender assignor and the Lender assignee
by (i) providing written notice of such request to the Agent and the Borrower
and (ii) delivering to the Borrower such assigning Lender's Note for
cancellation and substitution. Promptly following receipt by the Borrower of any
such notice, and verification from the Agent that the applicable Assignment and
Acceptance shall have been accepted by the Agent, the Borrower forthwith shall
cause to be executed, and shall deliver to the Lender assignee, a new Note to
the order of the assignee and, if applicable, a replacement Note to the order of
the Lender assignor, and such Notes shall equal the aggregate principal amount
of such assigning Lender's Note issued by the Borrower immediately prior to the
acceptance by the Agent of the applicable Assignment and Acceptance. The
Borrower shall immediately upon delivery of such new Note(s), cancel the
original Note delivered by the Lender assignor to the Borrower.
(g) Notwithstanding anything herein to the contrary, each
Lender may assign all or any portion of its rights under this Agreement as
collateral security to any Federal Reserve Bank or any Governmental Authority
succeeding to its functions.
(h) Notwithstanding the foregoing, no Lender, assignee or
participant shall assign any portion of its rights or obligations under this
Agreement or sell a participating interest in any Note held by such Lender,
assignee or participant or assign, sell or otherwise transfer any stock pursuant
to any Pledge Agreement to (i) any individual not a citizen of the United
States, or (ii) any entity that is not a citizen of the United States qualified
to operate vessels in coastwise trade within the meanings of Section 2 of the
Shipping Act, 1916 as amended (46 App. U.S.C. Section 802); provided, however,
that the foregoing restriction as to assignment, sale or transfer to entities
not qualified to operate vessels in coastwise trade may be waived if, in the
opinion of counsel to the Agent, said
86
<PAGE> 93
assignment, sale or transfer does not result in the loss of U.S. citizen status
of the Borrower or any of its Subsidiaries.
Within the meaning of the Shipping Act, no corporation,
partnership, or association is a citizen of the United States for purposes of
operating a vessel in coastwise trade unless at least 75% of the interest in the
entity is owned by citizens of the United States. A corporation is not a citizen
of the United States unless (a) its president or other chief executive officer
and the chairman of its board of directors are citizens of the United States and
(b) no more of its directors than a minority of the number necessary to
constitute a quorum are noncitizens and (c) the corporation itself is organized
under the laws of the United States or of a State, Territory, District, or
possession thereof. In the case of a corporation, 75% of the stock is not deemed
to be owned by a citizen of the United States (a) if title to 75% of the stock
is not vested in citizens of the United States free from any trust or fiduciary
obligation in favor of any person not a citizen of the United States; or (b) if
75% of the voting power in such corporation is not vested in citizens of the
United States; or (c) if, through any contract or understanding, it is so
arranged that more than 25% of the voting power in such corporation may be
exercised, directly or indirectly, in behalf of any person who is not a citizen
of the Untied States; or (d) if by any other means whatsoever control of any
interest in the corporation in excess of 25% is conferred upon or permitted to
be exercised by any person who is not a citizen of the United States.
11.03. Expenses.
(a) Generally. Whether or not any Funding Date shall have
occurred, Borrower agrees upon demand to pay, or reimburse the Agent for all
such Agent's and any of its Affiliates' costs and expenses of every type and
nature (including, without limitation, the reasonable fees, expenses and
disbursements of attorneys and legal assistants (including allocated costs of
internal counsel and legal assistants), and such auditors, accountants,
appraisers, printers, insurance and environmental advisers, and other
consultants retained by the Agent as shall have been reasonably approved by
Borrower, and other legal, travel, search and filing fees and expenses and all
fees, taxes (except income and franchise taxes), assessments and duties incurred
by any of them) incurred by the Agent or its Affiliates in connection with (i)
the negotiation, preparation and execution of this Agreement and any amendments
or waivers thereto (including, without limitation, the satisfaction or attempted
satisfaction of any of the conditions set forth in Article III, the Collateral
Documents and the other Transaction Documents or any amendment or waiver thereto
and the making of the Loans); (ii) the creation, perfection or protection of the
Agent's Liens in the Collateral for the benefit of itself and the Holders of
Secured Obligations (including, without limitation, any fees and expenses for
title and lien searches, filing and recording fees and taxes, trustee's fees,
duplication costs and corporate search fees); (iii) reasonable fees, expenses
and disbursements of the Agent's legal counsel (including allocated costs of
internal counsel and legal assistants) in connection with the administration of
this Agreement, the Transaction Documents, the Loans and the Collateral; and
(iv) the protection, collection or enforcement of any of the Obligations or the
Collateral.
87
<PAGE> 94
(b) After Default. Borrower further agrees to pay, or
reimburse the Agent, the Issuing Bank and the Lenders for all out-of-pocket
costs and expenses, including, without limitation, reasonable attorneys' and
legal assistants' fees, expenses and disbursements (including allocated costs of
internal counsel and costs of settlement) incurred by the Agent, the Issuing
Bank or any Lender after the occurrence of an Event of Default (i) in enforcing
any of the Obligations or in foreclosing against the Collateral or exercising or
enforcing any other right or remedy available by reason of such Event of
Default; (ii) in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or in
any insolvency or bankruptcy proceeding; (iii) in commencing, defending or
intervening in any litigation or in filing a petition, complaint, answer, motion
or other pleading in any legal proceeding relating to Borrower or any of its
Subsidiaries and related to or arising out of the transactions contemplated
hereby or by any of the Transaction Documents; (iv) in protecting, preserving,
collecting, leasing, selling, taking possession of, or liquidating any of the
Collateral; or (v) in attempting to enforce or enforcing any security interest
in any of the Collateral or any other rights under the Collateral Documents. Any
payments made by Borrower or received by the Agent and applied as reimbursements
for costs and expenses under this Section 11.03(b) shall be apportioned among
the Agent, the Issuing Bank and the Lenders in the order of priority set forth
in Section 2.07.
11.04. Indemnification and Waiver. Borrower agrees to defend,
protect, indemnify, and hold harmless the Agent, the Issuing Bank, each Lender
and each Related Party of each of the foregoing (collectively called the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees) in
connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitees shall be designated a party thereto that may be
imposed on, incurred by, or asserted against such Indemnitees (whether direct,
indirect or consequential and whether based on any federal or state laws or
other statutory regulations, including, without limitation, securities and
commercial laws and regulations, under common law or at equitable cause, or on
contract or otherwise, including any liabilities and costs under federal, state
or local environmental, health or safety laws, regulations, or common law
principles, arising from or in connection with the past, present or future
operations of Borrower and of its Subsidiaries, or their respective predecessors
in interest, or the past, present or future environmental condition of the
Property of Borrower or any of its Subsidiaries, the presence of
asbestos-containing materials at any such Property, or the Release or threatened
Release of any Contaminant into the environment from any such Property) in any
manner relating to or arising out of this Agreement, the Collateral Documents or
any of the other Transaction Documents, the capitalization of Borrower, the
Lenders' Commitments, the making or issuance of, management of and participation
in the Loans or the Letters of Credit or the use or intended use of and the
proceeds of the Loans or the Letters of Credit hereunder (collectively, the
"Indemnified Matters"); provided that Borrower shall have no obligation to an
Indemnitee hereunder with respect to (i) matters for which such Indemnitee has
been compensated pursuant to or for which an exemption is provided in Section
2.09(d) or 2.11(b) or any other provision of this Agreement and (ii) Indemnified
Matters caused by or resulting from the gross negligence or willful misconduct
of that Indemnitee, as determined by a final judgment of a court
88
<PAGE> 95
of competent jurisdiction. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in this Section 11.04 may be unenforceable because
it is violative of any law or public policy, Borrower shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all Indemnified Matters incurred by the
Indemnitees. Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section 11.04 shall survive the payment in full of principal and interest
hereunder and the termination of this Agreement.
11.05. Limitation of Liability. No claim may be made by
Borrower, any Lender or other Person against the Agent, the Issuing Bank, any
Lender or any Related Party of any of them for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement or any other Transaction Document, or any act,
omission or event occurring in connection therewith, and Borrower and each
Lender hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
11.06. Ratable Sharing. Subject to Sections 2.07, the Lenders
agree among themselves that (i) with respect to all amounts received by them
which are applicable to the payment of the Agreement Obligations (excluding
amounts payable under this Agreement which are determined on a non-pro-rata
basis, including, without limitation, amounts payable under Sections 2.02(c),
2.05(b), 2.09(d), 2.10, 2.11, 2.14, 11.03 and 11.04), equitable adjustment will
be made so that, in effect, all such amounts will be shared among them ratably
in accordance with their Pro Rata Shares, whether received by voluntary payment,
by the exercise of the right of set-off or banker's lien, by counterclaim or
cross action or by the enforcement of any or all of the Agreement Obligations
(excluding amounts payable under this Agreement which are determined on a
non-pro-rata basis, including, without limitation, amounts payable under
Sections 2.02(c), 2.05(b), 2.09(d), 2.10, 2.11, 2.14, 11.03 and 11.04) or the
Collateral, (ii) if any of them shall by voluntary payment or by the exercise of
any right of counterclaim, setoff, banker's lien or otherwise, receive payment
of a proportion of the aggregate amount of the Agreement Obligations held by it
which is greater than its Pro Rata Share of the payments on account of the
Agreement Obligations (excluding the fees described or referred to in Section
2.05), the one receiving such excess payment shall purchase, without recourse or
warranty, an undivided interest and participation (which it shall be deemed to
have been done simultaneously upon the receipt of such payment) in such
Agreement Obligations owed to the others so that all such recoveries with
respect to such Agreement Obligations shall be applied ratably in accordance
with their Pro Rata Shares; provided that if all or part of such excess payment
received by the purchasing party is thereafter recovered from it, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to that party to the extent necessary to adjust
for such recovery, but without interest except to the extent the purchasing
party is required to pay interest in connection with such recovery. Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 11.06 may, to the fullest extent permitted by law,
exercise all its rights of payment with respect to such participation as fully
as if such Lender were the direct creditor of Borrower in the amount of such
participation.
89
<PAGE> 96
11.07. Amendments and Waivers. Subject to the provisions of
Section 2.07(b)(ii) no amendment or modification of any provision of this
Agreement shall be effective without the written agreement of the Requisite
Lenders and Borrower, and no termination or waiver of any provision of this
Agreement, or consent to any departure by Borrower therefrom, shall in any event
be effective without the written concurrence of the Requisite Lenders, which the
Requisite Lenders shall have the right to grant or withhold at their sole
discretion; provided that any amendment, modification, or waiver of any
provision of this Agreement which would (i) extend the time of expiration or
termination of any of the Commitments or the Termination Date or the time of
payment of principal on any Loan or LC Disbursement, interest thereon or fees or
waive any prescribed prepayment (including, without limitation by any amendment
to or waiver of Section 9.02(a)), (ii) reduce the interest rate, the amount of
any fees, indemnities or reimbursements hereunder, or the principal amount of
the Loans or LC Disbursements (including, without limitation by any amendment to
or waiver of Section 9.02(a)), (iii) increase the aggregate amount of the
Commitments or the Loans of the Lenders or the Lenders' participations in
Letters of Credit or LC Disbursements or increase any Lender's Pro Rata Share or
waive any prescribed reduction in the Commitments, (iv) release the security
interest of the Holders of Secured Obligations in all or substantially all of
the Collateral or, except in connection with a sale or other disposition
permitted under Section 7.02, any of the Delta Queen, the Mississippi Queen or
any New Vessel, (v) release any of the Subsidiary Guaranties or (vi) amend the
definitions of "Requisite Lenders" or "Pro Rata Share," the provisions of
Section 2.01(b), the provisions of Section 7.02(a), the next to the last
sentence of Section 11.15 or the provisions contained in Section 11.06 or in
this Section 11.07 or the parties whose consent is required for action hereunder
or under the other Loan Documents, shall be effective only if evidenced by a
writing signed by or on behalf of all Lenders. No amendment, modification,
termination, or waiver of any provision of Article X or any other provision
referring to the Agent shall be effective without the written concurrence of the
Agent, and no amendment, modification, termination or waiver of any provision of
this Agreement affecting the rights or obligations of the Issuing Bank shall be
effective without the written concurrence of the Issuing Bank. The Agent may,
but shall have no obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of such Lender. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on Borrower in
any case shall entitle Borrower to any other or further notice or demand in
similar or other circumstances. The making of a Loan or the issuance of a Letter
of Credit shall not be construed as a waiver of any Event of Default or
Potential Event of Default, regardless of whether the Agent, any Lender or the
Issuing Bank may have had notice or knowledge thereof at the time. Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section 11.07 shall be binding on each assignee, transferee or
recipient of a Lender's Commitment or Revolving Credit Exposure, each future
assignee, transferee, recipient of a Lender's Commitment or Revolving Credit
Exposure, and, if signed by Borrower, on Borrower.
11.08. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telecopied, telexed or sent by
courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex
90
<PAGE> 97
or upon delivery or refusal to accept delivery if deposited in the United States
mail (registered or certified, with postage prepaid and properly addressed).
Notices to the Agent shall not be effective until received by the Agent. For the
purposes hereof, the addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this Section 11.08) shall be as set forth in
Schedule A or on the applicable Assignment and Acceptance, or, as to each party,
at such other address as may be designated by such party in a written notice to
all of the other parties.
11.09. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any Lender in the exercise of
any power, right or privilege under any of the Loan Documents shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege. All rights and remedies existing under the Loan
Documents are cumulative to and not exclusive of any rights or remedies
otherwise available.
11.10. Termination. Upon the termination in whole of the
Commitments pursuant to the terms of this Agreement, Borrower shall pay to the
Agent for the benefit of the Lenders an amount equal to any and all Agreement
Obligations then outstanding.
11.11. Marshalling; Recourse to Security; Payments Set Aside.
Neither any Lender nor the Agent shall be under any obligation to marshal any
assets in favor of Borrower or any other party or against or in payment of any
or all of the Obligations. Recourse to security shall not be required at any
time. To the extent that Borrower makes a payment or payments to the Agent, the
Issuing Bank or the Lenders, or the Agent, the Issuing Bank or the Lenders
enforce their security interests or exercise their rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied, and all Liens, right and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
11.12. Severability. In case any provision in or obligation
under this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
11.13. Headings. Article and Section headings in this
Agreement and in the Table of Contents hereto are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
11.14. GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS AGREEMENT,
ON BEHALF OF ITSELF AND THE LENDERS, AT NEW YORK, NEW
91
<PAGE> 98
YORK BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE AMONG THE BORROWER,
THE AGENT, THE ISSUING BANK, ANY LENDER OR ANY OTHER HOLDER OF SECURED
OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK AND THE GENERAL MARITIME LAWS OF THE UNITED STATES.
11.15. Successors and Assigns; Subsequent Holders of Notes.
This Agreement and the other Loan Documents shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. The terms and provisions of this Agreement shall inure to the
benefit of any assignee or transferee of the Revolving Credit Exposure and
Commitment of any Lender (to the extent such assignment or transfer is effected
in accordance with Section 11.02), and in the event of such transfer or
assignment, the rights and privileges herein conferred upon Lenders shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. Borrower's rights or any interest
therein hereunder, and Borrower's duties and Obligations hereunder, may not be
assigned without the written consent of all of the Lenders. All of Borrower's
obligations and duties under this Agreement and under each of the other Loan
Documents shall be binding upon each of Borrower's successors and assigns,
including, without limitation, any receiver, trustee or debtor-in-possession of
or for Borrower.
11.16. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY
TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION
(B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK,
BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF THE
PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. BORROWER AGREES THAT THE AGENT, THE
ISSUING BANK OR ANY LENDER SHALL HAVE THE RIGHT TO PROCEED AGAINST BORROWER OR
ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN
PERSONAL JURISDICTION OVER THE BORROWER OR (2) REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS
92
<PAGE> 99
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON.
BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF SUCH PERSON. BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED
IN THIS SUBSECTION.
(C) SERVICE OF PROCESS. BORROWER WAIVES PERSONAL SERVICE OF
ANY PROCESS UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, IRREVOCABLY
APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC., WHOSE ADDRESS IS 500
CENTRAL AVENUE, ALBANY, NEW YORK, 12206, AS BORROWER'S AGENT FOR THE PURPOSE OF
ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT. BORROWER IRREVOCABLY WAIVES
ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES
HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
93
<PAGE> 100
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH
OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 11.16, WITH ITS COUNSEL.
11.17. Counterparts; Effectiveness; Inconsistencies. This
Agreement and any amendments, waivers, consents, or supplements may be executed
in counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective against Borrower, each
Lender, the Issuing Bank and the Agent on the date when all of such parties have
duly executed and delivered this Agreement to each other (delivery by Borrower
to the Lenders and the Issuing Bank and by any Lender or the Issuing Bank to the
Borrower and any other Lender being deemed to have been made by delivery to the
Agent). This Agreement and each of the other Loan Documents shall be construed
to the extent reasonable to be consistent one with the other, but to the extent
that the terms and conditions of this Agreement are actually inconsistent with
the terms and conditions of any other Loan Document, this Agreement shall
govern.
11.18. Performance of Obligations. Borrower agrees that the
Agent may, but shall have no obligation to, make any payment or perform any act
required of Borrower under any Loan Document or take any other action which the
Agent in its discretion deems necessary or desirable to protect or preserve the
Collateral, including, without limitation, any action to (i) pay or discharge
taxes, liens, security interests or other encumbrances levied or placed on or
threatened against any Collateral, (ii) effect any repairs or obtain any
insurance called for by the terms of any of the Loan Documents and to pay all or
any part of the premiums therefor and the costs thereof and (iii) pay any rents
payable by Borrower which are more than 30 days past due, or as to which the
landlord has given notice of termination, under any lease. The Agent shall use
its best efforts to give Borrower notice of any action taken under this Section
11.18 prior to the taking of such action or promptly thereafter provided the
failure to give such notice shall not affect Borrower's obligations in respect
thereof. The Borrower agrees to pay the Agent, upon demand, the principal amount
of all funds advanced by the Agent under this Section 11.18, together with
interest thereon at the rate from time to time applicable to Base Rate Loans
from the date of such advance until the outstanding principal balance thereof is
paid in full. If the Borrower fails to make payment in respect of any such
advance under this Section 11.18 within one (1) Business Day after the date the
Borrower receives written demand therefor from the Agent, the Agent shall
promptly notify each Lender and each Lender agrees that it shall thereupon make
available to the Agent, in Dollars in immediately available funds, the amount
equal to such Lender's Pro Rata Share of such advance. If such funds are not
made available to the Agent by such Lender within one (1) Business Day after the
Agent's demand therefor, the Agent will be entitled to recover any such amount
from such Lender together with interest thereon at the Federal Funds Effective
Rate for each day during the period commencing on the date of such demand and
ending on the date such amount is received. The failure of any Lender to make
available to the Agent its Pro Rata Share of any such unreimbursed advance under
this Section 11.18 shall neither relieve any other Lender of its obligation
hereunder to make available to the Agent such other Lender's Pro Rata Share of
such advance on the date such payment is to be made nor increase the obligation
of any other Lender to make such payment to the Agent. All
94
<PAGE> 101
outstanding principal of, and interest on, advances made under this Section
11.18 shall constitute Obligations secured by the Collateral until paid in full
by the Borrower.
11.19. ENTIRE AGREEMENT. THIS WRITTEN CREDIT AGREEMENT,
TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT AMONG THE
PARTIES AS TO ITS SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES. THERE
ARE NO ORAL AGREEMENTS AMONG THE PARTIES.
11.20. Confidentiality. Each of the Agent, the Issuing Bank
and the Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees, accountants, legal counsel and other
advisors who are actively and directly participating in the preparation,
evaluation, administration or enforcement of the Loan Documents (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations
under this Agreement, (g) with the consent of the Borrower or (h) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Agent, the Issuing Bank
or any Lender on a nonconfidential basis from a source other than the Borrower.
For the purposes of this Section, "Information" means all information received
from the Borrower relating to the Borrower or its business, other than any such
information that is available to the Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower. Any Person required
to maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
95
<PAGE> 102
IN WITNESS WHEREOF, this Agreement has been duly executed on
the date set forth above.
THE DELTA QUEEN STEAMBOAT CO.
as Borrower
By: /s/ JORDAN B. ALLEN
-------------------------------------
Name: Jordan B. Allen
--------------------------------
Title: Executive Vice President
-------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent, as Issuing Bank
and as a Lender
By: /s/ STEVEN J. FALISKI
-------------------------------------
Name: Steven J. Faliski
--------------------------------
Title: Vice President
-------------------------------
HIBERNIA NATIONAL BANK, as Documentation
Agent and as a Lender
By: /s/ WILLIAM P. HERRINGTON
-------------------------------------
Name: William P. Herrington
--------------------------------
Title: Sr. Vice President
-------------------------------
BANK ONE, LOUISIANA, NATIONAL ASSOCIATION
as a Lender
By: /s/ LIZETTE TERRAL
-------------------------------------
Name: Lizette Terral
--------------------------------
Title: Sr. Vice President
-------------------------------
CREDIT AGRICOLE INDOSUEZ,
as a Lender
By: /s/ KATHERINE L. ABBOTT
-------------------------------------
Name: Katherine L. Abbott
--------------------------------
Title: First Vice President
-------------------------------
By: /s/ DAVID BOUHL
-------------------------------------
Name: David Bouhl
--------------------------------
Title: First Vice President
-------------------------------
THE BANK OF NEW YORK,
as a Lender
By: /s/ RICHARD RAFFETO
-------------------------------------
Name: RICHARD RAFFETO
--------------------------------
Title: Vice President
-------------------------------
96
<PAGE> 1
4(ii)(a)(2)
EXECUTION COPY
[BORROWER]
SECURITY AGREEMENT
SECURITY AGREEMENT ("Agreement"), dated as of February 25, 1999, is
made and entered into by and between The Delta Queen Steamboat Co., a Delaware
corporation (the "Grantor") and THE CHASE MANHATTAN BANK, a New York banking
corporation, as agent (hereinafter in such capacity, the "Agent") for its
benefit and for the benefit of the other Holders of Secured Obligations (as
referred to and defined in the "Credit Agreement" described below).
WHEREAS, the Grantor, certain financial institutions and each other
financial institution which from time to time becomes a party thereto in
accordance with Section 11.02(a) (together with their respective successors and
permitted assigns, individually, a "Lender" and, collectively, the "Lenders")
and the Agent are parties to that certain Credit Agreement, dated as of February
25, 1999, (such agreement as it may be amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement");
WHEREAS, it is a condition precedent to the Lenders' making any
loans or otherwise extending credit to the Grantor under the Credit Agreement
that the Grantor execute and deliver to the Agent, for its benefit and the
benefit of the other Holders of Secured Obligations, a security agreement in
substantially the form hereof; and
WHEREAS, the Grantor wishes to grant security interests in favor of
the Agent, for its benefit and the benefit of the Holders of Secured
Obligations, as herein provided;
NOW, THEREFORE, in connection of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. All capitalized terms used herein without
definitions shall have the respective meanings provided therefor in the Credit
Agreement. The term "Uniform Commercial Code" shall mean the Uniform Commercial
Code as the same may, from time to time, be in effect in the State of Louisiana;
and terms defined therein shall be used herein as defined therein; provided,
however, in the event that by reason of mandatory provisions of law, any and all
of the attachment, perfection, or priority of the security interest created
hereunder is governed by the Uniform Commercial Code as in effect in any
jurisdiction other than the State of Louisiana, the term "Uniform Commercial
Code" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for the purposes of the provisions hereof related to such
attachment, perfection or priority and for purposes of definitions related as
such provisions.
<PAGE> 2
Section 2. Grant of Security Interest.
(a) The Grantor hereby grants to the Agent, for its benefit and the
benefit of the other Holders of Secured Obligations, to secure the prompt
payment and performance in full when due of the Obligations (whether at stated
maturity, by acceleration or otherwise), a security interest in and so pledges
and assigns to the Agent, for its benefit and the benefit of the other Holders
of Secured Obligations, the following properties, assets and rights of the
Grantor, wherever located, whether now owned or hereafter acquired or arising,
and all proceeds and products thereof (all of the same being hereinafter called
the "Collateral"):
All personal and fixture property of every kind and nature including
without limitation all furniture, fixtures, machinery, equipment, raw
materials, inventory, goods, accounts, contract rights, rights to the
payment of money, charter hire, earnings and freight, insurance refund
claims and all other insurance claims and proceeds, tort claims, chattel
paper, documents, instruments, deposit accounts, investment property and
all general intangibles including, without limitation, all membership
interests in limited liability companies, partnership interests, tax
refund claims, license fees, patents, patent applications, trademarks,
trademark applications, trade names, copyrights, copyright applications,
rights to sue and recover for past infringement of patents, trademarks and
copyrights, technology, know-how and processes, computer programs,
computer software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits agreements of any kind or nature
pursuant to which the Grantor possesses, uses or has authority to posses
or use property (whether tangible or intangible) of others or which others
possess, use or have authority to possess or use property (whether
tangible or intangible) of the Grantor, and all recorded data of any kind
or nature, regardless of the medium of recording including, without
limitation, all software, writings, plans, specifications and schematics,
but excluding all trademarks, servicemarks, designs, logos, indicia, trade
names, corporate names, company names, business names, fictitious business
names, source and product or service identifiers comprised in whole or in
part by the words "American Queen" and any designs, logos or other
depictions of the vessel known as the American Queen.
(b) Pursuant to the terms hereof, the Grantor has endorsed, assigned
and delivered to the Agent all negotiable or nonnegotiable instruments,
certificated securities and chattel paper pledged by it hereunder, together with
instruments of transfer or assignment duly executed in blank as the Agent may
have specified. In the event that the Grantor shall, after the date of this
Agreement, acquire any other negotiable or nonnegotiable instruments,
certificated securities or chattel paper to be pledged by it hereunder, the
Grantor shall promptly endorse, assign and deliver the same to the Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as the Agent may from time to time specify. To the extent that any securities
are uncertificated, the issuer thereof has agreed or, in the case of
uncertificated securities hereafter acquired by the Grantor, will agree at the
time of such acquisition to comply
-2-
<PAGE> 3
with instructions originated by the Agent without further consent by the
Grantor, with the Agent having at all times the right to obtain definitive
certificates (in the Agent's name or in the name of one or more nominees of the
Agent) where the issuer customarily issues certificates, all to be held as
Collateral hereunder. To the extent that the Grantor has, or acquires after the
date of this Agreement, any security entitlement with respect to a financial
asset held in a securities account, the securities intermediary maintaining the
account has agreed, or will at the time of such acquisition agree, to comply
with entitlement orders originated by the Agent without further consent by the
Grantor. The Grantor hereby acknowledges that the Agent may, in its discretion,
appoint one or more financial institutions to act as the Agent's agent in
holding in a custodial account instruments or other financial assets in which
the Agent on behalf of the Agent and the other Holders of Secured Obligations is
granted a security interest hereunder, including, without limitation,
certificates of deposit and other instruments evidencing short-term obligations.
(c) Notwithstanding the foregoing provisions of this Section 2, such
grant of security interest shall not extend to, and the term "Collateral" shall
not include, any chattel paper and general intangibles which are now or
hereafter held by the Grantor as licensee, lessee or otherwise, to the extent
that (i) such chattel paper and general intangibles are not assignable or
capable of being encumbered as a matter of law or under the terms of the
license, lease or other agreement applications thereto (but solely to the extent
that any such restriction shall be enforceable under applicable law), without
the consent of the licensor or lessor thereof or other applicable party thereto
and (ii) such consent has not been obtained; provided, however, that the
foregoing grant of security interest shall extend to, and the term "Collateral"
shall include, (A) any and all proceeds of such chattel paper and general
intangibles to the extent that the assignment or encumbering of such proceeds is
not so restricted and (B) upon any such licensor, lessor or other applicable
party consent with respect to any otherwise excluded chattel paper or general
intangibles being obtained, thereafter such chattel paper or general intangibles
as well as any and all proceeds thereof that might have theretofore have been
excluded from such grant of a security interest and the term "Collateral".
Section 3. Title to Collateral, etc. The Grantor is the owner of the
Collateral free from any adverse lien, security interest or other encumbrance,
except for the security interest created by this Agreement and other liens
permitted by the Credit Agreement. None of the Collateral constitutes, or is the
proceeds of, "farm products" as defined in Section 9-109(3) of the Uniform
Commercial Code of the State of Louisiana. None of the account debtors in
respect of any accounts, chattel paper or general intangibles and none of the
obligors in respect of any instruments included in the Collateral is a
Governmental Authority subject to the Federal Assignment of Claims Act.
Section 4. Continuous Perfection. The Grantor's place or places of
business and, if it has more than one place of business, its chief executive
office are indicated on Schedule 1 attached hereto. The Grantor will not change
the same, or the name, identity or corporate structure of the Grantor in any
manner, without providing at least 30 days' prior written notice to the Agent.
The Collateral other than the Delta Queen and the Mississippi Queen and any
Collateral located thereon, to the extent not delivered to the Agent pursuant to
Section 2(b), will
-3-
<PAGE> 4
be kept at those locations listed on Schedule 1 and the Grantor will not remove
the Collateral from such locations, except with respect to inventory as required
in the ordinary course of business, without providing at least 30 days' prior
written notice to the Agent.
Section 5. No Liens. Except for the security interest herein granted
and liens permitted by the Credit Agreement, the Grantor shall be the owner of
the Collateral free from any lien, security interest or other encumbrance, and
the Grantor shall defend the same against all claims and demands of all Persons
at any time claiming the same or any interests therein adverse to the Agent or
any of the other Holders of Secured Obligations. The Grantor shall not pledge,
mortgage or create, or suffer to exist a security interest in the Collateral in
favor of any Person other than Agent, for its benefit and the benefit of the
other Holders of Secured Obligations, except for liens permitted by the Credit
Agreement.
Section 6. No Transfers. Subject to the provisions of the Credit
Agreement, the Grantor will not sell or offer to sell or otherwise transfer the
Collateral or any interest therein except for sales or other dispositions of
obsolescent items of equipment in the ordinary course of business consistent
with past practices.
Section 7. Insurance. Grantor shall maintain casualty insurance with
respect to the Collateral in accordance with Section 6.05 of the Credit
Agreement.
Section 8. Maintenance of Collateral; Compliance with Law. The
Grantor will keep the Collateral in good order and repair and will not use the
same in violation of law or any policy of insurance thereon. The Agent, or its
designee, upon reasonable advance notice to Grantor may inspect the Collateral
at any reasonable time, wherever located.
Section 9. Collateral Protection Expenses; Preservation of
Collateral.
(a) In its discretion, the Agent may, upon ten (10) days' prior
written notice to the Grantor so long as no Event of Default has occurred and is
continuing (and otherwise without prior notice), discharge taxes and other
encumbrances at any time levied or placed on any of the Collateral (except for
taxes and encumbrances being contested by the Grantor in accordance with Section
6.04 of the Credit Agreement), make repairs thereto and pay any necessary filing
fees. The Grantor agrees to reimburse the Agent on demand for any and all
expenditures so made. The Agent shall have no obligation to the Grantor to make
any such expenditures, nor shall the making thereof relieve the Grantor of any
default.
(b) Anything herein to the contrary notwithstanding, the Grantor
shall remain liable under each contract or agreement comprised in the Collateral
to be observed or performed by the Grantor thereunder. Neither the Agent nor any
other Holder of Secured Obligations shall have any obligation or liability under
any such contract or agreement by reason of or arising out of this Agreement or
the receipt by the Agent or any other Holder of Secured Obligations of any
payment relating to any of the Collateral, nor shall the Agent or any other
Holder of Secured Obligations be obligated in any manner to perform any of the
obligations of the Grantor under or
-4-
<PAGE> 5
pursuant to any such contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by the Agent or any other Holder of Secured
Obligations in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Agent or to which the
Agent or any other Holder of Secured Obligations may be entitled at any time or
times. The Agent's sole duty with respect to the custody, safe keeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Uniform Commercial Code or otherwise, shall be to deal with such
Collateral in the same manner as the Agent deals with similar property for its
own account.
Section 10. Securities and Deposits. If an Event of Default shall
have occurred and be continuing, (i) the Agent may at any time, at its option,
transfer to itself or any nominee any investment property constituting
Collateral, receive any income thereon and hold such income as additional
Collateral or apply it to the Obligations, and (ii) whether or not any
Obligations are due, the Agent may demand, sue for, collect, or make any
settlement or compromise which it deems desirable with respect to the
Collateral. Regardless of the adequacy of Collateral or any other security for
the Obligations, any deposits or other sums at any time credited by or due from
the Agent or any other Holder of Secured Obligations to the Grantor may at any
time be applied to or set off against any of the Obligations.
Section 11. Notification to Account Debtors and Other Obligors. If
an Event of Default shall have occurred and be continuing, the Grantor shall, at
the request of the Agent, notify account debtors on accounts, chattel paper and
general intangibles of the Grantor and obligors on instruments for which the
Grantor is an obligee of the security interest of the Agent in any account,
chattel paper, general intangible or instrument and that payment thereof is to
be made directly to the Agent or to any financial institution designated by the
Agent as the Agent's agent therefor, and the Agent may itself, if an Event of
Default shall have occurred and be continuing, without notice to or demand upon
the Grantor, so notify account debtors and obligors. After the making of such a
request or the giving of any such notification, the Grantor shall hold any
proceeds of collection of accounts, chattel paper, general intangibles and
instruments received by the Grantor as trustee for the Agent, for its benefit
and the benefit of the other Holders of Secured Obligations, without commingling
the same with other funds of the Grantor and shall turn the same over to the
Agent in the identical form received, together with any necessary endorsements
or assignments. The Agent shall apply the proceeds of collection of accounts,
chattel paper, general intangibles and instruments received by the Agent to the
Obligations, such proceeds to be immediately entered after final payment in cash
or solvent credits of the items giving rise to them.
Section 12. Further Assurances. The Grantor, at its own expense,
shall do, make, execute and deliver all such additional and further acts,
things, deeds assurances and instruments as the Agent may reasonably require
more completely to vest in and assure to the Agent and the other Holders of
Secured Obligations their respective rights hereunder or in any of the
Collateral, including, without limitation, (a) executing, delivering and, where
appropriate, filing financing
-5-
<PAGE> 6
statements and continuation statements under the Uniform Commercial Code, (b)
obtaining any consent of any licensor, lessor or other applicable party referred
to in Section 2(c), (c) obtaining waivers from mortgagees and landlords and (d)
taking all actions required by Sections 8-106, 8-301 and 9-115 of the Uniform
Commercial Code, as applicable in each relevant jurisdiction, with respect to
certificated and uncertificated securities. The Grantor agrees that a carbon,
photographic or other reproduction of this security agreement or a financing
statement is sufficient as a financing statement.
Section 13. Power of Attorney.
(a) The Grantor hereby irrevocably constitutes and appoints the
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorneys-in-fact during the existence of any Event of Default
with full irrevocable power and authority in the place and stead of the Grantor
or in the Agent's own name, for the purpose of carrying out the terms of this
Agreement, without notice to or assent by the Grantor, to do the following:
(i) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral in such manner as
is consistent with the Uniform Commercial Code and as fully and completely
as though the Agent were the absolute owner thereof for all purposes, and
to do at the Grantor's expense, at any time, or from time to time, all
acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in
order to effect the intent of this Agreement, all as fully and effectively
as the Grantor might do, including, without limitation, (A) the filing and
prosecuting of registration and transfer applications with the appropriate
federal or local agencies or authorities with respect to trademarks,
copyrights and patentable inventions and processes, (B) upon written
notice to the Grantor, the exercise of voting rights with respect to
voting securities, which rights may be exercised, if the Agent so elects,
with a view to causing the liquidation in a commercially reasonable manner
of assets of the issuer of any such securities and (C) the execution,
delivery and recording, in connection with any sale or other disposition
of any Collateral, of the endorsements, assignments or other instruments
of conveyance or transfer with respect to such Collateral; and
(ii) to file such financing statements with respect hereto, with or
without the Grantor's signature, or a photocopy or carbon copy of this
Agreement or of a signed financing statement in substitution for a
financing statement, as the Agent may deem appropriate and to execute in
the Grantor's name such financing statements and continuation statements
which may require the Grantor's signature.
(b) To the extent permitted by law, the Grantor hereby ratifies all
that said attorneys shall lawfully do or cause to be done by virtue hereof. This
power of attorney is a power coupled with an interest and shall be irrevocable.
-6-
<PAGE> 7
(c) The powers conferred on the Agent hereunder are solely to
protect the interests of the Agent and the other Holders of Secured Obligations
in the Collateral and shall not impose any duty upon the Agent to exercise any
such powers. The Agent shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers and neither
it nor any of its officers, directors, employees or agents shall be responsible
to the Grantor for any act or failure to act, except for the Agent's own gross
negligence or willful misconduct.
Section 14. Remedies. If an Event of Default shall have occurred and
be continuing, the Agent may, without notice to or demand upon the Grantor,
declare this Agreement to be in default, and the Agent shall thereafter have in
any jurisdiction in which enforcement hereof is sought, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial Code, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Agent may, so far as the
Grantor can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Agent may require
the Grantor to assemble all or any part of the Collateral at such location or
locations within the state(s) of the Grantor's principal office(s) or at such
other locations as the Agent may designate. Unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Agent shall give to the Grantor at least ten (10)
Business Days' prior written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended
disposition is to be made. The Grantor hereby acknowledges that ten (10)
Business Days' prior written notice of such sale or sales shall be reasonable
notice. In addition, the Grantor waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Agent's rights
hereunder, including, without limitation, its right following an Event of
Default to take immediate possession of the Collateral and to exercise its
rights with respect thereto. To the extent that any of the Obligations are to be
paid or performed by a Person other than the Grantor, the Grantor waives and
agrees not to assert any rights or privileges which it may have under Section
9-112 of the Uniform Commercial Code.
Section 15. Special Louisiana Provisions. The Grantor hereby agrees
as follows:
(a) For purposes of Louisiana executory process, the Grantor
acknowledges the Obligations secured hereby, whether now existing or to arise
hereafter, and confesses judgment thereon. Upon the occurrence of an Event of
Default and at any time thereafter so long as the same shall be continuing, and
in addition to all other rights and remedies granted the Agent hereunder, it
shall be lawful for and the Grantor hereby authorizes the Agent without making a
demand or putting the Grantor in default, a putting in default being expressly
waived, to cause all and singular the Collateral to be seized and sold after due
process of law, the Grantor waiving the benefit of any and all laws or parts of
laws relative to the appraisement of property seized and sold under executory
process or other legal process, and consenting that the Collateral be sold
without appraisement, either in its entirety or in lots or parcels, as the Agent
may determine, to the highest bidder for cash or on such other terms as the
plaintiff in such proceedings may direct. In addition, the Agent shall have all
of the rights and remedies available to it under this
-7-
<PAGE> 8
Agreement or under the Louisiana Commercial Laws (Louisiana Revised Statutes,
Title 10), then in effect, and under Chapter 9 of the Louisiana Commercial Laws,
then in effect (La. R.S. 10:9-101 et seq.).
(b) the Grantor hereby waives:
(i) the benefit of appraisement provided for in Articles 2332,
2336, 2723 and 2724 of the Louisiana Code of Civil Procedure and all
other laws conferring the same;
(ii) the demand and three (3) days' notice of demand as provided
in Articles 2639 and 2721 of the Louisiana Code of Civil Procedure;
(iii) the notice of seizure provided by Articles 2293 and 2721 of
the Louisiana Code of Civil Procedure; and
(iv) the three (3) days' delay provided for in Articles 2331 and
2722 of the Louisiana Code of Civil Procedure.
(c) the Grantor expressly authorizes and agrees that the Agent shall
have the right to appoint a keeper of the Collateral, or any part thereof,
pursuant to the terms and provisions of La. R.S. 9:5136.
Section 16. No Waiver, etc. The Grantor waives demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description. With respect to
both the Obligations and the Collateral, the Grantor assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of Collateral, to the addition or release of
any party or Person primarily or secondarily liable, to the acceptance of
partial payment thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the Agent may deem
advisable. The Agent shall have no duty as to the collection or protection of
the Collateral or any income thereon, nor as to the preservation of rights
against prior parties, nor as to the preservation of any rights pertaining
thereto beyond the safe custody thereof as set forth in Section 9(b). The Agent
shall not be deemed to have waived any of its rights upon or under the
Obligations or the Collateral unless such waiver shall be in writing and signed
by the Agent. No delay or omission on the part of the Agent in exercising any
right shall operate as a waiver of such right or any other right. A waiver on
any one occasion shall not be construed as a bar to or waiver of any right on
any future occasion. All rights and remedies of the Agent with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the
Agent deems expedient.
-8-
<PAGE> 9
Section 17. Marshalling. Neither the Agent nor any other Holder of
Secured Obligations shall be required to marshal any present or future
collateral security (including but not limited to this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of the rights of the Agent hereunder and of the
Agent or any other Holder of Secured Obligations in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights, however existing or arising. To the extent that it lawfully
may, the Grantor hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Agent's rights under this Agreement or under any other instrument
creating or evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
the Grantor hereby irrevocably waives the benefits of all such laws.
Section 18. Proceeds of Dispositions; Expenses. The Grantor shall
pay to the Agent on demand any and all expenses, including reasonable attorneys'
fees and disbursements, incurred or paid by the Agent in protecting, preserving
or enforcing the Agent's rights under or in respect of any of the Collateral.
After deducting all of said expenses, the residue of any proceeds of collection
or sale of the Collateral shall, to the extent actually received in cash, be
applied to the payment of the Obligations in accordance with Section 2.07(b) of
the Credit Agreement. Upon the indefeasible payment and satisfaction in full of
all of the Obligations and the termination of all financial arrangements among
the Grantor and the Holders of Secured Obligations (other than continuing
contingent indemnity obligations), and after making any payments required by
Section 9-504(1)(c) of the Uniform Commercial Code, any excess shall be returned
to the Grantor, and the Grantor shall remain liable for any deficiency in the
payment of the Obligations.
Section 19. Agent. The Agent shall exercise its rights and remedies
hereunder in accordance with the provisions of the Credit Agreement, including
without limitation the provisions for acting upon the request or at the
direction of one or more of the Lenders.
Section 20. Overdue Amounts. Until paid, all amounts due and payable
by the Grantor hereunder shall be a debt secured by the Collateral and shall
bear, whether before or after judgment, interest at the Default Rate as set
forth in the Credit Agreement.
Section 21. GOVERNING LAW. THIS AGREEMENT AND ANY DISPUTE AMONG THE
GRANTOR, THE AGENT OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE INTERPRETED
AND RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA.
Section 22. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
-9-
<PAGE> 10
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED
EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE
PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF THE PARTIES
HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE GRANTOR AGREES THAT THE AGENT OR ANY
OTHER HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO PROCEED AGAINST THE
GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1)
OBTAIN PERSONAL JURISDICTION OVER THE GRANTOR OR (2) REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE GRANTOR AGREES THAT IT WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE GRANTOR
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH
PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION.
(C) SERVICE OF PROCESS. THE GRANTOR WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, IRREVOCABLY
APPOINTS THE PRENTICE-HALL CORPORATION SYSTEM, INC., WHOSE ADDRESS IS 500
CENTRAL AVENUE, ALBANY, NEW YORK, 12206, AS THE GRANTOR'S AGENT FOR THE PURPOSE
OF ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT. THE GRANTOR IRREVOCABLY
WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR
-10-
<PAGE> 11
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. THE GRANTOR WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Section 23. Miscellaneous. The headings of each section of this
Agreement are for convenience only and shall not define or limit the provisions
thereof. This Agreement and all rights and obligations hereunder shall be
binding upon the Grantor and its respective successors and assigns, and shall
inure to the benefit of the Agent, the other Holders of Secured Obligations and
their respective successors and permitted assigns. If any term of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity of all other
terms hereof shall in no way be affected thereby, and this Agreement shall be
construed and be enforceable as if such invalid, illegal or unenforceable term
had not been included herein. The Grantor acknowledges receipt of a copy of this
Agreement.
Section 24. Notice, Etc. All notices, requests, consents, approvals,
waivers and other communications under this Agreement to the Grantor shall be
given in the manner and to the addresses set forth in the Credit Agreement.
-11-
<PAGE> 12
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
THE DELTA QUEEN STEAMBOAT CO.
By: /s/ JORDAN B. ALLEN
--------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
THE CHASE MANHATTAN BANK, as Agent
By: /s/ STEVEN J. FALISKI
--------------------------------
Name: Steven J. Faliski
------------------------------
Title: Vice President
------------------------------
-12-
<PAGE> 13
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF ILLINOIS )
) ss
COUNTY OF COOK )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of February, 1999, personally appeared Jordan B.
Allen to me known personally, and who, being by me duly sworn, deposes and says
that he is the Executive Vice President of The Delta Queen Steamboat Co., and
that said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said Executive Vice President
acknowledged said instrument to be the free act and deed of said corporation.
--------------------------------
Notary Public
My Commission Expires:
-13-
<PAGE> 14
SCHEDULE 1
to
SECURITY AGREEMENT
dated as of February , 1999
Places of Business and
Chief Executive Office of the Grantor
The Delta Queen Steamboat Co
Robin Street Wharf
1380 Port of New Orleans Place
New Orleans, LA 70130
-14-
<PAGE> 1
4(ii)(a)(3)
EXECUTION COPY
BORROWER
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Agreement") is made as of
February 25, 1999, by and between THE DELTA QUEEN STEAMBOAT CO., a Delaware
corporation (the "Pledgor") and THE CHASE MANHATTAN BANK, a New York banking
corporation, as agent (hereinafter in such capacity, the "Agent") for its
benefit and the benefit of the other Holders of Secured Obligations (as such
term is referred to and defined in the "Credit Agreement" described below).
WHEREAS, the Pledgor, THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES THEREOF and each other financial institution which from time to
time becomes a party thereto in accordance with Section 11.02(a) thereof
(together with their respective successors and permitted assigns, individually,
a "Lender" and, collectively, the "Lenders") and the Agent are parties to that
certain Credit Agreement, dated as of February 25, 1999 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement");
WHEREAS, it is a condition precedent to the Lenders' making
any loans or otherwise extending credit to the Pledgor under the Credit
Agreement that the Pledgor execute and deliver to the Agent, for its benefit and
the benefit of the other Holders of Secured Obligations, a pledge agreement in
substantially the form hereof with respect to all the issued and outstanding
shares of the capital stock or other form of equity interest in certain
Subsidiaries described on Annex A; and
WHEREAS, the Pledgor is presently the record and beneficial
owner of all of the issued and outstanding shares of the capital stock (or other
form of equity) of each of the Subsidiaries described on Annex A; and
WHEREAS, the Pledgor wishes to grant and pledge the security
interests in favor of the Agent, for its benefit and the benefit of the other
Holders of Secured Obligations, as herein provided;
NOW, THEREFORE, in consideration of the premises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Pledge of Stock, Etc.
<PAGE> 2
(a) The Pledgor hereby pledges, assigns, grants a security
interest in, and delivers to the Agent, for its benefit and the benefit of the
other Holders of Secured Obligations, all the shares of capital stock (or other
equity) of the Subsidiaries of every class described on Annex A hereto, to be
held by the Agent, for its benefit and the benefit of the other Holders of
Secured Obligations, subject to the terms and conditions hereinafter set forth.
The certificates for such shares, accompanied by stock powers or other
appropriate instruments of assignment thereof duly executed in blank by the
Pledgor, have been delivered to the Agent.
(b) In case the Pledgor shall acquire any additional shares of
the capital stock (or other equity) of any Subsidiary, or corporation or other
business entity which is the successor of a Subsidiary described on Annex A
hereto, or any securities exchangeable for or convertible into shares of such
capital stock (or other equity) of any class of such Subsidiary, by purchase or
otherwise, then the Pledgor shall forthwith deliver to and pledge such shares or
other securities to the Agent, for its benefit and the benefit of the other
Holders of Secured Obligations, under this Agreement.
(c) The Pledgor also hereby pledges, assigns, grants a
security interest in, and delivers to the Agent, for its benefit and the benefit
of the other Holders of Secured Obligations, the Cash Collateral Account and all
of the Cash Collateral as such terms are hereinafter defined.
(d) In the event the Pledgor shall acquire any shares of the
capital stock (or other equity) of any additional Subsidiary formed or acquired
as a corporation the capital stock of which is required to be pledged to the
Agent hereunder pursuant to Section 6.10 of the Credit Agreement, the Pledgor
shall execute and deliver to the Agent, for its benefit and the benefit of the
other Holders of Secured Obligations, a supplement to this Agreement in the form
of Exhibit A attached hereto with respect to all classes of such capital stock
and shall deliver to the Agent therewith all certificates for the shares of such
capital stock, which shall be described on Annex A thereto, accompanied by stock
powers or other appropriate instruments of assignment thereof duly executed in
blank by the Pledgor, all within the time period prescribed by Section 6.10 of
the Credit Agreement.
Section 2. Definitions. The term "Obligations" and all other
capitalized terms used herein without definition shall have the respective
meanings provided therefor in the Credit Agreement. Terms used herein and not
defined in the Credit Agreement or otherwise defined herein that are defined in
the Uniform Commercial Code of New York have such defined meanings herein,
unless the context otherwise indicated or requires, and the following terms
shall have the following meanings:
Cash Collateral. See Section 4.
Cash Collateral Account. See Section 4.
-2-
<PAGE> 3
Stock. Includes the shares of capital stock or other equity
described in Annex A attached hereto and any additional shares of stock or other
forms of equity interest of a Subsidiary listed on Annex A hereto at the time of
reference pledged with the Agent hereunder.
Stock Collateral. The property at any time pledged to the
Agent hereunder and all income therefrom, increases therein and proceeds
thereof, including without limitation that included in Cash Collateral, but
excluding from the definition of "Stock Collateral" any income, increases or
proceeds received by the Pledgor to the extent expressly permitted by Section 6.
Time Deposits. See Section 4.
Section 3. Security for Obligations. This Agreement and the
security interest in and pledge of the Stock Collateral hereunder are made with
and granted to the Agent, for its benefit and the benefit of the other Holders
of Secured Obligations, as security for the payment and performance in full of
all the Obligations.
Section 4. Liquidation, Recapitalization, Etc.
(a) Any sums or other property paid or distributed upon or
with respect to any of the Stock, whether by dividend or redemption or upon the
liquidation or dissolution of the issuer thereof or otherwise, shall, except to
the limited extent provided in Section 6, be paid over and delivered to the
Agent to be held by the Agent, for its benefit and the benefit of the other
Holders of Secured Obligations, as security for the payment and performance in
full of all of the Obligations. In case, pursuant to the recapitalization or
reclassification of the capital of the issuer thereof or pursuant to the
reorganization thereof, any distribution of capital shall be made on or in
respect of any of the Stock or any property shall be distributed upon or with
respect to any of the Stock, the property so distributed shall be delivered to
the Agent, for its benefit and the benefit of the other Holders of Secured
Obligations, to be held by it as security for the Obligations. Except to the
limited extent provided in Section 6, all sums of money and property paid or
distributed in respect of the Stock, whether as a dividend or upon such a
liquidation, dissolution, recapitalization or reclassification or otherwise,
that are received by the Pledgor shall, until paid or delivered to the Agent, be
held in trust for the Agent, for its benefit and the benefit of the other
Holders of Secured Obligations, as security for the payment and performance in
full of all of the Obligations.
(b) All sums of money that are delivered to the Agent pursuant
to this Section 4 shall be deposited into an interest bearing account with the
Agent (the "Cash Collateral Account"). Some or all of the funds from time to
time in the Cash Collateral Account may be invested in time deposits, including,
without limitation, certificates of deposit issued by the Agent (such
certificates of deposit or other time deposits being hereinafter referred to,
collectively, as "Time Deposits"), that are reasonably satisfactory to the Agent
after consultation with the Pledgor. Interest earned on the Cash Collateral
Account and on the Time Deposits, and the principal of the Time Deposits at
maturity that is not invested in new Time Deposits, shall be
-3-
<PAGE> 4
deposited in the Cash Collateral Account. The Cash Collateral Account, all sums
from time to time standing to the credit of the Cash Collateral Account, any and
all Time Deposits, any and all instruments or other writings evidencing Time
Deposits and any and all proceeds or any thereof are hereinafter referred to as
the "Cash Collateral."
(c) Except as otherwise expressly provided in Section 15, the
Pledgor shall have no right to withdraw sums from the Cash Collateral Account,
to receive any of the Cash Collateral or to require the agent to part with the
Agent's possession of any instruments or other writings evidencing any Time
Deposits.
Section 5. Warranty of Title; Authority. The Pledgor hereby
represents and warrants that: (a) the Pledgor is the sole owner of the Stock
described in Section 1, subject to no pledges, liens, security interests,
charges, options or other encumbrances except the pledge and security interest
in favor of the Agent on behalf of itself and the other Holders of Secured
Obligations pursuant to the Loan Documents and (b) the Pledgor has full power,
authority and legal right to execute, deliver and perform its obligations under
this Agreement and to pledge and grant a security interest in all of the Stock
Collateral pursuant to this Agreement, and the execution, delivery and
performance hereof and the pledge of and granting of a security interest in the
Stock Collateral hereunder have been duly authorized by all necessary corporate
or other action and do not contravene in any material respect any applicable
law, rule or regulation or any provision of the Pledgor's charter documents or
by-laws or of any applicable judgment, decree or order of any tribunal or of any
agreement or instrument to which the Pledgor is a party or by which it or any of
its property is bound or affected or constitute a default thereunder. The
Pledgor covenants that it will defend the rights of the Agent and the other
Holders of Secured Obligations and security interest of the Agent, for its
benefit and the benefit of the other Holders of Secured Obligations, in such
Stock against the claims and demands of all other Persons whomsoever. The
Pledgor further covenants that it will have the like title to and right to
pledge and grant a security interest in the Stock Collateral hereafter pledged
or in which a security interest is granted to the Agent hereunder and will
likewise defend the rights, pledge and security interest thereof and therein of
the Agent and the other Holders of Secured Obligations.
Section 6. Dividends, Voting, Etc., Prior to Maturity. So long
as no Event of Default shall have occurred and be continuing, the Pledgor shall
be entitled to directly receive all cash dividends and cash distributions paid
in respect of the Stock (except liquidation distributions), to vote the Stock
and to give consents, waivers and ratifications in respect of the Stock;
provided, however, that no vote shall be cast or consent, waiver or ratification
given by the Pledgor if the effect thereof would result in any violation of any
of the provisions of the Credit Agreement, the Notes or any of the other Loan
Documents. All such rights of the Pledgor to receive cash dividends shall cease
in case an Event of Default shall have occurred and be continuing. All such
rights of the Pledgor to vote and give consents, waivers and ratifications with
respect to the Stock shall, at the Agent's option, as evidenced by the Agent's
notifying the Pledgor of such election, cease in case an Event of Default shall
have occurred and be continuing.
-4-
<PAGE> 5
Section 7. Remedies.
(a) If an Event of Default shall have occurred and be
continuing, the Agent shall thereafter have the following rights and remedies
(to the extent permitted by applicable law) in addition to the rights and
remedies of a secured party under the Uniform Commercial Code of New York, all
such rights and remedies being cumulative, not exclusive, and enforceable
alternatively, successively or concurrently by the Agent at such time or times
as the Agent deems expedient:
(i) if the Agent so elects and gives notice of such election
to the Pledgor, the Agent may vote any or all shares of the Stock
(whether or not the same shall have been transferred into its name or
the name of its nominee or nominees) for any lawful purpose, including,
without limitation, if the Agent so elects, for the liquidation of the
assets of the issuer thereof, and give all consents, waivers and
ratifications in respect though it were the outright owner thereof,
including without limitation, act by shareholder consent to remove any
director of the Pledgor, (the Pledgor hereby irrevocably constituting
and appointing the Agent the proxy and attorney-in-fact of the Pledgor,
with full power of substitution, to do so long as an Event of Default
exists);
(ii) the Agent may demand, sue for, collect or make any
compromise or settlement the Agent deems suitable in respect of any
Stock Collateral;
(iii) the Agent may sell, resell, assign and deliver, or
otherwise dispose of any or all of the Stock Collateral, for cash or
credit or both and upon such terms at such place or places, at such
time or Agent thinks expedient, all without demand for performance by
the Pledgor or any notice or advertisement whatsoever except as
expressly provided herein or as may otherwise be required by law;
(iv) the Agent may cause all or any part of the Stock held by
it to be transferred into its name or the name of its nominee or
nominees; and
(v) the Agent may set off against the Obligations any and all
sums deposited with it or held by it, including without limitation, any
sums standing to the credit of the Cash Collateral Account and any Time
Deposits issued by the Agent.
(b) In the event of any disposition of the Stock Collateral as
provided in clause (iii) of Section 7(a), the Agent shall give to the Pledgor at
least ten (10) Business Days' prior written notice of the time and place of any
public sale of the Stock Collateral or of the time after which any private sale
or any other intended disposition is to be made. The Pledgor hereby acknowledges
that ten (10) Business Days' prior written notice of such sale or sales shall be
reasonable notice. The Agent may enforce its rights hereunder without any other
notice and
-5-
<PAGE> 6
without compliance with any other condition precedent now or hereunder imposed
by statute, rule of law or otherwise (all of which are hereby expressly waived
by the Pledgor, to the fullest extent permitted by law). The Agent may buy any
part or all of the Stock Collateral at any public sale and if any part or all of
the Stock Collateral is of a type customarily sold in a recognized market or is
of the type which is the subject of widely-distributed standard price
quotations, the Agent may buy at private sale and may make payments thereof by
any means. The Agent may apply the cash proceeds actually received from any sale
or other disposition to the reasonable expenses of retaking, attorneys' fees,
travel and all other expenses which may be incurred by the Agent in attempting
to collect the obligations or action or proceeding related to the subject matter
of this such order or preference as the Agent may determine after proper
allowance for Obligations not then due. Only after such required by
Section 9-504(1)(c) of the Uniform Commercial Code of the State of New York,
need the Agent account to the Pledgor for any surplus. To the extent that any
of the Obligations are to be paid or performed by a Person other than the
Pledgor, the Pledgor waives and agrees not to assert any rights or privileges
which it may have under Section 9-112 of the Uniform Commercial Code of the
State of New York.
(c) The Pledgor recognizes that the Agent may be unable to
effect a public sale of the Stock by reason of certain prohibitions contained in
the Securities Act of 1933, as amended (the "Securities Act"), federal banking
laws, and other applicable laws, but may be compelled to resort to one or more
private sales thereof to restricted group of purchasers. The Pledgor agrees that
any such private sales may be at prices and other terms less favorable to the
seller than if sold at public sales and that such private sales shall not by
reason thereof be deemed not to have been made in a commercially reasonable
manner. The Agent shall be under no obligation to delay a sale of any of the
Stock for the period of time necessary to permit the issuer of such securities
to register such securities for public sale under the Securities Act, or such
other federal banking or other applicable laws, even if the issuer would agree
to do so.
Section 8. Marshaling. Neither the Agent nor any other Holder
of Secured Obligations shall be required to Marshall any present or future
collateral security for (including but not limited to this Agreement and the
Stock Collateral), or other assurances of payment of, the Obligations or any of
them, or to resort to such collateral security or other assurances of payment in
any particular order. All of the Agent's rights hereunder and of the Agent and
the other Holders of Secured Obligations in respect of such collateral security
and other assurances of payment shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that it lawfully may, the
Pledgor hereby agrees that it will not invoke any law relating to the
marshalling of collateral that might cause delay in or impede the enforcement of
the Agent's rights under this Agreement or under any other instrument evidencing
any of the Obligations or under which any of the obligations is outstanding or
by which any of the Obligations is secured or payment thereof is otherwise
assured, and to the extent that it lawfully may the Pledgor hereby irrevocably
waives the benefits of all such laws.
Section 9. Pledgor's Obligations Not Affected. The obligations
of the Pledgor hereunder shall remain in full force and effect without regard
to, and shall not be impaired by (a)
-6-
<PAGE> 7
any exercise or nonexercise, or any waiver, by the Agent or any other Holder of
Secured Obligations of any right, remedy, power or privilege under or in respect
of any of the Obligations or any security therefor (including this Agreement)
except to the extent set forth in any writing executed by the Agent; (b) any
amendment to or modification of the Credit Agreement, the Note, the other Loan
Documents or any of the Obligations; (c) any amendment to or modification of any
instrument (other than this Agreement) securing any of the Obligations,
including, without limitation, any of the Collateral Documents; (d) the taking
of additional security for, or any other assurance of payment of, any of the
Obligations of the release or discharge or termination of any security or other
assurances of payment or performance for any of the Obligations or (e) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the obligations or of this Agreement;
whether or not the Pledgor shall have notice or knowledge of an of the
foregoing.
Section 10. Transfer, Etc., by Pledgor. Without the prior
written consent of the Agent, the Pledgor will not sell, assign, transfer or
otherwise dispose of, grant any option with restrict any of the Stock Collateral
or any interest therein, except for the pledge or grant any security interest in
or otherwise encumber or restrict any of the Stock Collateral or any interest
therein, except for the pledge thereof and security interest therein provided
for in this Agreement.
Section 11. Further Assurances. The Pledgor will do all such
acts, and will furnish to the Agent all such financing statements, certificates,
legal opinions, corporate approvals and other documents, as the Agent may
reasonably request from time to time in order to give full effect to this
Agreement and to secure the rights of the Agent and the other Holders of Secured
Obligations hereunder, all without any cost or expense to the Agent or any such
Holder. If the Agent so elects, a photocopy of this Agreement may at any time
and from time to time be filed by the Agent as a financing statement in any
recording office in any jurisdiction.
Section 12. Agent; Agent's Exoneration. The Agent shall
exercise its rights and remedies hereunder in accordance with the provisions of
the Credit Agreement, including without limitation the provisions for acting
upon the request or at the direction of one or more of the Holders of Secured
Obligations. Under no circumstances shall the Agent be deemed to assume any
responsibility for or obligation or duty with respect to any part or all of the
Stock Collateral of any nature or kind or any matter or proceedings arising out
of or relating thereto, other than (a) to exercise reasonable care in the
physical custody of the Stock Collateral and (b) after an Event of Default shall
have occurred and be continuing to act in a commercially reasonable manner.
Neither the Agent nor any other Holder of Secured Obligation shall be required
to take any action of any kind to collect, preserve or protect its or the
Pledgor's rights in the Stock Collateral or against other parties thereto. The
Agent's prior recourse to any part or all of the Stock Collateral shall not
constitute a condition of any demand, suit or proceeding for payment or
collection of any of the Obligations.
Section 13. No Waiver, Etc. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by a written
instrument expressly referring to
-7-
<PAGE> 8
this Agreement and to the provisions so modified or limited, and executed by the
Agent and the Pledgor. No act, failure or delay by the Agent shall constitute a
waiver of its rights and remedies hereunder or otherwise. No single or partial
waiver by the Agent of any default or right or remedy that it may have shall
operate as a waiver of any other default, right or remedy or of the same
default, right or remedy on a future occasion. The Pledgor hereby waives
presentment, notice of dishonor and protest of all instruments, included in or
evidencing any of the Obligations or the Stock Collateral, and any and all other
notices and demands whatsoever (except as expressly provided herein, in the
Credit Agreement or in the other Loan Documents).
Section 14. Notice, Etc. All notices, requests and other
communications hereunder shall be made in the manner set forth in the Credit
Agreement.
Section 15. Termination. Upon indefeasible payment and
satisfaction in full of all of the Obligations and after termination of all
financial arrangements among the Pledgor and the Holders of Secured Obligations
(other than continuing contingent indemnity obligations), and after making any
payments required by Section 9-504(1)(c) of the Uniform Commercial Code, this
Agreement shall terminate and the Agent shall, at the Pledgor's request and
expense, promptly return such Stock Collateral in the possession or control of
the Agent as has not theretofore been disposed of pursuant to the provisions
hereof, together with any moneys and other property at the time held by the
Agent hereunder.
Section 16. Overdue Amounts. Until paid, all amounts due and
payable by the Pledgor hereunder shall be a debt secured by the Stock Collateral
and shall bear, whether before or after judgment, interest at the Default Rate
set forth in the Credit Agreement.
Section 17. GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS
AGREEMENT ON BEHALF OF ITSELF AND THE OTHER HOLDERS OF SECURED OBLIGATIONS, AT
NEW YORK, NEW YORK BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE AMONG
THE PLEDGOR, THE AGENT AND ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 18. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY
TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION
(B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN
-8-
<PAGE> 9
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY
BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL
DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE PLEDGOR AGREES THAT THE AGENT OR
ANY OTHER HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO PROCEED AGAINST
THE PLEDGOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO
(1) OBTAIN PERSONAL JURISDICTION OVER THE PLEDGOR OR (2) REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE PLEDGOR AGREES THAT IT
WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH
PERSON TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. EXCEPT AS
PROHIBITED BY LAW, THE PLEDGOR WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS SUBSECTION.
(C) SERVICE OF PROCESS. THE PLEDGOR WAIVES PERSONAL SERVICE OF
ANY PROCESS UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, IRREVOCABLY
APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC., WHOSE ADDRESS IS 500
CENTRAL AVENUE, ALBANY, NEW YORK, 12206, AS THE PLEDGOR'S AGENT FOR THE PURPOSE
OF ACCEPTING SERVICE OR PROCESS ISSUED BY ANY COURT. THE PLEDGOR IRREVOCABLY
WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
-9-
<PAGE> 10
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES
HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. THE PLEDGOR WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Section 19. Miscellaneous. The headings of each section of
this Agreement are for convenience only and shall not define or limit the
provisions thereof. This Agreement and all rights and obligations hereunder
shall be binding upon the Pledgor and its respective successors and assigns, and
shall inure to the benefit of the Agent and the other Holders of Secured
Obligations and their respective successors and assigns. If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall be in no way affected thereby, and this Agreement
shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Pledgor acknowledges
receive of a copy of this Agreement.
-10-
<PAGE> 11
IN WITNESS WHEREOF, intending to be legally bound, the Pledgor
and the Agent have caused this Agreement to be executed as of the date first
above written.
THE DELTA QUEEN STEAMBOAT CO.
By: /s/ JORDAN B. ALLEN
--------------------------------
Name: Jordan B. Allen
------------------------------
Title: Executive Vice President
-----------------------------
THE CHASE MANHATTAN BANK, as Agent
By: /s/ STEVEN J. FALISKI
--------------------------------
Name: Steven J. Faliski
------------------------------
Title: Vice President
-----------------------------
-11-
<PAGE> 12
The undersigned Subsidiaries hereby join in the above
Agreement for the sole purpose of consenting to and being bound by the
provisions of Sections 4(a), 6 and 7 thereof, the undersigned hereby agreeing to
cooperate fully and in good faith with the Agent and the Pledgor in carrying out
such provisions.
CRUISE AMERICA TRAVEL, INCORPORATED
By: /s/ JORDAN B. ALLEN
--------------------------------
Name: Jordan B. Allen
------------------------------
Title: Executive Vice President
-----------------------------
DQSC PROPERTY CO.
By: /s/ JORDAN B. ALLEN
--------------------------------
Name: Jordan B. Allen
------------------------------
Title: Executive Vice President
-----------------------------
DQSB II, INC.
By: /s/ JORDAN B. ALLEN
--------------------------------
Name: Jordan B. Allen
------------------------------
Title: Executive Vice President
-----------------------------
-12-
<PAGE> 13
ANNEX A
to
STOCK PLEDGE AGREEMENT
<TABLE>
<CAPTION>
Subsidiary Class Number of Shares
- ---------- ----- ----------------
<S> <C> <C>
Cruise America Travel, Incorporated Common 100
DQSC Property Co. Common 1,000
DQSB II, Inc. Common 1,000
</TABLE>
-13-
<PAGE> 14
EXHIBIT A
SUPPLEMENT
to
STOCK PLEDGE AGREEMENT
This Supplement is made as of , to the Stock Pledge
Agreement dated as of February , 1999 (as amended, supplemented, modified or
restated from time to time, the "Pledge Agreement"), by and between THE DELTA
QUEEN STEAMBOAT CO., a Delaware corporation (the "Pledgor") and THE CHASE
MANHATTAN BANK, as Agent, for its benefit and the benefit of the other Holders
of Secured Obligations (as such term is referred to and defined in the "Credit
Agreement" referred to below).
RECITALS: The Pledgor, certain Lenders and the Agent are
parties to that certain Credit Agreement dated as of February , 1999, (as
amended, supplemented, modified or restated from time to time, the "Credit
Agreement"; capitalized terms used herein without definition shall have the
respective meanings assigned thereto in the Credit Agreement or the Pledge
Agreement). Pursuant to Section 1(d) of the Pledge Agreement, the Pledgor is
required to execute and deliver to the Agent, for its benefit and the benefit of
the other Holders of Secured Obligations, this Supplement and all of the issued
and outstanding shares of capital stock (or other equity) of the Subsidiaries of
every class described on Annex A attached hereto, together with an undated stock
power executed by the Pledgor in blank with respect to each stock certificate so
delivered.
ACCORDINGLY, the Pledgor agrees with the Agent as follows:
1. Pledge of Stock. The shares of capital stock of each of the
Subsidiaries described on Annex A hereto and delivered to the Agent herewith
(the "Pledged Stock") shall constitute "Stock" and "Stock Collateral" as defined
in the Pledge Agreement as if such shares had originally been described on Annex
A to the Pledge Agreement, shall be subject to the pledge and security interest
created by, and all other terms, conditions and covenants contained in, the
Pledge Agreement, and shall secure the payment and performance of the
Obligations as provided in the Pledge Agreement.
2. Representations and Warranties. The representations and
warranties of the Pledgor contained in Section 5 of the Pledge Agreement are
true and correct in all material respects with respect to the Pledged Stock as
of the date hereof.
-14-
<PAGE> 15
THE DELTA QUEEN STEAMBOAT CO.
By: __________________________
Name:
Title:
-15-
<PAGE> 16
ANNEX A
TO
SUPPLEMENT
TO
STOCK PLEDGE AGREEMENT
<TABLE>
<CAPTION>
Number
Subsidiary Class of Shares
- ---------- ----- ---------
<S> <C> <C>
</TABLE>
-16-
<PAGE> 17
ACKNOWLEDGMENT
Dated as of __________,_______
The undersigned hereby acknowledges the pledge set forth in
the foregoing Supplement and agrees (i) to be bound by the provisions of
Sections 4(a), 6 and 7 of the Pledge Agreement and (ii) to cooperate fully and
in good faith with the Agent and the Pledgor in carrying out such provisions.
[SUBSIDIARY]
By: __________________________
Name:
Title:
-17-
<PAGE> 1
4(ii)(a)(4)
EXECUTION COPY
[BORROWER]
LIMITED LIABILITY COMPANY PLEDGE AGREEMENT
THIS LIMITED LIABILITY COMPANY PLEDGE AGREEMENT ("AGREEMENT")
is made as of February 25, 1999 by and between THE DELTA QUEEN STEAMBOAT CO., a
Delaware corporation ("PLEDGOR"), and THE CHASE MANHATTAN BANK, as agent (the
"AGENT"), for its benefit and the benefit of the other Holders of Secured
Obligations (as such term is defined in the Credit Agreement referred to below).
Capitalized terms used herein and not herein defined shall have the same
meanings assigned to such terms in the Credit Agreement described below.
WHEREAS, the Pledgor, certain financial institutions (such
financial institutions being herein referred to collectively as the "LENDERS"),
and the Agent as one of the Lenders and as the agent for the Lenders are parties
to that certain Credit Agreement dated as of February 25, 1999 (as such
agreement may be amended, restated, supplemented or modified from time to time,
the "CREDIT AGREEMENT"), pursuant to which the Lenders have agreed, subject to
certain conditions precedent, to make loans and other financial accommodations
to the Pledgor from time to time.
WHEREAS, it is a condition precedent to the making of the
loans to the Pledgor under the Credit Agreement that this Agreement shall be
executed and delivered by the Pledgor to the Agent, for its benefit and the
benefit of the other Holders of Secured Obligations, and that this Agreement
shall be in full force and effect.
WHEREAS, the Pledgor desires to secure its "LIABILITIES" (as
hereinafter defined) by the grant to the Agent, for its benefit and the benefit
of the other Holders of Secured Obligations of a first priority security
interest in the Pledged Collateral (as hereinafter defined).
ACCORDINGLY, for and in consideration of the foregoing and of
any financial accommodations or extensions of credit (including, without
limitation, any loan or advance by renewal, refinancing or extension of the
agreements described hereinabove or otherwise) heretofore, now or hereafter made
to or for the benefit of the Pledgor pursuant to the Credit Agreement or any
other agreement, instrument or document executed pursuant to or in connection
therewith, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Pledgor and the Agent hereby
agree as follows:
<PAGE> 2
1. Pledge. (a) The Pledgor hereby pledges, grants and assigns
to the Agent, for the benefit of the Agent and the other Holders of Secured
Obligations, and grants to the Agent for the benefit of the Agent and the other
Holders of Secured Obligations, a security interest in, the following
(collectively, the "PLEDGED COLLATERAL"):
(i) The membership interests of Pledgor in each Subsidiary of
the Pledgor organized as a limited liability company and listed on
Exhibit A attached hereto and made a part hereof (the "LLC
SUBSIDIARIES") now or at any time or times hereafter owned by the
Pledgor, and any certificates representing such membership interests
(such membership interests being identified on Exhibit A, all of the
right, title and interest of the Pledgor in, to and under its
respective percentage interest, shares or units as a member in each LLC
Subsidiary, including, without limitation, Pledgor's interest in (or
allocation of) the profits, losses, income, gains, deductions, credits
or similar items of each LLC Subsidiary and the right to receive
distributions of each LLC Subsidiary's cash, other property, assets,
and all options and warrants for the purchase of membership interests,
whether now existing or hereafter arising, whether arising under the
terms of the Certificate of Formation, the Limited Liability Company
Agreement or any of the other organizational documents (such documents
hereinafter collectively referred to as the "OPERATING AGREEMENTS") of
any LLC Subsidiary, or at law or in equity, or otherwise and any and
all of the proceeds thereof (all of said membership interests,
certificates, and warrants being hereinafter collectively referred to
as the "PLEDGED MEMBERSHIP INTEREST") herewith delivered to the Agent
accompanied by the certificates or other writings evidencing the same,
accompanied by duly executed instruments of transfer or assignments in
blank, all in form and substance satisfactory to the Agent (such
instruments being collectively referred to hereinafter as the "POWERS")
duly executed in blank, and all distributions, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of, or in exchange for, any or all of the
Pledged Membership Interest;
(ii) Any additional membership interests in each LLC
Subsidiary from time to time acquired by the Pledgor in any manner, and
any certificates representing such additional membership interests or
any additional percentage interests, shares, units, options or warrants
of membership interests in each LLC Subsidiary (any such additional
interests shall constitute part of the Pledged Membership Interest and
the Agent is irrevocably authorized to amend Exhibit A from time to
time to reflect such additional interests), and all options, warrants,
distributions, cash, instruments and other rights and options from time
to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such interests and will promptly
thereafter deliver to the Lender, a certificate duly executed by the
Pledgor describing such percentage interests, certificates, units,
options or warrants and certifying that the same have been duly pledged
hereunder;
2
<PAGE> 3
(iii) The property and interests in property described in
Section 3 below; and
(iv) All proceeds of the foregoing.
(b) In the event that the Pledgor shall acquire any membership
interests (or other equity) of any additional Subsidiary formed or acquired as a
limited liability company the membership interests of which are required to be
pledged to the Agent hereunder pursuant to Section 6.10 of the Credit Agreement,
the Pledgor shall execute and deliver to the Agent, for its benefit and the
benefit of the other Holders of Secured Obligations, a supplement to this
Agreement in the form of Exhibit B attached hereto (the "Supplement"), shall
describe such membership interests on Annex A thereto and shall deliver to the
Agent therewith all certificates and other writings representing such membership
interests in such Subsidiary, accompanied by duly executed instruments of
transfer or assignment duly executed in blank by the Pledgor, all within the
time period prescribed by Section 6.10 of the Credit Agreement.
2. Security for Liabilities. The Pledged Collateral secures
the prompt payment, performance and observance of (i) the Obligations and (ii)
the Pledgor's obligations and liabilities under this Agreement and each
agreement, document or instrument executed by the Pledgor pursuant to or in
connection with this Agreement (all such obligations and liabilities of the
Pledgor now or hereafter existing being hereinafter referred to as the
"LIABILITIES").
3. Pledged Collateral Adjustments. If, during the term of this
Agreement:
(a) Any reclassification, readjustment or other change is
declared or made in the capital structure of any LLC Subsidiary, or any
option included within the Pledged Collateral is exercised, or both, or
(b) Any subscription, warrants or any other rights or options
shall be issued in connection with the Pledged Collateral,
then all new, substituted and additional membership interests, certificates,
warrants, rights, options or other securities, issued by reason of any of the
foregoing, shall be immediately delivered to and held by the Agent under the
terms of this Agreement and shall constitute Pledged Collateral hereunder;
provided, however, that nothing contained in this Section 3 shall be deemed to
permit any distribution, issuance of additional membership interests, warrants,
rights or options, reclassification, readjustment or other change in the capital
structure of any LLC Subsidiary which is not expressly permitted in the Credit
Agreement.
4. Subsequent Changes Affecting Pledged Collateral. The
Pledgor represents and warrants that it has made its own arrangements for
keeping itself informed of changes or potential changes affecting the Pledged
Collateral (including, but not limited to, rights to convert,
3
<PAGE> 4
rights to subscribe, cash distributions or other distributions, reorganization
or other exchanges, tender offers and voting rights), and the Pledgor agrees
that neither the Agent nor any of the other Holders of Secured Obligations shall
have any obligation to inform the Pledgor of any such changes or potential
changes or to take any action or omit to take any action with respect thereto.
The Agent may, after the occurrence of an Event of Default, without notice and
at its option, transfer or register the Pledged Collateral or any part thereof
into its or its nominee's name with or without any indication that such Pledged
Collateral is subject to the security interest hereunder. In addition, the Agent
may at any time exchange certificates or instruments representing or evidencing
Pledged Membership Interests for certificates or instruments of smaller or
larger denominations.
5. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the sole legal and beneficial owner of the
membership interests in the LLC Subsidiaries pledged to the Agent
pursuant to this Agreement;
(b) This Agreement has been duly and validly authorized,
executed and delivered by Pledgor and constitutes the legal, valid and
binding obligation of the Pledgor enforceable against the Pledgor in
accordance with its terms except as enforcement may be limited by
bankruptcy, insolvency and other similar laws affecting the enforcement
of creditors' rights generally and by moratorium laws from time to time
in effect and general equitable principles;
(c) The Pledgor is the direct beneficial owner of the Pledged
Collateral hereby pledged by it;
(d) The Pledgor owns such Pledged Collateral free and clear of
any Lien, except for the pledge and security interest granted to the
Agent and the other Holders of Secured Obligations pursuant to the Loan
Documents;
(e) The Pledgor shall cause each LLC Subsidiary to make a
notation on its records, which notation shall indicate the security
interest granted hereby, and the Pledgor agrees to execute and file
financing statements pursuant to the Uniform Commercial Code as the
Agent may reasonably request to perfect the security interest granted
hereby;
(f) The pledge of the Pledged Collateral by the Pledgor does
not violate (1) the Operating Agreements of any LLC Subsidiary or any
of the other organizational documents of any LLC Subsidiary; (2) the
certificate of incorporation or by-laws of the Pledgor; (3) any
indenture, mortgage, loan or credit agreement to which the Pledgor or
any LLC Subsidiary is a party or by which any of their respective
properties or assets
4
<PAGE> 5
may be bound; or (4) any restriction on such transfer or encumbrance of
such Pledged Collateral;
(g) Except as set forth in the Operating Agreements, there are
no restrictions upon the voting rights associated with, or upon the
transfer of, any of the Pledged Collateral;
(h) Except as set forth in the Operating Agreements, the
Pledgor has the right to vote, pledge, assign and grant a security
interest in or otherwise transfer such Pledged Collateral free of any
Liens;
(i) No authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required either (i) for the pledge of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by the Pledgor or (ii) for the exercise
by the Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant
to this Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities
generally);
(j) The pledge of the Pledged Collateral pursuant to this
Agreement creates a valid and perfected first priority security
interest in the Pledged Collateral, in favor of the Agent for the
benefit of the Agent and the other Holders of Secured Obligations,
securing the payment and performance of the Liabilities; and
(k) With respect to each LLC Subsidiary organized under the
laws of Delaware, the pledge of the Pledged Collateral pursuant to this
Agreement constitutes a complete assignment of the Pledged Collateral
pursuant to 6 Del. Code Ann. Section 18-702 (1996).
6. Voting Rights and Other Powers. During the term of this
Agreement, and except as provided in this Section 6 below, the Pledgor shall
have (i) the right to vote the Pledged Membership Interest on all questions in a
manner not inconsistent with the terms of this Agreement, the Credit Agreement
and any other agreement, instrument or document executed pursuant thereto or in
connection therewith, and (ii) the right to be the member and manager of each
LLC Subsidiary, and shall be entitled to exercise all managerial, election and
other rights relating to the Pledged Collateral. After the occurrence or during
the continuance of an Event of Default, the Agent or the Agent's nominee may, at
the Agent's or such nominee's option and following written notice ("ELECTION
NOTICE") from the Agent to the Pledgor (x) exercise, or direct such Pledgor as
to the exercise of (whereupon such Pledgor shall exercise as so directed), all
voting, consent, managerial, election and other membership and manager rights to
the Pledged Collateral of the Pledgor; such authorization shall constitute an
irrevocable voting proxy from the Pledgor to the Agent or, at the Agent's
option, to the Agent's nominee; and (y) exercise, or direct such Pledgor as to
the exercise of (whereupon the Pledgor shall exercise as so directed), any and
5
<PAGE> 6
all rights of conversion, exchange, subscription or any other rights, privileges
or options pertaining to the Pledged Collateral of the Pledgor as if the Agent
were the absolute owner thereof, all without liability except to account for
property actually received by it, but the Agent shall have no duty to exercise
any of the aforesaid rights, privileges or options and shall not be responsible
for any failure so to do or delay in so doing. Under no circumstances shall the
Agent have, or be deemed to have or to have had, any right to exercise, or to
direct the Pledgor to exercise, any voting, managerial, election or other rights
of an owner of the Pledged Collateral, or arising under the Pledged Collateral,
unless and until the Agent shall have delivered to such Pledgor an Election
Notice as described hereinabove.
7. Cash and Other Distributions. (a) So long as no Event of
Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to receive and retain for
its own account free and clear of the lien and security interest
created by this Agreement any and all cash distributions and interest
paid in respect of the Pledged Collateral (including a distribution of
net cash flow) to the extent such distributions are not prohibited by
the Credit Agreement, provided, however, that any and all
(A) distributions and interest paid or payable other
than in cash with respect to, and instruments and other
property received, receivable or otherwise distributed with
respect to, or in exchange for, any of the Pledged Collateral;
(B) other distributions paid or payable in cash with
respect to any of the Pledged Collateral on account of a
partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in
surplus; and
(C) cash paid, payable or otherwise distributed with
respect to principal of, or in redemption of, or in exchange
for, any of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Agent to hold, for the benefit of the Agent and the other Holders of
Secured Obligations, as Pledged Collateral and shall, if received by
the Pledgor, be received in trust for the Agent, for the benefit of the
Agent and the other Holders of Secured Obligations, be segregated from
the other property or funds of the Pledgor, and be delivered
immediately to the Agent as Pledged Collateral in the same form as so
received (with any necessary endorsement); and
(ii) The Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to receive the distributions or interest payments
which it is authorized to receive and retain pursuant to clause (i)
above.
6
<PAGE> 7
(b) After the occurrence and during the continuance of an Event of
Default:
(i) All rights of the Pledgor to receive the distributions and
interest payments which it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(i) hereof shall cease, and all such
rights shall thereupon become vested in the Agent, for the benefit of
the Agent and the other Holders of Secured Obligations, which shall
thereupon have the sole right to receive and hold as Pledged Collateral
such distributions and interest payments;
(ii) All distributions and interest payments which are
received by the Pledgor contrary to the provisions of clause (i) of
this Section 7(b) shall be received in trust for the Agent, for the
benefit of the Agent and the other Holders of Secured Obligations,
shall be segregated from other funds of the Pledgor and shall be paid
over immediately to the Agent as Pledged Collateral in the same form as
so received (with any necessary endorsements).
(c) All sums of money that are delivered to the Agent pursuant to this
Section 7 shall be deposited into an interest bearing account with the Agent
(the "CASH COLLATERAL ACCOUNT"). Some or all of the funds from time to time in
the Cash Collateral Account may be invested in time deposits, including, without
limitation, certificates of deposit issued by the Agent (such certificates of
deposit or other time deposits being hereinafter referred to, collectively, as
"TIME DEPOSITS"), that are reasonably satisfactory to the Agent after
consultation with the Pledgor. Interest earned on the Cash Collateral Account
and on the Time Deposits, and the principal of the Time Deposits at maturity
that is not invested in new Time Deposits, shall be deposited in the Cash
Collateral Account. The Cash Collateral Account, all sums from time to time
standing to the credit of the Cash Collateral Account, any and all Time
Deposits, any and all instruments or other writings evidencing Time Deposits and
any and all proceeds of any thereof are hereinafter referred to as the "Cash
Collateral" and shall constitute Pledged Collateral hereunder. Except as
otherwise expressly provided in Section 13, the Pledgor shall have no right to
withdraw sums from the Cash Collateral Account, to receive any of the Cash
Collateral or to require the agent to part with the Agent's possession of any
instruments or other writings evidencing any Time Deposits.
8. Transfers and Other Liens. The Pledgor agrees that except
as may be permitted by the Credit Agreement, it will not (i) sell or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral
without the prior written consent of the Agent, or (ii) create or permit to
exist any Lien upon or with respect to any of the Pledged Collateral, except for
the security interest under this Agreement. To the extent additional or
different members of any LLC Subsidiary are permitted, Pledgor shall cause as a
condition to permitting such entity to become a member that the new member
consent to (i) the terms of this Agreement; (ii) the pledge and assignment of
the Pledged Collateral; and (iii) the rights granted hereunder for the Agent to
become the/a member of such LLC Subsidiary at its election.
7
<PAGE> 8
9. Remedies. (a) The Agent shall have, in addition to any
other rights given under this Agreement or by law, all of the rights and
remedies with respect to the Pledged Collateral of a secured party under the
Uniform Commercial Code as in effect in the State of New York. After the
occurrence and during the continuance of an Event of Default and following
written notice to the Pledgor, the Agent (personally or through an agent) is
hereby authorized and empowered to transfer and register in its name or in the
name of its nominee the whole or any part of the Pledged Collateral, to exercise
all voting rights with respect thereto, to collect and receive all cash
distributions and other distributions made thereon, and to otherwise act with
respect to the Pledged Collateral as though the Agent were the outright owner
thereof and the sole member and manager of each LLC Subsidiary, the Pledgor
hereby irrevocably constituting and appointing the Agent as the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to do so, such
proxy being effective during the existence of an Event of Default and following
written notice thereof; provided, however, that the Agent shall have no duty to
exercise any such right or to preserve the same and shall not be liable for any
failure to do so or for any delay in doing so. In addition, after the occurrence
of an Event of Default, the Agent shall have such powers of sale and other
powers as may be conferred by applicable law. With respect to the Pledged
Collateral or any part thereof which shall then be in or shall thereafter come
into the possession or custody of the Agent or which the Agent shall otherwise
have the ability to transfer under applicable law, the Agent may, in its sole
discretion, without notice except as specified below, after the occurrence of an
Event of Default, sell or cause the same to be sold at any exchange, broker's
board or at public or private sale, in one or more sales or lots, at such price
as the Agent may deem best, for cash or on credit or for future delivery,
without assumption of any credit risk, and the purchaser of any or all of the
Pledged Collateral so sold shall thereafter own the same, absolutely free from
any claim, encumbrance or right of any kind whatsoever. The Agent and each of
the other Holders of Secured Obligations may, in its own name, or in the name of
a designee or nominee, buy the Pledged Collateral at any public sale and, if
permitted by applicable law, buy the Pledged Collateral at any private sale. The
Pledgor will pay to the Agent all reasonable expenses (including, without
limitation, court costs and reasonable attorneys' and paralegals' fees and
expenses) of, or incidental to, the enforcement of any of the provisions hereof.
The Agent agrees to distribute any proceeds of the sale of the Pledged
Collateral in accordance with the Credit Agreement and the Pledgor shall remain
liable for any deficiency following the sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens to decline
speedily in value or is or becomes of a type sold on a recognized market, the
Agent will give the Pledgor reasonable notice of the time and place of any
public sale thereof, or of the time after which any private sale or other
intended disposition is to be made. Any sale of the Pledged Collateral conducted
in conformity with reasonable commercial practices of banks, commercial finance
companies, insurance companies or other financial institutions disposing of
property similar to the Pledged Collateral shall be deemed to be commercially
reasonable. Notwithstanding any provision to the contrary contained herein, the
Pledgor agrees that any requirements of reasonable notice shall be met if such
notice is received by the Pledgor as provided in Section 25 below at least ten
(10)
8
<PAGE> 9
Business Days before the time of the sale or disposition; provided, however,
that Agent may give any shorter notice that is commercially reasonable under the
circumstances. Any other requirement of notice, demand or advertisement for sale
is waived, to the extent permitted by law.
(c) In view of the fact that federal and state securities laws
may impose certain restrictions on the method by which a sale of the Pledged
Collateral may be effected after a Default, the Pledgor agrees that after the
occurrence of an Event of Default, the Agent may, from time to time, attempt to
sell all or any part of the Pledged Collateral by means of a private placement
restricting the bidders and prospective purchasers to those who are qualified
and will represent and agree that they are purchasing for investment only and
not for distribution. In so doing, the Agent may solicit offers to buy the
Pledged Collateral, or any part of it, from a limited number of investors deemed
by the Agent, in its reasonable judgment, to be financially responsible parties
who might be interested in purchasing the Pledged Collateral. If the Agent
solicits such offers from not less than four (4) such investors, then the
acceptance by the Agent of the highest offer obtained therefrom shall be deemed
to be a commercially reasonable method of disposing of such Pledged Collateral;
provided, however, that this Section does not impose a requirement that the
Agent solicit offers from four or more investors in order for the sale to be
commercially reasonable.
10. Security Interest Absolute. All rights of the Agent and
security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of:
(i) Any lack of validity or enforceability of the Credit
Agreement or any other agreement or instrument relating thereto;
(ii) Any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Liabilities, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement;
(iii) Any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any part of the Liabilities; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of the
Liabilities or of this Agreement.
11. Agent Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Agent its attorney-in-fact, with full authority, in the name of the
Pledgor or otherwise, after the occurrence and during the continuation of an
Event of Default, from time to time in the Agent's sole discretion, to take any
action and to execute any instrument which the Agent may deem
9
<PAGE> 10
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, to receive, endorse and collect all instruments made payable
to the Pledgor representing any cash distribution, interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same, to exercise all rights of a member and manager
(upon the election of the Agent) such as all voting, consent, managerial and
other member rights, and to arrange for the transfer of all or any part of the
Pledged Collateral on the books of any LLC Subsidiary to the name of the Agent
or the Agent's nominee.
12. Waivers; Marshalling. (a) The Pledgor waives presentment
and demand for payment of any of the Liabilities, protest and notice of dishonor
or default with respect to any of the Liabilities and all other notices to which
the Pledgor might otherwise be entitled except as otherwise expressly provided
herein or in the Credit Agreement.
(b) Neither the Agent nor any other Holder of Secured Obligations shall
be required to marshall any present or future collateral security for (including
but not limited to this Agreement and the Pledged Collateral), or other
assurances of payment of, the Obligations or any of them, or to resort to such
collateral security or other assurances of payment in any particular order. All
of the Agent's rights hereunder and of the other Holders of Secured Obligations
in respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that it lawfully may, the Pledgor hereby agrees that it will not
invoke any law relating to the marshalling of collateral that might cause delay
in or impede the enforcement of the Agent's rights under this Agreement or under
any other instrument evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and to the extent that it lawfully may,
the Pledgor hereby irrevocably waives the benefits of all such laws.
13. Term. This Agreement shall remain in full force and effect
until the Liabilities (other than continuing contingent indemnity obligations)
have been fully and indefeasibly paid in cash and the Credit Agreement has
terminated pursuant to its terms. Upon the termination of this Agreement as
provided above (other than as a result of the sale of the Pledged Collateral),
the Agent will release the security interest created hereunder and, if it then
has possession of the Pledged Membership Interest or other Pledged Collateral,
will promptly deliver the Pledged Membership Interest and the Powers or such
other Pledged Collateral to the Pledgor.
14. Definitions. The singular shall include the plural and
vice versa and any gender shall include any other gender as the context may
require.
15. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Pledgor, the Agent, for the benefit of
itself and the other Holders of Secured
10
<PAGE> 11
Obligations, and their respective successors and assigns. The Pledgor's
successors and assigns shall include, without limitation, a receiver, trustee or
debtor-in-possession of or for the Pledgor.
16. GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS AGREEMENT, ON
BEHALF OF ITSELF AND THE OTHER HOLDERS OF SECURED OBLIGATIONS, AT NEW YORK, NEW
YORK BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN THE AGENT OR
ANY OTHER HOLDER OF SECURED OBLIGATIONS AND THE PLEDGOR ARISING OUT OF OR
RELATED TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
17. Consent to Jurisdiction; Counterclaims; Forum Non
Conveniens. (a) Exclusive Jurisdiction. Except as provided in subsection (b) of
this Section 17, the Agent, on behalf of itself and the other Holders of Secured
Obligations, and the Pledgor agree that all disputes between them arising out of
or related to the relationship established between them in connection with this
Agreement, whether arising in contract, tort, equity, or otherwise, shall be
resolved only by state or federal courts located in New York, New York, but the
parties acknowledge that any appeals from those courts may have to be heard by a
court located outside of New York, New York.
(b) Other Jurisdictions. The Agent shall have the right to
proceed against the Pledgor or its real or personal property in a court in any
location to enable the Agent to obtain personal jurisdiction over the Pledgor,
to realize on the Pledged Collateral or any other security for the Liabilities
or to enforce a judgment or other court order entered in favor of the Agent. The
Pledgor shall not assert any permissive counterclaims in any proceeding brought
by the Agent arising out of or relating to this Agreement.
(c) Venue; Forum Non Conveniens. Each of the Pledgor and the
Agent, for itself and on behalf of the other Holders of Secured Obligations,
waives any objection that it may have (including, without limitation, any
objection to the laying of venue or based on forum non conveniens) to the
location of the court in which any proceeding is commenced in accordance with
this Section 17.
18. Service of Process. The Pledgor waives personal service of
any process upon it and, as security for the Liabilities, irrevocably appoints
[The Prentice Hall Corporation System, Inc., 1013 Centre Road, Wilmington,
Delaware 19805], as its registered agent for the purpose of accepting service of
process issued by any court.
19. WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR AND THE AGENT,
FOR ITSELF AND ON BEHALF OF THE OTHER HOLDERS OF SECURED OBLIGATIONS, WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN THE AGENT OR ANY OTHER HOLDER OF SECURED OBLIGATIONS AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
11
<PAGE> 12
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. THE PLEDGOR, THE AGENT
OR ANY OTHER HOLDER OF SECURED OBLIGATIONS MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
20. Waiver of Bond. The Pledgor waives the posting of any bond
otherwise required of the Agent in connection with any judicial process or
proceeding to realize on the Pledged Collateral or any other security for the
Liabilities, to enforce any judgment or other court order entered in favor of
the Agent, or to enforce by specific performance, temporary restraining order,
or preliminary or permanent injunction, this Agreement or any other agreement or
document between the Agent and the Pledgor.
21. Advice of Counsel. The Pledgor represents and warrants to
the Agent and the other Holders of Secured Obligations that it has consulted
with its legal counsel regarding all waivers under this Agreement, including
without limitation those under Section 12 and Sections 16 through 20 hereof,
that it believes that it fully understands all rights that it is waiving and the
effect of such waivers, that it assumes the risk of any misunderstanding that it
may have regarding any of the foregoing, and that it intends that such waivers
shall be a material inducement to the Agent and the other Holders of Secured
Obligations to extend the indebtedness secured hereby.
22. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
23. Further Assurances. The Pledgor agrees that it will
cooperate with the Agent and will execute and deliver, or cause to be executed
and delivered, all such other stock powers, proxies, instruments and documents,
and will take all such other actions, including, without limitation, the
execution and filing of financing statements, as the Agent may reasonably
request from time to time in order to carry out the provisions and purposes of
this Agreement.
24. The Agent's Duty of Care. The Agent shall not be liable
for any acts, omissions, errors of judgment or mistakes of fact or law,
including, without limitation, acts, omissions, errors or mistakes with respect
to the Pledged Collateral, except for those arising out of or in connection with
the Agent's (i) gross negligence or willful misconduct, or (ii) failure to use
reasonable care with respect to the safe custody of the Pledged Collateral in
the Agent's possession. Without limiting the generality of the foregoing, the
Agent shall be under no obligation to take any steps necessary to preserve
rights in the Pledged Collateral against any
12
<PAGE> 13
other parties but may do so at its option. All expenses incurred in connection
therewith shall be for the sole account of the Pledgor, and shall constitute
part of the Liabilities secured hereby.
25. Notices. All notices and other communications required or
desired to be served, given or delivered hereunder shall be made in the manner
set forth in the Credit Agreement.
26. Amendments, Waivers and Consents. No amendment or waiver
of any provision of this Agreement nor consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent pursuant to the terms of the Credit Agreement, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
27. Section Headings. The section headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
28. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which shall together constitute one and the same agreement.
29. Merger. This Agreement represents the final agreement of
the Pledgor, the Agent and the other Holders of Secured Obligations with respect
to the matters contained herein and may not be contradicted by evidence of prior
or contemporaneous agreements, or subsequent oral agreements, between the
Pledgor and the Agent or any other Holder of Secured Obligations.
30. No Strict Construction. The parties hereto 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 hereto and no
presumption or burden or proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
IN WITNESS WHEREOF, the Pledgor and the Agent have executed
this Agreement as of the date set forth above.
THE DELTA QUEEN STEAMBOAT CO.
By: /s/ JORDAN B. ALLEN
------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
13
<PAGE> 14
THE CHASE MANHATTAN BANK,
as Agent
By: /s/ STEVEN J. FALISKI
------------------------
Name: Steven J. Faliski
----------------------
Title: Vice President
---------------------
14
<PAGE> 15
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a copy of the
foregoing Agreement, agrees promptly to note on its books the security interests
and assignment granted under such Agreement, and waives any rights or
requirement at any time hereafter to receive a copy of such Agreement in
connection with the registration of any Pledged Collateral in the name of the
Agent or its nominee or the exercise of voting rights by the Agent or its
nominee.
GREAT RIVER CRUISE LINE, L.L.C.
By: The Delta Queen Steamboat Co.,
a Managing Member
By: /s/ JORDAN B. ALLEN
------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
By: DQSB II, Inc., a Managing Member
By: /s/ JORDAN B. ALLEN
------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
15
<PAGE> 16
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a copy of the
foregoing Agreement, agrees promptly to note on its books the security interests
and assignment granted under such Agreement, and waives any rights or
requirement at any time hereafter to receive a copy of such Agreement in
connection with the registration of any Pledged Collateral in the name of the
Agent or its nominee or the exercise of voting rights by the Agent or its
nominee.
GREAT OCEAN CRUISE LINE, L.L.C.
By: The Delta Queen Steamboat Co.,
a Managing Member
By: /s/ JORDAN B. ALLEN
------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
By: DQSB II, Inc., a Managing Member
By: /s/ JORDAN B. ALLEN
------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
16
<PAGE> 17
CONSENT
The undersigned hereby acknowledges receipt of a copy of the
foregoing Agreement and consents to the pledge by The Delta Queen Steamboat Co.
of its membership interests in GRCL and GOCL to the Agent.
DQSB II, INC.
By:___________________________
Name: Jordan B. Allen
Title: Executive Vice President
17
<PAGE> 18
EXHIBIT A
to
LIMITED LIABILITY COMPANY PLEDGE AGREEMENT
dated as of February _____, 1999
Pledged Membership Interests
<TABLE>
<CAPTION>
Percentage of
Membership Interest
Name of the Pledgor
- ---- -------------------
<S> <C>
Great River Cruise Line, L.L.C. 99%
Great Ocean Cruise Line, L.L.C. 99%
</TABLE>
18
<PAGE> 19
EXHIBIT B
SUPPLEMENT
to
LIMITED LIABILITY COMPANY PLEDGE AGREEMENT
This Supplement is made as of , to the
Limited Liability Company Pledge Agreement dated as of February , 1999 (as
amended, supplemented, modified or restated from time to time, the "LLC Pledge
Agreement"), by and between THE DELTA QUEEN STEAMBOAT CO., a Delaware
corporation (the "Pledgor") and THE CHASE MANHATTAN BANK, as Agent, for its
benefit and the benefit of the other Holders of Secured Obligations (as such
term is referred to and defined in the "Credit Agreement" referred to below).
RECITALS: The Pledgor, certain Lenders and the Agent are
parties to that certain Credit Agreement dated as of February , 1999, (as
amended, supplemented, modified or restated from time to time, the "Credit
Agreement"; capitalized terms used herein without definition shall have the
respective meanings assigned thereto in the Credit Agreement or the LLC Pledge
Agreement). Pursuant to Section 1(b) of the LLC Pledge Agreement, the Pledgor is
required to execute and deliver to the Agent, for its benefit and the benefit of
the other Holders of Secured Obligations, this Supplement and all of the
membership interests of the Subsidiaries listed on Annex 1 attached hereto,
together with any certificate or other writing representing such membership
interests.
ACCORDINGLY, the Pledgor agrees with the Agent as follows:
1. Pledge of Membership Interests. The membership interests of
each of the Subsidiaries described on Annex 1 hereto, together with any
certificates representing such membership interest and delivered to the Agent
herewith (the "Pledged Interests") shall constitute "Pledged Collateral" as
defined in the LLC Pledge Agreement as if such membership interests had
originally been described on Exhibit A to the LLC Pledge Agreement, shall be
subject to the pledge and security interest created by, and all other terms,
conditions and covenants contained in, the LLC Pledge Agreement, and shall
secure the payment and performance of the Obligations as provided in the LLC
Pledge Agreement.
2. Representations and Warranties. The representations and
warranties of the Pledgor contained in Section 5 of the LLC Pledge Agreement are
true and correct in all material respects with respect to the Pledged Interests
as of the date hereof.
19
<PAGE> 20
THE DELTA QUEEN STEAMBOAT CO.
By: __________________________
Name:
Title:
20
<PAGE> 21
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a copy of the
foregoing Supplement, agrees promptly to note on its books the security
interests and assignment granted under such Supplement, and waives any rights or
requirement at any time hereafter to receive a copy of such Supplement in
connection with the registration of any Pledged Collateral in the name of the
Agent or its nominee or the exercise of voting rights by the Agent or its
nominee.
[SUBSIDIARY]
By: [ ], a Managing Member
By: _________________________
Name:
Title:
By: [ ], a Managing Member
By: _________________________
Name:
Title:
21
<PAGE> 22
CONSENT
The undersigned hereby acknowledges receipt of a copy of the
foregoing Supplement and consents to the pledge by The Delta Queen Steamboat Co.
of its membership interests in [SUBSIDIARY NAME] to the Agent.
[OTHER MEMBER]
By:___________________________
Name:
Title:
22
<PAGE> 23
ANNEX 1
to
SUPPLEMENT
to
LIMITED LIABILITY COMPANY PLEDGE AGREEMENT
Pledged Membership Interests
<TABLE>
<CAPTION>
Percentage of
Membership Interest
[SUBSIDIARY NAME] of the Pledgor
- ----------------- -------------------
<S> <C>
</TABLE>
23
<PAGE> 1
4(ii)(a)(5)
EXECUTION COPY
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY ("Guaranty") is made as of February
25, 1999, by Cruise America Travel, Incorporated, a Delaware corporation, DQSC
Property Co., a Delaware corporation, DQSB II, Inc., a Delaware corporation,
Great Ocean Cruise Line, L.L.C., a Delaware limited liability company and Great
River Cruise Line, L.L.C., a Delaware limited liability company (each
individually, a "Guarantor" and collectively, the "Guarantors") in favor of The
Chase Manhattan Bank, a New York banking corporation, as agent (hereinafter in
such capacity, the "Agent") for its benefit and the benefit of the other
"Holders of Secured Obligations" (as defined in that certain Credit Agreement
referred to below). Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the Credit Agreement.
WHEREAS, THE DELTA QUEEN STEAMBOAT CO., a Delaware
corporation, (the "Borrower"), THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES THEREOF and each other financial institution which from time to
time becomes a party thereto in accordance with Section 11.02(a) thereof
(together with their respective successors and permitted assigns, individually,
a "Lender" and, collectively, the "Lenders") and the Agent are parties to that
certain Credit Agreement, dated as of February 25, 1999 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement")
providing, subject to the terms and conditions thereof, for extensions of credit
to be made by the Lenders to the Borrower;
WHEREAS, each of the Guarantors is a direct Subsidiary of
Borrower and will derive both direct and indirect benefits from the loans made
to the Borrower pursuant to the Credit Agreement;
WHEREAS, as a condition to the Lenders' and the Agent's
willingness to enter into the Credit Agreement and the Lenders' willingness to
extend credit to Borrower under the Credit Agreement, the Lenders have required
that each of the Guarantors enter into this Guaranty.
NOW, THEREFORE, in consideration of the premises set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the Guarantors agrees as
follows:
<PAGE> 2
1. Guaranty. (a) For value received and in consideration of
any loan, advance or financial accommodation of any kind whatsoever heretofore,
now or hereafter made, given or granted to the Borrower by the Lenders, each of
the Guarantors, jointly and severally, unconditionally and irrevocably
guarantees for the benefit of the Agent and the other Holders of the Secured
Obligations the full and prompt payment when due (whether at maturity or
earlier, by reason of acceleration or otherwise, and at all times thereafter),
and the performance of (i) all of the Obligations of Borrower under the Credit
Agreement (including, without limitation, interest accruing following the filing
of a bankruptcy petition by or against Borrower, at the applicable rate
specified in the Credit Agreement, whether or not such interest is allowed as a
claim in bankruptcy) and (ii) all other Obligations of Borrower to the Agent or
any other Holder of Secured Obligations under the Loan Documents (the
Obligations of Borrower which are described in clauses(i) through (ii) of this
Section 1(a) are hereinafter referred to collectively as the "Obligations").
(b) At any time after the occurrence and during the
continuance of an Event of Default, each of the Guarantors shall pay to the
Agent, for the benefit of the Agent and the other Holders of Secured
Obligations, on demand by the Agent and in immediately available funds, the full
amount of the Obligations then due and payable. Each of the Guarantors jointly
and severally and unconditionally further agrees to pay to the Agent, for the
benefit of the Agent and the other Holders of Secured Obligations, as
applicable, and reimburse the Agent for the benefit of the Agent and the other
Holders of Secured Obligations, as applicable, for, on demand and in immediately
available funds, (a) all losses, reasonable fees, reasonable costs and expenses
of the type and to the extent permitted under Section 11.03 of the Credit
Agreement (including, without limitation, all court costs and reasonable
attorneys' and paralegals' fees, costs and expenses) paid or incurred by the
Agent or any other Holder of Secured Obligations in: (1) endeavoring to collect
all or any part of the Obligations from, or in prosecuting any action against,
Borrower or any of the Guarantors relating to the Credit Agreement, this
Guaranty, the other Loan Documents or the transactions contemplated thereby; (2)
taking any action with respect to any security or collateral securing the
Obligations or obligations of any of the Guarantors hereunder; and (3)
preserving, protecting or defending the enforceability of, or enforcing, this
Guaranty or their respective rights hereunder (all such costs and expenses
described in clauses (1) through (3) of this Section 1(b)(a) are hereinafter
referred to as the "Expenses") and (b) interest on the Expenses, from the date
of demand under this Guaranty until paid in full at the Default Rate described
in Section 2.03(d) of the Credit Agreement (the "Interest Rate") (all such
Obligations and other indebtedness, liabilities and obligations set forth in
this Section 1 being hereinafter collectively referred to as the "Guaranteed
Obligations"). Each of the Guarantors hereby agrees that this Guaranty is an
absolute guaranty of payment and is not a guaranty of collection.
(c) In the event that any additional Subsidiary is formed or
acquired that is required to become a Guarantor hereunder pursuant to Section
6.10 of the Credit Agreement, such Subsidiary shall execute and deliver to the
Agent, for its benefit and the benefit of the other Holders of Secured
Obligations, a supplement to this Guaranty in the form of Exhibit A attached
hereto within the time period prescribed by Section 6.10 of the Credit
Agreement.
-2-
<PAGE> 3
2. Obligations Unconditional. Each of the Guarantors hereby
agrees that its obligations under this Guaranty shall be unconditional,
irrespective of:
(i) The validity, enforceability, avoidance, assignment or
subordination of any of the Guaranteed Obligations or any of the Loan
Documents;
(ii) the absence of any attempt by, or on behalf of, the Agent
or any other Holder of Secured Obligations to collect, or to take any
other action to enforce, all or any part of the Guaranteed Obligations
whether from or against Borrower, any of the other Guarantors or any
other Person;
(iii) the election of any remedy by, or on behalf of, the
Agent or any other Holder of Secured Obligations with respect to all or
any part of the Guaranteed Obligations;
(iv) any change in the time, manner or place of payment of, or
in any other term of, or any increase in the amount of, all or any of
the Obligations, or the waiver, consent, extension, forbearance or
granting of any indulgence, by, or on behalf of, the Agent or any other
Holder of Secured Obligations with respect to any provision of any of
the Loan Documents;
(v) the failure of the Agent or any other Holder of Secured
Obligations to take any steps to perfect and maintain its security
interest in, or to preserve its rights to, any security or collateral
for any or any part of the Guaranteed Obligations;
(vi) the election by, or on behalf of, the Agent or any one or
more of the other Holders of Secured Obligations, in any proceeding
instituted under Chapter 11 of Title 11 of the United States Code (11
U.S.C. 101 et seq.) (the "Bankruptcy Code"), of the application of
Section 1111(b)(2) of the Bankruptcy Code;
(vii) any borrowing or grant of a security interest by
Borrower as debtor-in-possession under Section 364 of the Bankruptcy
Code;
(viii) the disallowance, under Section 502 of the Bankruptcy
Code, of all or any portion of the claims of any of the Agent or any
other Holder of Secured Obligations for repayment of all or any part of
the Guaranteed Obligations;
(ix) any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of Borrower or any of the
Guarantors; or
(x) any change, restructuring or termination of or to the
corporate structure or existence of any Guarantor, Borrower or any
restructuring or refinancing of all or any portion of the Guaranteed
Obligations.
-3-
<PAGE> 4
3. Enforcement; Application of Payments. Upon the occurrence
and during the continuance of an Event of Default, the Agent may proceed
directly and at once, without notice, against any of the Guarantors to obtain
performance of and to collect and recover the full amount, or any portion, of
the Guaranteed Obligations, without first proceeding against Borrower or any
other Guarantors hereunder, or any other Person, or against any security or
collateral for the Guaranteed Obligations. Subject only to the terms and
provisions of the Credit Agreement, the Agent shall have the exclusive right to
determine the application of payments and credits, if any, from any of the
Guarantors, Borrower or from any other Person on account of the Guaranteed
Obligations or any other liability of any of the Guarantors to the Agent or any
other Holder of Secured Obligations.
4. Waivers. (i) Each of the Guarantors hereby waives
promptness, diligence, presentment, demand of payment, filing of claims with a
court in the event of receivership or bankruptcy of Borrower, protest or notice
with respect to any or any part of the Guaranteed Obligations, all setoffs and
counterclaims and all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor and notices of
acceptance of this Guaranty or any other guaranty, the benefits of all statutes
of limitation, the benefits of any statute the effect of which would require the
Agent or any other Holder of Secured Obligations to first proceed against
Borrower, any other Guarantor or any other Person to enforce or collect all or
any portion of the Guaranteed Obligations before proceeding against such
Guarantor for the enforcement of such Guarantor's obligations and indebtedness
hereunder, and all other demands whatsoever (and shall not require that the same
be made on Borrower or any Guarantor as a condition precedent to the obligations
of any of the Guarantors hereunder), and covenants that this Guaranty will not
be discharged, except by indefeasible payment and performance in full of all of
the Guaranteed Obligations and any other obligations contained herein. Each of
the Guarantors further waives all notices of the existence, creation or
incurring of new or additional indebtedness, arising either from additional
loans extended to Borrower or otherwise, and also waives all notices that the
principal amount, or any portion thereof, and/or any interest on any instrument
or document evidencing all or any part of the Guaranteed Obligations is due,
notices of any and all proceedings to collect from the maker, any endorser or
any other guarantor of all or any part of the Guaranteed Obligations, or from
any other Person, and, to the extent permitted by law, notices of exchange,
sale, surrender or other handling of any security or collateral given to the
Agent or any other Holder of Secured Obligations to secure payment of all or any
part of the Guaranteed Obligations. Each of the Guarantors further waives any
requirement that the Agent or any other Holder of Secured Obligations protect,
secure, perfect or insure any security interest or exhaust any right to take
action against Borrower or any other Person or any collateral.
(ii) Each of the Guarantors hereby waives, to the fullest
extent permitted by applicable law in accordance with Section 2856 of the
California Civil Code, all rights and benefits under California Civil Code
Sections 2787 to 2855, inclusive (or any similar laws in other jurisdictions)
and all rights and benefits of California Civil Code Sections 2899 and 3433 (or
any similar laws in any other jurisdiction). In addition, without limiting the
generality of the
-4-
<PAGE> 5
foregoing or any other provision hereof, each of the Guarantors hereby waives,
in accordance with Section 2856 of the California Civil Code, all rights and
defenses (including, without limitation, all rights and defenses arising out of
an election of remedies by the Agent or any other Holder of Secured Obligations)
that such Guarantor may have because the Obligations are secured by real
property. This means, among other things:
(i) the Agent or any other Holder of Secured Obligations
may collect from each of the Guarantors without first foreclosing
on any real or personal property collateral pledged to or for the
benefit of the Agent or any other Holder of Secured Obligations;
and
(ii) if the Agent or any other Holder of Secured
Obligations forecloses on any real property collateral pledged by
the Borrower:
(A) the amount of the debt may be reduced only by
the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more
than the sale price; and
(B) the Agent or any other Holder of Secured
Obligations may collect from each of the Guarantors even
if the Agent or any other Holder of Secured Obligations,
by foreclosing on the real property collateral, has
destroyed any right the Guarantors may have to collect
from the Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses each
of the Guarantors may have because the Guaranteed Obligations are or may be
secured by real property. These rights and defenses include, but are not limited
to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the
California Code of Civil Procedure (or any similar laws in any other
jurisdiction). In accordance with Section 15 below, this Guaranty shall be
governed by, and shall be construed and enforced in accordance with, the
internal laws (as opposed to the conflicts of laws provisions other than those
contained in New York General Obligations Law Section 5-1401) of the State of
New York. This Section 4(ii) and any other referenced provisions of California
law are included solely out of an abundance of caution, and shall not be
construed to mean that any of the referenced provisions of California law are in
any way applicable to this Guaranty or to any of the Guaranteed Obligations.
(iii) Each Guarantor agrees that notwithstanding the foregoing
and without limiting the generality of the foregoing if, after the occurrence
and during the continuance of an Event of Default, any of the Agent or any other
Holder of Secured Obligations is prevented by applicable law from exercising its
rights to accelerate the maturity of the Obligations, to collect interest on the
Obligations, or to enforce or exercise any other right or remedy with respect to
the Obligations, or the Agent is prevented from taking any action to realize on
the Collateral, each such Guarantor agrees to pay to the Agent for the account
of the Agent and the other Holders of Secured Obligations, upon demand therefor,
the amount which otherwise would have been due
-5-
<PAGE> 6
and payable had such rights and remedies been permitted to be exercised by the
Agent or such Holder.
(iv) The Holders of Secured Obligations, either themselves or
acting through the Agent, are hereby authorized, without notice or demand and
without affecting the liability of any of the Guarantors hereunder, from time to
time, (a) to renew, extend, accelerate or otherwise change the time for payment
of, or other terms relating to, all or any part of the Guaranteed Obligations,
or to otherwise modify, amend or change the terms of any of the Loan Documents;
(b) to accept partial payments on all or any part of the Guaranteed Obligations;
(c) to take and hold security or collateral for the payment of all or any part
of the Guaranteed Obligations, this Guaranty, or any other guaranty of all or
any part of the Guaranteed Obligations or other liabilities of Borrower or any
of the Guarantors, (d) to exchange, enforce, waive and release any such security
or collateral; (e) to apply such security or collateral and direct the order or
manner of sale thereof as in their discretion they may determine; (f) to settle,
release, exchange, enforce, waive, compromise or collect or otherwise liquidate
all or any part of the Guaranteed Obligations, this Guaranty, any other guaranty
of all or any part of the Guaranteed Obligations, and any security or collateral
for the Guaranteed Obligations or for any such guaranty; or (g) to the extent
permitted under the Credit Agreement, to assign all or any portion of their
rights and interests in the Guaranteed Obligations and/or any collateral or
other security therefor to any Person. Any of the foregoing may be done in any
manner, without affecting or impairing the obligations of any of the Guarantors
hereunder.
5. Financial Information. Each of the Guarantors hereby assumes
responsibility for keeping itself informed of the financial condition of
Borrower and the other Guarantors, any endorsers and/or other guarantors of all
or any part of the Guaranteed Obligations, and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations, or any part
thereof, that diligent inquiry would reveal, and each of the Guarantors hereby
agrees that neither the Agent nor any other Holder of Secured Obligations shall
have any duty to advise any of the Guarantors of information known to any of
them regarding such condition or any such circumstances. In the event the Agent
or any other Holder of Secured Obligations, in its sole discretion, undertakes
at any time or from time to time to provide any such information to any of the
Guarantors, such Holder or the Agent shall be under no obligation (i) to
undertake any investigation not a part of its regular business routine (ii) to
disclose any information which such Holder or the Agent pursuant to accepted or
reasonable commercial finance or banking practices, wishes to maintain
confidential or (iii) to make any other or future disclosure of such information
or any other information to any of the Guarantors.
6. No Marshaling; Reinstatement. Each of the Guarantors consents
and agrees that neither the Agent nor any other Holder of Secured Obligations
nor any Person acting for or on behalf of the Agent or any other Holder of
Secured Obligations shall be under any obligation to marshall any assets in
favor of any of the Guarantors or against or in payment of any or all of the
Guaranteed Obligations. Each of the Guarantors further agrees that, to the
extent that Borrower, any of the Guarantors or any other guarantor of all or any
part of the Guaranteed
-6-
<PAGE> 7
Obligations makes a payment or payments to the Agent or any other Holder of
Secured Obligations receives any proceeds of Collateral, which payment or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to Borrower,
any of the Guarantors, such other guarantors or any other Person, or their
respective estates, trustees, receivers or any other party, including, without
limitation, any of the Guarantors, under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, the part of the Guaranteed Obligations which has been paid, reduced
or satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately proceeding such initial payment, reduction or
satisfaction.
7. Waiver of Subrogation. EACH GUARANTOR HEREBY IRREVOCABLY
WAIVES ALL RIGHTS OF SUBROGATION (WHETHER CONTRACTUAL, UNDER SECTION 509 OF THE
BANKRUPTCY CODE, UNDER COMMON LAW, OR OTHERWISE) TO THE CLAIMS OF THE HOLDERS OF
SECURED OBLIGATIONS OR THE AGENT AGAINST THE BORROWER AND ALL CONTRACTUAL,
STATUTORY OR COMMON LAW RIGHTS OF CONTRIBUTION, REIMBURSEMENT, INDEMNIFICATION
AND SIMILAR RIGHTS AND "CLAIMS" (AS SUCH TERM IS DEFINED IN THE BANKRUPTCY CODE)
AGAINST THE BORROWER WHICH ARISE IN CONNECTION WITH, OR AS A RESULT OF, THIS
GUARANTY OR PAYMENT BY ANY SUCH GUARANTOR OF ANY OF THE GUARANTEED OBLIGATIONS.
8. Subordination. Each of the Guarantors agrees that any and all
claims of such Guarantor against any endorser or any other guarantor of all or
any part of the Obligations, or against any of their respective properties,
shall be subordinate and subject in right of payment to the prior payment, in
full, of all of the Guaranteed Obligations. Notwithstanding any right of any of
the Guarantors to ask, demand, sue for, take or receive any payment from any
other Guarantor, all rights, liens and security interests of such Guarantor,
whether now or hereafter arising and howsoever existing, in any assets of any
other Guarantor (whether constituting part of the security or collateral given
to the Agent, for the benefit of itself and the other Holders of Secured
Obligations, to secure payment of all or any part of the Guaranteed Obligations
or otherwise) shall be and hereby are subordinated to the rights of the Agent
and the other Holders of Secured Obligations in those assets. None of the
Guarantors shall have any rights to possession of any such asset or to foreclose
upon any such asset, whether by judicial action of otherwise, unless and until
all of the Guaranteed Obligations are indefeasibly paid and performed in full
and financing arrangements between Borrower and the Holders of Secured
Obligations have been terminated. Should any payment, distribution, security or
instrument or proceeds thereof be received by any of the Guarantors upon or with
respect to any indebtedness of any Guarantor to any of the other Guarantors
after the occurrence and during the continuance of an Event of Default and prior
to the satisfaction of all of the Guaranteed Obligations and the termination of
all financing arrangements between the Borrowers and the Holders of Secured
Obligations, such Guarantor shall receive and hold the same in trust, as trustee
for the benefit of
-7-
<PAGE> 8
the Agent and the other Holders of Secured Obligations and shall forthwith
deliver the same to the Agent, in precisely the form received (except for the
endorsement or assignment of such Guarantor where necessary), for application on
any of the Guaranteed Obligations, due or not due, and, until so delivered, the
same shall be held in trust by such Guarantor as the property of the Agent and
the other Holders of Secured Obligations. If any of the Guarantors fails to make
any such endorsement or assignment to the Agent, the Agent or any of its
officers or employees are hereby irrevocably authorized to make the same. Each
of the Guarantors agrees that until the Guaranteed Obligations are indefeasibly
paid and performed in full and all financing arrangements between the Borrowers
and the Holders of Secured Obligations have been terminated, such Guarantor will
not assign or transfer to others any claim of such Guarantor has or may have
against Borrower except for items payable by the Borrower and deposited by any
Guarantor with a financial institution for payment.
9. Enforcement; Amendments; Waivers. No delay on the part of the
Agent or any other Holder of Secured Obligations in the exercise of any right or
remedy arising under this Guaranty, the Credit Agreement, any of the other Loan
Documents or otherwise with respect to all or any part of the Guaranteed
Obligations, the Collateral or any other guaranty of or security for all or any
part of the Guaranteed Obligations, shall operate as a waiver thereof, and no
single or partial exercise by any such Person of any such right or remedy shall
preclude any further exercise thereof. The remedies set forth herein are
cumulative and not exclusive of any remedies provided by law or the other Loan
Documents. No modification or waiver of any of the provisions of this Guaranty
shall be binding upon the Agent or any other Holder of Secured Obligations,
except as expressly set forth in a writing duly signed and delivered in
accordance with the provisions of Section 11.07 of the Credit Agreement. Failure
by the Agent or any other Holder of Secured Obligations at any time or times
hereafter to require strict performance by Borrower, any of the Guarantors, any
other guarantor of all or any part of the Guaranteed Obligations or any other
Person of any of the provisions, warranties, terms and conditions contained in
any of the Loan Documents now or at any time or times hereafter executed by such
Persons and delivered to the Agent or any other Holder of Secured Obligations
shall not waive, affect or diminish any right of the Agent or such Holder of
Secured Obligations at any time or times hereafter to demand strict performance
thereof and such right shall not be deemed to have been waived by any act or
knowledge of the Agent or any other Holder of Secured Obligations, or their
respective agents, officers or employees, unless such waiver is contained in an
instrument in writing, directed and delivered to Borrower or each of the
Guarantors, as applicable, specifying such waiver, and is signed by the party or
parties necessary to give such waiver under Section 11.07 of the Credit
Agreement. No waiver of any Event of Default by the Agent or any other Holder of
Secured Obligations shall operate as a waiver of any other Event of Default or
the same Event of Default on a future occasion, and no action by the Agent or
any other Holder of Secured Obligations permitted hereunder shall in any way
affect or impair the Agent's or such Holder's rights and remedies or the
obligations of any of the Guarantors under this Guaranty. Any determination by a
court of competent jurisdiction of the amount of any principal and/or interest
owing by Borrower or any of the Guarantors to any Holder of Secured Obligations
shall
-8-
<PAGE> 9
be conclusive and binding on each of the Guarantors irrespective of whether such
Guarantor was a party to the suit or action in which such determination was
made.
10. Effectiveness; Termination; Release. This Guaranty shall become
effective upon its execution by each of the Guarantors and shall continue in
full force and effect and may not be terminated or otherwise revoked until the
Credit Agreement and all financing arrangements governed by the Loan Documents
among the Borrower, the Agent and the other Holders of Secured Obligations shall
have been terminated (other than continuing contingent indemnity obligations)
and the Guaranteed Obligations shall have been indefeasibly and fully paid and
discharged. If, notwithstanding the foregoing, any of the Guarantors shall have
any right under applicable law to terminate or revoke its Guaranty, each of the
Guarantors agrees that such termination or revocation shall not be effective
until a written notice of such revocation or termination, specifically referring
hereto, signed by such Guarantor, is actually received by the Agent and each of
the Lenders. Such notice shall not affect the right and power of any of the
Agent or any other Holder of Secured Obligations to enforce rights arising prior
to receipt thereof by the Agent and each other Holder of Secured Obligations. If
the Agent or any other Holder of Secured Obligations grants loans or takes other
action after any of the Guarantors terminates or revokes this Guaranty but
before such Person receives such written notice, the rights of such Person with
respect thereto shall be the same as if such termination or revocation had not
occurred. Notwithstanding anything to the contrary contained in this Guaranty or
any of the other Loan Documents, any Guarantor shall be released from its
obligations hereunder and under the other Loan Documents upon the consummation
of a sale or other disposition of all of the capital stock or membership
interest of such Guarantor by Borrower or another Guarantor which is permitted
under the Credit Agreement or consented to by the Lenders.
11. Successors and Assigns. This Guaranty shall be binding upon each
of the Guarantors and upon their respective successors and assigns and shall
inure to the benefit of the Agent and the other Holders of Secured Obligations
and their respective successors and assigns; all references herein to Borrower
and to the Guarantors shall be deemed to include their respective successors and
assigns. The successors and assigns of the Guarantors and Borrower shall
include, without limitation, their respective receivers, trustees or
debtors-in-possession; provided, however, that none of the Guarantors shall
voluntarily assign or transfer its rights or obligations hereunder without the
Agent's prior written consent.
12. Definitions. All references to the singular shall be deemed to
include the plural and vice versa where the context so requires.
13. Payments to be Free of Deductions; Withholding Tax Exemption.
All payments by the Guarantors under this Guaranty shall be made without setoff
or counterclaim and free and clear of, and without deductions of the type and to
the extent described in Section 2.10 of the Credit Agreement. A delivery by a
Lender that is not incorporated under the laws of the United States of America
of its IRS Form 1001 or 4224 to Borrower pursuant to the Credit Agreement shall
be deemed a delivery of such form to each of the Guarantors hereunder.
-9-
<PAGE> 10
14. Officer Authority. Each of the undersigned hereby certifies that
he/she has all necessary authority to execute and deliver this Guaranty on
behalf of the Guarantors for whom he/she has executed and delivered this
Guaranty.
15. GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS GUARANTY, ON BEHALF
OF ITSELF AND THE OTHER HOLDERS OF SECURED OBLIGATIONS, AT NEW YORK, NEW YORK,
BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE AMONG THE AGENT, ANY
OTHER HOLDERS OF SECURED OBLIGATIONS AND ANY OF THE GUARANTORS ARISING OUT OF OR
RELATED TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
GUARANTY, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE CONFLICTS OF LAW
PROVISIONS OTHER THAN THOSE CONTAINED IN NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1401, OF THE STATE OF NEW YORK.
16. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED
EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE
PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF THE PARTIES
HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. EACH OF THE GUARANTORS AGREES THAT THE
AGENT OR ANY OTHER HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO PROCEED
AGAINST EACH OF THE GUARANTORS OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER ANY OF THE
GUARANTORS OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PERSON. EACH OF THE GUARANTORS AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIBLE COUNTERCLAIMS IN AN PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. EACH OF THE GUARANTORS
WAIVES ANY OBJECTION THAT IT
-10-
<PAGE> 11
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS SUBSECTION.
(C) SERVICE OF PROCESS. EACH OF THE GUARANTORS WAIVES PERSONAL
SERVICE OF ANY PROCESS UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS,
IRREVOCABLY APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC., WHOSE ADDRESS
IS 500 CENTRAL AVENUE, ALBANY, NEW YORK, 12206, AS SUCH GUARANTORS' AGENT FOR
THE PURPOSE OF ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT. EACH OF THE
GUARANTORS IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY
JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECT WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT ANY PARTY HEREWITH MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. EACH OF THE GUARANTORS WAIVES THE POSTING OF ANY
BOND OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
17. Advice of Counsel. Each of the Guarantors represents and
warrants to the Agent and the other Holders of Secured Obligations that it has
discussed this Guaranty and, specifically, the provisions of Sections 16 hereof,
with its lawyers.
-11-
<PAGE> 12
18. Notices. Each of the Guarantors appoints Borrower as such
Guarantor's agent to receive notices and other communications under this
Guaranty. Any such notice or communication received by Borrower under this
Guaranty shall be deemed to have been received by each such Guarantor. All such
notices to Borrower shall be given in the manner and to the addresses set forth
in the Credit Agreement.
19. Severability. Wherever possible, each provision of this Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
20. Collateral. Each of the Guarantors hereby acknowledges and
agrees that its obligations under this Guaranty are secured pursuant to the
terms and provisions of the Collateral Documents to which it is a party.
21. Merger. This Guaranty represents the final agreement of each of
the Guarantors with respect to the matters contained herein and may not be
contradicted by evidence of prior or contemporaneous agreements, or prior or
subsequent oral agreements, among any of the Guarantors and the Agent or any
other Holder of Secured Obligations.
22. Execution in Counterparts. This Guaranty may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
23. Definitions. The singular shall include the plural and vice
versa and any general shall include any other gender as the context may require.
24. Section Headings. The section headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
-12-
<PAGE> 13
IN WITNESS WHEREOF, this Guaranty has been duly executed by each of
the Guarantors as of the day and year first set forth above.
CRUISE AMERICA TRAVEL, INCORPORATED
DQSC PROPERTY CO.
DQSB II, INC.
By: /s/ JORDAN B. ALLEN
--------------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
GREAT RIVER CRUISE LINE, L.L.C.
By: The Delta Queen Steamboat Co.,
a Managing Member
By: /s/ JORDAN B. ALLEN
-------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
By: DQSB II, Inc., a Managing Member
By: /s/ JORDAN B. ALLEN
-------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
GREAT OCEAN CRUISE LINE, L.L.C.
By: The Delta Queen Steamboat Co.,
a Managing Member
By: /s/ JORDAN B. ALLEN
-------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
By: DQSB II, Inc., a Managing Member
By: /s/ JORDAN B. ALLEN
-------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
-13-
<PAGE> 14
EXHIBIT A
SUPPLEMENT
TO
SUBSIDIARY GUARANTY
Reference is hereby made to the Subsidiary Guaranty (the "Guaranty")
made as of February , 1999, by Cruise America Travel, Incorporated, a Delaware
corporation, DQSC Property Co., a Delaware corporation, DQSB II, Inc., a
Delaware corporation, Great Ocean Cruise Line, L.L.C., a Delaware limited
liability company and Great River Cruise Line, L.L.C., a Delaware limited
liability company (each individually, a "Guarantor" and collectively, the
"Guarantors") in favor of The Chase Manhattan Bank, a New York banking
corporation, as Agent, for its benefit and the benefit of the other "Holders of
Secured Obligations" (as defined in the Credit Agreement). Capitalized terms
used herein shall have the meaning given to them in the Guaranty. By its
execution below, the undersigned [NAME OF NEW GUARANTOR], a , agrees to
become, and does hereby become, a Guarantor under the Guaranty and agrees to be
bound by the Guaranty as if originally a party thereto. By its execution below,
the undersigned represents and warrants as to itself that all of the
representations and warranties contained in the Guaranty are true and correct in
all material respects as of the date hereof.
IN WITNESS WHEREOF, [NAME OF NEW GUARANTOR], a has executed and
delivered this Supplement to the Guaranty as of , .
[NAME OF NEW GUARANTOR]
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
-14-
<PAGE> 1
4(ii)(a)(6)
EXECUTION COPY
TRUST INDENTURE
THIS TRUST INDENTURE (this "Indenture") dated as of this 25th day of
February, 1999 is entered into by and among GREAT RIVER CRUISE LINE, L.L.C., a
Delaware limited liability company ("Mortgagor"), and THE CHASE MANHATTAN BANK,
a New York banking corporation, as Agent (hereinafter in such capacity, the
"Agent"), as referred to and defined in the Credit Agreement described below,
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES THEREOF of the Credit
Agreement described below and each other financial institution which from time
to time becomes a party thereto in accordance with Section 11.02(a) thereof
(together with their respective successors and permitted assigns, individually,
a "Lender" and, collectively, the "Lenders"), and THE CHASE MANHATTAN BANK, not
in its individual capacity but as trustee under this Indenture ("the Trustee").
PRELIMINARY STATEMENT
A. The Agent, Hibernia National Bank, as Documentation Agent, the
Lenders and The Delta Queen Steamboat Co. (the "Borrower") have entered into a
Credit Agreement dated as of February 25, 1999 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Credit Agreement; and
B. In order to secure the Obligations (as defined in the Credit
Agreement ), the Mortgagor has executed and delivered a Preferred Ship Mortgage
dated February 25, 1999 (the "Mortgage") in favor of the Agent, as Agent and
Trustee for the Lenders, which Mortgage encumbers one hundred percent (100%) of
the Vessel "Delta Queen" (the "Vessel"); and
C. In accordance with the provisions of Chapter 313 of Title 46 of the
United States Code, as amended (the "Act"), the Lenders and the Mortgagor have
requested that the Trustee serve as Trustee and Mortgagee for the benefit of the
Lenders under the Mortgage, and to hold the Mortgage to secure the Obligations
and such additional sums as the Mortgagor may be obligated to pay under and
pursuant to the Mortgage (collectively, the "Mortgage Obligations"). The Lenders
and the Mortgagor are sometimes referred to individually as a "Settlor" and
collectively as "Settlors"; and
D. The Trustee has obtained the approval of the Maritime Administration,
United States Department of Transportation ("MARAD") to act as an "approved
trustee" pursuant to Public Law 89-346 and 46 U.S.C.A. Section 31328 to hold
security instruments and other items in connection with the financing of vessels
documented under the laws of the United States;
NOW, THEREFORE, in consideration of the following declaration of trust
and of the mutual agreements herein set forth, the Settlors and the Trustee
hereby agree as follows:
<PAGE> 2
ARTICLE I
The Settlors, in furtherance of the aforesaid purposes and in order to
secure the payment and performance of the Mortgage Obligations, do hereby
constitute and appoint the Trustee to act as trustee under the Mortgage for the
benefit of the Lenders, and the Trustee does hereby declare that it does and
will hold as trustee all right, title and interest of the Lenders under the
Mortgage. The Mortgage Obligations are to be fully secured by the Mortgage and
the Mortgage is to be held by the Trustee in trust, for the benefit of the
Lenders upon the terms and conditions of this Indenture.
Capitalized terms used herein without definition and otherwise defined
in the Credit Agreement shall have the same meanings used herein as therein.
ARTICLE II
This Indenture is irrevocable and may not be altered or amended in any
respect except as stated herein and may not be terminated except upon the
written agreement of the Settlors and the Trustee or upon the occurrence of
events stated herein.
ARTICLE III
To secure the Obligations owed by the Mortgagor to the Agent and the
Lenders, and the other Mortgage Obligations (including all obligations of
Borrower under the Credit Agreement) the Trustee shall be, or has been, granted
the Mortgage on the Vessel to be held in trust as provided herein.
ARTICLE IV
Under the terms of this Indenture, the Trustee shall have the following
rights and duties:
(a) The Trustee shall hold the Mortgage for the benefit of the
Agent and the Lenders as collateral security for the Mortgage
Obligations owed to the Agent or the Lenders until such time as the
Mortgage Obligations shall have been fully satisfied and all of the
Mortgagor's obligations under and pursuant to the Mortgage Obligations
and the Mortgage shall have extinguished.
(b) The Trustee shall exercise all the rights and powers granted
under the Mortgage except as limited herein or therein, and except as
the Requisite Lenders (as defined in the Credit Agreement) may further
request the Trustee to limit the exercise of its power and rights under
the Mortgage, and the Trustee shall use its best efforts, at all times,
to preserve its status as a "United States citizen" under 46 U.S.C.A.
Section 802(c) and as otherwISE may be required by federal law, and to
timely renew its status as an approved trustee under 46 CFR
Section 221.35.
Page 2
<PAGE> 3
(c) Upon default by the Mortgagor under the Mortgage and notice
thereof from the Requisite Lenders, the Trustee shall make demand upon
the Mortgagor for payment of the Mortgage Obligations and full and
punctual performance of its obligations under the Mortgage. If the
Mortgagor should fail to make payment in full to the Trustee when due,
the Trustee shall exercise its rights, as may be directed by the
Requisite Lenders, to foreclose under the Mortgage and/or to exercise
any other rights granted to the Trustee under the Mortgage or as be
authorized under applicable law.
(d) If the Mortgage Obligations shall be fully discharged,
including, without limitation, all fees and expenses of the Trustee duly
paid, and any obligations secured by the Mortgage fully discharged by
the Mortgagor, and all of Lenders' obligations under the Credit
Agreement or the Mortgage shall have terminated, the obligations and
powers of Trustee hereunder shall terminate and the lien of the Mortgage
shall be extinguished.
(e) The Trustee, at the Requisite Lenders' election, upon default
by Mortgagor under the Mortgage securing the Obligations, shall have the
right to take and operate the Vessel and any other property, encumbered
by the Mortgage as provided by the Mortgage, subject to prior written
approval of the U.S. Secretary of Transportation to the extent required
by 46 U.S.C.A. Sections 808 and 835, 46 U.S.C.A. 31328(e) and/or
pursuant to 46 U.S.C.A. Section 31325(e) or to the extent authorized by
the court pursuant to 46 U.S.C.A. Section 31325(e) provided, however,
that this Indenture shall be subject to any statute of the United States
and any regulations of MARAD, that may be in conflict herewith.
(f) If the Trustee upon direction from the Requisite Lenders
shall foreclose upon the Mortgage, the proceeds of the sale shall be
applied as set forth in the Mortgage.
(g) The Trustee shall be allowed to exercise such rights as
provided under the Mortgage, including without limitation, the advance
of funds or payment of expenses where such exercise will, in the
reasonable determination of the Trustee, result in the preservation of
the Vessel and be in the best interests of the Agent and the Lenders.
(h) The Trustee is authorized to employ any custodian, receiver,
attorney or other agent to assist the Trustee in the administration of
this Indenture or the exercise of its rights under the Mortgage.
(i) Upon the written direction of the Requisite Lenders, the
Trustee is authorized to execute appropriate documentation releasing and
discharging the Vessel from the lien of the Mortgage, and to execute,
deliver and record any and all documents necessary in connection
therewith.
(j) The Mortgagor agrees to deliver to the Lenders copies of all
notices, documents and other instruments required to be delivered to the
Trustee under the Mortgage at the same time the same are delivered to
Trustee.
Page 3
<PAGE> 4
(k) The Trustee shall fulfill all obligations imposed on it under
46 CFR Part 221 and 46 U.S.C.A. Chapter 313, including the giving of any
notices required under 46 CFR Section 221.37.
ARTICLE V
The Trustee may resign at any time by giving sixty (60) days' written
notice to the Settlors, provided, however, that such resignation shall only be
effective upon the appointment of a successor trustee, qualifying as an approved
trustee under the provisions of 46 U.S.C.A. Sections 808, 835 and/or 46
U.S.C.A. Section 31328(b) as listed by MARAD. In addition, the Requisite Lenders
may at any time remove the Trustee with or without cause by an instrument in
writing delivered to the Trustee, such removal to be effective upon the
acceptance of appointment of a successor trustee as hereinafter provided. In the
case of resignation or removal of the Trustee, the Requisite Lenders shall
appoint a successor trustee by an instrument signed by each such Lender, which
need not be executed by the Mortgagor. At such time as a successor trustee shall
be qualified, the Trustee shall assign all of its right, title and interest in
and to the Mortgage to said successor trustee, and thereafter each reference in
this Indenture to the Trustee shall be deemed to mean such successor trustee.
Any corporation into which the Trustee may be merged or converted with which it
may be consolidated or any corporation resulting from or surviving any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation to which substantially all the corporate trust business of the
Trustee may be transferred, shall immediately become the successor trustee under
this Indenture, provided that such successor trustee qualifies as a "citizen of
the United States" within the meaning of 46 U.S.C.A. Section 802 and satisfies
the requirements of 46 U.S.C.A. 31328. Notwithstanding anything to the contrary
contained in this Indenture, in the event that the Trustee, or any successor
trustee shall at any time fail to be a citizen of the United States within the
meaning of 46 U.S.C.A. Section 802, such that the Vessel subjected to this
Indenture or the Mortgage should fail to qualify for coastwise trading, the
Trustee or successor trustee, whose United States citizenship status then
jeopardized the coastal trading license of the Vessel, shall be deemed to have
resigned immediately prior to such loss of United States citizenship, and shall
notify the Lenders thereof, and the Lenders shall thereafter designate a
successor trustee under the procedures set forth in this Indenture.
ARTICLE VI
No bond shall be required of the Trustee or of any Person appointed as
successor trustee for the faithful performance of its duties as trustee and
funds in the hands of the Trustee may be deposited with the Trustee without the
necessity of posting collateral.
Page 4
<PAGE> 5
ARTICLE VII
The Trustee shall be reimbursed for all costs and expenses incurred in
the administration of this Indenture and in the exercise of its rights and
obligations under the Mortgage. Fees for usual or special services, including
services rendered hereunder as a result of a default by the Mortgagor under the
Mortgage or the obligation secured thereby will be reasonable. The Mortgagor
shall pay all of the Trustee's fees, costs, expenses, attorneys' and paralegals'
fees and charges. To the extent such fees and expenses are incurred during a
period of default under the Mortgage or Credit Agreement and are not paid timely
by the Mortgagor, the Lenders agree to pay or reimburse the Trustee for such
unpaid amounts.
ARTICLE VIII
The validity, construction and interpretation of this Indenture, and the
administration of the trust created hereunder, shall be governed by the laws of
the State of Louisiana (without regard to the laws applicable to conflicts or
choice of law) except to the extent preempted by federal or maritime law of the
United States. This Indenture and any amendments, waivers, consents or
supplements may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument.
ARTICLE IX
If any provision of this Indenture is contrary to, prohibited by or
deemed invalid under any applicable law or regulation, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder of this Indenture shall not be invalidated thereby
and shall be given full force and effect so far as possible.
ARTICLE X
The Mortgagor hereby agrees to defend, indemnify and hold the Trustee
and its successors, assigns, legal representatives and agents, harmless from and
against any and all liabilities, obligations, losses, damages, fines, penalties,
taxes, claims, actions, suits, costs or disbursements (including without
limitation, reasonable attorneys' fees and expenses) of any kind or nature
whatsoever (except such arising from the wilful misconduct or gross negligence
on the part of the Trustee) incurred by the Trustee which may be imposed on,
incurred or assessed against the Trustee arising out of or in connection with
the acceptance or administration of the Indenture created hereby.
Page 5
<PAGE> 6
ARTICLE XI
The Lenders shall have the right to sell or assign the Obligations, and
any part thereof, with or without recourse, in accordance with the provisions of
the Credit Agreement and upon presentation to the Trustee of such instrument(s)
and/or other documents required pursuant to the Credit Agreement evidencing such
sale or assignment, in form reasonably satisfactory to the Trustee, such
purchaser or assignee of the Obligations shall succeed to all of the rights and
obligations of the Lenders hereunder.
ARTICLE XII
All notices, consents, approvals, requests, demands and other
communications hereunder shall be in writing and shall be sent by mail (by
registered or certified mail, return receipt requested), Federal Express or
similar overnight delivery service, telecopy or hand delivery, as follows:
(a) To the Owner:
c/o The Delta Queen Steamboat Co.
Two North Riverside Plaza, 2nd Floor
Chicago, IL 60606
Attention: Jordan Allen
Telephone: (312) 466-6202
Telecopy: (312) 466-6151
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, IL 60606
Attention: Jim Phipps
Telephone: (312) 466-3623
Telecopy: (312) 575-7000
and
Adams and Reese, L.L.P.
4500 One Shell Square
New Orleans, Louisiana 70139
Attention: Louis A. Wilson, Jr.
Telephone: (504) 581-3234
Telecopy: (504) 566-0210
Page 6
<PAGE> 7
(b) To the Mortgagee:
The Chase Manhattan Bank
c/o Chase Securities Inc.
10 South LaSalle Street
Chicago, Illinois 60603
Attention: Jon Hinard
Telephone: (312) 807-4550
Telecopy: (312) 807-4046
with a copy to:
Sidley & Austin
One First National Plaza,
Chicago, Illinois 60603
Attention: Douglas H. Williams
Telephone: (312) 853-7667
Telecopy: (312) 853-7036
with notice, request or communication hereunder deemed to have been given when
delivered in person or by courier service, upon receipt of a telecopy or telex
or upon delivery or refusal to accept delivery if deposited in the United States
mail (registered or certified, with postage prepaid and properly addressed). Any
party may change the Person or address to whom or which the notices are to be
given hereunder, by notice duly given hereunder.
[END OF PAGE]
Page 7
<PAGE> 8
SIGNATURE PAGE - TRUSTEE
IN WITNESS WHEREOF, the parties have caused this Indenture to be
executed by their duly authorized officers as of the date first above written.
WITNESSES: THE CHASE MANHATTAN BANK, NOT IN ITS
INDIVIDUAL CAPACITY, BUT AS TRUSTEE
/s/ STEVEN J. FALISKI
- ------------------------------------ ------------------------------------
Name: STEVEN J. FALISKI
- ------------------------------------ -------------------------------
Title: Vice President
-------------------------------
Page 8
<PAGE> 9
SIGNATURE PAGE - SETTLORS
IN WITNESS WHEREOF, the parties have caused this Indenture to be
executed by their duly authorized officers as of the date first above written.
WITNESSES: THE CHASE MANHATTAN BANK, AS
LENDER
/s/ STEVEN J. FALISKI
- ------------------------------------ ------------------------------------
Name: Steven J. Faliski
- ------------------------------------ -------------------------------
Title: Vice President
-------------------------------
HIBERNIA NATIONAL BANK, AS LENDER
- ------------------------------------ ------------------------------------
Name:
- ------------------------------------ -------------------------------
Title:
-------------------------------
BANK ONE, LOUISIANA, NATIONAL
ASSOCIATION, AS LENDER
- ------------------------------------ ------------------------------------
Name:
- ------------------------------------ -------------------------------
Title:
-------------------------------
Page 9
<PAGE> 10
WITNESSES: CREDIT AGRICOLE INDOSUEZ, AS LENDER
/s/ KATHERINE L. ABBOTT
- ------------------------------------ ------------------------------------
Name: Katherine L. Abbott
- ------------------------------------ -------------------------------
Title: First Vice President
-------------------------------
THE BANK OF NEW YORK, AS LENDER
/s/ RICHARD RAFFETTO
- ------------------------------------ ------------------------------------
Name: Richard Raffetto
- ------------------------------------ -------------------------------
Title: Vice President
-------------------------------
GREAT RIVER CRUISE LINE, L.L.C.
BY: THE DELTA QUEEN STEAMBOAT CO.,
A MANAGING MEMBER
/s/ JORDAN B. ALLEN
- ------------------------------------ ------------------------------------
Name: Jordan B. Allen
- ------------------------------------ Title: Executive Vice President
BY: DQSB II, INC., A MANAGING MEMBER
/s/ JORDAN B. ALLEN
- ------------------------------------ ------------------------------------
Name: Jordan B. Allen
- ------------------------------------ Title: Executive Vice President
Page 10
<PAGE> 11
ACKNOWLEDGMENT OF TRUSTEE
STATE OF ILLINOIS
COUNTY OF COOK
On this 25th day of February, 1999, before me, the undersigned
authority, duly commissioned and qualified in and for the aforesaid
jurisdiction, personally came and appeared:
/s/ STEVEN J. FALISKI
---------------------------------------------
appearing herein in his capacity as Vice President of The Chase Manhattan Bank,
a New York banking corporation, as Trustee under the aforesaid Trust Indenture
(the "Indenture"), to me personally known to be the identical person whose name
is subscribed to the Indenture, who declared and acknowledged, that he executed
the same on behalf of such with full authority, and that the instrument is the
free act and deed of such Bank, executed for the uses, purposes and benefits
therein expressed.
By:
------------------------------
Title:
------------------------------------
NOTARY PUBLIC
Page 11
<PAGE> 12
ACKNOWLEDGMENT OF SETTLOR
STATE OF ILLINOIS
COUNTY OF COOK
On this 25th day of February, 1999, before me, the undersigned
authority, duly commissioned and qualified in and for the aforesaid
jurisdiction, personally came and appeared:
/s/ STEVEN J. FALISKI
---------------------------------------------
appearing herein in his capacity as Vice President of The Chase Manhattan Bank,
a New York banking corporation, as Lender under the aforesaid Trust Indenture
(the "Indenture"), to me personally known to be the identical person whose name
is subscribed to the Indenture, who declared and acknowledged, that he executed
the same on behalf of such with full authority, and that the instrument is the
free act and deed of such Bank, executed for the uses, purposes and benefits
therein expressed.
By:
------------------------------
Title:
------------------------------------
NOTARY PUBLIC
Page 12
<PAGE> 13
ACKNOWLEDGMENT OF SETTLOR
STATE OF LOUISIANA
PARISH OF ORLEANS
On this 25th day of February, 1999, before me, the undersigned
authority, duly commissioned and qualified in and for the aforesaid
jurisdiction, personally came and appeared:
/s/ WILLIAM P. HERRINGTON
---------------------------------------------
appearing herein in his capacity as Sr. Vice President of Hibernia National
Bank, as Lender under the aforesaid Trust Indenture (the "Indenture"), to me
personally known to be the identical person whose name is subscribed to the
Indenture, who declared and acknowledged, that he executed the same on behalf of
such with full authority, and that the instrument is the free act and deed of
such Bank, executed for the uses, purposes and benefits therein expressed.
By:
------------------------------
Title:
------------------------------------
NOTARY PUBLIC
Page 13
<PAGE> 14
ACKNOWLEDGMENT OF SETTLOR
STATE OF LOUISIANA
PARISH OF ORLEANS
On this 25th day of February, 1999, before me, the undersigned
authority, duly commissioned and qualified in and for the aforesaid
jurisdiction, personally came and appeared:
/s/ LIZETTE TERRAL
---------------------------------------------
appearing herein in his capacity as Sr. Vice President of Bank One, Louisiana,
N.A., as Lender under the aforesaid Trust Indenture (the "Indenture"), to me
personally known to be the identical person whose name is subscribed to the
Indenture, who declared and acknowledged, that he executed the same on behalf of
such with full authority, and that the instrument is the free act and deed of
such Bank, executed for the uses, purposes and benefits therein expressed.
By:
------------------------------------
Title:
-------------------------------------
NOTARY PUBLIC
Page 14
<PAGE> 15
ACKNOWLEDGMENT OF SETTLOR
STATE OF ILLINOIS
COUNTY OF COOK
On this 25th day of February, 1999, before me, the undersigned
authority, duly commissioned and qualified in and for the aforesaid
jurisdiction, personally came and appeared:
/s/ DAVID BOUHL
---------------------------------------------
appearing herein in his capacity as First VP of Credit Agricole Indosuez, as
Lender under the aforesaid Trust Indenture (the "Indenture"), to me personally
known to be the identical person whose name is subscribed to the Indenture, who
declared and acknowledged, that he executed the same on behalf of such with full
authority, and that the instrument is the free act and deed of such Bank,
executed for the uses, purposes and benefits therein expressed.
By:
------------------------------
Title:
------------------------------------
NOTARY PUBLIC
Page 15
<PAGE> 16
ACKNOWLEDGMENT OF SETTLOR
STATE OF NEW YORK
COUNTY OF NEW YORK
On this 25th day of February, 1999, before me, the undersigned
authority, duly commissioned and qualified in and for the aforesaid
jurisdiction, personally came and appeared:
/s/ RICHARD RAFFETTO
---------------------------------------------
appearing herein in his capacity as Vice President of The Bank of New York, as
Lender under the aforesaid Trust Indenture (the "Indenture"), to me personally
known to be the identical person whose name is subscribed to the Indenture, who
declared and acknowledged, that he executed the same on behalf of such with full
authority, and that the instrument is the free act and deed of such Bank,
executed for the uses, purposes and benefits therein expressed.
By:
------------------------------
Title:
------------------------------------
NOTARY PUBLIC
Page 16
<PAGE> 17
ACKNOWLEDGMENT OF SETTLOR
STATE OF ILLINOIS
COUNTY OF COOK
On this 25th day of February, 1999, before me, the undersigned
authority, duly commissioned and qualified in and for the aforesaid
jurisdiction, personally came and appeared:
JORDAN B. ALLEN
the duly authorized Executive Vice President and representative of THE DELTA
QUEEN STEAMBOAT CO. and DQSB II, INC., which said corporations are the sole
managing members of GREAT RIVER CRUISE LINE, L.L.C., a Delaware limited
liability company, as Settlor under the aforesaid Trust Indenture (the
"Indenture"), to me personally known to be the identical person whose name is
subscribed to the Indenture, who declared and acknowledged, that he executed the
same on behalf of such with full authority, and that the instrument is the free
act and deed of such Bank, executed for the uses, purposes and benefits therein
expressed.
By:
------------------------------
Title:
------------------------------------
NOTARY PUBLIC
Page 17
<PAGE> 1
Exhibit 4(ii)(a)(7)
PREFERRED SHIP MORTGAGE
ON 100.000% OF THE VESSEL "DELTA QUEEN"
OFFICIAL NUMBER 225875
EXECUTED BY
GREAT RIVER CRUISE LINE, L.L.C.
IN FAVOR OF
THE CHASE MANHATTAN BANK,
AS AGENT AND TRUSTEE FOR THE BENEFIT OF THE
FINANCIAL INSTITUTIONS DESIGNATED IN THE
TRUST INDENTURE
DATED AS OF FEBRUARY 25, 1999
EXECUTED ON THE 25TH DAY OF FEBRUARY, 1999
OBLIGATIONS SECURED, DIRECT OR CONTINGENT
(EXCLUSIVE OF INTEREST, EXPENSES AND FEES) PURSUANT TO
46 U.S.C.A. SECTION 31321(b)(3) AND 46 CFR SECTION 67.235,
MAXIMUM PRINCIPAL BALANCE:
$70,000,000
VESSEL NAME: DELTA QUEEN
HOME PORT: NEW ORLEANS, LOUISIANA
GROSS TONNAGE: 3,360 TONS
NET TONNAGE: 1,160 TONS
YEAR BUILD: 1926
OWNER AND MORTGAGOR: MORTGAGEE:
GREAT RIVER CRUISE LINE, L.L.C. THE CHASE MANHATTAN BANK,
ROBIN STREET WHARF AS AGENT AND TRUSTEE FOR THE BENEFIT OF
1380 PORT OF NEW ORLEANS PLACE THE FINANCIAL INSTITUTIONS DESIGNATED
NEW ORLEANS, LOUISIANA 70130-1890 HEREIN (TIN: 13-499-4650)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
<PAGE> 2
EXECUTION COPY
PREFERRED SHIP MORTGAGE UNITED STATES OF AMERICA
BY: STATE OF ILLINOIS
GREAT RIVER CRUISE LINE, L.L.C. COUNTY OF COOK
IN FAVOR OF:
THE CHASE MANHATTAN BANK, A NEW YORK BANKING
CORPORATION, AS AGENT AND TRUSTEE (IN SUCH
CAPACITY, "AGENT") FOR ITSELF AND THE
FINANCIAL INSTITUTIONS DESIGNATED IN THE
TRUST INDENTURE DATED AS OF FEBRUARY 25,
1999
BE IT KNOWN, that on the 25th day of February, 1999, in the presence of the
undersigned competent witnesses;
PERSONALLY CAME AND APPEARED:
GREAT RIVER CRUISE LINE, L.L.C. , a Delaware limited liability company (the
"Owner") whose Louisiana mailing address is Robin Street Wharf, 1380 Port of
New Orleans Place, New Orleans, Louisiana 70130, whose taxpayer
identification number is 72-1353488, successor by merger to GREAT RIVER
CRUISE LINE, INC., a Delaware corporation, as evidenced by Certificate of
Merger filed with the Delaware Secretary of State on December 27, 1996, but
effective as of December 31, 1996, represented herein by and through The
Delta Queen Steamboat Co., a Delaware corporation, a managing member, itself
appearing through Jordan Allen, its executive vice president and duly
authorized representative pursuant to a resolution of its board of
directors, a certified copy of which is attached hereto, and DQSB II, Inc.,
a Delaware corporation, a managing member, itself appearing through Jordan
Allen, its executive vice president and duly authorized representative
pursuant to a resolution of its board of directors, a certified copy of
which is attached hereto; which managing members are authorized under the
terms of Owner's operating agreement and a unanimous consent resolution of
its members, a certified copy of which is attached hereto;
WHO DECLARED THAT:
PRELIMINARY STATEMENT:
A. The Owner is the sole owner of the whole of the Vessel "DELTA QUEEN", of
3,360 gross tons, 1,160 net tons, official number 225875, documented in the
name of the Owner under and
Page 1
<PAGE> 3
pursuant to the laws of the United States of America, having its home port
at New Orleans, Louisiana (hereinafter called the "Vessel").
B. Pursuant to the terms of that certain Credit Agreement, dated as of
February 25, 1999 (as amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"), by and among THE DELTA QUEEN
STEAMBOAT CO. ("Borrower"), the owner of a 99% direct interest and a 1%
indirect beneficial interest in the Owner, THE FINANCIAL INSTITUTIONS LISTED
ON THE SIGNATURE PAGES THEREOF and each other financial institution which
from time to time becomes a party thereto in accordance with Section
11.02(a) (together with their respective successors and assigns,
individually, a "Lender" and, collectively, the "Lenders") and the Agent (a
copy of which is attached hereto as Exhibit A (without exhibits and
schedules) and incorporated by reference herein, with the same force and
effect as if fully set forth to herein), the Lenders have agreed to provide
the Borrower (subject to the conditions set forth in the Credit Agreement)
Revolving Loans with the maximum amount that may be outstanding (exclusive
of interest, expenses and fees) at any one time being the aggregate amount
of Seventy Million Dollars ($70,000,000), which the Borrower has agreed to
repay pursuant to the terms stated therein. Capitalized terms used herein
without definition and otherwise defined in the Credit Agreement shall have
the same meanings used herein as therein.
C. The Revolving Loans are evidenced by certain Notes of the Borrower dated
the 25th day of February, 1999, due and payable in the amounts and upon the
terms and conditions therein recited, to the order of the payee therein
named, with interest as set forth in or by reference in said Notes, a form
of which is attached hereto and incorporated by reference herein as Exhibit
B, with the same force and effect as if fully set forth herein.
D. The Owner has executed a Subsidiary Guaranty ("Guaranty") dated February
25, 1999 pursuant to which it has guaranteed payment and performance of the
Obligations, a form of which Guaranty is attached hereto and incorporated
herein by reference as Exhibit C, with the same force and effect as if fully
set forth herein.
E. The Owner, in order to secure the payment of the Obligations, and such
additional sums as the Owner may be obligated to pay pursuant to the
Guaranty and under the covenants, terms and conditions in this Preferred
Ship Mortgage (this "Mortgage"), and in order to secure the performance and
observance of and compliance with all agreements, covenants, terms and
conditions in the Guaranty and this Mortgage, has duly authorized the
execution and delivery of this Mortgage under and pursuant to Title 46
U.S.C.A. Section 31301 et seq in favor of The Chase Manhattan Bank, as Agent
and Trustee for the benefit of the Lenders (the "Mortgage") pursuant to a
Trust Indenture dated as of February 25, 1999 (the "Indenture").
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING, THIS
MORTGAGE WITNESSETH:
That in consideration of the premises and of the sums loaned as above
recited, and of other good and valuable consideration, the receipt whereof is
hereby acknowledged, and in order to secure the payment of the Obligations, and
such additional sums as the Owner may be obligated to pay under the agreements,
covenants, terms and conditions in the Guaranty and this Mortgage, and in order
to
Page 2
<PAGE> 4
secure the performance and observance of and compliance with all the agreements,
covenants, terms and conditions in the Credit Agreement, the Notes, the Guaranty
and this Mortgage, the Owner has granted, conveyed, mortgaged, pledged, set over
and confirmed and does by these presents grant, convey, mortgage, pledge, set
over and confirm unto the Mortgagee, its successors and assigns, the whole of
the Vessel, together with all engines, machinery, masts, boats, anchors, cables,
chains, rigging, tackle, apparel, furniture, spare parts and gear and all other
appurtenances thereunto appertaining or belonging, whether now owned or
hereafter acquired, whether on board or not, and any and all additions,
improvements and replacements hereafter made in or to the Vessel, or any part
thereof, or in or to the equipment and appurtenances aforesaid (said Vessel and
all items thereof above enumerated being included in the term "Vessel" as used
in this Mortgage);
TO HAVE AND TO HOLD all and singular the above mortgaged and described
Vessel unto the Mortgagee, and its successors and assigns, forever; upon the
terms herein set forth for the enforcement of the payment of the Obligations in
accordance with the terms of the Credit Agreement and the Notes and to secure
the performance and observance of, and compliance with, all agreements,
covenants, terms and conditions in the Guaranty and this Mortgage;
PROVIDED ONLY, and the condition of these presents is such, that if the
Owner and the Borrower, or their respective successors or assigns, shall fully
discharge the Obligations, including, without limitation, the indefeasible
payment and satisfaction in full of all of the indebtedness evidence by the
Notes and all interest, expenses and fees thereon, and all other such sums as
may hereafter become secured by this Mortgage and shall perform, observe and
comply with all agreements, covenants, terms and conditions in this Mortgage,
expressed or implied, to be performed, observed or complied with by and on the
part of the Owner and the Borrower, then these presents and the rights hereunder
shall cease, determine and be void, and otherwise shall be and remain in full
force and effect.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Vessel is to be held
subject to the further covenants, conditions, provisions, terms and uses
hereinafter set forth:
ARTICLE I
COVENANTS OF THE OWNER
The Owner represents to, and covenants and agrees with, the Mortgagee as
follows:
SECTION 1.1. The Owner will observe, perform and comply with all the
covenants, terms and conditions herein and in the Guaranty, expressed or
implied, on its part to be observed, performed or complied with in accordance
with the terms thereof.
SECTION 1.2. The Owner was duly organized and is now validly existing as a
limited liability company under the laws of the State of Delaware with a
principal place of business at Robin Street Wharf, 1380 Port of New Orleans
Place, New Orleans, Louisiana 70130-1890. The Owner is now, and shall so remain
during the life of this Mortgage, a citizen of the United States as defined in
Section 2 of the Shipping Act of 1916, as amended, for the purpose of operating
a vessel in the
Page 3
<PAGE> 5
coastwise trade in accordance with the provisions of said Section 2. The Owner
is duly authorized to mortgage the Vessel; all action of the Owner necessary for
the execution and delivery of the Guaranty and this Mortgage has been duly and
effectively taken; and the Guaranty and this Mortgage in the hands of the holder
thereof are the valid and enforceable obligations of the Owner in accordance
with their terms.
SECTION 1.3. The Owner lawfully owns and is lawfully possessed of the
Vessel, free from any lien, encumbrance, security interest or charge of any kind
(except liens arising out of trade debt incurred in the ordinary course of
business none of which shall be (a) outstanding longer than sixty (60) days and
(b) greater than $250,000 in the aggregate, unless covered by a bond, or a
letter of undertaking issued by an insurance underwriter or its authorized
agent, or unless an adequate funded reserve is maintained, none of which shall
be permitted to have priority over this Mortgage), and the Owner warrants, and
will defend the title and possession thereto and to every part thereof for the
benefit of the Mortgagee against the claims and demands of all Persons
whosoever. The Vessel is tight, staunch and strong and well and sufficiently
tackled, appareled, furnished and equipped and in all respects seaworthy.
SECTION 1.4. The Owner will comply with and satisfy all the provisions of
Title 46 U.S.C.A. Section 31301 et seq. in order to establish and maintain this
Mortgage as a first preferred mortgage thereunder upon the Vessel.
SECTION 1.5. The Owner will at all times operate the Vessel as a United
States inland waterway vessel, engaged exclusively in the passenger cruise trade
in the Mississippi, Missouri, Tennessee, Cumberland and Ohio Rivers, the
Intercoastal Waterway, their tributaries and connecting waterways, and in
compliance, in all material respects with the requirements of 46 U.S.C.A.
Section 3503 and all orders and regulations promulgated thereunder
(collectively, the "Exemptive Order"); and pursuant to the provisions of such
Exemptive Order, the Vessel is in compliance with all applicable governmental
requirements for domestic transportation of passengers for hire. The Owner will
neither cause nor permit the Vessel to be operated in any manner contrary to the
applicable law or to carry any cargo that will expose the Vessel to penalty,
forfeiture or capture and will not do or suffer or permit anything to be done
which can or might adversely affect the documentation of the Vessel under the
laws and regulations of the United States of America and will at all times keep
the Vessel duly documented thereunder.
SECTION 1.6. The Owner will pay and discharge or cause to be paid and
discharged, when due and payable from time to time, all taxes, assessments,
governmental charges, fines and penalties imposed on the Vessel or any income
therefrom and all lawful claims which if unpaid might become a lien or charge
upon the Vessel, except that it shall be entitled to contest any such taxes,
assessments, governmental charges, fines and penalties in good faith, provided
it obtains a bond, or an insurance underwriter's letter of undertaking or sets
aside on its books adequate reserves with respect thereto.
SECTION 1.7. Except as otherwise provided in Section 1.3 hereof, neither the
Owner, the Master of the Vessel, any charterer nor any other Person has or shall
have any right, power or authority to suffer to continue, create, incur or
permit to be placed or imposed upon the Vessel, its
Page 4
<PAGE> 6
freights, profits or hire, any liens, encumbrance, security interest or charge
whatsoever other than liens for crew's wages and salvage and the lien of this
Mortgage.
SECTION 1.8. The Owner will carry or cause to be carried a properly
certified copy of this Mortgage on board the Vessel with its documents and will
cause such certified copy and the documents of the Vessel to be exhibited to any
and all Persons having business with the Vessel which might give rise to a
maritime lien thereon or to any sale, conveyance, mortgage or lease thereof, and
to any representative of the Mortgagee; and will cause to be placed and kept
prominently displayed in the chart room and in the Master's cabin of the Vessel
a notice, framed under glass, printed in plain type of such size that the
paragraph of reading matter shall cover a space not less than four inches wide
and six inches long, reading as follows:
NOTICE OF PREFERRED SHIP MORTGAGE
This Vessel is owned by Great River Cruise Line, L.L.C. and is subject
to a Preferred Ship Mortgage, dated February 25, 1999, in favor of The
Chase Manhattan Bank, as Agent and Trustee pursuant to a Trust Indenture
dated as of February 25, 1999 among the aforesaid Agent and Trustee, as
Mortgagee, and the financial institutions designated therein, under
authority of Title 46 U.S.C.A. Section 31301 et seq. Under the terms of
said Mortgage neither the Owner, any charterer, the Master, nor any
other Person has any right, power or authority to create, incur or
permit to be placed or imposed upon this Vessel, its freights, profits
or hire, any lien whatsoever, other than the lien of, and liens
permitted by, said Mortgage.
SECTION 1.9. If a notice of claim of lien be recorded against the Vessel, or
a libel be filed against the Vessel and the Vessel be attached, levied upon or
taken into custody as a result thereof, or if the Vessel be otherwise attached,
levied upon or taken into custody by virtue of any proceedings in any court or
tribunal, the Owner will promptly notify the Mortgagee thereof by telecopy or
telex, confirmed by letter; and within thirty (30) days of such recording,
filing, attachment, levy, or taking, will cause a certificate of discharge to be
recorded in the case of any such recording of notice of claim or will cause the
Vessel to be released in the case of any such attachment, levy or other taking
into custody and will cause all liens thereon relating to such recording, libel,
attachment, levy or other taking into custody to be discharged and will promptly
notify the Mortgagee thereof.
SECTION 1.10. The Owner will at all times and without cost and expense to
the Mortgagee maintain and preserve or cause to be maintained and preserved the
Vessel in good running order and repair, and will cause all equipment and parts
thereof which become worn out, broken or damaged to be repaired or replaced and
will keep the Vessel, or cause it to be kept, in such condition that is in the
highest state of maintenance for vessels of like age and type. The Vessel shall,
and the Owner covenants that it will, at all times comply with all applicable
United States law, treaties and conventions, and rules and regulations issued
thereunder, and shall have on board, when required thereby, valid certificates
showing compliance therewith. The Owner will not make, or permit to be made, any
substantial change in the structure, type or speed of the Vessel or change in
its rig without first receiving the written approval thereof by the Mortgagee.
Page 5
<PAGE> 7
SECTION 1.11. The Owner will at all reasonable times and upon reasonable
prior notice afford the Mortgagee or its authorized representatives full and
complete access to the Vessel where located for the purpose of inspecting the
same and its cargoes and papers and, at the request of the Mortgagee, will
deliver for inspection copies of any and all contracts and documents relating to
the Vessel, whether on board or not.
SECTION 1.12. The Owner will not sell, mortgage, transfer or demise charter
the Vessel without the prior written consent of the Mortgagee, and any such
written consent to any one sale, mortgage, transfer or demise charter shall not
be construed to be a waiver of this provision with respect to any subsequent
proposed sale, mortgage, transfer or demise charter.
SECTION 1.13. At all times while and so long as this Mortgage shall be
outstanding:
(a) The Owner will, at its own expense insure the Vessel and keep the
same insured (in lawful money of the United States) for hull and machinery,
general mortgagee's interest, and against protection and indemnity risks,
generally insured against by prudent shipowners in such form, and with
reputable and financially sound insurance companies, underwriters, funds,
mutual insurance associations or clubs.
(b) Until otherwise required by the Mortgagee, the protection and
indemnity, hull and machinery and mortgagee's interest insurance required by
this Section 13 may be on the American Institute forms current at the time
such insurance takes effect with deductibles or franchises no higher than
the following:
Hull and Machinery: All claims,
each accident or occurrence....................................$750,000
Protection and indemnity insurance in respect to the Vessel shall be by
unlimited entry in a British, Scandinavian or Bermuda mutual insurance
association or placed with underwriters acceptable to the Mortgagee and
shall include pollution liabilities (including coverage for third party
claims, statutory and governmental cleanup liabilities, penalties and fines
in the minimum amount of $500,000,000 for any one occurrence) with
deductibles or franchises no higher than $200,000.
For the purposes of insurance against total loss, the Vessel shall be
insured for and valued at an amount at least equal to the full commercial
value of the Vessel. For purposes of the broker's reports and opinions
referred to above, the broker giving the same may rely on a statement as to
the full commercial value of the Vessel and the gross tonnage of the Vessel
as furnished annually by the Owner to such broker and the Mortgagee at the
time insurance is negotiated with underwriters.
Page 6
<PAGE> 8
(c) All insurance other than protection and indemnity insurance shall be
taken out in the names of the Owner and the Mortgagee as their respective
interests may appear; the policies or certificates shall provide that there
shall be no recourse against the Mortgagee for payment of premiums; and all
insurance shall provide for at least ten (10) days' prior notice to be given
to the Mortgagee by the underwriters in event of cancellation or any
material change in coverage. Protection and indemnity insurance cover notes
shall indicate the interest of the Mortgagee.
(d) Subject to the terms of the Credit Agreement, all hull and machinery
and mortgagee's interest insurance policies or certificates shall provide
that losses thereunder shall be payable to the Mortgagee, and all insurance
moneys received by the Mortgagee shall be distributed as provided below in
this Section 1.13. However, the policies or certificates may provide that
unless the underwriters shall have been otherwise instructed by notice in
writing from the Mortgagee that an Event of Default shall have occurred and
is continuing:
(i) any loss under any insurance on the Vessel with respect to
protection and indemnity or collision liability risks may be paid
directly to the Person to whom any liability covered by such insurance
has been incurred, or to the Owner to reimburse it for any loss, damage
or expense incurred by it and covered by such insurance, provided that
in the latter event the underwriter shall have first received evidence
that the liability insured against has been discharged; and
(ii) in the case of any loss (other than a loss covered by
subparagraph (i) above in this paragraph (d) or by paragraph (e) of this
Section 1.13) under any insurance with respect to the Vessel involving
any damage to the Vessel or liability of the Vessel, the underwriters
may pay directly for the repair, salvage, liability or other charges
involved, or, if the Owner shall have first fully repaired the damage
and paid the cost thereof or discharged the liability or paid other
charges and the underwriters shall have first received evidence thereof,
may pay the Owner as reimbursement therefor; provided, however, that (a)
if such damage involves a loss in excess of Five Million Dollars
($5,000,000), the underwriters shall not make such payment without first
obtaining the written consent of the Mortgagee (which consent shall not
be unreasonably withheld, conditioned or delayed), and (b) no payment
shall be made to the Owner if there shall have occurred an Event of
Default. Any loss which is paid to the Mortgagee but which should have
been paid, in accordance with the provisions of this paragraph, directly
to the Owner, shall be paid by the Mortgagee to or as directed by the
Owner, but only if there shall not have occurred any Event of Default.
(e) Subject to the terms of the Credit Agreement, in the event of an
actual or constructive total loss or an agreed or a compromised constructive
total loss of or requisition of title to or seizure or forfeiture of the
Vessel, all amounts payable therefor shall be paid to the Mortgagee and
shall be applied: first, to the payment of the expenses of the Mortgagee in
collecting such payments; second, to the payment of the then accrued but
unpaid interest on the Notes; third, to the payment of the unpaid principal
indebtedness evidenced by the Notes; fourth, to the payment of such
additional sums as the Owner may be obligated to pay the Mortgagee or the
Lenders under the terms of this Mortgage, the Guaranty, the Notes and the
Credit Agreement; and any
Page 7
<PAGE> 9
funds remaining after such payments shall be paid to the Owner, its
successors in interest or its assigns or to whomsoever may be entitled
thereto.
(f) The Owner shall deliver to the Mortgagee the originals of all cover
notes, binders and certificates of entry in protection and indemnity
associations, and all endorsements and riders amendatory thereof in respect
of insurance maintained under this Mortgage.
(g) The Owner agrees that it will not do any act, or voluntarily suffer
or permit any act to be done, whereby any insurance required hereunder shall
or may be suspended, impaired or defeated and will not suffer or permit the
Vessel to engage in any voyage or to carry any cargo not permitted under the
policies of insurance in effect, without first covering the Vessel with
insurance, satisfactory in all respects, including the amount thereof, to
the Mortgagee in the exercise of its reasonable discretion, for such voyage
or the carriage of such cargo.
(h) In the event that any claim or lien is asserted against the Vessel
for loss, damage or expense which is covered by insurance hereunder, and it
is necessary for the Owner to obtain a bond or supply other security to
prevent the arrest of the Vessel or to release the Vessel from arrest on
account of such claim or lien, the Mortgagee may, in its sole discretion,
and upon notice to the Owner, assign to any Person, firm or corporation
executing a surety or guarantee bond or other agreement to save or release
the Vessel from such arrest, all right, title and interest of the Mortgagee
in and to said insurance covering said loss, damage or expense, as
collateral security to indemnify such Person, firm or corporation against
liability under said bond or other agreement.
SECTION 1.14. The Owner will, within five (5) days following written demand
therefor, pay or reimburse the Mortgagee, with interest at the Default Rate,
for: (i) any and all expenses or expenditures which the Mortgagee may from time
to time incur or make in connection with insurance premiums, discharge or
purchase of liens, taxes, dues, assessments, governmental charges, fines and
penalties, repairs, attorneys' fees and any other expenses or expenditures which
the Owner is obligated herein to incur or make, but fails to incur or make; and
(ii) all costs, fees and expenses suffered, incurred or made by the Mortgagee in
exercising, protecting or pursuing its rights or remedies under this Mortgage
(including, but not limited to, expenses of any sales or taking of the Vessel,
attorneys' fees and court costs). Such obligation of the Owner to reimburse the
Mortgagee shall be an additional indebtedness due from the Owner, secured by
this Mortgage, and shall be payable by the Owner on demand. The Mortgagee,
though privileged so to do, shall be under no obligation to the Owner or to any
other Person to incur or make any such expenses or expenditures, nor shall the
incurring or making thereof relieve the Owner of any default in that respect.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
SECTION 2.1. If any Event of Default shall have occurred and be continuing,
then and in each and every such case the Mortgagee shall have the right to:
Page 8
<PAGE> 10
(a) Exercise all of the rights and remedies in foreclosure and otherwise
given to mortgagees by the provisions of Title 46 U.S.C.A. Section 31301 et
seq. and all acts amendatory thereof and supplemental thereto, or the
applicable law of any other jurisdiction;
(b) Bring suit at law, in equity or in admiralty to recover judgment for
any and all outstanding Obligations or any sum secured by this Mortgage, or
otherwise, and collect the same out of any and all property of the Owner
whether covered by this Mortgage or otherwise;
(c) Take and enter into possession of the Vessel, at any time, wherever
the same may be, without legal process and without being responsible for
loss or damage; and the Owner or other Person in possession forthwith upon
demand of the Mortgagee shall surrender to the Mortgagee possession of the
Vessel, and the Mortgagee may, without being responsible for loss or damage,
hold, lay up, lease, charter, operate or otherwise use the Vessel, for such
time and upon such terms as it may deem to be for its best advantage, and
demand, collect and retain, compromise and sue for all hire, freights,
earnings, issues, revenues, income, profits, return premiums, salvage awards
or recoveries, recoveries in general average, and all other sums due or to
become due in respect of the Vessel, including any amounts payable in
respect of any insurance in connection with the Vessel, from any Person
whomsoever, accounting only for the net profits, if any, arising from such
use of the Vessel and charging upon all receipts from the use of the Vessel
or from the sale thereof by court proceedings or pursuant to subparagraph
(4) next following, all costs, expenses, charges, damages or losses by
reason of such use; and if at any time the Mortgagee shall avail itself of
the right herein given to take the Vessel, the Mortgagee shall have the
right to dock the Vessel for a reasonable time at any dock, pier or other
premises of the Owner without charge, or to dock it at any other place at
the cost and expense of the Owner;
(d) Take and enter into possession of the Vessel, at any time, wherever
the same may be, without legal process, and if it seems desirable to the
Mortgagee and without being responsible for loss or damage, sell the Vessel
at public or private sale, at any place and at such time as the Mortgagee
may deem advisable, free from any claim by the Owner in admiralty, in
equity, at law or by statute. In the case of a public sale, the Mortgagee
shall give notice of the time and place of the sale with a general
description of the property in the following manner:
(i) By publishing such notice for ten (10) consecutive days in a
daily newspaper of general circulation such as The Times Picayune,
published in New Orleans, Louisiana;
(ii) If the place of sale should not be in New Orleans,
Louisiana, then also by publication of a similar notice in a daily
newspaper, if any, published at the place of sale; and
(iii) By mailing a similar notice to the Owner at least fourteen
(14) days prior to the date fixed for such sale.
In the case of a private sale no newspaper publication of notice shall
be required, but the Mortgagee shall mail written notice of sale to the
Owner at least fourteen (14) days prior to the date fixed for entering into
the contract of sale. The Mortgagee may, without notice or
Page 9
<PAGE> 11
publication, adjourn any public or private sale or cause such sale to be
adjourned from time to time by announcement at the time and place fixed for
sale or for entering into a contract of sale, and such sale or contract of
sale may, without further notice, be made at the time and place to which the
sale or contract of sale was so adjourned. The Mortgagee shall not be
obligated to make any sale of the Vessel if it shall determine not to do so,
regardless of the fact that notice of sale may have been given. Any sale may
be conducted without bringing the Vessel to the place designated for such
sale and in such manner as the Mortgagee may deem to be for the best
advantage of the Mortgagee.
(e) Instruct the Owner to terminate any existing management agreement
affecting the Vessel, and the Owner shall, upon the giving of such
instructions by the Mortgagee, immediately terminate any such management
agreement and shall appoint other managers satisfactory to the Mortgagee and
upon terms and conditions satisfactory to the Mortgagee.
(f) Instruct the Owner to make application, if relevant, to the United
States Maritime Administration ("MARAD") for permission of MARAD to sell the
Vessel for purposes of foreign scrapping of the Vessel, and the Owner shall,
upon the giving of such instructions by the Mortgagee, immediately apply for
permission of MARAD for such foreign scrapping.
SECTION 2.2. Any sale of the Vessel made in pursuant of this Mortgage,
whether by exercise of the power of sale granted herein or by virtue of any
judicial proceedings, shall operate to divest all right, title and interest of
any nature whatsoever of the Owner therein and thereto, and shall bar the Owner,
its successors and assigns, and all Persons claiming by, through or under them.
No purchaser shall be bound to inquire whether notice has been given, or whether
any default has occurred, or as to the propriety of the sale, or as to the
application of the proceeds thereof. In the case of any such sale, any purchaser
who is the holder of any of the Notes shall be entitled, for the purpose of
making settlement or payment for the property purchased, to apply the balance
due under such Note or a part thereof as part or all of the purchase price to
the extent of the amount remaining due and unpaid thereon. At any such sale, the
holder of a Note may bid for and purchase such property and upon compliance with
the terms of sale may hold, retain and dispose of such property without further
accountability therefor.
SECTION 2.3. The Mortgagee is hereby appointed attorney-in-fact of the
Owner, with full power of substitution, upon the occurrence of any Event of
Default, to make application, if relevant, to MARAD for permission of MARAD to
sell the Vessel for purposes of foreign scrapping of the Vessel.
SECTION 2.4. The Mortgagee is hereby appointed attorney-in-fact of the
Owner, with full power of substitution, upon the occurrence of any Event of
Default, to execute and deliver to any purchaser upon any sale of the Vessel
made in pursuance of this Mortgage, whether by exercise of the power of sale
granted herein or by virtue of any judicial proceedings, and is hereby vested
with full power and authority to make, in the name and on behalf of the Owner, a
good conveyance of the title to the Vessel when so sold. In the event of any
sale of the Vessel by exercise of any power herein contained, the Owner will, if
and when required by the Mortgagee, execute such form of conveyance of the
Vessel as the Mortgagee may direct or approve.
Page 10
<PAGE> 12
SECTION 2.5. The Mortgagee is hereby irrevocably appointed attorney-in-fact
of the Owner, with full power of substitution, upon the occurrence of any Event
of Default, in the name of the Owner to demand, collect, receive, compromise and
sue for, so far as may be permitted by law, all freights, hire, earnings,
issues, revenues, income and profits of the Vessel, including all amounts due
from underwriters under any insurance thereon as payment of losses or as return
premiums or otherwise, salvage awards and recoveries, recoveries in general
average or otherwise, and all other sums due or to become due at the time of the
occurrence of any Event of Default in respect of the Vessel, or in respect of
any insurance thereon, from any Person whomsoever, and to make, give and execute
in the name of the Owner acquittance, receipts, releases or other discharges for
the same, whether under seal or otherwise, to take possession of, sell or
otherwise dispose of or manage or employ the Vessel, to execute and deliver
charters, and a bill of sale with respect to the Vessel and to endorse and
accept in the name of the Owner all checks, notes, drafts, warrants, agreements
and other instruments in writing with respect to the foregoing.
SECTION 2.6. Whenever any right to enter and take possession of the Vessel
accrues to the Mortgagee, it may require the Owner to deliver and the Owner
shall on demand, at its own cost and expense, deliver the Vessel to the
Mortgagee. If any legal proceedings shall be taken to enforce any right under
this Mortgage, the Mortgagee shall be entitled as a matter of right to the
appointment of a receiver of the Vessel and the freights, hire, earnings,
issues, revenues and profits due or to become due and arising from the operation
thereof.
SECTION 2.7. The Owner authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Owner, its successors and
assigns, in any court of any country or nation of the world where a suit is
pending against the Vessel because of or on account of any alleged lien against
the Vessel from which the Vessel has not been released and to take such
proceedings as to them may seem proper toward the defense of such suit, and the
purchase or discharge of such lien, and all expenditures made or incurred by
them for the purpose of such defense or purchase or discharge shall be a debt
due from the Owner, its successors and assigns, to the Mortgagee and shall be
secured by the lien of this Mortgage.
SECTION 2.8. Each and every power and remedy herein given to the Mortgagee
shall be cumulative and shall be in addition to every other power and remedy
herein given or now or hereafter existing at law, in equity, in admiralty or by
statute, and each and every power and remedy, whether herein given or otherwise
existing, may be exercised from time to time and as often and in such order as
may be deemed expedient by the Mortgagee, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other consistent or
inconsistent power or remedy. No delay or omission by the Mortgagee in the
exercise of any right or power or in the prosecution of any remedy accruing upon
any Event of Default shall impair any such right, power or remedy or be
construed to be a waiver of any such Event of Default or to be an acquiescence
therein; nor shall the acceptance by the Mortgagee of any security or of any
payment maturing after any Event of Default or of any payment on account of any
past default be construed to be a waiver of any right arising out of any future
Event of Default or of any past Event of Default not completely cured thereby.
Page 11
<PAGE> 13
SECTION 2.9. If at any time after the occurrence of an Event of Default and
prior to the actual sale of the Vessel by the Mortgagee or prior to commencement
of any foreclosure proceedings, the Owner offers to cure completely all events
of default and to pay all expenses and advances to the Mortgagee consequent on
such Event of Default, with interest at the Default Rate, then the Mortgagee
may, if it in its sole discretion so elects, accept such offer and payment and
restore the Owner to its former position, but such action shall not affect any
subsequent Event of Default or impair any rights consequent thereon.
SECTION 2.10. In case the Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Mortgagee, then, and in every such
case, the Owner and the Mortgagee shall be restored to their former positions
and rights hereunder with respect to the property subject or intended to be
subject to this Mortgage, and all rights, remedies and powers of the Mortgagee
shall continue as if no such proceedings had been taken.
SECTION 2.11. In the event of any taking of the Vessel by the Mortgagee or
any sale of the Vessel under any of the powers herein specified, the proceeds of
any such sale and the net earnings of any charter operation or other use of the
Vessel by the Mortgagee under any such power, together with any and all moneys
received by the Mortgagee pursuant to or under the terms of this Mortgage or in
any proceedings hereunder or with respect hereto, the application of which has
not elsewhere herein been specifically provided for, shall be applied as
follows:
FIRST: To the payment of all expenses and charges, including the expenses of
any sale, the expenses of any taking, attorneys' and paralegals' fees, court
costs, and any other expenses or advances made or incurred by the Mortgagee
or any of the Lenders in the protection of their rights or the pursuance of
their remedies hereunder or under the Credit Agreement;
SECOND: To the payment of the unpaid interest on the Notes;
THIRD: To the payment of principal of the Notes then due, by acceleration or
otherwise;
FOURTH: To the payment of any additional unpaid Obligations under the Credit
Agreement;
FIFTH: To the payment of such additional sums as the Owner may be obligated
to pay the Mortgagee or the Lenders under the terms of this Mortgage; and
SIXTH: To the payment of any surplus thereafter remaining to the Owner or to
whomsoever may be entitled thereto.
SECTION 2.12. In the event that this Mortgage, the Guaranty, the Credit
Agreement or the Notes, or any provision hereof or thereof, shall be deemed
invalid in whole or in part by reason of any present or future law or any
decision of any court having jurisdiction, or if the documents at any time held
by the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to
carry out the provisions, true intent or spirit of this Mortgage, the Guaranty,
the Credit Agreement or the
Page 12
<PAGE> 14
Notes, then, from time to time, then Owner will execute, on its own behalf, such
other and future assurances and documents as in the opinion of the Mortgagee may
be required more effectually to subject the Vessel to the payment of the
principal sum of the Obligations, as in the Credit Agreement and as herein
provided, and to the performance of the terms and provisions of the Notes, the
Credit Agreement, the Guaranty and this Mortgage.
SECTION 2.13. Any provision of this Mortgage which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or nonauthorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
SECTION 2.14. In the event that the title or ownership of the Vessel shall
be requisitioned, purchased or taken by any government of any country or any
department, agency or representative thereof, pursuant to any present or future
law, proclamation, decree, order or otherwise, the lien of this Mortgage shall
be deemed to attach to the claim for compensation therefor, and the
compensation, purchase price, reimbursement or award for such requisition,
purchase or other taking of such title or ownership is hereby agreed to be
payable to the Mortgagee, who shall be entitled to receive the same and shall
apply it as provided in Section 2.11 of this Article II. In the event of any
such requisition, purchase or taking, and the failure of the Mortgagee to
receive proceeds as herein provided, the Owner shall promptly execute and
deliver to the Mortgagee such documents, if any, and shall promptly do and
perform such acts, if any, as in the opinion of the Mortgagee may be necessary
or useful to facilitate or expedite the collection by the Mortgagee of such part
of the compensation, purchase price, reimbursement or award as is payable to it
hereunder.
ARTICLE III
DEFEASANCE
SECTION 3.1. If the Owner shall pay and discharge the entire indebtedness
secured hereby by well and truly paying or causing to be paid the principal of
and interest due under the Notes and all of the Obligations under the Credit
Agreement as and when the same becomes due and payable and if the Owner shall
also pay or cause to be paid all other sums payable hereunder by the Owner, all
such payments being indefeasible, then this Mortgage and the lien, rights and
interest hereby granted shall cease, determine and become null and void, and the
Mortgagee shall, at the request of the Owner, execute and deliver such
instrument or instruments of satisfaction as may be necessary to satisfy and
discharge the lien hereof; and forthwith the estate, right, title and interest
of the Mortgagee in and to all property subject to this Mortgage shall thereupon
cease, determine and become null and void.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1. For purpose of recording of this Mortgage, as required by Title
46 U.S.C.A. Section 31301 et seq., the total amount of the Mortgage is the
principal sum of Seventy Million Dollars ($70,000,000) plus interest, expenses
and fees, plus any additional amounts for which the Owner
Page 13
<PAGE> 15
may become liable in connection with the performance of the covenants of this
Mortgage, the Guaranty and the Credit Agreement. The discharge amount is the
same as the total amount.
SECTION 4.2. All of the covenants, promises, stipulations and agreements of
the Owner in this Mortgage contained shall bind the Owner and its successors and
assigns and shall inure to the benefit of the Mortgagee and its successors and
assigns.
SECTION 4.3. Wherever and whenever herein any right, power or authority is
granted or given to the Mortgagee, such right, power or authority may be
exercised in all cases by the Mortgagee or such agent or agents as it may
appoint, and the act or acts of such agent or agents when taken shall constitute
the act or acts of the Mortgagee hereunder.
SECTION 4.4. Any notice, request, demand, direction, consent or waiver or
other documents in respect of this Mortgage shall be sufficient for every
purpose if in writing and sent either by telecopy or letter (delivered by hand
or sent by registered or certified mail, return receipt requested, postage
prepaid or by reputable overnight courier) or telecopy confirmed by letter (sent
as aforesaid), addressed as follows:
(a) To the Owner:
c/o The Delta Queen Steamboat Co.
Two North Riverside Plaza, 2nd Floor
Chicago, IL 60606
Attention: Jordan Allen
Telephone: (312) 466-6202
Telecopy: (312) 466-6151
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, IL 60606
Attention: Jim Phipps
Telephone: (312) 466-3623
Telecopy: (312) 575-7000
and
Adams and Reese, L.L.P.
4500 One Shell Square
New Orleans, Louisiana 70139
Attention: Louis A. Wilson, Jr.
Telephone: (504) 581-3234
Telecopy: (504) 566-0210
Page 14
<PAGE> 16
(b) To the Mortgagee:
The Chase Manhattan Bank
c/o Chase Securities Inc.
10 South LaSalle Street
Chicago, Illinois 60603
Attention: Jon Hinard
Telephone: (312) 807-4550
Telecopy: (312) 807-4046
with a copy to:
Sidley & Austin
One First National Plaza,
Chicago, Illinois 60603
Attention: Douglas H. Williams
Telephone: (312) 853-7667
Telecopy: (312) 853-7036
with notice, request or communication hereunder deemed to have been given when
delivered in person or by courier service, upon receipt of a telecopy or telex
or upon delivery or refusal to accept delivery if deposited in the United States
mail (registered or certified, with postage prepaid and properly addressed). Any
party may change the Person or address to whom or which the notices are to be
given hereunder, by notice duly given hereunder.
SECTION 4.5. Notwithstanding anything contained in this Mortgage to the
contrary, nothing herein shall waive the preferred status of this Mortgage and
if any provision herein shall be construed to waive such status, then such
provision shall to the extent so construed be void and of no effect.
IN WITNESS WHEREOF, the Owner has executed this Mortgage on the day, month
and year hereinbefore first written.
WITNESSES: GREAT RIVER CRUISE LINE, L.L.C.
By: The Delta Queen Steamboat Co.,
a Managing Member
/s/ JORDAN B. ALLEN
- ---------------------------------- ---------------------------------------
Name: Jordan B. Allen
Title: Executive Vice President
By: DQSB II, Inc., a Managing Member
/s/ JORDAN B. ALLEN
- ---------------------------------- ---------------------------------------
Name: Jordan B. Allen
Page 15
<PAGE> 17
Title: Executive Vice President
ACKNOWLEDGMENT
STATE OF ILLINOIS
COUNTY OF COOK
On this 25th day of February, 1999, before me, the undersigned Notary
Public, personally came and appeared JORDAN B. ALLEN, the duly authorized
Executive Vice President and representative of THE DELTA QUEEN STEAMBOAT CO. and
DQSB II, INC., which said corporations are the sole managing members of GREAT
RIVER CRUISE LINE, L.L.C. ("GREAT RIVER"), who declared under oath that he is
the duly authorized representative of GREAT RIVER and its aforesaid managing
members, and that he signed the foregoing Preferred Ship Mortgage with full
authorization under the articles of organization of GREAT RIVER and the board of
directors of each of the managing members; and that the foregoing Preferred Ship
Mortgage is the free and voluntary act and deed of GREAT RIVER and its managing
members, as well as said appearer in his capacity as the representative of GREAT
RIVER, for the uses, purposes and covenants therein expressed.
---------------------------------------
Notary Public
My Commission expires:
--------------.
[SEAL]
Page 16
<PAGE> 18
EXHIBIT "A"
FORM OF CREDIT AGREEMENT
(WITHOUT EXHIBITS OR SCHEDULES)
Page 17
<PAGE> 19
EXHIBIT "B"
FORM OF REVOLVING LOAN NOTES
Page 18
<PAGE> 1
10(ii)(a)(3)
FIRST AMENDMENT
This First Amendment (the "Amendment") is made and entered into as of
the 12th day of March, 1997, by and between Equity Office Properties, L.L.C. as
agent for beneficial owner ("Landlord") and Great Hawaiian Properties
Corporation, a Delaware corporation, d/b/a American Hawaii Cruises ("Tenant").
WITNESSETH
A. WHEREAS, Landlord and Tenant are parties to that certain lease dated
the 30th day of May, 1995 currently containing approximately 37,367 rentable
square feet of space on the second (2nd) floor of the building commonly known as
Two North Riverside Plaza, Chicago, Illinois 60606 (the "Building"), which lease
has not been previously amended or assigned (the "Lease"); and
B. WHEREAS, Tenant and Landlord mutually desire that the Lease be amended
on and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant agree as
follows:
I. AMENDMENT. Landlord and Tenant agree that the Lease shall be
amended in accordance with the following terms and conditions:
A. Commencement Dates
Notwithstanding anything to the contrary in Sections I.A.3.a, b, c or
in Section III.A. of the Lease, the Commencement Dates for the Premises are the
following:
1. The Premises A Commencement Date is bifurcated. It is July 1,
1994 as applicable to the 12,482 rentable square feet
colloquially referred to as the "Reservation Area." It is
September 9, 1994 as applicable to the 5,250 rentable square
feet colloquially referred to as the "MIS Area."
2. The Premises B Commencement Date is August 19, 1994.
3. The Premises C Commencement Date is June 1, 1995.
The Termination Date as to the entire Premises is December 31, 2004.
B. Base Rental
Exhibit B-1 is deleted from the Lease in its entirety, and Exhibit A
attached hereto and by this reference made a part hereof is substituted
therefor.
C. Base Rental Abatement. Landlord and Tenant acknowledge and agree that
Tenant's obligation to pay Base Rental in accordance with the provisions of
Exhibit A attached hereto shall be fully abated for the period beginning July 1,
1994 and ending May 15, 1998. The total amount of such Base Rental abated during
such period is $578,323,87. Such Base Rental Abatement shall be in full and
complete satisfaction of Landlord's obligation to abate Base Rental as described
in the fourth (4th), fifth (5th) and sixth (6th) sentences of Paragraph 1.A and
in Paragraph 1.B of Exhibit E to the Lease.
D. Right of First Refusal. Landlord and Tenant acknowledge and agree that
space shown as dotted on Exhibit A-1 of the Lease and specifically identified
thereon as Suite 212 and labeled "World Express Travel" is not Refusal Space for
the purposes of Paragraph 2 of Exhibit E to the Lease, and Tenant acknowledges
and agrees that Tenant has no Right of First Refusal as to said Suite 212.
Landlord and Tenant acknowledge and agree that Tenant has a Right of First
Refusal only on the dotted space shown on Exhibit A-1 of the Lease and
identified thereon as Suite 267 and labeled as "Cyborg Solution Center."
1
<PAGE> 2
E. Members Advantage Credit Union. Landlord acknowledges and agrees that
Tenant has completely satisfied its reimbursement obligations pursuant to
Paragraph 6 of Exhibit E of the Lease. Accordingly, the provisions of said
Paragraph 6 of Exhibit E of the Lease are deleted in their entirety and are
null, void and of no further force and effect.
F. Temporary Space and Signage. Landlord and Tenant acknowledge and agree
that Paragraphs 7 and 8 of Exhibit E to the Lease are deleted in their entirety
and are null, void and of no further force and effect.
G. License Agreement to Use Roof Space. Landlord and Tenant acknowledge
and agree that Exhibit G-2 is deleted from the Lease in its entirety and its
provisions are null, void and of no further force and effect. The license to use
the roof of the Building is hereby revoked, and Tenant agrees to eliminate as
soon as reasonably practical any roofdeck or roof penetrations, to repair any
damage caused by their installation or removal, and to restore the roof to the
condition in which it existed prior to the execution of the Lease. Any and all
such repair and removal work shall be performed at Tenant's sole cost and
expense and in accordance with Article X.B of the Lease.
H. Guaranty. Tenant acknowledges and agrees that, by oversight, the
Guaranty attached hereto as Exhibit B was not signed contemporaneously with the
Lease and that Landlord's willingness to enter into this Amendment is
conditioned upon the execution of the attached Exhibit B by Guarantor
simultaneous with Tenant's execution of this Amendment.
I. Entry by Landlord. Article XII of the Lease shall be amended by
deleting the parenthetical "(during the final 6 months of the Lease Term)" from
the first sentence of Article XII and substituting the following therefor:
"(during the final six months of the Lease Term; provided, however, with regard
to Premises C, Landlord shall have the right to enter Premises C to show
Premises C to prospective tenants throughout the Lease Term)".
J. Landlord's Termination Option. The following shall be added as a new
Paragraph 10 to Exhibit E to the Lease:
Landlord Termination Option. Landlord shall have the right from and
after the Effective Date at Landlord's cost and expense to market
Premises C for lease to third parties and should Landlord identify a
bona fide prospective tenant who evidences an interest in leasing
Premises C on terms Landlord would be willing to accept ("Third Party
Interest"), Landlord shall have the further right and option (the
"Premises C Termination Option") to be exercised on thirty (30) days'
prior notice to Tenant to terminate this Lease as to the space
measuring approximately 6,707 rentable square feet and identified as
Premises C in the Lease. Tenant agrees to vacate and surrender
possession of Premises C on and as of the effective date of Landlord's
termination just as if that were the scheduled Termination Date of the
Lease for Premises C; provided that Tenant, within five (5) days after
receipt of Landlord's notice of termination, shall have the right to
lease said Premises C or whatever portion thereof is covered by the
Third Party Interest on the same terms and conditions as in this Lease
in which case Landlord's notice of termination shall be null and void
and of no further force and effect. In the event of this Lease's being
terminated as to Premises C, Landlord shall prepare an amendment to the
Lease to reflect changes in the Premises, Rentable Area of the
Premises, Tenant's Pro Rata Share, and any other affected terms and
shall submit same to Tenant within a reasonable time following five (5)
days after Landlord's exercise of its Termination Option. Tenant agrees
to execute same within ten (10) days following receipt of the amendment
from Landlord. Tenant specifically acknowledges and agrees that should
Landlord exercise the Premises C Termination Option and Tenant does not
elect to continue to lease same on the terms of this Lease, Premises C
and the Rentable Area of Premises C shall no longer be subject to the
Lease, but Base Rental as reflected on Exhibit A to this Amendment
shall not be reduced so long as the Base Rental Abatement has not been
fully exhausted in accordance with the provisions of Paragraph C of
this Amendment.
II. EFFECTIVE DATE. This Amendment shall become effective as of,
on and after September 1, 1996 (the "Effective Date") and shall continue in
effect until otherwise amended by the parties in writing or until expiration or
sooner termination of the Lease.
2
<PAGE> 3
III. MISCELLANEOUS.
A. This Amendment sets forth the entire agreement between the
parties with respect to the matters set forth herein. There
have been no additional oral or written representations or
agreements.
B. Except as herein modified or amended, the provisions,
conditions and terms of the Lease shall remain unchanged and
in full force and effect.
C. In the case of any inconsistency between the provisions of
the Lease and this Amendment, the provisions of this Amendment
shall govern and control.
D. Submission of this Amendment by Landlord is not an offer to
enter into this Amendment but rather is a solicitation for
such an offer by Tenant. Landlord shall not be bound by this
Amendment until Landlord has executed and delivered the same
to Tenant.
E. The capitalized terms used in this Amendment shall have the
same definitions as set forth in the Lease to the extent that
such capitalized terms are defined therein and not redefined
in this Amendment.
F. This Amendment shall be of no force and effect unless and
until accepted by any guarantors of the Lease, who by signing
below shall agree that their guarantee shall apply to the
Lease as amended herein.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Amendment as of the day and year first above written.
WITNESSES; ATTESTATION LANDLORD: EQUITY OFFICE PROPERTIES,
L.L.C., as Agent for beneficial
owner
By:
---------------------------------------
Name: Michael Sheinkop
- -----------------------------
Name (print): Title: Senior Vice President-Asset Management
----------------
TENANT: GREAT HAWAIIAN PROPERTIES
CORPORATION, a Delaware
corporation d/b/a American Hawaii
Cruises
By:
- ------------------------------ ---------------------------------------
Name (print): Its:
----------------- ---------------------------------------
GUARANTOR:
- ------------------------------ GREAT HAWAIIAN CRUISE LINE, INC., a
Name (print): corporation
----------------- -----------------------
By:
---------------------------------------
Its:
---------------------------------------
3
<PAGE> 4
EXHIBIT A
SCHEDULE OF BASE RENTAL
This Exhibit is attached to and made a part of the First Amendment
dated , 1997 by and between Equity Office Properties, L.L.C., as agent
for Beneficial Owner ("Landlord") and Great Hawaiian Properties Corporation, a
Delaware corporation, d/b/a American Hawaii Cruises ("Tenant") for space in the
Building located at Two North Riverside.
A. Tenant shall pay Landlord the sum of One Million Eight Hundred Sixty
Five Thousand Five Hundred Twenty Nine and 88/100's Dollars ($1,865,529.88) as
Base Rental for the Lease Term in monthly installments as follows:
1. One (1) monthly installment of $4,160.67 payable on or before the
first day of July 1994 as applicable to the period beginning July 1,
1994, and ending July 31, 1994.
2. One (1) monthly installment of $5,967.81 payable on or before the
first day of August 1994 as applicable to the period beginning August
1, 1994, and ending August 31, 1994.
3. One (1) monthly installment of $9,753.33 payable on or before the
first day of September 1994 as applicable to the period beginning
September 1, 1994 and ending September 30, 1994.
4. Eight (8) equal monthly installments of $10,220.00 payable on or
before the first day of each month during the period beginning October
1, 1994, and ending May 31, 1995.
5. One (1) monthly installment of $12,455.67 payable on or before the
first day of June 1995 as applicable to the period beginning June 1,
1995 and ending June 30, 1995.
6. Twelve (12) equal monthly installments of $12,953.90 each payable on
or before the first day of each month during the period beginning July
1, 1995, and ending June 30, 1996.
7. Twelve (12) equal monthly installments of $13,472.06 each payable on
or before the first day of each month during the period beginning July
1, 1996, and ending June 30, 1997.
8. Twelve (12) equal monthly installments of $14,010.94 each payable on
or before the first day of each month during the period beginning July
1, 1997, and ending June 30, 1998.
9. Twelve (12) equal monthly installments of $14,571.38 each payable on
or before the first day of each month during the period beginning July
1, 1998, and ending June 30, 1999.
10. Twelve (12) equal monthly installments of $15,154.24 each payable
on or before the first day of each month during the period beginning
July 1, 1999, and ending June 30, 2000.
11. Twelve (12) equal monthly installments of $15,760.41 each payable
on or before the first day of each month during the period beginning
July 1, 2000, and ending June 30, 2001.
12. Twelve (12) equal monthly installments of $16,390.83 each payable
on or before the first day of each month during the period beginning
July 1, 2001, and ending June 30, 2002.
<PAGE> 5
13. Twelve (12) equal monthly installments of $17,046.46 each payable
on or before the first day of each month during the period beginning
July 1, 2002, and ending June 30, 2003.
14. Eighteen (18) equal monthly installments of $17,728.32 each payable
on or before the first day of each month during the period beginning
July 1, 2003, and ending December 31, 2004.
B. All such Base Rental shall be payable by Tenant in accordance with
the terms of Article V of the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as
of the date first written above.
WITNESSES; ATTESTATION LANDLORD: EQUITY OFFICE PROPERTIES,
L.L.C., as Agent for beneficial
owner
By:
---------------------------------------
Name: Michael Sheinkop
- -------------------------------
Title: Senior Vice President-Asset
- ------------------------------- Management
TENANT: GREAT HAWAIIAN PROPERTIES
CORPORATION, a Delaware
corporation, d/b/a American Hawaii
Cruises
By:
- ------------------------------- --------------------------------------
Its:
- ------------------------------- --------------------------------------
<PAGE> 6
EXHIBIT B
GUARANTY OF LEASE DATED MAY 30, 1995
BETWEEN EQUITY OFFICE PROPERTIES, L.L.C.
AS AGENT FOR BENEFICIAL OWNER ("LANDLORD")
AND GREAT HAWAIIAN PROPERTIES CORPORATION,
A DELAWARE CORPORATION, D/B/A AMERICAN HAWAII CRUISES ("TENANT")
FOR VALUE RECEIVED and in consideration for and as an inducement to
EQUITY OFFICE PROPERTIES, L.L.C., as Agent for Beneficial Owner ("Landlord") to
lease certain real property to GREAT HAWAIIAN PROPERTIES CORPORATION, A DELAWARE
CORPORATION, D/B/A AMERICAN HAWAII CRUISES as Tenant ("Tenant"), pursuant to a
lease (the "Lease") of even date herewith, the undersigned does hereby
unconditionally and irrevocably guarantee to Landlord the punctual payment of
all Rent, (as such term is defined in the Lease) payable by Tenant under the
Lease throughout the term of the Lease and any and all renewals and extensions
thereof in accordance with and subject to the provisions of the Lease, and the
full performance and observance of all other terms, covenants, conditions and
agreements therein provided to be performed and observed by Tenant under the
terms of the Lease, for which the undersigned shall be jointly and severally
liable with Tenant. If any default on the part of Tenant shall occur under the
Lease, the undersigned does hereby covenant and agree to pay to Landlord in each
and every instance such sum or sums of money and to perform each and every
covenant, condition and agreement under the Lease as Tenant is and shall become
liable for or obligated to pay or perform under the Lease, together with the
costs reasonably incurred by Landlord in connection therewith, including without
limitation reasonable attorneys' fees. Such payments of Rent and other sums
shall be made monthly or at such other intervals as the same shall or may become
payable under the Lease, including any accelerations thereof, all without
requiring any notice from Landlord (other than any notice required by the Lease)
of such non-payment or non performance, all of which the undersigned hereby
expressly waives.
The maintenance of any action or proceeding by Landlord to recover any
sum or sums that may be or become due under the Lease and to secure the
performance of any of the other terms, covenants and conditions of the Lease
shall not preclude Landlord from thereafter instituting and maintaining
subsequent actions or proceedings for any subsequent default or defaults of
Tenant under the Lease. The undersigned does hereby consent that without
affecting the liability of the undersigned under this Guaranty and without
notice to the undersigned, time may be given by Landlord to Tenant for payment
of Rent and such other sums and performance of said other terms, covenants and
conditions, or any of them, and such time extended and indulgence granted, from
time to time, or Tenant may be dispossessed or Landlord may avail itself of or
exercise any or all of the rights and remedies against Tenant provided by law or
by the Lease, and may proceed either against Tenant alone or jointly against
Tenant and the undersigned or against the undersigned alone without first
prosecuting or exhausting any remedy or claim against Tenant. The undersigned
does hereby further consent to any subsequent change, modification or amendment
of the Lease in any of its terms, covenants or conditions, or in the Rent
payable thereunder, or in the premises demised thereby, or in the term thereof,
and to any assignment or assignments of the Lease, and to any subletting or
sublettings of the premises demised by the Lease, and to any renewals or
extensions thereof, all of which may be made without notice to or consent of the
undersigned and without in any manner releasing or relieving the undersigned
from liability under this Guaranty.
The undersigned does hereby agree that the bankruptcy of Tenant shall
have no effect on the obligations of the undersigned hereunder. The undersigned
does hereby further agree that in respect of any payments made by the
undersigned hereunder, the undersigned shall not have any rights based on
suretyship, subrogation or otherwise to stand in the place of Landlord so as to
compete with Landlord as a creditor of Tenant, unless and until all claims of
Landlord under the Lease shall have been fully paid and satisfied.
<PAGE> 7
Neither this Guaranty nor any of the provisions hereof can be modified,
waived or terminated, except by a written instrument signed by Landlord. The
provisions of this Guaranty shall apply to, bind and inure to the benefit of the
undersigned and Landlord and their respective heirs, legal representatives,
successors and assigns. The undersigned, if there be more than one, shall be
jointly and severally liable hereunder, and for purposes of such several
liability the word "undersigned" wherever used herein shall be construed to
refer to each of the undersigned parties separately, all in the same manner and
with the same effect as if each of them had signed separate instruments, and
this Guaranty shall not be revoked or impaired as to any of such parties by the
death or another party or by revocation or release of any obligations hereunder
of any other party. This Guaranty shall be governed by and construed in
accordance with the internal laws of the state where the premises demised by the
Lease are located. For the purpose solely of litigating any dispute under this
Guaranty, the undersigned submits to the jurisdiction of the courts of said
state.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
the date of the Lease.
GUARANTOR:
ATTEST/WITNESS: GREAT HAWAIIAN CRUISE LINE, INC.,
a
--------------------------------
By:
- -------------------------------- --------------------------------
Name (print): Name:
------------------- --------------------------------
Title:
- -------------------------------- --------------------------------
Name (print):
-------------------
STATE OF )
---------------- ) SS
COUNTY OF )
----------------
BE IT REMEMBERED, that on the day of , 1995, before me, a
Notary Public in and for said County personally appeared , by
, its President, the GUARANTOR in the foregoing GUARANTY
who acknowledged that the signing thereof was the duly authorized act and deed
of said corporation and his free and voluntary act and deed as said officer for
the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal on the day and year first above written.
-----------------------------------
Notary Public
My Commission Expires:
- -----------------------
<PAGE> 1
10(ii)(a)(4)
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is entered
into as of the 1st day of January, 1998, between GREAT HAWAIIAN PROPERTIES
CORPORATION, d/b/a AMERICAN HAWAII CRUISES ("Assignor"), a Delaware corporation
and AMERICAN CLASSIC VOYAGES CO. ("Assignee"), a Delaware corporation having an
office at Two North Riverside Plaza, Suite 200, Chicago, Illinois 60606.
1. Lease. The "Lease" shall mean that certain Lease Agreement dated May 30,
1995, as amended by First Amendment dated March 12, 1997, by and between Equity
Office Properties, L.L.C., as agent for beneficial owner, as Landlord, and Great
Hawaiian Properties Corporation, d/b/a American Hawaii Cruises, as Tenant.
2. Assignment. For good and valuable consideration received by Assignor, the
receipt and sufficiency of which are hereby acknowledged, Assignor hereby
assigns to Assignee the entire right, title and interest of Assignor in and to
the Lease to the extent applicable to the period from and after the date hereof.
3. Assumption. Assignee hereby assumes, and agrees to be bound by and to
perform, all of the covenants, agreements and obligations of Assignor under the
Lease as applicable to the period from and after the date hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
the day and year first written above.
ASSIGNOR:
GREAT HAWAIIAN PROPERTIES CORPORATION,
d/b/a American Hawaii Cruises, a Delaware corporation
By: /s/ Jordan B. Allen
-----------------------------------------------
Title: Executive Vice President
ASSIGNEE:
AMERICAN CLASSIC VOYAGES CO., a Delaware corporation
By: /s/ Jordan B. Allen
-----------------------------------------------
Title: Executive Vice President
ACCEPTED:
EQUITY OFFICE PROPERTIES, L.L.C.,
as agent for beneficial owner
By:
-----------------------------------------------
Title:
<PAGE> 1
10.(ii)(a)(5)
SECOND AMENDMENT
This Second Amendment (the "Amendment") is made and entered into as of
the 10th day of August, 1998, by and between TWO NORTH RIVERSIDE PLAZA JOINT
VENTURE LIMITED PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP, SOLE BENEFICIARY
OF LASALLE NATIONAL TRUST, N.A., SUCCESSOR TRUSTEE UNDER TRUST AGREEMENT DATED
JUNE 26, 1969 AND KNOWN AS TRUST NO. 39712 ("Landlord") BY ITS AGENT, EQUITY
OFFICE PROPERTIES MANAGEMENT CORP., A DELAWARE CORPORATION and AMERICAN CLASSIC
VOYAGES CO., A DELAWARE CORPORATION ("Tenant").
WITNESSETH
A. WHEREAS, Landlord and GREAT HAWAIIAN PROPERTIES CORPORATION, a Delaware
corporation ("Original Tenant") are parties to that certain lease dated
the 30th day of May, 1995, for space currently containing approximately
37,367 rentable square feet of space (the "Original Premises") on the
second (2nd) floor of the building commonly known as Two North
Riverside Plaza and the address of which is Two North Riverside Plaza,
Chicago, Illinois 60606 (the "Building"), which lease has been
previously amended by instrument dated March 12, 1997 (collectively,
the "Lease"); and
B. WHEREAS, Effective as of January 1, 1998, Original Tenant assigned its
rights under the Lease to Tenant pursuant to the Assignment and
Assumption Agreement, a copy of which is attached hereto as Exhibit B,
which assignment did not require Landlord's consent pursuant to the
terms of the Lease; and
C. WHEREAS, Tenant desires to surrender a portion of the Premises to
Landlord containing approximately 16,732 rentable square feet on the
second (2nd) floor of the Building as shown on Exhibit A hereto (the
"Reduction Space") and that the Lease be appropriately amended, and
Landlord is willing to accept such surrender on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Landlord and Tenant
agree as follows:
I. REDUCTION. Effective as of May 31, 1998 (the "Reduction
Effective Date"), the Premises is decreased from 37,367
rentable square feet on the second (2nd) floor to 20,635
rentable square feet on the second (2nd) floor by the
elimination of the Reduction Space. As of the Reduction
Effective Date, the Reduction Space shall be deemed
surrendered by Tenant to Landlord, the Lease shall be deemed
terminated with respect to the Reduction Space, and the
"Premises", as defined in the Lease, shall be deemed to mean
the Original Premises, less the Reduction Space. Tenant shall
fully comply with all obligations under the Lease respecting
the Reduction Space through the Reduction Effective Date,
including those provisions relating to the condition of the
Reduction Space and removal of Tenant's Property therefrom
upon termination or expiration of the Lease.
II. MONTHLY BASE RENTAL. As of the Reduction Effective Date, the
schedule of monthly installments of Base Rental contained in
the Lease is deleted, and the following is substituted
therefor:
Tenant shall pay Landlord the sum of Seven Hundred Six
Thousand Seven Hundred Forty Eight and 75/100 Dollars
($706,748.75) as Base Rental for the balance of the Lease Term
in seventy nine (79) monthly installments as follows:
A. One (1) installment of Seven Thousand Seven Hundred
Thirty Eight and 13/100 Dollars ($7,738.13) ($4.50
per rentable square foot) payable on or before June
1, 1998 for the period beginning June 1, 1998, and
ending June 30, 1998.
B. Twelve (12) equal installments of Eight Thousand
Forty Seven and 65/100 Dollars ($8,047.65) ($4.68 per
rentable square foot) each payable on or before the
first day of each month during the period beginning
July 1, 1998, and ending June 30, 1999.
C. Twelve (12) equal installments of Eight Thousand
Three Hundred Seventy Four and 37/100 Dollars
($8,374.37) ($4.87 per rentable square foot) each
payable on or before the first day of each month
during the period beginning July 1, 1999, and ending
June 30, 2000.
D. Twelve (12) equal installments of Eight Thousand
Seven Hundred One and 09/100 Dollars ($8,701.09)
($5.06 per rentable square foot) each payable on or
before the first day of each month during the period
beginning July 1, 2000, and ending June 30, 2001.
E. Twelve (12) equal installments of Nine Thousand Forty
Five and 01/100 Dollars ($9,045.01) ($5.26 per
rentable square foot) each payable on or
<PAGE> 2
before the first day of each month during the period
beginning July 1, 2001, and ending June 30, 2002.
F. Twelve (12) equal installments of Nine Thousand Four
Hundred Six and 12/100 Dollars ($9,406.12) ($5.47 per
rentable square foot) each payable on or before the
first day of each month during the period beginning
July 1, 2002, and ending June 30, 2003.
G. Eighteen (18) equal installments of Nine Thousand
Seven Hundred Eighty Four and 43/100 Dollars
($9,784.43) ($5.69 per rentable square foot) each
payable on or before the first day of each month
during the period beginning July 1, 2003, and ending
December 31, 2004.
All such Base Rental shall be payable by Tenant in accordance
with the terms of Article V of the Lease.
III. ADDITIONAL CONSIDERATION. As additional consideration for this
Amendment, Landlord agrees to give Tenant an abatement in the
amount of Six Hundred Thousand and 00/100 Dollars
($600,000.00), which abatement shall be applied against Rent,
Base Rental and Tax Adjustments coming due under the Lease as
amended by this Agreement as follows: (a) against the full
amount of any Rent due Landlord as of the date hereof; then,
on a monthly basis, (b) against the full amount of monthly
Base Rental coming due under the Lease as amended by this
Agreement and (c) $4,692.98 first against Tenant's monthly
payment of the estimate of Tenant's Tax Adjustment and, with
respect to said $4,692.98 thereafter against any additional
rent due under the Lease. The abatement shall be applied
against the foregoing payments until it is exhausted. At no
time shall a cash payment be owed to Tenant with respect to
this abatement.
IV. TENANT'S PRO RATA SHARE. Notwithstanding the reduction of the
Premises, for the period commencing with the Reduction
Effective Date and ending on the Termination Date, Tenant's
Pro Rata Share for the purposes of calculating Tenant's Tax
Adjustment shall remain seven and two thousand eight hundred
forty nine ten thousandths percent (7.2849%). Such Tax
Adjustment shall be paid at the time, in the manner and
otherwise in accordance with the terms of the Lease, unless
otherwise specified herein.
V. REPRESENTATIONS. Each party represents to the other that it
has full power and authority to execute this Amendment. Tenant
represents that it has not made any assignment, sublease,
transfer, conveyance of the Lease or any interest therein or
in the Reduction Space other than subleases to EOP Operating
and Chicago Cares, which have been previously consented to by
Landlord and further represents that there is not and will not
hereafter be any claim, demand, obligation, liability, action
or cause of action by any other party respecting, relating to
or arising out of the Reduction Space. In addition, each party
represents to the other that it has no knowledge of any fact
or circumstance which would give rise to any claim, demand,
obligation, liability, action or cause of action arising out
of or in connection with the Lease.
VI. OTHER PERTINENT PROVISIONS. Landlord and Tenant agree that,
effective as of the date hereof (unless different effective
date(s) is/are specifically referenced in this Section), the
Lease shall be amended in the following additional respects:
A. Any Right of First Refusal in the Lease is hereby
deemed null and void.
B. Nothing herein shall be deemed to waive any rights
Landlord has to require Tenant to remove Required
Removables at the end of the Lease Term including,
without limitation, the "wave wall".
C. Tenant hereby grants a license to Landlord and any
occupant of the Reduction Space to access the
corridor leased by Tenant.
D. Any amount owed to Tenant pursuant to the provisions
of Article XX of the Lease (as the unamortized value
of the Initial Alterations) shall be reduced by an
amount equal to that part of the additional
consideration set forth in Article III of this
Amendment which has been credited against Rent
payments due (as set forth in said Article III)
through the date payment under Article XX is due.
2
<PAGE> 3
E. Tenant shall be entitled to a Base Rental abatement
(the "Chicago Cares Abatement") equal to Eleven
Thousand One Hundred Fifty Six and 25/100 Dollars
($11,156.25) (4,250 X $4.50 X 7/12). The Chicago
Cares Abatement shall be applied against the next
Base Rental due under the Lease.
VII. MISCELLANEOUS.
A. This Amendment sets forth the entire agreement
between the parties with respect to the matters set
forth herein. There have been no additional oral or
written representations or agreements. Under no
circumstances shall Tenant be entitled to any Rent
abatement, improvement allowance, leasehold
improvements, or other work to the Premises, or any
similar economic incentives that may have been
provided Tenant in connection with entering into the
Lease, unless specifically set forth in this
Amendment. This Amendment shall not be relied upon by
any other party, individual, corporation, partnership
or entity as a basis for reducing its lease
obligations with Landlord. Tenant agrees that it
shall not disclose any matters set forth in this
Amendment or disseminate or distribute any
information concerning the terms, details or
conditions hereof to any person, firm or entity
without obtaining the express written consent of
Landlord.
B. Except as herein modified or amended, the provisions,
conditions and terms of the Lease shall remain
unchanged and in full force and effect.
C. In the case of any inconsistency between the
provisions of the Lease and this Amendment, the
provisions of this Amendment shall govern and
control.
D. Submission of this Amendment by Landlord is not an
offer to enter into this Amendment but rather is a
solicitation for such an offer by Tenant. Landlord
shall not be bound by this Amendment until Landlord
has executed and delivered the same to Tenant.
E. The capitalized terms used in this Amendment shall
have the same definitions as set forth in the Lease
to the extent that such capitalized terms are defined
therein and not redefined in this Amendment.
F. Tenant agrees to indemnify and hold Landlord, its
members, principals, beneficiaries, partners,
officers, directors, employees, mortgagee(s) and
agents, and the respective principals and members of
any such agents (collectively, the "Landlord Related
Parties") harmless from all claims of any brokers
claiming to have represented Tenant in connection
with this Amendment. Landlord hereby represents to
Tenant that Landlord has dealt with no broker in
connection with this Amendment. Landlord agrees to
indemnify and hold Tenant, its members, principals,
beneficiaries, partners, officers, directors,
employees, and agents, and the respective principals
and members of any such agents (collectively, the
"Tenant Related Parties") harmless from all claims of
any brokers claiming to have represented Landlord in
connection with this Amendment.
G. This Amendment shall be of no force and effect unless
and until accepted by any guarantors of the Lease,
who by signing below shall agree that their guarantee
shall apply to the Lease as amended herein, unless
such requirement is waived by Landlord in writing.
3
<PAGE> 4
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Amendment as of the day and year first above written.
WITNESSES; ATTESTATION LANDLORD: TWO NORTH RIVERSIDE PLAZA JOINT VENTURE
LIMITED PARTNERSHIP, AN ILLINOIS LIMITED
/s/ Diane Pantaleo PARTNERSHIP, SOLE BENEFICIARY OF LASALLE
NATIONAL TRUST, N.A.,N.A., SUCCESSOR
Name (print): Diane Pantaleo TRUSTEE UNDER TRUST AGREEMENT DATED JUNE
------------------- 26, 1969 AND KNOW AS TRUST NO. 39712
- --------------------------------- By:Equity Office Properties Management
Corp., a Delaware corporation, as agent
Name (print):
--------------------- By: /s/ Christopher D. Wood
---------------------------------
Name: Christopher D. Wood
------------------------------
Title: Vice President - Leasing
------------------------------
TENANT: AMERICAN CLASSIC VOYAGES CO.,
A DELAWARE CORPORATION
/s/ Nancy A. Warchol By: /s/ Jordan B. Allen
- ------------------------- -------------------------------------
Name: Jordan B. Allen
/s/ Shahem Zenni ------------------------------------
- ------------------------- Title: Executive Vice President
-----------------------------------
GUARANTORS: GREAT HAWAIIAN CRUISE LINE, INC.
Nancy Warchol /s/ Jordan B. Allen
- ------------------------- -----------------------------------------
Shahem Zenni Executive Vice President
- ------------------------- -----------------------------------------
4
<PAGE> 5
EXHIBIT A
Floor Plan
Showing Reduction Space
5
<PAGE> 6
EXHIBIT B
Assignment and Assumption of Lease
6
<PAGE> 1
10.(ii)(a)(6)
AMFAC CENTER
OFFICE LEASE
THIS INDENTURE OF LEASE made this 16th day of October, 1998, by and between
MFD PARTNERS, a Hawaii General Partnership, hereinafter called "Landlord", and
AMERICAN HAWAIIAN PROPERTIES CORPORATION
hereinafter called "Tenant;"
W I T N E S S E T H
Landlord, in consideration of the rents hereinafter reserved and subject to the
provisions, covenants and conditions hereinafter set forth, does hereby lease to
Tenant, and Tenant does hereby lease from Landlord, those certain premises
hereinafter described (the "Premises"), situated within the building identified
in Paragraph I(A) below (the "Building"), which Building is a part of the
office, parking and commercial complex commonly known as Amfac Center (the
"Property") located on that certain property bounded by Fort, Queen and Bishop
Streets and Nimitz Highway, Honolulu, Hawaii (the "Land"), together with the
nonexclusive right of access to the Premises over and across the common areas
within the property.
I. SPECIFIC PROVISIONS
The following subparagraphs constitute certain specific provisions of
this lease which are or may be referred to elsewhere herein:
<TABLE>
<CAPTION>
(A). Building and floor(s) on which Premises are located: Amfac Building,
------ Eighth
Floor(s)
---------
<S> <C> <C>
(B). Approximate area of Premises:
(1) Usable area 11,357 sq. ft.
------
(2) Allocable share of common area -0- sq. ft.
----
(3) Rentable area 11,357 sq. ft.
------
(4) Rentable area as percentage of the
total rentable area of the Property 2.401%
-----
</TABLE>
(C). Tenant's Premises are designated as Suite 800 and shown
outlined in red on the floor plan(s) attached as Exhibit A.
(D). The term of this Lease shall be ten (10) years, unless sooner
terminated as herein provided, and shall commence on the first
day of the month immediately following the completion of
Tenant's initial buildout of the Premises (the "Commencement
Date"); provided, however, that the Commencement Date shall
not be earlier than February 1, 1999, nor shall it occur later
than April 1, 1999.
(E). Monthly Rent: the sum of
(1) Base or minimum rent:
<TABLE>
<CAPTION>
AMOUNT FOR THE PERIOD
<S> <C>
$ 0.00 from and including Month 1 through Month 12
$11,357.00 ($1.00/RSF) from and including Month 13 through Month 60
$14,764.10 ($1.30/RSF) from and including Month 61 through Month 120
</TABLE>
(2) Additional rent in the amount of $11,243.43,
representing Tenant's share of estimated operating
expenses for the calendar year 1998, subject to
adjustment as set forth in Paragraph 4 below; and
(3) Hawaii State General Excise Tax (as provided for and
subject to adjustment under Paragraph 3.2.).
(F). Amount of Security Deposit: None.
-1-
<PAGE> 2
(G). Uses to be made of Premises: General office.
(H). Tenant's address for notice shall be as follows:
700 Bishop Street, Suite 800
Honolulu, Hawaii 96813
Attn: Townsend Carman, Senior V.P.
with copies of all notices delivered
to:
American Classic Voyages Co.
2 North Riverside Plaza, Suite 200
Chicago, Il. 60606
Attn: Jordan B. Allen, Exec. V.P. and General Counsel
(I). Landlord's address for notice shall be as follows:
MFD 700 BISHOP, INC.
745 Fort Street, Lobby
Honolulu, Hawaii 96813
(J). Parking: During the lease term, Landlord shall make available
to the employees of Tenant, two (2) reserved level, twenty
(20) unreserved level, and an additional ten (10) month to
month parking space(s) for automobile(s) in the Property's
parking facility. The parking spaces shall not be assigned,
subleased or otherwise transferred separate from the Premises
and this lease. The fees charged for Tenant's employees use of
the parking space shall be established by Landlord from time
to time in accordance with the prevailing market rate;
provided, however, that the monthly amount charged for the
spaces shall not be less than the initially established
monthly fees which are $175.00 per space for reserved level
and $145.00 per space for unreserved level parking, plus the
General Excise Tax payable in accordance with Paragraph 3.2.
below (See Exhibit E, Special Conditions, No. 9). If Landlord
becomes unable to provide the number of parking spaces agreed
upon above by reason of government regulation or other causes
beyond Landlord's reasonable control, then such inability
shall not constitute a breach of this lease on the part of the
Landlord.
(K). EXHIBITS: The following drawings, specifications and other
items are attached hereto as exhibits and made a part of this
lease.
Exhibit A: Floor Plan of Premises.
Exhibit B: General Conditions of Lease.
Exhibit C: Rules and Regulations.
Exhibit D: Specifications for Tenant Improvements.
Exhibit E: Special Conditions (if any).
Exhibit F: Cleaning Schedule
Exhibit G: Guaranty Agreement
-2-
<PAGE> 3
IN WITNESS WHEREOF, Landlord and Tenant have executed these presents as of the
day and year first above written.
MFD PARTNERS, a Hawaii general partnership
MFD 700 BISHOP, INC., its Managing Agent
By /s/ Lawrence Chasy
----------------------------------------
Its Senior Vice President and CFO
Landlord
AMERICAN HAWAIIAN PROPERTIES CORPORATION
By /s/ Townsend Carman
----------------------------------------
TOWNSEND CARMAN
Its Senior Vice President
Tenant
-3-
<PAGE> 4
EXHIBIT B
GENERAL CONDITIONS OF THE LEASE
1. QUIET ENJOYMENT. Landlord hereby covenants with Tenant that upon
payment by Tenant of the rents and upon observance and performance of the
covenants and conditions by Tenant, Tenant shall peaceably hold and enjoy the
Premises for the term demised without hindrance or interruption by Landlord or
any other person or persons lawfully or equitably claiming through Landlord,
except as expressly provided in this Lease.
2. SERVICES PROVIDED BY LANDLORD AS PART OF OPERATING EXPENSES. If Tenant
shall not be in default, Landlord agrees to furnish, in reasonable quantities,
unheated water to public restrooms, electric current for lighting and normal
office use only, automatic elevator service, common restroom facilities, air
conditioning at such times as specified in the Rules and Regulations (Exhibit
C), reasonable janitorial services (as specified in Exhibit F) on the basis of
Tenant's 5-day workweek or Tuesday - Saturday (exclusive of holidays) or such
other schedule as Landlord may from time to time determine to be appropriate, as
provided in the Rules and Regulations, window washing with reasonable frequency,
and reasonable rubbish and trash removal service. The air conditioning system
shall maintain the temperature at 74 degrees FDB +/- 2 degrees FDB during the
summer, and 72 degrees FDB +/- 2 degrees FDB during the winter throughout the
demised Premises, unless otherwise prohibited by local codes or ordinances.
Landlord shall not be liable for any damage or injuries caused or resulting from
the stoppage or interruption of any of the services mentioned in this paragraph
caused by maintenance, labor disturbances or labor disputes, accident, repairs,
wars, riots or other causes beyond the Landlord's control, nor shall any such
failure relieve tenant from the obligation to pay the full amount of rent or
constitute a constructive or other eviction of Tenant.
3. RENT.
3.1. RENT PAYMENT. Tenant shall pay the Monthly Rent to Landlord or
Landlord's designated agent at the office of Landlord, the office of Landlord's
agent, or such other place designated by Landlord, on the first day of each
calendar month during the term of this Lease ("Due Date"), and, except as may
otherwise be provided herein, without any demand, notice, set-off, offset,
counterclaim or deduction whatsoever. If the rental period commences on a day
other than the first day of a calendar month, then the rent for the first
fractional month shall be computed on a daily basis for the period from the date
of commencement to the end of such calendar month. The daily basis shall be
calculated by dividing the monthly rent by thirty (30) and the amount being
multiplied by the number of days remaining in the fractional month. If a
fractional month shall occur upon the termination of this Lease, then the rent
for that period shall be computed using the foregoing formula.
3.2. EXCISE AND OTHER TAXES. Tenant shall pay to Landlord as additional
rent, together with each payment of rent or any other payment which is subject
to the State of Hawaii general excise tax on gross income, as the same may be
amended, an amount which, when added to the rent or other payment shall yield to
Landlord, after deduction of all the taxes payable by Landlord with respect to
all the payments, a net amount equal to that which Landlord would have realized
from the payments had no taxes been imposed. This paragraph shall be applicable
to all other similar taxes imposed on Landlord on rent or other payments in the
nature of a gross receipts tax, sales tax, privilege tax or the like (excluding
federal or state net income taxes), whether imposed by the United State of
America, or the State of Hawaii, the City and County of Honolulu, or any other
duly authorized taxing body.
3.3. ADDITIONAL PAYMENTS.
(1) Tenant shall also pay as additional rent those payments
required by the provisions of Paragraph I.(J), and Paragraphs 4, 5, 6, 7, 8, 9,
10, 11, 12 and 18 below and any other payments which may now or hereafter be
imposed.
(2) Tenant shall pay any additional payments required as provided
above no later than on the first day of each calendar month following the month
of the billing or ten (10) days after the billing date, whichever is later.
3.4. RENTAL DETERMINATION. If the base rent for the entire lease term
has not been fixed at the time of execution of this Lease, then the base rent
for each successive rental period following the last period for which base rent
was fixed, and for any subsequent period, shall be determined by mutual
agreement. If the Landlord and Tenant are unable to agree on the base rent for
each period at least three (3) months prior to the date of commencement, the
base rent shall be the fair market rental value of the Premises (at least
commensurate with base rents typical of similar space in other first class
office buildings in comparable locations), including amenities offered, but
exclusive of any fixtures, equipment, alterations, additions or improvements
installed or made by Tenant, or rent abatement, tenant improvement allowances or
other incentives provided to new tenants, as determined by a real estate
appraiser agreed upon by Landlord and Tenant. In case of failure to agree on the
appraiser at least sixty (60) days prior to the commencement of the period, the
determination of the monthly rent shall be made by three impartial real
-4-
<PAGE> 5
estate appraisers. Either party may give to the other written notice to have a
determination of such fair market rental value and indicate the name of one of
the appraisers. The other party, within ten (10) days after receipt of the
notice, shall name another appraiser and give notice to the party who gave the
initial notice. In case of failure of the second to do so, the party who has
named an appraiser shall have the right to apply to any judge of the First
Circuit Court of the State of Hawaii to appoint an appraiser. The two appraisers
thus appointed (in either manner) shall select and appoint a third appraiser,
and give notice to Landlord and Tenant. If the two appraisers so appointed
shall, within ten (10) days after the naming of the second appraiser, fail to
appoint the third appraiser, either party may have the appraiser selected and
appointed by any judge of the First Circuit Court. The three appraisers so
appointed shall proceed to determine the fair market rental value under the
guidelines stated above. The decision of any two appraisers shall be final and
binding upon both parties for the particular rental period then under
consideration, unless the decision shall be vacated, modified or corrected, as
provided in Chapter 658, Hawaii Revised Statutes, as the same may be amended.
Notwithstanding the fair market rental value, the base rent for the period shall
not be less than the base rent being paid for the immediately preceding period.
Tenant shall pay for all costs of any determination, including without
limitation, appraiser's, witness' and reasonable attorney's fees of Landlord. If
the fixing of such base rent is under arbitration, Tenant, pending its
determination, shall continue to pay the same base rent which Tenant had been
paying during the immediately preceding rental period and shall pay the
deficiency, if any, within ten (10) days from the date other new base rent is
determined. The rental redetermination shall be the only issue resolved by
arbitration. All other disputes involving this Lease shall be resolved through
litigation in a court of law.
3.5. COMPONENTS OF MONTHLY RENT. The monthly rent provided in Paragraph
I.(E) above is (a) base rent as set forth in Paragraph I.(E)(1), plus (b)
Tenant's share of the estimated operating expenses (computed on the basis of
known or estimated operating expenses for each calendar year), plus (c) the
Hawaii State General Excise Tax and other taxes, if any, as set forth in
Paragraph 3.2. above. The amount of Tenant's share of the estimated operating
expenses for the calendar year in which the term commences shall be as stated in
Paragraph I.(E)(2) above.
4. OPERATING EXPENSES.
4.1. ESTIMATED OPERATING EXPENSES.
(1) The monthly rent payable to Landlord shall be adjusted
annually as of the commencement of each calendar year (the "current year") (a)
by increasing the additional rent for the current year over the additional rent
for the preceding year by the amount of Tenant's share of any increase in the
estimated operating expenses for the current year, or (b) by reducing (except as
provided in Paragraph 4.3. below) the additional rent for the current year by
the amount of Tenant's share of any reduction in the operating expenses from the
preceding year. Landlord shall notify Tenant of Tenant's share of the estimated
operating expenses for the year.
(2) The additional rent during the current year shall be adjusted,
effective as of the commencement of the current year, and shall be payable in
equal monthly installments. Tenant's share of the operating expenses shall be in
the same percentage as the percentage set forth in Paragraph I.(B)(4) above.
4.2. ACTUAL OPERATING EXPENSES.
(1) After the end of each calendar year (including the years in
which the term commences and terminates), Landlord shall compute the actual
operating expenses for such calendar year. Landlord shall notify Tenant of any
correction from the estimated operating expenses as soon as reasonably possible
after the end of each year.
(2) Within thirty (30) days after receiving notice that the actual
expenses were greater than the estimated expenses, Tenant shall pay to Landlord
an amount equal to Tenant's share of the excess of the actual operating expense
over the estimated operating expenses upon which Tenant's rent had been based
during the preceding year.
(3) If the actual operating expenses for the calendar year were
less than the estimated operating expenses, Tenant shall be entitled to a credit
against future rent payments, or a refund in the case of the last year of the
term, in an amount equal to Tenant's share of the difference between the actual
operating expenses and the estimated operating expenses.
4.3. OPERATING EXPENSES DEFINED. Operating expenses shall be determined
in accordance with acceptable principles of sound accounting practice as applied
to the operating and maintenance of first class office buildings. The term
"operating expenses" shall mean all of the expenses which shall be incurred or
paid on account of the operation and maintenance of the Property, including,
without limitation, expenses of operation of the parking facility except as
provided below.
(1) Operating expenses shall include, without limiting the
generality of the foregoing, the costs and expenses (including capital costs)
of: utilities, automated control systems, security control, elevators, air
conditioning, sprinkler systems, trash disposal, supplies, repair and
maintenance (including without limitation, waterproofing and repair and
maintenance of roofs, exterior walls and utility and other installations and
services), the cost of management contracts or the cost of equivalent management
services, wages and salaries of employees used in management, maintenance and
general operations, (as distinguished from the cost of management contracts or
equivalent management services), and payroll
-5-
<PAGE> 6
taxes, insurance, employee benefits and similar other charges with respect
thereto, depreciation or rental of equipment used in operations and maintenance,
audit and bookkeeping expenses, legal fees and expenses and financing expenses
relating to operation and management, cost of insurance (including but not
limited to, fire and extended coverage, vandalism and malicious mischief,
difference in conditions coverage, public liability and property damage and
workers' compensation insurance customarily carried by owners of first class
office buildings), property taxes and other taxes, charges and assessments
imposed by governmental authority and paid by Landlord with respect to the
Property and the Land, including without limitation, taxes upon or measured by
Landlord's gross income to the extent that such taxes have not already been
recovered under Paragraph 3 of this or similar leases (but excluding taxes upon
or measured by Landlord's net income), and the cost and expenses of any contest
by appropriate legal proceedings of the amount or validity of any taxes, charges
or other assessments, and the cost of repairs, alterations, additions and
improvements required by laws, codes, regulations or ordinances now or hereafter
in effect or made by Landlord to reduce energy requirements. Real property tax
expense shall be the full amount of real property taxes applicable to the
Property and the Land prior to any exemptions which may be granted due to the
occupancy of space within the Property by any tenants or other occupants which
may be entitled to receive real property tax exemptions.
(2) Operating expenses shall not include capital costs or its
depreciation/amortization (except as above mentioned), or direct wages and
benefits of operating personnel employed wholly within the parking facility,
special supplies and materials used exclusively in connection with the
production of revenue from the parking facility or management fees paid on
account of the operation of the parking facility, and cost of tenant alterations
or improvements; depreciation and interest and principal payments on mortgages,
and any other debt or refinancing costs, if any; real estate broker leasing
commissions or compensation; marketing costs; attorneys' fees incurred in lease
negotiations or lease disputes; costs of Landlord remedying violations of laws
or leases; ground rent and related costs; management fees in excess of 3% of
gross receipts; interest or penalties resulting from late payments by Landlord;
costs reimbursable from tenants, insurance companies, governmental authorities
or other third parties; special services paid for by other tenants; and costs
associated with off-site personal and overhead. Further, operating expenses
shall not include taxes on Landlord's net income, federal excess profit taxes,
franchise, transfer, capital stock, or gift, estate or inheritance taxes of
Landlord.
4.4. CALCULATION OF EXPENSES. For the purpose of determining increase
or decrease in rent payable by Tenant under this Paragraph 4, the calculation
and adjustment shall be based on a full calendar year. Any additional rent
computed as herein set forth shall be deemed to have accrued uniformly during
the calendar year. The additional rent payment under the provisions of this
Paragraph 4 for the year in which this Lease terminates shall be prorated, based
on the actual expenses for such year, through the termination of this Lease. Any
additional rent shall be due or any refund of overpayment shall be made thirty
(30) days after notification to Tenant of any adjustment as provided in
Paragraphs 4.1 to 4.3. If any part of the Property is not fully occupied,
serviced and used during any calendar year, for the purpose of calculations
under this Paragraph 4, the operating expenses, both estimated and actual for
such year, shall be adjusted by adding amounts and items of operating expenses
which would normally have been incurred if the Property had been fully occupied,
serviced and used during the entire year, as estimated by Landlord.
4.5. INDIVIDUAL TENANT EXPENSES. If any expense above normal operating
expenses is incurred or paid by Landlord specifically for the benefit of a
particular tenant, such expense shall be charged directly against the particular
tenant and shall not be included in operating expenses for the purpose of this
Paragraph 4. There shall be deducted from the operating expenses for any period
all amounts paid to Landlord by any particular tenant, including Tenant, on
account of the cost of repairs or extra services for which the particular tenant
is directly responsible that have been included in the operating expenses for
the period.
4.6. AREAS DEFINED.
(1) The term "rentable area" for an entire floor shall mean the
area computed by measuring the inside finish of permanent outer building walls
or to the glass line where the permanent outer building walls have glass
installed and shall exclude any major vertical penetrations of the floor. Major
vertical penetrations shall include stairs, elevator shafts, flues, pipe shafts,
vertical ducts and their enclosing walls, which serve more than one floor of the
building, but shall not include stairs, dumbwaiters, lifts, and the like,
exclusively serving one tenant occupying offices on more than one floor.
(2) The "usable area" of any premises on a multiple tenancy floor
shall be computed by measuring to the finished surface of the premises side of
corridor and other permanent walls, to the center of partitions that separate
the premises from adjoining usable areas, and to the inside finished surface of
the permanent outer building walls or to the glass line where the permanent
outer building walls have glass installed. In determining usable area, no
deductions shall be made for columns and projections necessary to the building.
(3) The "rentable area" of any premises on a single tenancy floor
or the ground floor shall be the same as the usable area of such premises.
(4) Except for premises on the ground floor, if Tenant's premises
is located on a multiple tenancy floor, the percentage set forth in Paragraph I.
(B)(4) above shall be the percentage applicable to the Premises after conversion
of the usable area of the Premises to rentable area by adding to
-6-
<PAGE> 7
the usable floor area set forth in Paragraph I. (B) (1) an appropriate allocable
share of the common areas on the floor.
(5) The rentable area is subject to adjustment from time to time
to correct any error in measurement or if changes are made to the Premises, and
the percentage applicable to the Premises shall be adjusted accordingly.
(6) The rentable area of the basement health club, for calculating
of the total rentable area, shall be assumed to be 5,000 square feet.
Accordingly, as of the date of execution of this Lease, Landlord and Tenant
agree that the total rentable area for the purposes of calculating Tenant's
percentage in Paragraph I.(B)(4) is 473,000 square feet. The percentage as
shown in Paragraph I.(B)(4) is as determined as of the date of this Lease.
(7) Landlord reserves the right, from time to time, to reconstruct
or reconfigure portions of the Property.
4.7. EXPENSE REPORT. Operating expenses shall be audited annually by
Landlord's certified public accountant. The audited statement shall be available
for inspection by Tenant during normal business hours. Tenant and/or its agents
may, upon reasonable notice, inspect the books and records of Landlord
pertaining to operating expenses, including the invoices and other accounting
data on which operating expenses were billed, subject to reasonable restrictions
as to time and manner. If such examination of Landlord's records by Tenant
and/or its agents discloses any charge which is not allowed by the terms of this
Lease, Landlord shall reimburse Tenant within thirty (30) days of Tenant's
request for any amount not permitted to be charged; and if such amount is in
excess of two percent (2%) of Tenant's actual share or operating expenses,
Landlord shall reimburse Tenant for the reasonable costs of such examination or
audit. In the event Tenant disputes any amount of such charges owed pursuant to
this Lease, Tenant shall have the right to pay such amount "under protest"
without waiver of any right or remedy hereunder.
5. SECURITY DEPOSIT. [Intentionally Omitted]
6. INTEREST AND COLLECTION COSTS. Every installment of rent and every
other payment due from Tenant to Landlord not received by Landlord by 4:00 p.m.
on the 5th day after notice from Landlord that the same has not been received
and is due shall bear interest at one percent (1%) per month or at the maximum
rate allowable by law, if one percent (1%) per month exceeds the maximum rate
allowable by law, from the Due Date, as defined in Paragraph 3.1, to and
including the date of payment. "Interest" as used in this Lease shall be as
defined herein. It is also agreed that collection of any past due amount
represents a cost to Landlord even where no collection agent or attorney is
employed, and, accordingly, it is agreed that Tenant will pay Landlord on demand
not only Landlord's out-of-pocket costs of collection with respect to any past
due sum, including the reasonable fees of collection agents and attorneys, but
also a sum to reimburse Landlord for its other costs in an amount equal to the
higher of (a) One Cent of every Dollar ($1.00) past due, or (b) Five Dollars
($5.00) for each billing rendered by Landlord to Tenant for a past due amount
for the first three (3) times that Tenant fails to make payment within the
specified time period, and (a) Five Cents of every Dollar ($1.00) past due, or
(b) Five Dollars ($5.00) for each billing rendered by Landlord to Tenant for a
past due amount for each time thereafter. Tenant's obligation to pay collection
costs and interests on amounts due Landlord in accordance with the terms of this
Lease shall continue subsequent to termination of this Lease and shall cease
only upon payment of all amounts and accrued interest in full.
7. ATTORNEY'S FEES. If Landlord and Tenant litigate any provision of this
Lease or the subject matter of this Lease, the unsuccessful litigant will pay to
the successful litigant all costs and expenses, including reasonable attorneys'
fees and court costs, incurred by the successful litigant. If litigation or
legal expense is incurred by Landlord or Tenant in connection with any
litigation commenced by or against the other (other than condemnation
proceedings) in which Landlord or Tenant shall without fault be made a party,
the other party will be entitled to recover from such party all of its costs and
expenses so incurred, including reasonable attorneys' fees. If Landlord or
Tenant is required to use the services of an attorney or collection agent to
collect amounts due under this Lease, the one party agrees to reimburse the
other reasonable attorneys' fees and costs incurred by such party, whether or
not such collection results in suit being filed.
8. EXPENDITURES BY LANDLORD. Whenever Tenant shall be obligated to make
any payment or expenditure or to do any act or to incur any liability, and
Tenant does not perform or pay as required within five (5) calendar days after
written notice from Landlord, Landlord shall be entitled, but shall not be
obligated, to perform or pay at the cost and for the account of Tenant. In such
event the cost, together with interest, shall be deemed additional rent and
shall be added to the next installment of rent becoming due from Tenant or shall
be paid by Tenant upon demand.
9. CONVEYANCE TAXES AND TAXES ON TENANT'S PROPERTY. Tenant shall pay when
due, as additional rent, any conveyance tax imposed by the State of Hawaii by
reason of the execution of this Lease or any extension, amendment or renewal.
Tenant shall, at Landlord's request, timely execute such
-7-
<PAGE> 8
affidavits and other documentation as may be required. Tenant shall also pay
before the same become delinquent all taxes assessed during the term of this
Lease against any leasehold interest, leasehold improvements, or personal
property of any kind, owned by or placed in, the Premises by or for the Tenant.
10. REPAIRS AND MAINTENANCE.
10.1. LANDLORD OBLIGATION. Landlord shall be under no obligation to
make any repairs, alterations, or improvements to the Premises or any part
thereof at any time except as in this Lease expressly provided. Landlord shall
be responsible for maintaining and keeping in good service, condition and repair
consistent with a first-class office building all common areas at the Property,
including but not limited to the roof, exterior portions of the Building, the
landscaped areas, retention/detention facilities, lighting fixtures and
equipment, loading areas, parking lots and sidewalks, all interior portions of
the Building which are not part of the Premises or any other tenant's demised
premises and all structural supports and elements of the Premises and the
Building. Landlord shall provide trash storage and removal services as is
customary for similar buildings in the metropolitan Honolulu area, including but
not limited to emptying the compactor on a regular basis and keeping the trash
area in a sightly manner. Landlord agrees, at Landlord's expense, subject to
Paragraph 4, to perform all maintenance and to make all necessary repairs,
replacements and substitutions, to keep the Building and the Premises and
fixtures thereon in good condition and repair, except for such repairs and
maintenance to the Premises as are required of Tenant pursuant to the terms and
provisions of this Lease.
10.2. TENANT OBLIGATION TO REPAIR. Tenant shall, at its sole cost,
maintain the Premises in substantially similar condition and repair as of the
commencement of this Lease and, if necessary, improve the Premises to be in
compliance with all applicable laws and regulations, including but not limited
to compliance with the American Disabilities Act. Tenant shall, at its sole
cost, repair any damage to the roof or exterior walls of the Premises resulting
from acts or omissions of Tenant, Tenant's agents, employees or invitees. All
repairs required shall be made with the least inconvenience possible under the
circumstances.
10.3. LANDLORD'S OPTION TO REPAIR. If Tenant fails to repair the
Premises as required to the reasonable satisfaction of Landlord after the time
limit stated in the written demand, Landlord may make such repairs without
liability to Tenant for any loss or damage to Tenant's stock or other property
or to Tenant's business. Tenant shall pay Landlord's costs in making such
repairs, together with interest, as additional rent.
10.4. STRUCTURAL AND INTERIOR REPAIRS. If any repairs appear necessary
to the structural portions of the Premises, then Tenant shall immediately notify
Landlord in writing stating the necessity for and the nature of the repairs, and
Landlord, with reasonable promptness, shall determine the necessity of the
repairs. Landlord shall not be required to make repairs to the interior surfaces
of the Premises it being the intention of this Lease that any such damage shall
be insured against by Tenant on behalf of Tenant with Landlord and the
Management Company named as an additional insureds. Landlord shall not be
responsible for damage or destruction of Tenant's personal property, business
records or equipment, or for damage to or interruption of Tenant's business, all
of which are the responsibility of the Tenant under the Tenant's required
insurance coverages.
11. CONSTRUCTION, ADDITIONS AND ALTERATIONS.
11.1. ACCEPTANCE BY TENANT. Except as may be specially provided by this
Lease or by an exhibit attached to this Lease, Landlord has rented and Tenant
hereby approves and accepts the Premises, the common areas, and the utility
pipes, structural walls and supports and other installations and services
available to and designated for the Premises in an "as is" condition.
11.2. APPROVAL OF CONSTRUCTION, ADDITIONS, ALTERATIONS AND REPAIRS. All
work involving construction, additions, alterations and repairs performed by
Tenant pursuant to Paragraphs 10 and 11 of this Lease shall be completed at the
sole cost of Tenant and in accordance with all governmental laws, rules and
regulations. If required by applicable law or by Landlord, Tenant shall, at
Tenant's cost, retain experts or consultants for any work approved by Landlord
that may involve asbestos containing or any other such material, extensions or
modifications of utility lines and other systems and services in the Premises or
in the Building or the Property which may be affected by Tenant's work and
construction and additions and alterations which may overburden or otherwise
affect the safety and structural integrity of the Building or the Property.
11.3. APPROVAL OF PLANS. Landlord may withhold approval of any
construction, alterations, additions and improvements if the plans or
specifications are not acceptable to the architect or engineer, if any, retained
by Landlord. In connection with requests by Tenant for approval, Landlord may
retain the services of an architect, consultant and/or engineer and their
reasonable fees shall be reimbursed to Landlord by Tenant or paid directly by
Tenant if required by Landlord. Landlord's approval of any plans and
specifications and suggestions for their revision shall not be construed to be
an agreement or representation on Landlord's part of the adequacy or suitability
of the construction, alterations, additions or improvements proposed by Tenant.
11.4. CONSTRUCTION BY TENANT. Tenant, at Tenant's cost, shall perform
all work for construction of Tenant improvements and supply all materials
necessary to prepare the Premises for
-8-
<PAGE> 9
Tenant's failure to cure within five (5) calendar days thereafter, at the cost
and for the account of Tenant, from obtaining and filing a bond to discharge the
lien application if Tenant fails to furnish the letter of credit or cash
security within the 30-day period. If Landlord shall assign to its successor in
interest Tenant's letter of credit or cash security, Tenant agrees to look
solely to the successor in interest for the letter of credit or cash security
deposit.
12.3. DISCHARGE OF JUDGMENT LIEN. Should for whatever reason a lien
attach or a final judgment be entered, Tenant shall immediately bond over or
fully pay and discharge the judgment and lien. Tenant shall reimburse Landlord
for any loss, damage and expense, including reasonable attorney's fees, which
Landlord may incur. Nothing contained herein shall prevent Landlord upon prior
written notice to Tenant and Tenant's failure to cure within five (5) calendar
days thereafter, at the cost and for the account of Tenant, from satisfying any
judgment or lien if Tenant fails to do so.
12.4. NOTICE BY TENANT REQUIRED. If any claim or lien is filed against
the Premises, or any action is instituted affecting the title to the Premises,
Tenant shall give Landlord written notice as soon as Tenant obtains knowledge of
the claim, lien or action.
13. INDEMNITY.
13.1 INDEMNIFICATION OF LANDLORD. Tenant, as a material part of the
consideration to Landlord for this Lease, will and does hereby assume all risk
of bodily injury, wrongful death and/or property damage occasioned by any
accident or nuisance made or suffered in the demised Premises or resulting from
any failure on the part of Tenant to maintain the demised Premises in a safe
condition or by reason of the use, occupancy and enjoyment of the demised
Premises by the Tenant or any person thereon or holding under Tenant. Tenant
hereby waives all claims in respect thereof against the Landlord and its
officers, directors, partners, managers, trustees, employees, agents, licensees,
contractors and invitees (as used in this Paragraph the term Landlord shall
include all such persons). Tenant hereby agrees to indemnify and save harmless
the Landlord from and against any and all claims, liens, loss, cost and
liability for bodily injury, wrongful death and/or property damage suffered by
any persons (including, without limitation, Tenant's employees) arising out of,
caused or occasioned by, or resulting from any accident, fire or nuisance in the
demised Premises, or failure to maintain the demised Premises, except where such
injury, death or damage is caused by the negligence or willful act or omission
of the Landlord or the failure of the Landlord after reasonable written notice,
to repair any structural defect or any other repair which Landlord is
responsible under this Lease. Without limitation, Tenant will indemnify and save
harmless the Landlord against and from any and all claims by or on behalf of any
person or persons, firm or firms, corporation or corporations, arising from the
conduct or management of any work or thing whatsoever done by Tenant or Tenant's
employees in or about the Premises, and will further indemnify and save
Landlord, harmless against and from any and all claims arising from any breach
or default on the part of Tenant in the performance of any covenant or agreement
on the part of Tenant to be performed pursuant to the terms of this Lease, or
arising from any act or negligence of Tenant or Tenant's employees, and shall
reimburse Landlord the reasonable costs, attorneys' fees, expenses and
liabilities incurred in connection with any such claim or any action or
proceeding brought thereon. Tenant further agrees that in case of any claim,
demand, proceeding, action or cause of action, threatened or actual, against
Landlord, upon its written requests, Tenant shall defend Landlord at Tenant's
expense by counsel satisfactory to Landlord as the case may be.
INDEMNIFICATION OF TENANT. Landlord hereby agrees to indemnify,
save and hold Tenant harmless from any and all claims, loss, cost and liability
for bodily injury, wrongful death and/or property damage suffered by any persons
arising out of, caused or occasioned by, or resulting from the use of the common
areas of the Building and/or Premises when due to the negligence or willful act
or omission of Landlord or due to the failure of the Landlord after reasonable
written notice, to repair any structural defect or any other repair which
Landlord is responsible under this Lease, unless due to Tenant's negligence or
willful act or omission or failure to perform its obligations under this Lease.
13.2 NON-LIABILITY OF LANDLORD. Tenant, as a material part of the
consideration to Landlord for this Lease, will and hereby does assume all risk
of loss or damage to furniture, fixtures, supplies, merchandise, and other
property, by whomsoever owned, stored or placed in, upon or about the demised
Premises, and does hereby agree that the Landlord will not be responsible for
loss or damage to any such property, unless caused by the negligence or willful
act or omission of Landlord, and waives all claims in respect thereof against
Landlord. It is the intent of this Lease that damage to the Tenant's Premises
and property shall be covered by the Tenant's insurance. Tenant hereby agrees to
indemnify and save harmless the Landlord from and against any and all claims for
such loss or damage, other than damage caused by the negligence or willful act
or omission of Landlord or the failure of Landlord after reasonable written
notice to replace any structural defect or repair any other item for which
Landlord is responsible under this Lease. Without prejudice to the generality of
the foregoing, Landlord shall not be liable for any damage to any property
entrusted to Landlord, nor for damage to any property at any time stored or kept
in the demised Premises, arising from rain or from any other water which may
leak, issue or flow from any part of the Building, or from the pipes or plumbing
from the same or any other place or quarter, nor for any damage to property in
the Building caused by theft or for damage of any character arising out of
defects of
-10-
<PAGE> 10
construction of the Building, the demised Premises or any machinery, equipment,
electrical wiring or facility therein or failure or breakdown thereof, or from
lack of repair or proper Tenant operation of the same, or from acts of
negligence of co-tenants, or other occupants of the Property. Landlord shall not
be liable for any damage to or loss of any property of Tenant, including but not
limited to automobiles, personal effects and other property kept in the
automobiles or in other areas of the Premises, the Building and the parking
facility. Landlord shall not be responsible to Tenant for any loss of or damage
to Tenant's effects by any independent janitorial personnel.
NON-LIABILITY OF TENANT. Except as otherwise provided herein,
Landlord will and hereby does assume all risk of loss or damage to furniture,
fixtures, supplies, merchandise, and other property, by whomsoever owned, stored
or placed in, upon or about the common areas of the Property and Building, and
does hereby agree that the Tenant will not be responsible for loss or damage to
any such property, unless caused by the negligence or willful act or omission of
Tenant, and waives all claims that it may have in respect thereof against
Tenant.
13.3 CONDITION OF THE DEMISED PREMISES. Tenant agrees that Tenant
assumes all risks occasioned by any nonconforming improvements of the demised
premises and agrees to indemnify and save harmless Landlord from and against any
and all claims arising out of, occasioned by or resulting from any nonconforming
improvements of the demised premises, whether alleged or established and agrees
to indemnify Landlord from and against all costs, attorneys' fees, expenses,
fines and liabilities incurred by landlord in connection with any such claim or
any action or proceeding brought thereon and further agrees that Tenant shall
have no claim or cause of action or right of offset or set off or any other
defense against Landlord or its obligations under this Section whatsoever.
14. INSURANCE
14.1. GENERAL REQUIREMENTS. Tenant will, at its own expense, at all
times during said term of this Lease, keep in force policies of insurance as
required in this Lease. All policies shall be issued by insurance companies that
are Best's rate A- or better, financial category class VII or greater, and
licensed as an admitted insurer in the State of Hawaii. All insurance policies
shall contain an endorsement specifically naming Landlord and the Building's
Management Company as additional insured, and all such insurance shall be
primary to any other insurance that may be available to Landlord, and not
contributing with and not in excess of coverage which Landlord may carry. All
insurance policies shall contain an endorsement stating that the insurer will
not cancel, reduce coverages, or materially change coverages without first
giving Landlord thirty (30) days prior written notice. Tenant will provide
Landlord with current certificates of such insurance within thirty (30) days
after execution of this Lease, and will provide true and complete copies of such
insurance policies upon Landlord's reasonable request. All commercial general
liability and property damage policies shall contain a provision that Landlord,
although named as an additional insured, shall nevertheless be entitled to
recovery under the policies for any loss occasioned to it, its agents and
employees by reason of the negligence of Tenant.
14.2. WAIVER OF SUBROGATION. For the purpose of waiver of subrogation,
the parties mutually release and waive unto the other all rights to claim
damages, costs or expenses for any damages to property caused by a casualty of
any type in, on or about the Property if the amount of such damages, cost or
expense has been paid to such damaged party under the terms of any policy of
insurance. Tenant and Landlord each agree to have their insurance companies
insuring their respective properties waive any right of subrogation against the
other; provided, however, that the mutual waiver hereunder shall pertain only to
property coverage and not to any other liability that may exist.
14.3. PROPERTY INSURANCE. Tenant will keep the Premises and
Improvements (whether installed or paid for by Landlord or Tenant), including
alterations, additions, repairs, and business personal property, inventory,
stock, Tenant machinery and equipment on the demised Premises insured against
loss or damage by fire and all other causes of loss as provided in the standard
"Causes of Loss Special Form" (copyright by ISO Commercial Risk Services, Inc.),
in an amount as near as practicable to the full replacement cost thereof, and
including debris removal without limitation, an agreed amount endorsement,
building ordinance coverage, including coverage for contingent liability from
operation of building laws, demolition, and increased cost of construction,
exclusive of foundation and excavation costs, which amount Tenant will review as
to the sufficiency at least annually and, if insufficient, will increase. The
deductible for any one insurance policy shall not exceed the sum of $10,000.00
per occurrence.
14.4. RENT INSURANCE. [Intentionally Omitted]
14.5. OTHER PROPERTY INSURANCE. Tenant will, at its own expense, effect
and maintain such other property insurance with respect to said Premises or said
rent as Landlord may reasonably from time to time require; provided that such is
consistent with prevailing prudent business practice for first-class commercial
buildings in the metropolitan Honolulu area.
14.6. LIABILITY INSURANCE. Tenant shall maintain commercial general
liability insurance for the Premises and any business operations conducted by
Tenant, its independent contractors and sublessees, if any. Said insurance shall
provide coverages for: bodily injury and property damage liability; premises
operations liability; broad form property damage; personal and advertising
injury liability; blanket
-11-
<PAGE> 11
contractual liability; independent contractors liability; fire damage legal
liability; products/completed operations liability; host liquor liability;
limited worldwide liability; additional persons insured-employees; coverage of
newly acquired or created organizations (90 days); and, exception to pollution
exclusion for bodily injury or property damage arising from hostile file. If
Tenant or its independent contractor(s) engage in any construction, demolition
or excavation operations, all policies covering these operations shall be
endorsed to provide coverages for explosion, collapse and underground hazards.
Liquor liability insurance will be provided if Tenant or any sublessee sells,
serves or distributes alcoholic beverages on the covered premises. Tenant shall
also maintain automobile liability coverage that covers Tenant owned automobiles
driven by employees on the Property. The policy or policies of insurance shall
provide coverage on an "occurrence" basis (not on a "claims made" form) and
shall provide limits of not less than two million dollars ($2,000,000.00) per
occurrence with a general aggregate limit per location or project.
Landlord may from time to time require, with due regard to prevailing prudent
business practices, that these limits be increased, or that additional liability
coverages be provided, as may be adequate for Landlord's protection.
14.7 FIRE INSURANCE PREMIUM INCREASES. Tenant agrees to pay to Landlord
forthwith upon demand the amount of any increase in premiums for insurance
against loss by fire or other risks that may be charged on the amount of
insurance maintained by Landlord on the Property, resulting from Tenant doing
any act on the Premises which increases the insurance, whether or not Landlord
shall have consented to such act by Tenant. If Tenant installs upon the Premises
any electrical equipment which overloads the electrical lines of the Premises,
Tenant shall, at its own expense, make whatever changes are necessary to comply
with the requirements of the insurance underwriters and appropriate governmental
authority, but nothing herein contained shall be deemed to constitute Landlord's
consent to such overloading.
14.8 LANDLORD'S INSURANCE.
.1 PROPERTY INSURANCE. Landlord shall purchase and maintain
property insurance written on a layered loss limit basis on the Building,
improvements and betterments, machinery and equipment under a standard ISO
"Special" property insurance form. The "Special" form shall provide coverage for
"all direct causes of physical loss" subject to policy exclusions, limitations
and deductibles. Flood and earthquake coverage shall also be provided subject to
deductibles.
.2 GENERAL LIABILITY/UMBRELLA LIABILITY INSURANCE. Landlord shall
be responsible for purchasing and maintaining the Landlord's usual General
liability insurance covering the entire Amfac Center Property. All "standard"
ISO coverages shall be included within the coverage. Higher limits of coverage
may be secured under a layered umbrella/excess liability insurance program.
.3 WORKER'S COMPENSATION INSURANCE. Landlord shall purchase and
maintain statutory worker's compensation insurance for all employees of the
Amfac Center.
.4 BUSINESS AUTO/GARAGE LIABILITY INSURANCE. Landlord shall
purchase and maintain business auto coverage for vehicles owned by Mitsui
Fudosan (Hawaii), Inc. and its subsidiaries. Coverage shall also be provided for
"hired" and "non-owned" vehicles for Mitsui Fudosan (Hawaii), Inc. Garage
liability insurance shall be provided for the garage operations. Garagekeepers
coverage shall be provided for physical damage to vehicles in the care, custody
and control of Amfac Center.
15. FIRE OR DAMAGE TO PREMISES.
15.1. TERMINATION BY LANDLORD. If the Property, Building or Premises
shall be damaged or destroyed to such an extent that in the sole and absolute
opinion of Landlord the Property, Building or Premises cannot economically be
rendered tenantable, this Lease may be terminated by Landlord. Termination shall
be effective upon written notice by Landlord to the Tenant given within sixty
(60) days after the damage or destruction. Unless so terminated, this Lease
shall continue in full force and effect.
15.2. REPAIR BY LANDLORD. If this Lease is not terminated as set forth
in Paragraph 15.1, then the Landlord shall repair and/or rebuild the demised
Premises and/or the Building to substantially the same condition that they were
in at the time they were turned over to Tenant within one hundred twenty (120)
days from the date of such casualty; provided, however, that in the event
Landlord fails to so complete such repair and/or rebuilding work due to an act
or event of force majeure (as such term is defined below), then the one hundred
twenty (120) day time period shall be extended on a day for day basis equal to
the number of days of force majeure delay. The term "force majeure" is defined
in Paragraph 35 hereof. If Landlord fails to complete, such repairs within the
one hundred twenty (120) day period, as may be extended, Tenant shall have the
right to terminate this Lease upon thirty (30) days' written notice to Landlord.
Provided that the damage or destruction occurred through no fault or neglect of
the Tenant or Tenant's agents or employees or any one upon the Premises with
Tenant's express or implied consent, all base rent and any additional rent or
other charges payable hereunder from the date of such casualty until the
completion of the Landlord's repair and/or rebuilding work shall be abated. Any
abatement shall terminate upon the earlier of (a) the date upon which Tenant
commences to use substantially all of the demised Premises for office use, or
(b) five (5) days after the date upon which Landlord completes its repair and/or
rebuilding work. Tenant shall, at Tenant's sole cost and expense, restore any
and all improvements,
-12-
<PAGE> 12
additions, fixtures, alterations, decorations, installations, furniture,
furnishings, equipment, and machinery brought on to or made to the Premises
following the delivery of the Premises to the Tenant at the beginning of this
Lease term to substantially the same condition that it was in prior to the
damage or destruction. Once the Landlord makes the determination that the
Premises are unfit for occupancy, the Landlord has the right to secure and bar
entry to the Premises. If Tenant enters the Premises after it has been
determined by Landlord to be unfit, Tenant releases Landlord from any damage or
injury to Tenant or anyone who enters through Tenant.
16. DAMAGE CAUSED BY OTHER TENANTS AND PERSONS. Landlord shall not be
liable or responsible for any loss or damage sustained by Tenant, Tenant's
agents, employees, business guests, invitees, or subtenants, by reason of the
negligence, willfulness or malice of any other tenant, occupant or licensee of
the Property, or of any other person. Tenant shall not be liable or responsible
for any loss or damage sustained by Landlord, Landlord's agents, employees,
business guests, invitees, or subtenants, by reason of the negligence,
willfulness or malice of any other tenant, occupant or licensee of the Property,
or of any other person other than Tenant, Tenant's agents, employees, business
guests, invitees, or subtenants.
17. RELEASE OF LIABILITY OF LANDLORD. In the event of the sale or
conveyance of the Building or the Property by Landlord, Landlord shall be and
hereby is released from any future liability with respect to the covenants or
conditions, express or implied, in favor of Tenant. This Lease shall not
otherwise be affected by any such sale or conveyance and Tenant agrees to attorn
to the purchaser or assignee.
18. ELECTRICAL AND HEAT-PRODUCING EQUIPMENT.
18.1. USE OF ELECTRICAL POWER. Tenant's use of electrical power shall
not exceed the requirements for normal office use or other such amount set and
agreed to by Landlord and Tenant. Tenant shall not install or use or connect
with any electric wires in the Premises any x-ray machine, motor, water heater,
stove or furnace or any other apparatus requiring comparable electric power,
without the prior written consent of Landlord. Tenant shall pay as additional
rent the cost of additional electric power over and above normal office use (or
other such amount set and agreed to) within the Building as may be reasonably
established by Landlord. Landlord may, at its option, cause electric submeters
and/or BTUH meters to be installed in the Premises, at the sole cost of
Landlord, and kept in repair, at the sole cost of Landlord, to measure the
amount of electricity consumed by Tenant; provided, however, that if the
installation of such meters is due to specific needs of Tenant, such as separate
air conditioning units installed solely for Tenant's use, then such costs shall
be borne by Tenant and shall include Landlord's reasonable administrative
expenses in conjunction with the installation and service.
18.2. USE OF ADDITIONAL EQUIPMENT. Tenant shall not install or use any
equipment which may cause heat or other substances to be emitted into the
surrounding air, other than those in normal office use within the Building,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed by Landlord. If Landlord is
providing air conditioning to the Premises and nevertheless consents to such
installation or use, Tenant shall pay as additional rent the additional cost of
operation and maintenance of the air conditioning and ventilating system of the
Property, the cost of purchase, installation, operation and maintenance of any
additional air conditioning or other equipment resulting from such use and the
cost of measuring the additional use, as may be reasonably established by
Landlord. Any costs established by Landlord for additional electric power or for
additional cost of air conditioning based on Hawaiian Electric Company
projections made from time to time shall be conclusively deemed to be
reasonable. If agreed to by Landlord and Tenant, the projections made by another
qualified electrical consultant may be used.
19. USE OF PREMISES AND COMPLIANCE WITH LAW. Except with the prior written
consent of Landlord, Tenant shall not use the Premises for any purpose or
purposes other than set forth in Paragraph I.(G). Tenant shall not commit any
waste in the Premises or maintain any public or private nuisance or any other
action which may interfere with the quiet enjoyment of any other tenant of the
Building or the Property. Tenant shall not use the Premises for any improper,
offensive, or unlawful purpose and will keep the Premises in a clean and safe
condition. Tenant shall not permit anything to be done or kept in the Premises
which will increase the rate of fire or other insurance on the Building or the
Property or its contents. Tenant shall comply with all laws, ordinances, rules
and regulations of health and other governmental authorities applicable to the
Premises, including but not limited to the safe maintenance of all utility and
other installations and the proper and lawful use of the Premises. Tenant shall
comply with the terms and provisions of all insurance policies at any time duly
issued or enforced which are applicable to the conduct of Tenant's business in
the Premises and will indemnify Landlord against all actions and claims by
reason of the nonperformance or nonobservance of such laws, ordinances, rules
and regulations or of this covenant. Notwithstanding anything contained in this
paragraph to the contrary, Landlord shall be responsible for any repairs,
modifications or alterations to the structural portions of the Premises or the
Building required by any changes in applicable laws, orders or ordinances of
governmental authorities having jurisdiction over the demised Premises and/or
the Building, unless such repairs, alterations or
-13-
<PAGE> 13
modifications are required solely as a result of Tenant utilizing the demised
Premises in a manner which is unique to Tenant and not generally associated with
general office use. Landlord covenants that the Building and all common areas or
other areas under Landlord's direct control do comply with all applicable laws,
orders, ordinances of governmental authorities having jurisdiction, including
but not limited to compliance with the Americans With Disabilities Act, and with
all applicable board of fire insurance and underwriter's regulations, if any,
respecting all matters of occupancy, respecting all matters of occupancy,
condition or maintenance.
19.1 ADA COMPLIANCE. Tenant shall, with respect to the Premises, at its
own cost and expense: (a) comply with all requirements of the federal Americans
with Disabilities Act, as amended from time to time (the "ADA"), and the rules
now or in the future promulgated under the ADA (the "Rules"), to the extent
applicable to the Tenant's use, construction, repair, remodeling, rehabilitation
or alteration of the Premises, or any part thereof; and (b) immediately provide
to the Landlord written notice of any and all notices of actual, potential or
alleged violations of the ADA or the Rules and any and all governmental
investigations or regulatory or private actions instituted or threatened,
regarding the ADA or the Rules. Prior to undertaking any alterations or new
construction on the Premises the Tenant, in addition to all other requirements
for such alterations or new construction contained in this Lease, shall provide
to the Landlord a certification by an ADA Consultant that the plans and
specifications for the alteration or new construction comply with the ADA and
the Rules. Anything herein to the contrary notwithstanding, Tenant, with respect
to the restrooms located in the elevator lobby on floor on which the Premises
are located, shall not be responsible for compliance the requirements of the
ADA.
19.2. USE OF HAZARDOUS MATERIALS. Except as provided herein, Tenant
shall not cause or permit any Hazardous Material to be brought upon, kept or
used in or about the Demised Premises by Tenant, its agents, employees,
contractors or invitees without the prior written consent of Landlord, which
consent may be granted or withheld in Landlord's sole discretion. As a condition
to obtaining Landlord's consent, Tenant must demonstrate to Landlord's sole
satisfaction that such Hazardous Material is necessary or useful to Tenant's
business and will be used, kept, stored and disposed of in a manner that
complies with all laws regulating any such Hazardous Material so brought upon or
used or kept in or about the Demised Premises. If Tenant breaches the
obligations stated in the preceding sentences, or if the presence of Hazardous
Material on the Demised Premises caused or permitted by Tenant results in
contamination of the Demised Premises, or if contamination of the Demised
Premises by Hazardous Material otherwise occurs for which Tenant is legally
liable to Landlord for damage resulting therefrom, then Tenant shall indemnify,
defend and hold Landlord harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses (including, without limitation,
diminution in value of the Demised Premises and reasonable attorneys' fees,
consultant fees and expert fees) which arise during or after the Lease term as a
result of such contamination. This indemnification of Landlord by Tenant
includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Demised Premises and is caused by Tenant. Without
limiting the foregoing, if the presence of any Hazardous Material on the Demised
Premises caused or permitted by Tenant results in any contamination of the
Demised Premises, Tenant shall promptly take all actions at its sole expense as
are necessary to return the Demised Premises to the condition existing prior to
the introduction of any such Hazardous materials to the Demised Premises;
provided that Landlord's approval of such actions shall first be obtained, which
approval shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Demised Premises. The foregoing indemnity shall survive the expiration or
earlier termination of this Lease.
(1) Definitions. As used herein, the term "Hazardous Material"
means any hazardous or toxic substance, material or waste, including, but not
limited to, those substances, materials, and wastes listed in the United States
Department of Transportation Hazardous Materials Table (49 CFR 172.101) or by
the Environmental Protection Agency as hazardous substances (40 CFR Part 302)
and amendments thereto, or such substances, materials and wastes that are or
become regulated under any applicable local, state or federal law.
(2) Disclosure. [Intentionally Omitted].
(3) Inspection. During Tenant's business hours and upon at least
one (1) business day's notice to Tenant, Landlord and its agents shall have the
right, but not the duty, to inspect the Demised Premises at any time to
determine whether Tenant is complying with the terms of this Lease. If Tenant is
not in compliance with this Lease, Landlord shall, after written notice to
Tenant and Tenant's failure to cure such non-compliance within five (5) calendar
days, have the right to immediately enter upon the demised Premises to remedy
any contamination caused by Tenant's failure to comply notwithstanding any other
provision of this Lease. Landlord shall use its best efforts to minimize
interference with Tenant's business but shall not be liable for any interference
caused thereby.
(4) Reports. To the extent Tenant is required to file any reports
with the Environmental Protection Agency or any other federal, state, city or
county agency having jurisdiction over the subject matter contained herein,
Tenant shall concurrently provided Landlord a copy of such report.
(5) Default. Any default under this Paragraph 19.2 shall be a
material default enabling
-14-
<PAGE> 14
Landlord to exercise of the remedies set forth in this Lease.
(6) Cleanup Obligations. In the event Tenant does not fully
perform its obligations under this Paragraph, Landlord may at its option, after
written notice to Tenant and Tenant's failure to fully perform within five (5)
calendar days thereafter, perform or cause to be performed those obligations,
and recover the cost of such performance from Tenant. In the performance of the
foregoing obligations, Landlord shall have full access to the Demised Premises,
and Tenant shall fully cooperate with Landlord. Tenant shall bear full
responsibility for the performance of those obligations, as Tenant should have
if it had performed them itself, and shall hold harmless and indemnify Landlord
from any liability, loss, cost or expense (including, without limitation, all
court costs and reasonable attorneys' fees) arising from or in any way related
to such cleanup.
(7) Should Landlord allow Tenant to perform an environmental site
assessment, said assessment shall be prepared for the sole and exclusive use of
Tenant and Landlord, and Tenant shall not release such assessment, or any
information contained therein, to any third party (including, without
limitation, any governmental agency) except if required by law or upon the prior
written consent of Landlord, which consent may be withheld in Landlord's sole
discretion. Tenant shall indemnify, defend upon request, and hold Landlord
harmless from any and all costs, claims or losses suffered or claimed by
Landlord, based in whole or in part upon the breach of this Clause by Tenant.
The obligations of this Clause shall survive the expiration or earlier
termination of this Lease.
LANDLORD'S REPRESENTATIONS. Landlord covenants and agrees not to
permit, store, use, dump or dispose of any hazardous substance on any part of
the demised Premises, the Building or the Property in any manner that would
cause the demised Premises to be in violation of any applicable environmental
law or regulation. Landlord indemnifies and holds Tenant harmless, and agrees to
defend Tenant from and against any claims or actions arising from any alleged
hazardous substance upon any part of the demised Premises as a result of a prior
condition or Landlord's actions. Landlord represents and warrants to Tenant to
the best of its knowledge, that the demised Premises and the Building (except
for the improvements, fixtures and appurtenances thereto installed by Tenant or
otherwise disclosed to Tenant) do not contain any hazardous substance or
material nor has Landlord received notice of any violation or alleged violation
of any environmental law with respect to the demised Premises, the Property or
the Building. Landlord hereby agrees to save, defend, indemnify and hold Tenant
harmless for any claims, causes of action or liabilities occasioned by the
existence of any toxic or hazardous substance located in, on or under the
Property in violation of any applicable laws caused by Landlord, its agents,
employees, contractors, or invitees; provided, however, that the indemnity set
forth in this sentence shall not apply to any such condition which is caused by
Tenant, its agents, employees, contractors, or invitees. The indemnifications by
Landlord and Tenant shall survive termination of this Lease.
20. RULES AND REGULATIONS. (See Exhibit C)
Tenant shall, and Tenant shall cause Tenant's employees, agents, subtenants,
invitees and licensees, to observe faithfully and comply strictly with the Rules
and Regulations attached as Exhibit C and such other reasonable rules and
regulations as Landlord may from time to time adopt for the safety, cleanliness
and preservation of the Building and the Property; provided that any such
additional rules and regulations prescribed by Landlord shall not be binding
upon Tenant unless ten (10) days' notice has been given to Tenant and such rules
and regulations shall be applicable to all tenants and enforced by Landlord in a
non-discriminatory fashion. Landlord shall not be responsible to Tenant for the
nonperformance of any of the Rules and Regulations by any other occupant or
tenant of the Building or the Property. Landlord shall, however, use reasonable
efforts to secure compliance by other tenants. By Tenant's signature below,
Tenant agrees to abide by all Rules and Regulations.
21. OFFSET STATEMENT, SUBORDINATION AND ATTORNMENT.
21.1. OFFSET STATEMENT. It is understood that Landlord may at any time
assign or transfer, by sale, assignment or hypothecation, its interest as
Landlord in this Lease, or any part thereof, or its interest in the whole or any
portion of the Building, the Property or the Land. Upon any sale, assignment or
hypothecation, Tenant agrees, within ten (10) days after demand by Landlord, to
execute and deliver to Landlord or to any proposed mortgagee, trustee,
beneficiary or purchaser, a certificate such as an estoppel certificate in
recordable form certifying (a) that this Lease is in full force and effect, (b)
that this Lease is unmodified, or if modified stating any such modifications,
(c) that there are no defenses or offsets thereto, or stating such defenses or
offsets as are claimed by Tenant, and (d) the current rental amount and the
dates to which all rents have been paid. In addition, upon sale, assignment or
hypothecation by Tenant of its leasehold interest as permitted under the terms
of this Lease, Landlord agrees, within ten (10) days after demand by Tenant, to
execute and deliver to Tenant, a certificate such as an estoppel certificate in
recordable form certifying (a) that this Lease is in full force and effect, (b)
that this Lease is unmodified, or if modified stating any such modifications,
(c) that there are no defenses or offsets thereto, or stating such defenses or
offsets as are claimed by Landlord, and (d) the current rental amount and the
dates to which all rents have been paid.
21.2. SUBORDINATION. This Lease shall be subject and subordinated at
all times to the lien of all mortgages and deeds of trust in any amount now or
hereafter placed against the building or the
-15-
<PAGE> 15
paid by the governmental authority shall be prorated as of the date of
termination of this Lease. Tenant covenants that at the termination of the
taking prior to the expiration of this Lease, Tenant shall, at its sole cost,
restore the Premises and improvements as nearly as may be reasonably possible to
the same condition which they were in prior to the taking.
(4) Tenant hereby assigns the proceeds to Landlord and appoints
Landlord its attorney in fact for the limited and sole purpose of collecting the
proceeds from the governmental authority. In the event of a lump sum award,
Landlord shall retain for itself an amount sufficient to equal those amounts
payable by Tenant in accordance with the terms hereof. This amount shall be
calculated in terms of the present dollar value of the anticipated rental income
stream in accordance with recognized standard accounting practices. If the award
is made on a monthly basis, Landlord shall retain that amount due it in
accordance with the terms hereof. In both cases, any excess shall be paid to
Tenant.
24. DEFAULT BY LANDLORD. If Landlord fails or refuses to observe or perform
any of the provisions, covenants or conditions of this Lease, Tenant shall give
a thirty (30) day written notice to Landlord of such default, specifying in the
notice the default by Landlord. Tenant agrees that if the default specified in
the notice can be cured by Landlord, but cannot with reasonable diligence be
cured within the 30-day period, then the default shall be deemed to be cured if
Landlord within the 30-day period shall have commenced and shall thereafter
diligently prosecute to completion the curing of the default. Notwithstanding
the foregoing, in the event of an emergency, Tenant shall only be obligated to
give such notice as is reasonably practical under the circumstances. In the
event Landlord fails to do so in a reasonably timely manner, Tenant may, but is
under no obligation to perform such uncured obligations. In said event, Landlord
shall reimburse Tenant for the reasonable costs of such performance within
thirty (30) days of receipt of an invoice therefor.
Tenant acknowledges that any one or more of the services provided for in
Paragraph 2 may be interrupted or suspended by reason of accident, repair,
alterations or improvements necessary to be made, strikes, lockout, and, except
as hereinafter provided, Landlord shall not be liable to Tenant therefor;
provided however, that (a) Landlord shall use its best efforts to restore such
services as soon as reasonably possible, (b) in the event such services is not
restored within five (5) business days, through the fault of Landlord, to the
extent that Tenant cannot reasonably use all or any part of the Premises, rent
and other charges shall abate as to such part effective on the sixth (6th)
business day and continue abated until such service is restored, and (c) in the
event such interruption continues for thirty (30) calendar days, whether or not
through the fault of Landlord, then Tenant shall have the right and option to
cancel and terminate this Lease, upon ten (10) days written notice to Landlord,
and thereafter shall be relieved of all further liability under this Lease,
provided, however, that if the cause of the interruption or stoppage cannot be
cured solely by the payment of money and that more than thirty (30) calendar
days may be reasonably required for such cure, then Tenant shall not have the
option to cancel and terminate this Lease if Landlord shall commence such cure
within such thirty days (30) day period and shall thereafter diligently
prosecute such cure to completion. Item (c), notwithstanding, in the event such
interruption continues for sixty (60) calendar days, Tenant shall have the right
and option to cancel and terminate this Lease, upon ten (10) days written notice
to Landlord. In the event, that a suspension of service is caused due to the
Tenant's fault or neglect, items (b) and (c) of this subparagraph (j) shall not
apply.
25. DEFAULT BY TENANT.
25.1. NOTICE AND TERMINATION. Tenant shall be in default if:
(1) Tenant shall fail to pay when due any sums required to be paid
under this Lease and such failure shall continue for five (5) days after notice
to Tenant that the such payment is due; or
(2) Any event shall occur which shall be a breach of the paragraph
regulating the conduct of the business and use of the Premises and such breach
continues beyond twenty-four (24) hours after notice from Landlord to Tenant; or
(3) Tenant shall default in the performance of any other
provision, covenant or condition of this Lease and such default continues for
thirty (30) days after written notice from Landlord specifying the default by
Tenant; provided, that the default shall be deemed to be cured if the default
specified in the notice cannot with reasonable diligence be cured within the
30-day period, if Tenant within the 30-day period shall have commenced and shall
thereafter diligently prosecute to completion the curing of the default; or
(4) Any event shall occur which shall be a breach of any provision
of the bankruptcy paragraph herein; or
(5) Tenant should abandon the Premises for a period of fifteen
(15) days during the term of this Lease.
25.2. LANDLORD'S OPTIONS. If Tenant is in default, Landlord, at its
option, shall have the following rights in addition to all other rights and
remedies it may have under this Lease or by law:
(1) The right to declare the term of this Lease ended and to
re-enter the Premises and take possession of the Premises and to terminate all
of the rights of Tenant; or
(2) The right, without terminating this Lease, to re-enter the
Premises and to occupy
-18-
<PAGE> 16
and similar facilities within the Premises. Landlord shall have the right to
erect and maintain, scaffolding, canopies, barriers, fences and props as may be
required, without any rebate of rent or liability to Tenant for any loss of use
or quiet enjoyment of the Premises, provided, that all such work shall be done
promptly with as little interference as is reasonably practicable.
28.2. PASSKEY USE. Tenant agrees that Landlord and its agents may
retain a passkey to the Premises and may enter the Premises during normal
business hours or at any time during emergencies by the use of the passkey.
Landlord shall not be liable for the consequences of admitting or refusing to
admit Tenant or Tenant's agents or employees to the Premises by the use of the
passkey. Tenant shall not change any lock on the doors of the Premises without
the prior written consent of Landlord, which consent shall not be withheld,
provided the passkey to the new lock conforms to the passkey system established
by Landlord. If Tenant changes locks without prior written consent or fails to
supply Landlord with a passkey, Landlord shall have the right to use any means
to gain access in an emergency. Any entry made by Landlord under these
circumstances shall not be deemed to be an unlawful entry. Landlord shall not be
liable to Tenant for any damage or loss resulting from the use of force in
effecting entry.
28.3. PROSPECTIVE TENANTS. Tenant will permit Landlord to bring
prospective tenants upon the Premises at reasonable times within ninety (90)
days prior to the expiration of this Lease.
29. RELOCATION. [Intentionally Omitted]
30. NO RENT REDUCTION. Except as provided elsewhere under those provisions
of this Lease which specifically refer to rent reduction, Tenant shall not be
entitled to any abatement or reduction of rent, nor to the recovery of any sums
for any loss or damage on account of the interruption of the use of the Premises
or of any of the services required to be furnished by Landlord by reason of
delays beyond the reasonable control of Landlord.
31. DIMINUTION OF VIEW, LIGHT OR AIR BY ADJACENT STRUCTURE. It is expressly
understood and agreed that any diminution or shutting off of view, light or air
by any structure which may be erected adjacent to the Building or the Property,
whether by Landlord or by others, shall in no way affect this Lease or impose
any liability on Landlord or be construed as a constructive eviction or grounds
for abatement or reduction of rent.
32. CANCELLATION NOT MERGER. The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation, or the termination by Landlord pursuant to
any provision of this Lease, shall not work as a merger, but, at the option of
Landlord, shall either terminate any or all existing subleases or subtenancies
under this Lease, or operate as an assignment to Landlord of any or all of such
subleases or subtenancies.
33. SURRENDER OF LEASE OR HOLDING OVER.
33.1. HOLDING OVER WITH CONSENT. Any holding over after the expiration
of this Lease, with the consent of Landlord, shall be construed, in the sole
discretion of the Landlord, to be a tenancy from month-to-month at the higher of
(a) the monthly rent and monthly operating expenses or (b) the then prevailing
rate for comparable space in the Property as determined by Landlord, and shall
otherwise be on the terms and conditions of this Lease, so far as is applicable.
33.2. HOLDING OVER WITHOUT CONSENT. If Tenant shall, at the expiration
or other termination of this Lease, continue in possession of the Premises,
either actually or constructively, then the monthly rent shall be 125% of the
monthly rent and other amounts payable for the last month of the term for the
first three (3) months of any such holdover, and thereafter, two (2) times the
monthly rent and other amounts payable for the last month of the term, prorated
on a daily basis for each day that Tenant remains in possession. Tenant shall
not be liable to Landlord for any and all consequential damages sustained by
Landlord as a result of such continued possession if the holdover period is six
(6) months or less, thereafter Tenant shall be liable to Landlord for any and
all consequential damages sustained by Landlord. Landlord may, but shall not be
obligated to, take action to terminate the holding over by Tenant.
33.3. TERM OF LEASE DEFINED. Whenever reference is made to the term of
this Lease, the reference shall include the original term and any renewal or
extension of the term of this Lease.
34. SERVICE OF NOTICES.
34.1. PERSONAL OR MAIL SERVICE. Any notice and demand by or from
Landlord to Tenant, or by or from Tenant to Landlord, required or desired to be
given shall be in writing and shall be validly given if served either personally
or if deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested. If notice or demand is served personally,
service shall be conclusively deemed made at the time of personal service. If
the notice or demand is served by registered or certified mail, service shall be
conclusively deemed made forty-eight (48) hours after deposit in the United
States mail addressed to the party to whom the notice or demand is given as
follows:
(1) Any notice or demand to Landlord shall be addressed to the
individual or entity specified above (and at Landlord's option, any notice or
demand shall be given to any other persons, firms
-21-
<PAGE> 17
or corporations designated by Landlord).
(2) Any notice or demand to Tenant shall be addressed to Tenant at
the Premises and at the address noted above or in the event of assignment,
sublease, abandonment or surrender by Tenant, at the last address specified by
Tenant.
(3) Any party may change its address for the purpose of receiving
notices or demands by a written notice given to the other party in the manner
provided in this paragraph.
34.2. NOTICE TO MULTIPLE, CORPORATE, PARTNERSHIP, ETC. TENANTS. If
there are multiple Tenants, notice to one Tenant shall be deemed to be notice to
all Tenants. Notice to one partner of a partnership shall be deemed to be notice
to all partners. Notice to an officer or director or agent of a corporation
shall be deemed to be notice to the corporation.
35. FORCE MAJEURE CLAUSE. If either party shall be delayed or prevented
from the performance of any provision of this Lease by reason of strikes,
lockouts, labor troubles, inability to procure material, failure of power,
restrictive governmental laws or regulations, riots, insurrection, war or other
reason of a like nature not the fault of the party delayed in performing work
under the terms of this Lease, the performance, unless otherwise provided
herein, shall be excused for the period of the delay and the period for
performance shall be extended for a period equivalent to the period of the
delay; provided that the party so delayed shall notify the other party within
five (5) days after the onset of the event causing delay. It is understood,
however, that this provision shall not operate to excuse Tenant from the prompt
payment of rent or any other payments required by this Lease. It is also
understood that a party's financial ability to perform shall not be deemed to
excuse nonperformance or delayed performance.
36. BROKER'S COMMISSION. Landlord and Tenant acknowledge that CB Commercial
is the real estate broker which brought about this Lease transaction, and
Landlord shall pay the brokerage commission to such broker pursuant to separate
agreement. Landlord hereby indemnifies Tenant against the claims of any other
broker arising from Landlord's acts, and Tenant hereby indemnifies Landlord
against the claims of any other broker arising from Tenant's acts.
37. SUBMISSION FOR REVIEW. The submission of this Lease for examination
does not constitute a reservation of or an option for the Premises. This Lease
shall become effective according to its terms only upon execution in full by all
parties and its delivery by Landlord to Tenant.
38. RESERVATIONS OF LANDLORD. Landlord reserves the right to construct,
place, maintain, repair, replace, renovate, remodel, make additions to, or
demolish such structures, utility lines, pipes, tunneling wails, ceilings,
floors, public areas, restrooms, elevators, stairs, common areas and the like,
in, under, over and upon the Premises as may be reasonably necessary or
advisable for the operation, servicing, remodeling, or repairing of the Premises
or of other portions of the Building, the Property or the Land. Notwithstanding
the foregoing, Landlord agrees that reasonable access to the demised Premises
shall be maintained during the hours of business conducted by Tenant on the
demised Premises and the business of Tenant shall not be interfered with
unreasonably and any repairs to the demised Premises or which would affect
access to the demised Premises shall, except in the event of an emergency be
performed only upon prior written notice to Tenant. Additionally, Landlord shall
use its best efforts to minimize any interference with the operation of Tenant's
business during the course of any repairs, alterations, additions or
improvements. Further, Tenant shall be entitled to have access to the Premises,
parking areas and other common areas of the Property 24 hours per day, 365 days
per year, subject to reasonable restrictions by Landlord imposed in a
nondiscriminatory fashion. Landlord further reserves the right to change the
name of the Building and the Property in Landlord's sole discretion.
39. DIRECTORY AND OFFICE SIGNS. Landlord, at its cost, shall place a
directory in the lobby of the Building in which the Premises are located,
exclusively for the display of the names of tenants and their respective suite
numbers. Landlord shall include in the directory Tenant's name and the names of
at least twelve (12) of Tenant's employees. Landlord shall paint or attach
Tenant's trade name in the location established by Landlord on or next to the
door that is the principal entry to the Premises, the cost of the sign and its
installation to be paid by Tenant. Landlord has the sole right to determine the
type of directory and sign and the size and content of each, including, but not
limited to, the size of letters, motif, style, color, material and whether
painted, attached or free standing, with the cost of the directory inserts and
door signage to be paid by Tenant. Landlord's acceptance of any name for listing
on the Building Directory and/or for placement on Tenant's principal entry will
not be deemed, nor will it substitute for, Landlord's consent, as required by
this Lease, to any sublease, assignment, or other occupancy of the demised
Premises.
40. PARTIAL INVALIDITY. If any provision, covenant or condition of this
Lease is held by a court of competent jurisdiction to be void or unenforceable,
the remainder of this Lease shall continue in full force and effect. If any
interest rate, late charges, fees or other charges shall be in excess of the
permissible rate under any applicable usury statute or similar law, then such
rate of interest and late charges, fees or
-22-
<PAGE> 18
other charges shall be reduced to the maximum rate permitted by law.
41. LIMITATION ON RIGHT OF RECOVERY AGAINST LANDLORD. Tenant acknowledges
and agrees that the liability of Landlord or any partner in Landlord shall be
limited to Landlord's interest in the Property. Any judgments against Landlord
or any partner in Landlord shall be satisfied solely out of the proceeds of sale
of Landlord's or the partner's interest in the Property. No personal judgment
shall be against Landlord or any partner in Landlord and shall not give any
right of execution or levy against Landlord's or partner's other assets. These
provisions shall inure to Landlord's and the partner's successors and assigns,
including any mortgagee, its successors and assigns. These provisions are not
intended to relieve Landlord from the performance of any of Landlord's
obligations under this Lease, but only to limit the personal liability of
Landlord and any partner in Landlord. These provisions shall not limit Tenant's
rights to obtain injunctive relief or specific performance or to avail itself of
any other right or remedy which may be available by law or under this Lease.
42. TIME OF THE ESSENCE. Time is of the essence of all of the provisions,
covenants and conditions of this Lease.
43. RECORDATION. This Lease shall not be recorded, but the parties shall,
at the request of either party, execute and deliver a memorandum of lease, in
recordable form, sufficient to give constructive notice of the leasehold estate
hereby created. The memorandum may be filed in the Office of the Assistant
Registrar of the Land Court of Hawaii at the sole cost of the party filing the
memorandum. Upon termination, Tenant agrees that Landlord can file a recordable
instrument evidencing the termination. Tenant agrees that it shall cooperate
with Landlord in the execution and filing of an appropriate document as evidence
of the termination of this Lease.
44. SUCCESSORS AND ASSIGNS. All provisions, covenants and conditions of
this Lease shall inure to the benefit of and be binding upon the successors and
assigns of Landlord and (subject to the restrictions of assignment) the heirs,
personal representatives, successors and permitted assigns of Tenant.
45. GENERAL PROVISIONS.
45.1. PREMISES DEFINED. The term "Premises" shall mean the area
specifically described in the demise from Landlord to Tenant, except where such
meaning would be clearly repugnant to the context, together with all rights,
easements, interests, privileges and appurtenances relating thereto. The area
demised shall consist of the area shown outlined in red on Exhibit A and shall
be bounded by the unfinished interior surfaces of the perimeter walls and
windows, the unfinished surfaces of interior loadbearing walls, the unfinished
top of the floor slab and the unfinished bottom of the floor slab of the floor
above, excluding, however, any items within the boundaries which are not
included in rentable area as defined in Paragraph 4.6. above.
45.2. IMPROVEMENTS DEFINED.
(1) The term "improvements" shall include all improvements
existing at the commencement of the term or at any time thereafter built by
anyone in the space demised, including, without limitation, walls and partitions
which are not loadbearing, the interior decorated or finished surfaces of
perimeter and loadbearing walls and floor slabs, ceilings and ceiling light
fixtures, interior windows, entrance doors, mechanical and electrical conduits,
wiring, fixtures and equipment, floor tile, carpeting and wall covering and
other fixtures of all kinds.
(2) The term "improvements" shall not include water, electric,
telephone and other utility lines, ducts, conduits and other facilities serving
other portions of the Property which may pass through the demised area.
(3) The excluded items shall be the responsibility of Landlord,
and with respect to which landlord reserves the right to install, repair,
replace, maintain and remove the items in its discretion.
45.3. APPLICABLE LAW. The laws of the State of Hawaii shall govern the
validity, performance and enforcement of this Lease.
45.4. GRAMMATICAL REFERENCES. The grammatical changes required to make
the singular apply in the plural sense where there is more than one tenant and
to apply to corporations, associations, partnerships, or individuals, males or
females, shall be made where appropriate.
45.5. JOINT AND SEVERAL LIABILITY. Where there is more than one tenant,
the obligations shall be joint and several.
45.6. CAPTION REFERENCES. The captions of the paragraphs are for
convenience only and do not define, limit, describe or construe the contents of
the paragraphs.
46. ENTIRE AGREEMENT. This agreement constitutes the entire agreement of
Landlord and Tenant and supersedes all oral and written agreements and
understandings, if any, between the parties prior to the date of this Lease.
Except as otherwise provided, no subsequent alteration, amendment, modification
or addition to this Lease shall be binding upon Landlord or Tenant unless
reduced to writing and signed by each of them.
-23-
<PAGE> 19
EXHIBIT C
RULES AND REGULATIONS
1. RULES AND REGULATIONS. These rules and regulations have been adopted for the
purpose of insuring order and safety on the Property and to maintain the rights
of Tenants and Landlord. Landlord reserves the right to modify, supplement or
rescind any of these rules. Landlord may waive any one or more of these rules
and regulations for the benefit of any particular Tenant or Tenants, but no such
waiver by Landlord shall be construed as a waiver of such rules and regulations
in favor of any other Tenant or Tenants, nor prevent Landlord from thereafter
enforcing any such rules and regulations against any or all for the infraction
of any of these rules by Tenant, its employees, agents or invitees. Each Tenant
shall be liable for injury or damage caused by the infraction of any of these
rules and regulations by it, its employees, agents or invitees. Landlord may
repair such damage, charging the cost to Tenant, which amount shall be added to
rent due for the ensuing month. These rules and regulations are in addition to,
and shall not be construed in any way to modify or amend, in whole or in part,
the terms, covenants and conditions of any lease of premises on the Property.
2. ACCESS. Property will be open from 7:00 a.m. to 8:00 p.m. weekdays and 7:00
a.m. to 5:00 p.m. Saturdays. On Sundays, holidays and after normal access hours,
access to the Premises without proper identification may be refused.
3. CLOSING PREMISES. Each Tenant shall be responsible for its Premises to be
securely locked and all water faucets and powered equipment to be shut off
before Tenant or Tenant's employees leave the Property.
4. COMMON ROOMS. Rooms used in common by Tenant shall be subject to regulations
adopted by Landlord.
5. DEDICATION-PREVENTION OF. Landlord reserves the right to close off any and
all of the plazas, promenades and sidewalks of the Properly for twenty-four
hours once every five years to prevent dedication.
6. DELIVERIES AND SERVICE AREA. Only hand trucks equipped with rubber tires and
side guards will be permitted on the Property. All deliveries shall be made only
through the service entrance of the Properly on Nimitz Highway. All deliveries
requiring exclusive use of an elevator shall be scheduled through the Management
Office. Exclusive use will not be permitted without the use of elevator
protective padding and will be permitted only between the hours of 9:30 a.m. to
11:30 a.m. and 1:30 p.m. to 3:30 p.m., Monday through Friday.
7. HEAVY ITEMS. All carrying in or out of heavy freight, packages or other bulky
matter of any description must take place only during hours selected by Landlord
and only with prior notice to and approval by Landlord. No object beyond the
rated capacity of elevators shall be brought on the Property. Landlord shall
have the right to prescribe the location of heavy objects and, if considered
necessary, the means to distribute the weight to no more than 50 pounds per
square foot. Any damage to the Property caused by Tenant or its contractor,
delivery or moving service, will be repaired at Tenant's expense.
8. DIRECTORIES. The Tenant directories are provided for displaying the name and
location of each Tenant. A charge will be made in accordance with the standard
sign order form for the initial listing and for each name added to or other
change to Tenant's name. The initial listing and all additions or changes will
require Landlord's approval. Tenant shall provide Landlord with a written
request for any additions or changes to the directory.
9. ELECTRICAL AND AIR CONDITIONING SYSTEMS. The electrical and air conditioning
systems shall operate without additional charges, except for additional power
and equipment use and service, between the hours of 7:00 a.m. and 6:00 p.m.
Tuesdays through Saturdays excluding holidays. Additional charges for electrical
and air conditioning services will be made after normal operating hours of 7:00
a.m. and 6:00 p.m. on Tuesdays through Saturdays and for all hours on Mondays,
Sundays and holidays. Additional charges for excess energy consumption beyond
normal consumption shall be made by Landlord and assessed to the Tenant. The
standard building lighting and air conditioning system shall not be altered and
any wiring or abnormal power consuming equipment shall not be installed without
the prior written approval of Landlord.
10. DETERMINATION OF ADDITIONAL CHARGES FOR SERVICE. The additional charges for
electrical and air conditioning services and all other services during beyond
normal operating hours on
-24-
<PAGE> 20
Tuesdays through Saturdays and for all hours on Mondays, Sundays and holidays,
and additional charges for excess energy consumption shall be based upon the
rate schedule or energy agreement in effect for such services. If no rate
schedule or energy agreement shall be in effect, the additional charges shall be
based upon the actual cost of providing such services. The actual cost shall
include the cost of labor and fringe benefits for required operating personnel,
electricity at the per kilowatt hour rate applicable to the Property, water and
sewerage at the posted rate, consumable supplies and materials, if any, and any
other direct costs associated with providing such services, and may be adjusted
from time to time by Landlord.
11. JANITORIAL SERVICE. Janitorial personnel approved in writing by Landlord
shall be the only personnel permitted to perform janitorial service on the
Property. Janitorial service, if supplied by Landlord, shall not include
shampooing, spot cleaning of carpets or special cleaning of vinyl-covered.
hardwood, or other non-carpeted surfaces or dry cleaning of draperies. Landlord
shall not be responsible for any loss of or damage to Tenant's property by the
janitorial personnel or any other person performing janitorial services.
12. KEYS AND LOCKS. Two keys per lock will be furnished to Tenant by Landlord.
No locks other than those provided by Landlord shall be placed on any doors
without the written consent of the Landlord. Lock cylinders and keys shall be
changed by Landlord at Tenant's expense upon written request from Tenant. All
keys will be surrendered upon termination of Tenant's lease. Janitors and
contract cleaners will be provided with a passkey to Tenant's premises. If
Tenant declines in writing to provide a passkey, Landlord shall not be
responsible for providing janitorial services and emergency access to Tenant's
premises.
13. OBSTRUCTION OF COMMON AREA. All common areas will be used only for ingress
and egress to Tenant's premises. Landlord retains the right to control and
prevent access onto the Property by any and all persons other than those persons
having a legal right to ingress and egress from Tenant's premises. Only persons
authorized by Landlord will be permitted in areas housing mechanical, electrical
or equipment of any kind on the Property.
14. ANIMALS. No animals or pets are allowed on the Property or in Tenant's
premises at any time, except for Seeing Eye dogs.
15. BICYCLES. Bicycles shall be parked only in those areas designated for
bicycles in the parking garage.
16. REMOVAL OF PROPERTY. [Intentionally Omitted]
17. REPAIRS/ALTERATIONS/ADDITIONS TO PREMISES. Prior to commencement of any
construction work on the Premises. Tenant shall submit to Landlord in writing
for Landlord's written approval the following: 1) Work Description; 2) Work
Schedule; 3) Names of Architect, General Contractor and any Sub-Contractors; 4)
Final Plans, Working Drawings and Specifications; 5) Copy of Building Permit;
and 6) Copy of Construction Contract. Tenant shall also provide Landlord with
lien releases upon request. If asbestos containing or any other deleterious
material may be involved in the construction work the submittal for approval to
Landlord shall detail procedures for removal and disposal of such material in
accordance with all state and federal laws and regulations. Only contractors
approved by Landlord shall be permitted to perform any work within the Premises
and on the Property. Tenant shall comply with all requirements of Paragraph 11
in the General Conditions.
18. MAINTENANCE REQUESTS. Maintenance and other requests of Tenant will be
attended to only upon application by Tenant to Landlord. Landlord's employees
will not perform any work outside of regular duties unless under special
instructions from Landlord.
19. WINDOW DISPLAYS. Tenant shall not use any display or window advertising
without Landlord's prior written approval.
20. SIGNS, SCREENS AND AWNINGS. No notice or advertisement visible from the
exterior of the Property or in Tenant's premises shall be permitted without
prior written approval of Landlord. All graphics, curtains, blinds, shades,
signs, screens, awnings and other such furnishings visible from the exterior of
the Property or any other premises, where permitted, shall conform to the
standards specified by Landlord from time to time. In the event of the violation
of this rule, Landlord may, upon prior written notice to Tenant and failure to
cure within five (5) days thereafter, remove same without any liability, and may
charge the expense incurred to Tenant.
-25-
<PAGE> 21
21. HOLIDAYS. The Property will be secured, a security officer will be on duty,
and air conditioning and other services will not be provided on the following
days:
New Year's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day
The above holidays may be changed from time to time and the designated holidays
shall be based on the predominant practice in the business community as
reasonably determined by Landlord.
22. SOLICITORS. Landlord reserves the right to eject from the Property, any
solicitors, canvassers or peddlers and any other persons who, in the judgment of
Landlord, are annoying or interfering with any of Tenant's or Landlord's
operations or who are otherwise detrimental to the Property and its Tenants.
Canvassing, peddling, soliciting and distribution of any written materials on
the Property are prohibited and each Tenant shall cooperate to prevent any such
activity.
23. TRASH. Each Tenant shall store all trash and garbage for removal by
janitorial personnel within the interior of its own Premises. No material,
rubbish or debris shall be placed in trash boxes or receptacles if such
materials are of such nature as to be in violation of any law or ordinance
governing their disposal. All Tenant construction debris shall be removed from
the Premises and the Property by Tenant, its contractors or its employees.
Janitorial personnel shall not be required to remove bulk trash, crates, packing
material and other debris resulting from Tenant's move-in, move-out,
construction, repairs and renovations.
24. USE OF PREMISES. Except with prior written consent of Landlord, Tenant shall
not conduct any business other than that specifically provided for in its lease.
Tenant shall not permit its Premises to be used in a manner offensive or
objectionable to the other Tenants or Landlord. No cooking, other than microwave
or toaster oven cooking, shall be permitted in the Premises nor shall Tenant
cause any unusual or objectionable odors to be produced upon or permeate from
the Premises. Tenant shall not at any time use or keep on the Premises any
asbestos containing and other such material or any flammable, combustible or
explosive fluid, chemical or substance in such quantities as may endanger the
Premises or the Property or safety of other persons. Tenant shall not make any
unreasonable vibration, unseemly noise or disturb or interfere with occupants of
the Property or adjoining buildings by the use of any business machines and
other equipment, musical instruments, radio or television sets, or other such
activities. The Premises shall not be used for lodging or as sleeping quarters.
25. VIOLATIONS. Landlord shall not be responsible to any Tenant for the
non-observance or violation of any rules and regulations by any other Tenant or
other person. Tenant shall be deemed to have read these rules and regulations
and to have agreed to abide by them as a condition to occupancy of its Premises.
26. WASHROOMS. The lavatory facilities and other water apparatus shall not be
used for any purpose other than that for which they were constructed. The
expense to repair any breakage, stoppage or damage shall be paid by the Tenant
responsible for, or whose employees or invitees are responsible for, the
violation of this rule.
27. WATER. Water will be supplied by the Landlord for drinking and toilet
purposes only.
28. WINDOWS AND DOORS. Windows, glass doors or any other light sources that
reflect into the lobbies or other places of the Property shall not be obstructed
or covered except in a manner approved in writing by Landlord.
Suggestions for the betterment of services in Amfac Center should be directed to
MFD 700 BISHOP, INC.
Manager of Amfac Center
745 Fort Street, Lobby
Honolulu, Hawaii 96813
-26-
<PAGE> 22
EXHIBIT D
SPECIFICATIONS FOR TENANT IMPROVEMENTS
The following are Minimum Requirements Only:
1.COMMON AREAS. Common areas which occur when a full floor Tenant subdivides and
subleases to another occupant shall conform to the design of the common areas of
Multiple Tenant floors. Tenant entries and partitions shall be of the Building
Standard design.
2.TENANT SPACE
2.1 FLOOR COVERINGS. Standard floor covering shall be commercial
quality carpet (Commercial on 44-00 II or other Landlord approved carpet) and
shall not be affixed to the floor in any manner except by a tack strip, paste,
or other material which may be easily removed with water. The use of cement or
other similar adhesive materials is expressly prohibited. The method of affixing
the floor covering to the floor shall be specified in the plans and
specifications submitted to Landlord for its written approval. The expense of
repairing any damage resulting from a violation of this rule and any expense of
removing any floor covering affixed to the Premises in violation of this rule
shall be paid by Tenant. Requests for non-standard floor coverings shall be
submitted to Landlord for its written approval. A base material (e.g., vinyl,
wood) shall be used on all walls and partitions.
2.2 INTERIOR PARTITIONS. Partitions shall be constructed of metal stud
and drywall or other similar forms of construction in accordance with the
Uniform Building Code. Partitions meeting the interior face of the glazed
external building wall shall terminate only on the window mullions.
2.3 INTERIOR DOORS. Doors and frames shall be as specified reasonably
by Landlord.
2.4 FINISH HARDWARE. Butt hinges, locksets, lanterns and knobsets shall
be as specified by Landlord and shall be purchased by Tenant from Landlord.
2.5 DRAPERIES AND DRAPERY TRACK. Draperies or other Landlord approved
window coverings at the glazed external building wail and drapery track shall be
provided and installed by Tenant.
2.6 GRAPHICS. Specifications shall be as determined by Landlord.
2.7 LIGHTING PATTERN. The lighting pattern shall conform to the task
lighting orientation and design as established by Landlord.
2.8 CONCRETE FLOORS. Holes for electrical and telephone services or
chases may be cut through the concrete floor slabs only with prior written
approval of and under the direction of Landlord and its consultants.
2.9 CONCRETE WALLS. Chases and holes may be cut in any concrete wall or
column only with the prior written approval of and under the direction of
Landlord and its consultants.
2.10 OFFICE/STORE FURNITURE AND FIXTURES. All furniture and fixtures
exposed to public view must be new or fully reconditioned and suitable for use
within a building of similar location and character as the Property. Design of
furniture, fixtures, equipment and interiors which are visible through Tenant
entries and storefronts shall be subject to approval by Landlord.
-27-
<PAGE> 23
EXHIBIT E
SPECIAL CONDITIONS
1. Base Rent Concession: Landlord will provide twelve (12) months base
rent abatement to Tenant at the beginning of the Lease term.
2. Renewal Option: Provided Tenant is not in default of the terms and
conditions of the lease at the time of exercise of the option and at
the time for commencement of the extended term, Tenant shall have two
(2), five (5) year options to renew the term of the lease at the same
terms and conditions other than base rent. The option shall be
exercised, if at all, not later than 180 days prior to the expiration
of the initial term hereof.
The option is personal to Tenant and shall not be assignable nor may
the option be exercised for the benefit of any sublessee or
successor-in-interest.
Base rent for the option period shall be ninety-five percent (95%) of
the then Fair Market Value of comparable office space in the downtown
Honolulu business district. Upon Tenant's notice to renew, Landlord and
Tenant shall have thirty (30) days to agree upon the base rent to be
paid by Tenant to Landlord during the option extension period, it being
intended that the new base rent shall be equal to ninety-five percent
(95%) of the fair market value for similar space in the submarket in
which the demised Premises is located. In the event Landlord and Tenant
are unable to agree on the new base rent for such option extension
period, each of the Landlord and Tenant shall designate an appraiser
holding the MAI designation who has a minimum of ten (10) years
experience in appraising office buildings of similar size and class in
the submarket in which the demised Premises is located. Each such
appraiser shall determine the fair market rental of the demised
Premises based upon an analysis of similar buildings in the area in
which the demised Premises is located and considering all other factors
which an experienced appraiser would consider when determining the fair
market value of office rental space, including but not limited to
concessions being granted at the time to tenants in similar type
buildings. In the event each appraiser identifies a fair market rental
value for the Premises which is within ten percent (10%) of the other
appraiser's fair market rental value, it shall be conclusively
determined that the fair market rental value of the Premises shall be
equal to the average of the two amounts. In the event the two
appraisers' figures for fair market rental value differ by more than
ten percent (10%), the two appraisers shall jointly choose a third
appraiser holding the same qualifications, which appraiser shall make a
determination as to the fair market rental value of the Premises; in
such event it shall be conclusively determined that the fair market
rental value of the Premises shall be equal to the average of such
third appraiser's fair market rental value and the next closest fair
market rental value as determined by the first two appraisers. All
fees, costs and expenses incurred in connection with the foregoing
procedure shall be paid in equal part by the Tenant and Landlord.
Landlord shall provide a $20.00 per useable square foot improvement
allowance upon each exercise of its option.
3. Right of First Refusal: Provided Tenant is not in default of the terms
and conditions of the lease, Tenant shall have a continuing Right of
First Refusal on all available contiguous floors or to contiguous space
on the same floor to its original premises upon its availability
subject to any existing first rights.
Base rent on said expansion space shall be the then current rent
payable by Tenant for the initial premises and the term of the
expansion space shall be coterminous with the initial lease and any
extensions thereof.
Subject to previously existing Rights of First Refusal, when
appropriate, Landlord agrees to notify Tenant in writing from time to
time of its receipt of any acceptable proposal to lease all or a
portion of contiguous space on same floor to its original premises or
on a contiguous floor to its original premises. Tenant shall then have
ten (10) calendar days from the date of Landlord's written notice to
notify Landlord of its intent to exercise its Right of First Refusal.
If Tenant notifies Landlord in writing of its intent to exercise any
such right of first refusal, Landlord and Tenant shall enter into a
written agreement agreeing to lease such space and to
<PAGE> 24
Exhibit E - Special Conditions
Page Two
execute a lease for such space (or an amendment to this Lease) within
thirty (30) days thereafter, upon the same terms and conditions of this
Lease. Landlord further agrees to provide a non-cash allowance for
improvements for refurbishment of the expansion space to be calculated
as follows: (1) during the first five (5) years of the original term,
the improvement allowance shall be $40.00 per useable square foot of
the additional space being leased, or (2) during the remaining five (5)
years of the original term, the improvement allowance shall be equal to
the amount obtained by multiplying $40.00 by the useable area of the
additional space and then multiplying such product by the fraction
whose denominator is sixty (60) months and the numerator is the
remaining number of months on the Lease.
4. Contraction Option: Tenant shall have a one-time option to reduce its
occupancy in the Building by up to twenty-five (25%) of the useable
space that constitutes Tenant's Initial Premises at the end of the
fifth (5th) year of the initial ten (10) year lease term. Tenant shall
notify the Landlord of its intent to contract no later than six (6)
months prior to such effective contraction date and pay to Landlord a
contraction fee equal to the unamortized portion (straight-line, no
interest) of all concessions given to Tenant to include the following:
Base Rent Abatement, Tenant Improvement Allowance, Space Planning
Allowance, Moving Allowance, and Brokerage Commissions, as it relates
to the reduced square footage. Tenant's reimbursement shall be payable
to Landlord on or before the end of the month preceding the effective
contraction date.
If Tenant exercises its right to contract, Tenant's First Right of
Refusal option shall be terminated. In the event that the contraction
option is exercised, the parties shall each execute an amendment to
this Lease so reflecting the new terms.
5. Option To Cancel: Tenant shall have a one-time option to cancel the
lease or any portion thereof effective at the end of the fifth (5th)
year of the initial ten (10) year lease term provided Tenant has
notified Landlord in writing of its intent to cancel said lease at
least six (6) months prior to the effective date of cancellation, and
upon the cancellation, pay to Landlord a cancellation fee equal to any
unamortized portion (straight-line, no interest) of all concessions
given to Tenant to include the following: Base Rent Abatement, Tenant
Improvement Allowance, Space Planning Allowance, Moving Allowance, and
Brokerage Commissions.
In addition to the payment of the unamortized portion of all
concessions provided, Tenant agrees to pay a "cost of money"
cancellation fee. This cost of money fee is defined as a 2.5% annual
interest (compounded monthly) based on a total concessions figure of
$770,380. This figure includes allowances for tenant improvements,
space planning, moving, leasing commissions, and free base rent (base
rent abatement is discounted using a rate of seven percent (7%) since
the total amount is not fully realized at the commencement of the lease
term).
This additional "cost of money" cancellation fee calculates out to be
$102,461.40 and shall be payable along with the unamortized portion of
all concessions provided on or before the end of the prior month
preceding the effective cancellation date.
6. Assignment/Sublease Rights: Tenant shall have the right, without
Landlord's consent, to assign or sublease the Premises to a subsidiary,
affiliate or related company of Tenant. In addition, Tenant shall be
permitted to assign or sublease all or a portion of its demised
Premises to any other entity, subject to Landlord's consent, which
consent shall not be unreasonably withheld or delayed.
All sublease premiums, profits or other consideration, if any, derived
from such sublease(s), shall be subject to the terms and conditions of
Landlord's standard lease form.
7. Tenant Improvement Allowance: Landlord shall provide Tenant with a
Tenant Improvement Allowance of $45.00 per useable square foot leased
for constructing the space to Tenant's specifications, which
specifications shall meet or exceed the minimum building standard
requirements and conform with all governmental laws, codes, regulations
and ordinances.
<PAGE> 25
Exhibit E - Special Conditions
Page Three
The following shall apply to the tenant improvements for the initial
premises or other space leased by Tenant during the initial lease term:
i) Landlord shall not charge Tenant any fee or other charges for
review of plans or specifications, or the supervision and/or
overhead associated with tenant improvement construction;
provided, however, that if Landlord should request
clarification of such plans or specifications, Tenant's
architect shall provide such clarification at no cost to
Landlord. Landlord agrees that such costs, if any, may be paid
out of the Tenant Improvement Allowance.
ii) Tenant shall have the right to bid and construct all
improvements. Tenant shall have the right to select
contractors, subcontractors, architects and engineers of
Tenant's choice for the construction of tenant improvements,
subject to Landlord's approval, which shall not be
unreasonably or arbitrarily withheld or delayed. Landlord
hereby approves the following contractors: Jay Kadowaki.
iii) All renovation work and activities shall conform to and comply
with the building standard requirements, as well as all
governmental regulations, codes and requirements, including
the Americans with Disabilities Act (ADA). All renovation work
is subject to the review and approval of the Landlord.
iv) Landlord shall disburse the Tenant Improvement Allowance to
the Tenant in periodic installments, as evidenced by submittal
of a Request for Progress Payment, fully executed by Tenant's
architect and contractor, along with all appropriate
supporting documents, such as lien releases, invoices, etc.,
in accordance with its normal payment practices.
v) Landlord shall make available to Tenant's architect, all
working and "as built" drawings of the premises as are
available in Landlord's files and records at no cost to
Tenant.
vi) Any unused portion of the Tenant Improvement Allowance shall
be applied to free Base Rent.
vii) During construction, Landlord agrees to provide free parking
(up to seven (7) stalls) for Tenant's contractors. Parking
stalls to be provided for a maximum of four (4) months.
8. Moving Allowance: Landlord shall provide Tenant with up to $3.00 per
useable square foot for moving allowance upon receipt of applicable
invoices.
9. Parking: Landlord shall provide twenty-two (22) parking stalls, two (2)
of which shall be on the reserved level, plus an additional ten (10)
parking stalls if available, at the prevailing monthly rate during the
term of the lease or any extensions thereof.
Landlord agrees to fix the parking rate for the first five (5) years of
the initial lease term at $145.00 per month for an unreserved level
stall and $175.00 per month for a reserved level stall, plus General
Excise Tax payable in accordance with Paragraph 3.2 in the General
Conditions of the Lease.
After the first five (5) years of the initial term of the lease, the
Landlord agrees to limit increases to the parking rates at three
percent (3%) annually.
10. Space Planning/Working Drawings: Tenant will contract directly with an
architect selected by Tenant subject to Landlord's approval. Landlord
shall reimburse Tenant $3.00 per usable square foot for working
drawings and space plans, upon receipt of applicable invoices.
11. Security Deposit: Based upon review of Tenant's financial condition,
Landlord shall not require a security deposit.
<PAGE> 26
Exhibit E - Special Conditions
Page Four
12. Broker's Commission: Landlord acknowledges CB Richard Ellis, Inc. as
Tenant's representatives in this transaction and agrees to compensate
CB Richard Ellis, Inc. on the following basis:
a) For all space leased and occupied by Tenant, approximately
11,357 rentable square feet, a total fee of $5.00 per rentable
square foot plus Hawaii State general excise tax.
b) Real estate commissions shall be disbursed fifty percent (50%)
upon full execution of the Landlord's building standard lease
form and fifty percent (50%) upon commencement of new lease
term.
13. Landlord and Tenant shall mutually agree that in the event of any
conflict between the terms, provisions and covenants of the Lease and
this Exhibit "E", the terms, provisions and covenants of this Exhibit
"E" shall control.
14. Landlord shall provide the following building services for the
operation and maintenance of the Amfac Center to be covered by
operating expenses recovered from tenants pursuant to the terms and
conditions of the building standard lease form and include, without
limiting the generality of the foregoing:
a) Air Conditioning for normal office use.
b) Electricity for normal office use.
c) Restroom facilities and supplies.
d) Janitorial service and supplies for office tower and common
areas.
e) Security control.
f) Window cleaning.
g) Elevator service.
h) Refuse removal for office tower and common areas.
15. Landlord warrants, to the best of its knowledge, that there are no
asbestos or other hazardous materials in the demised Premises.
16. Landlord warrants, to the best of its knowledge, that the Building is
in compliance with the current Americans with Disabilities Act ("ADA")
requirements. Tenant acknowledges that Tenant is solely responsible for
compliance with the ADA for the Premises. Tenant shall pay for capital
improvements if Landlord is required to make additional changes to
bring the building up to code due to changes in the ADA, to the same
all other tenants in the Building are required to pay for such
improvements.
17. In all cases where consent or approval shall be required of either
Tenant or Landlord, pursuant to the Lease, the giving of such consent
shall not be unreasonably withheld or delayed by the party from whom
such consent is required.
18. Landlord acknowledges and agrees that the Premises shall from time to
time include files, materials, information, documents, work product and
similar items which are proprietary to Tenant and are strictly
confidential ("Confidential Information"). Landlord covenants and
agrees that it shall take all reasonable steps to ensure that the
Confidential Information is not disclosed, transferred, utilized,
reproduced, disseminated to or discussed with any person by the
Landlord, and Landlord shall take reasonable steps to prevent any
employee, invitee, independent contractor or other representative of
the Landlord from violating the terms of this Section 15. Landlord
acknowledges and agrees that in the event that disclosure by the
Landlord of any Confidential Information is discovered in violation of
this Section 15, Tenant shall be entitled to an injunction to be issued
by any court of competent jurisdiction restraining the Landlord from
committing or continuing such violation. The obligation of the Landlord
to maintain confidentiality shall survive the termination of this
Lease. Further, Tenant, subject to the written consent of Landlord
which shall not be unreasonably withheld, shall have the right to
designate certain areas of the demised Premises as "Secured Areas",
which the Landlord shall not have access to except in the event of an
emergency. In that regard, Landlord hereby agrees that in the event
Landlord deems it
<PAGE> 27
Exhibit E - Special Conditions
Page Five
necessary to enter such Secured Areas due to an emergency, any
documents, information or other items contained in such Secured Areas
shall be deemed Confidential Information.
19. Guaranty: As an inducement to the Landlord to execute this Lease, Great
Hawaiian Cruise Line, Inc. ("Guarantor") has executed and delivered a
Guaranty Agreement of even date herewith attached to the Lease as
Exhibit "G". In the event that Guarantor files any petition in
bankruptcy, or the adjudication of Guarantor as bankrupt or insolvent,
or the appointment of a receiver or trustee to take possession of all
or substantially all of the assets of Guarantor, or a general
assignment by Guarantor for the benefit of creditors, or any action
taken or suffered by Guarantor under any state or federal insolvency or
bankruptcy act, or any similar law now or hereafter in effect,
including, without limitation, the filing of any petition for or in
reorganization shall constitute a breach of this Lease by Tenant and,
in any such event, Landlord may, at its option, terminate this Lease
upon written notice to Tenant in accordance with Paragraph 25 of this
Lease. Should the Landlord opt to terminate this Lease, all subleases
under this Lease shall, at Landlord's sole option, be terminated.
<PAGE> 1
10(iii)(a)(6)
AMERICAN CLASSIC VOYAGES CO.
DEFERRED COMPENSATION PLAN
PLAN DOCUMENT
EFFECTIVE AUGUST 1, 1998
<PAGE> 2
- 2 -
TABLE OF CONTENTS
PAGE
1. Definitions................................................... 1
2. Deferral Contributions........................................ 3
3. Matching Contributions........................................ 4
4. Accounts...................................................... 5
5. Funding of Deferred Amounts................................... 5
6. Distribution.................................................. 6
7. Deferral Agreements Irrevocable............................... 8
8. Administration................................................ 8
9. Arbitration................................................... 8
10. Amendments to the Plan........................................ 8
11. Termination of the Plan....................................... 8
12. Expenses...................................................... 9
13. Notices....................................................... 9
14. No Guarantee of Employment.................................... 9
15. Governing Law................................................. 9
16. Incapacity.................................................... 9
17. Liability Limited............................................. 9
18. Claims Procedure.............................................. 9
<PAGE> 3
1
AMERICAN CLASSIC VOYAGES CO.
DEFERRED COMPENSATION PLAN
This Deferred Compensation Plan is adopted to provide certain employees
an opportunity to elect to defer a portion of their compensation otherwise
payable by American Classic Voyages Co. and its related companies (ACV).
NOW, THEREFORE, ACV HEREBY ADOPTS THE PLAN, EFFECTIVE AUGUST 1, 1998,
TO READ AS FOLLOWS:
1. DEFINITIONS. DEFINITIONS. DEFINITIONS.
(a) Account shall mean the record of contributions, earnings and
distributions maintained for a Participant pursuant to Paragraph 4. Each Account
shall consist of a Deferral Contribution sub-account and a Matching Contribution
sub-account. Accounts under the Plan shall consist solely of bookkeeping records
of Plan participation, shall not (except as provided in Paragraph 5) require a
segregation of the assets of any Employer and shall not make the Plan funded for
purposes of the Code or ERISA.
(b) "ACV" shall mean American Classic Voyages Co., a Delaware
corporation, and any successor by merger or acquisition.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Compensation" shall mean the total compensation of each Eligible
Employee paid by the Employer during any Plan Year, including bonuses (except as
provided below), overtime pay and commissioned earnings, and before reductions
for salary reduction contributions contributed to this Plan, the Qualified Plan,
or to a cafeteria plan under Code Section 125. Compensation shall not include
(i) relocation pay or related payments; (ii) severance pay; (iii) automobile
allowances; (iv) disposition of incentive stock options; (v) miscellaneous
compensation; (vi) non-qualified stock options; (vii) tips; or (viii) any bonus
that is not a performance-based incentive bonus.
Any Eligible Employee's Compensation for any Plan Year in excess of
$160,000 (or such other amount provided pursuant to Section 401(a)(17) of the
Code) shall be disregarded for all purposes under the Plan.
(e) "Deferral Agreement" shall mean a written election by a Participant
to defer Compensation as a Deferral Contribution under the Plan in the form
prescribed by the Plan Administrator.
(f) "Deferral Contribution" shall mean an amount of Compensation
deferred by a Participant and contributed to the Plan on behalf of the
Participant pursuant to the provisions of Paragraph 2.
<PAGE> 4
2
(g) "Eligible Employee" shall mean any employee of an Employer who is
an active participant in the Qualified Plan and who has Compensation in excess
of $80,000 (or such higher amount as determined by the Plan Administrator),
determined as of each Entry Date for the preceding fifty-two (52) week period;
provided, however, that such employee is a member of a select group of
management or highly compensated employees as such group is described under
Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.
(h) "Employer" shall mean ACV or each other Related Employer that has
been authorized to and adopts the Plan.
(i) Entry Date shall mean January 1 and July 1 of each Plan Year, and
in addition, for the first Plan Year the Entry Date shall be August 1.
(j) ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
(k) Matching Contribution shall mean the Employer contribution
contributed to the Plan on behalf of the Participant pursuant to the provisions
of Paragraph 3.
(l) "Participant" shall mean an Eligible Employee who has made the
election described in Paragraph 2. Any such Eligible Employee shall remain a
Participant until no election to defer Compensation under the Plan remains
effective for him or her and all amounts contributed to the Plan for him or her
have been distributed.
(m) "Plan" shall mean the American Classic Voyages Co. Deferred
Compensation Plan set forth herein.
(n) "Plan Administrator" shall mean ACV or such person(s) or entity
designated by ACV from time to time.
(o) "Plan Year" shall mean each January 1 through December 31 from and
after the effective date of the Plan; provided that the first Plan Year shall be
the short Plan Year commencing August 1, 1998 and ending December 31, 1998.
(p) Qualified Plan shall mean the American Classic Voyages Co.
ADVANTAGE Retirement Savings Plan.
(q) "Related Employer" shall mean any company that is related to ACV as
described in Section 414(b), (c), (m) or (o) of the Code, or any other company
determined by the Plan Administrator to be related by ownership or otherwise to
an extent justifying the participation of its Eligible Employees hereunder.
(r) "Trust" shall mean the grantor trust maintained by ACV for the
purpose of funding amounts deferred under the Plan.
(s) "Trustee" shall mean the trustee of the Trust.
<PAGE> 5
3
(t) "Unforeseeable Emergency" shall mean a severe financial hardship to
the Participant resulting from a sudden and unexpected illness or accident of
the Participant or of a dependent (as defined in Section 152(a) of the Code) of
the Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
constitute an unforeseeable emergency will depend upon the facts of each case,
but, in any case, payment may not be made to the extent that such hardship is or
may be relieved:
(i) through reimbursement or compensation by insurance or
otherwise;
(ii) by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not
itself cause severe financial hardship; or
(iii) by cessation of deferrals under the Plan.
For purposes of the Plan, an "Unforeseeable Emergency" shall not
include a Participant's need to send his or her child to college or a
Participant's desire to purchase a home.
2. DEFERRAL CONTRIBUTIONS. DEFERRAL CONTRIBUTIONS. DEFERRAL
CONTRIBUTIONS.
(a) For each Plan Year, each Eligible Employee may elect to file a
Deferral Agreement and thereby elect to defer the amounts (if any) described in
subparagraphs (b) and (c). Each Deferral Agreement shall be filed in accordance
with subparagraphs (d) or (e) below. Subject to subparagraph (f) and Paragraph
7, each Deferral Agreement filed with the Plan Administrator shall be effective
for a Plan Year or the remainder of a Plan Year. A Participant filing a Deferral
Agreement for a Plan Year shall also agree to restrict his or her ability to
change or suspend contributions under the Qualified Plan to the same extent that
his or her ability to change or suspend contributions under this Plan is
limited.
(b) If a Participant has a Deferral Agreement filed with the Plan
Administrator for a Plan Year, ACV shall determine the maximum amount of
elective contributions that the Employer may make under Section 4.01 of the
Qualified Plan on behalf of each Participant for such current year, consistent
with the limitations of Code Section 401(k)(3). If a Participants elective
deferrals under the Qualified Plan for the Plan Year exceed the limitations of
Code Section 401(k)(3), amounts in excess of the Code Section 401(k)(3)
limitations shall be transferred from the Qualified Plan to the Trustee on the
Participants behalf as Deferral Contributions, no later than March 15th of the
following Plan Year.
(c) During each Plan Year for which a Participant has a Deferral
Agreement filed with the Plan Administrator, if a Participants elective
deferrals under the Qualified Plan for the Plan Year exceed the maximum dollar
amount under Code Section 402(g), amounts in excess of the Code Section 402(g)
limitation shall be withheld by the Participants Employer and paid directly to
the Trustee on the Participants behalf as Deferral Contributions.
<PAGE> 6
4
(d) For the Plan Year in which a person first becomes an Eligible
Employee, a Deferral Agreement will be effective as of the first day of the
calendar quarter beginning after the date the Deferral Agreement is filed with
the Plan Administrator with respect to Compensation earned after the first day
of such calendar quarter. Notwithstanding the foregoing, for the first Plan
Year, an Eligible Employees Deferral Agreement will be effective with respect to
Compensation earned after August 1, 1998, if the Deferral Agreement is filed
with the Plan Administrator on or before the deadline established by the Plan
Administrator, but in no event later than July 31, 1998.
(e) For each subsequent Plan Year, a Deferral Agreement shall be
effective as of the beginning of such Plan Year, if the Eligible Employee files
the Deferral Agreement with the Plan Administrator on or before the deadline
established by the Plan Administrator for the applicable Plan Year, but in no
event later than the December 31 that precedes the first day of such Plan Year.
For each Plan Year, an Eligible Employee who does not file a Deferral Agreement
to become effective January 1 of such Plan Year may elect to make a Deferral
Contribution by filing a Deferral Agreement with the Plan Administrator no fewer
than sixty (60) days before the July 1st Entry Date; provided that such deferral
election shall apply only to Compensation earned after July 1st of such Plan
Year.
(f) Once a Participant has entered into a Deferral Agreement with an
Employer, the Participant may not change or revoke such Agreement for the
remainder of the Plan Year, unless the Participant incurs an Unforeseeable
Emergency, or except as provided in this subparagraph (f). A Participant who
filed a Deferral Agreement to become effective January 1 of a Plan Year may
elect to increase the amount of his or her Compensation subject to the Deferral
Agreement by filing a new Deferral Agreement no fewer than sixty (60) days
before the July 1st Entry Date; provided that such deferral election shall apply
only to Compensation earned after July 1st of such Plan Year.
(g) A Participants Deferral Agreement shall be suspended as of any
Entry Date that the Plan Administrator, in its sole discretion, reasonably
determines that the Participant ceases to be an Eligible Employee. In such
event, no additional Deferral Contributions shall be made to the Account of the
Participant for the period his or her Deferral Agreement is suspended. A
Participant whose Deferral Agreement has been suspended pursuant to this
subparagraph shall not be deemed to have incurred a termination of employment,
and, subject to subparagraph 6(f), his or her Account shall continue to be
maintained under the terms of the Plan.
3. MATCHING CONTRIBUTIONS. MATCHING CONTRIBUTIONS. MATCHING
CONTRIBUTIONS. Each Plan Year, the Employer shall make a Matching Contribution
on behalf of each Participant in accordance with this Paragraph 3. At the end of
the Plan Year for which a Participants Deferral Agreement is effective and not
later than March 15th of the following calendar year, ACV shall determine the
maximum amount of employer matching contributions that the Employer may make
under Section 4.04 of the Qualified Plan on behalf of each Participant for such
current year, consistent with the limitations under Code Section 401(m)(2). Each
Participants Employer shall make a Matching Contribution to the Plan equal to
the amount by which the employer matching contributions made on the Participants
behalf under the Qualified Plan for the Plan Year are reduced because of the
limitations of Code Section 401(m)(2).
<PAGE> 7
5
Matching Contributions shall be paid directly to the Trustee on the Participants
behalf, no later than October 15th of the following Plan Year.
4. ACCOUNTS. ACCOUNTS. ACCOUNTS.
(a) An Account shall be established for each Participant. The
Participant's Account shall be credited with the amount of all contributions on
behalf of the Participant, and charged for distributions made to him or her
under the Plan. The Account of each Participant shall consist of a Deferral
Contribution sub-account and a Matching Contribution sub-account. Each
Participant shall direct, pursuant to procedures established by the Plan
Administrator, the allocation of his Account among investment alternatives
designated by the Plan Administrator.
(b) Periodically, but not less frequently than annually, the Trustee
(or in the case that the Trust terminates, the Plan Administrator if there is no
Trustee) shall value the Plan's assets and shall allocate earnings, gains and
losses among all Accounts. Each Account shall share proportionately based on its
average balance over the period since the most recent preceding date as of which
the assets of the Plan were valued. If an Account is invested specifically in
certain investments, the foregoing shall be accomplished in a manner that
considers the different investments of the various Accounts. Wherever, under the
Plan, distribution of a portion of the Participants Account is made, such amount
shall be as adjusted pursuant to this subparagraph.
(c) A Participant shall always have a fully vested interest in the
adjusted balance of his or her Deferral Contribution sub-account. A Participant
shall be vested in a percentage of the adjusted balance of his or her Matching
Contribution sub-account that is derived from Matching Contributions in an
amount equal to the Participants vested interest in his or her Employer
contributions under the Qualified Plan, as determined under Section 6.05(b)(ii)
of the Qualified Plan. Notwithstanding the foregoing, the Participant shall
become 100% vested in his or her Matching Contribution sub-account upon Plan
termination.
(d) If a Participant terminates employment before becoming fully
vested, any non-vested Matching Contributions shall be forfeited to ACV.
(e) An Account may not be encumbered or assigned by a Participant or
any beneficiary and any attempt to encumber or assign an Account shall be null
and void. No interest of any person or entity in, or right to receive a benefit
under, the Plan shall be subject in any manner to sale, transfer, assignment,
pledge, attachment, garnishment, or other alienation or encumbrance of any kind;
nor may such interest or right to receive a benefit be taken, either voluntarily
or involuntarily, for the satisfaction of the debts of, or other obligations or
claims against, such person or entity, including claims for alimony, support,
separate maintenance and claims in bankruptcy proceedings.
5. FUNDING OF DEFERRED AMOUNTS. FUNDING OF DEFERRED AMOUNTS. FUNDING OF
DEFERRED AMOUNTS.
(a) ACV has established the Trust as an irrevocable grantor trust.
Notwithstanding the foregoing, ACV may amend the Plan, including this Paragraph
5, at any time to provide that
<PAGE> 8
6
contributions for subsequent Plan Years shall not be segregated from the general
assets of ACV through the Trust or in any other manner.
(b) ACV shall be under no obligation to secure an opinion of counsel, a
private letter ruling from the Internal Revenue Service, or any other assurance
as to the tax status of any Deferral Agreement or of the Trust but shall use its
best efforts, consistent with the Plan, to establish and maintain the Plan and
the Trust so that amounts contributed to the Trust and earnings thereon shall
not be taxable to Participants until they are distributed from the Trust.
Amounts held in the Trust shall be held for purposes of the Plan and shall be
subject to the claims of creditors of the Employer in the event of its
insolvency.
(c) The Plan and the Trust shall be maintained and administered so that
the Plan is and continues to be unfunded for purposes of ERISA and the Code.
6. DISTRIBUTION. DISTRIBUTION. DISTRIBUTION.
(a) A Participant may specify a distribution date applicable to his or
her vested Account, in accordance with the following:
(i) On the Deferral Agreement filed for the Plan Year in
which he or she first becomes a Participant, the
Participant may specify the date on which
distribution of the portion of the Participants
vested Account described in the last sentence of this
subparagraph (i), as adjusted for earnings, gains and
losses, is to be made. Such specified date shall not
be earlier than the January 1 that is at least one
year after the Plan Year subject to such Deferral
Agreement. Such election shall apply to Deferral
Contributions and Matching Contributions (as
adjusted) for the Plan Year for which the Deferral
Agreement is filed, and for any subsequent Plan Year
the last day of which is at least one full Plan Year
before the Participants elected distribution date.
(ii) On the Deferral Agreement filed for the first Plan
Year with respect to which a distribution date
election under subparagraph (i) would not be
applicable (and for the first Plan Year with respect
to which an election under this subparagraph would
not be applicable pursuant to the last sentence of
this subparagraph), a Participant may specify the
date on which distribution of the portion of the
Participants vested Account described in the last
sentence of this subparagraph (ii), as adjusted for
earnings, gains and losses, is to be made. Such
specified date shall not be earlier than the January
1 that is at least one year after the Plan Year
subject to such Deferral Agreement. Such election
shall apply to Deferral Contributions and Matching
Contributions (as adjusted) for the Plan Year for
which the Deferral Agreement is filed, and for any
subsequent Plan Year the last day of which is at
least one full Plan Year before the Participants
elected distribution date.
<PAGE> 9
7
(b) If approved by the Plan Administrator, a Participant may change a
date elected for distribution pursuant to subparagraph (a); provided that (i)
the change is filed with the Plan Administrator no later than the December 31
that is at least one year before the Plan Year in which the previously elected
date occurs; (ii) the new date for distribution occurs no earlier than the
second Plan Year after the Plan Year in which the previously elected date
occurs; and (iii) no more than one change in distribution dates may be made by a
Participant during any five-year period.
(c) If a Participant elects a specified date for distribution pursuant
to subparagraphs (a) or (b), the Participant will be entitled to a distribution
of his or her vested Account balance, as of such specified date. If a
Participant has not specified a distribution date, the Participant will be
deemed to have elected as a distribution date, the date that the Participants
employment with all Employers terminates.
(d) A Participant may specify on a Deferral Agreement that upon the
Participants termination of employment he or she will be entitled to the
distribution of the vested balance of his or her Account, even if a later
distribution date is specified by the Participant pursuant to subparagraphs (a)
or (b).
(e) If a Participants Account is maintained under the Plan following
the Participants termination of employment, such Participants Account shall be
charged an administrative fee in an amount determined by the Plan Administrator
in its discretion for each calendar month following the Participants termination
of employment that the Participants Account balance remains in the Plan.
(f) Notwithstanding any provision of the Plan to the contrary, if a
Participant does not qualify as an Eligible Employee for any twenty-four (24)
consecutive month period, distribution of the vested balance of his or her
Account shall be made within the first ninety (90) days of the fifth Plan Year
following the Plan Year in which the Participant first fails to qualify as an
Eligible Employee, except to the extent an earlier distribution date has been
elected pursuant to subparagraph (a) or (b) above or would apply pursuant to
subparagraph (c) or (d) above.
(g) Notwithstanding any provision of the Plan to the contrary, if a
Participant incurs an Unforeseeable Emergency, he or she may elect to make a
withdrawal from the vested balance of his or her Account, but only to the extent
reasonably needed to satisfy the emergency need. A Participant who wishes to
receive a distribution pursuant to this subparagraph (g) shall apply for such
distribution on forms prescribed by the Plan Administrator and shall provide
information to the Plan Administrator reasonably necessary to permit the Plan
Administrator to determine whether an Unforeseeable Emergency exists and the
amount of the distribution reasonably needed to satisfy the emergency need.
(h) If a Participant dies before his or her Account has been
distributed under the Plan, the Participants Account shall be paid in a lump sum
to the beneficiary or beneficiaries designated in the Participant's Deferral
Agreement or on other forms prescribed by the Plan
<PAGE> 10
8
Administrator as soon as practicable after the Participants death. If no
beneficiary designation has been made, then such distribution shall be made in a
lump sum to the Participant's estate.
(i) Upon the request of a Participant, the Plan Administrator, in its
sole discretion, may pay to the Participant any amount up to the full vested
balance of the Participant's Account. A Participant requesting a withdrawal
under this section shall apply for the payment in writing on a form prescribed
by the Plan Administrator for that purpose, and shall provide such additional
information as the Plan Administrator may require. The Plan Administrator will
pay 90% of the withdrawn amount to the Participant and the remaining 10% will be
forfeited to ACV. A Participant shall be suspended from making Deferral
Contributions under the Plan until the first day of the Plan Year that is at
least twelve (12) months following the receipt of a distribution under this
subparagraph (i).
(j) All distributions under the Plan shall be made in cash in a lump
sum.
7. DEFERRAL AGREEMENTS IRREVOCABLE. DEFERRAL AGREEMENTS IRREVOCABLE.
DEFERRAL AGREEMENTS IRREVOCABLE. Except as provided in subparagraph 2(f), any
election to defer Compensation made by a Participant for a Plan Year shall be
irrevocable. Notwithstanding the foregoing, if a Participant incurs an
Unforeseeable Emergency, he or she may amend or revoke his or her Deferral
Agreement (but only to the extent reasonably needed to relieve the Unforeseeable
Emergency) by filing such forms as are prescribed by the Plan Administrator. Any
election to amend or revoke the Deferral Agreement shall be effective for at
least the remainder of the calendar year in which the election is made; provided
that if the Deferral Agreement was amended, the Participant will be entitled to
further amend or revoke the Deferral Agreement if the Participant incurs an
Unforeseeable Emergency.
8. ADMINISTRATION. ADMINISTRATION. ADMINISTRATION. The Plan shall be
administered by the Plan Administrator, who shall have all powers necessary to
carry out the provisions of the Plan. The Plan Administrator shall have the
sole, final and discretionary authority to interpret the Plan, and its
determinations including those regarding the eligibility, status, and rights of
Eligible Employees and Participants and factual determinations shall be
conclusive and binding on all persons; provided that if the Plan Administrator
or one of the persons constituting the Plan Administrator is a Participant, then
determinations regarding such Participant's benefits under the Plan shall be
made by the Chief Executive Officer of ACV.
9. ARBITRATION. ARBITRATION. ARBITRATION. At the election of ACV,
disputes under the Plan shall be submitted to binding arbitration, conducted in
the principal offices of ACV, in accordance with the rules of the American
Arbitration Association. Each party to such arbitration shall bear its own costs
provided that any unallocated costs shall be borne equally by the parties.
10. AMENDMENTS TO THE PLAN. AMENDMENTS TO THE PLAN. AMENDMENTS TO THE
PLAN. ACV or its delegate may amend the Plan at any time, without the consent of
Participants or their beneficiaries, provided, however, that no amendment shall
divest any Participant or beneficiary of the credits to his or her Accounts, or
of any rights to which he or she would have
<PAGE> 11
9
been entitled if the Plan had been terminated immediately prior to the effective
date of such amendment.
11. TERMINATION OF THE PLAN. TERMINATION OF THE PLAN. TERMINATION OF
THE PLAN. ACV may terminate the Plan at any time. Upon termination of the Plan,
distribution of Participants' Accounts shall be made in the manner and at the
time heretofore prescribed; provided that no additional amounts shall be
credited to the Account of a Participant following termination of the Plan other
than pursuant to subparagraph 4(b).
12. EXPENSES. EXPENSES. EXPENSES. Costs of administration of the
Plan will be paid out of the Trust except as provided in subparagraph 6(e)
herein or to the extent that ACV elects to pay such expenses.
13. NOTICES. NOTICES. NOTICES. Any notice or election required or
permitted to be given to an Employer or the Plan Administrator hereunder shall
be in writing and shall be deemed to be filed (a) on the date it is personally
delivered to the Plan Administrator, or (b) three business days after it is sent
by registered or certified mail, addressed to the Plan Administrator at ACV's
principal offices.
14. NO GUARANTEE OF EMPLOYMENT. NO GUARANTEE OF EMPLOYMENT. NO
GUARANTEE OF EMPLOYMENT. Nothing in the Plan shall constitute a contract or
guarantee of employment or impede or otherwise affect the right of ACV to
terminate the employment of any Participant or Eligible Employee.
15. GOVERNING LAW. GOVERNING LAW. GOVERNING LAW. Except to the extent
preempted by Federal law, the Plan, Deferral Agreements, and matters related
thereto, shall be construed under and governed by the laws of the State of
Illinois.
16. INCAPACITY. INCAPACITY. INCAPACITY. If any person entitled to a
payment under the Plan is deemed by the Plan Administrator to be incapable of
personally receiving and giving a valid receipt for such payment, then, unless
and until claim therefor shall have been made by a duly appointed guardian or
other legal representative of such person, ACV may provide for such payment or
any part thereof to be made to any other person or institution then contributing
toward or providing for the care and maintenance of such person. Any such
payment shall be a payment for the account of such person and a complete
discharge of any liability of all Employers, the Plan Administrator, and the
Plan therefor.
17. LIABILITY LIMITED. LIABILITY LIMITED. LIABILITY LIMITED.
Notwithstanding any of the preceding provisions of the Plan, any Employer, the
Plan Administrator, or any individual acting as an employee or agent of any
Employer or the Plan Administrator shall not be liable to any Participant,
former Participant, beneficiary or any other person for any claim, loss,
liability, or expense incurred in connection with the Plan.
<PAGE> 12
10
18. CLAIMS PROCEDURE. CLAIMS PROCEDURE. CLAIMS PROCEDURE.
(a) Any person claiming a benefit, requesting an interpretation or
ruling under the Plan, or requesting information under the Plan shall present
the request in writing to the Plan Administrator, which shall respond in writing
within 60 days.
(b) If the claim or request is denied, the written notice of denial
shall state:
(i) The reason for denial, with specific reference to the Plan
provision on which the denial is based.
(ii) A description of any additional material or information
required and an explanation of why it is necessary.
(iii) An explanation of the Plan's claim review procedure.
(c) Any person whose claim or request is denied or who has not received
a response within 60 days may request review by notice given in writing to the
Plan Administrator. The claim or request shall be reviewed by the Plan
Administrator who may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.
(d) The decision on review shall normally be made within 60 days. If an
extension of time is required for a hearing or other special circumstances, the
claimant shall be notified and the time limit shall be 120 days. The decision
shall be in writing and shall state the reason and the relevant Plan provisions.
All decisions on review shall be final and binding on all parties concerned.
IN WITNESS WHEREOF, ACV has caused this document to be executed by its
duly authorized officers as of the day of , 1998.
AMERICAN CLASSIC VOYAGES CO.
----------------------------
ATTEST:
- ------------------------
<PAGE> 13
The undersigned shareholders, owning beneficially and of record in the aggregate
7,405,747 shares or 51.8% of the outstanding shares of the Common Stock of
American Classic Voyages Co., a Delaware corporation (the "Corporation"), hereby
covenant to and agree with the Corporation and each other as follows: (i) to
vote those number of shares set forth below their names in favor of the attached
Action by Shareholders when so directed by the Corporation; and (ii) not to
sell, transfer, assign or otherwise dispose of those number of shares set forth
below their names prior to the earlier of the taking of such action or April 15,
1999.
EGI HOLDINGS, INC., an Illinois corporation
(3,641,873 shares)
By: /s/ Sheli Z. Rosenberg
-------------------------------
Name: Sheli Z. Rosenberg
Its: Vice President
EGIL INVESTMENTS, INC., an Illinois corporation
(3,641,874 shares)
By: /s/ Mark Slezak
-------------------------------
Name: Mark Slezak
Its: Vice President
SAMSTOCK, L.L.C., a Delaware limited liability company
(52,500 shares)
By: /s/ Sheli Z. Rosenberg
-------------------------------
Name: Sheli Z. Rosenberg
Its: Vice President
ANDA PARTNERSHIP, an Illinois general partnership
(52,500 shares)
By: Ann Only Trust, a general partner
By: /s/ Mark Slezak
----------------------------------
Name: Mark Slezak
Its: Trustee
By: Ann and Descendants Trust, a general partner
By: /s/ Mark Slezak
----------------------------------
Name: Mark Slezak
Its: Trustee
ANN LURIE REVOCABLE TRUST
(17,000 shares)
By: /s/ Mark Slezak, pursuant to power of attorney
------------------------------------------------
Name: Ann Lurie
Its: Trustee
Dated: February 22, 1999
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF
AMERICAN CLASSIC VOYAGES CO.
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Jurisdiction Under Percentage
Name of Subsidiary Which Organized of Ownership
--------------------------------------------------- ----------------------- ---------------------
<S> <C> <C>
The Delta Queen Steamboat Co. Delaware 100%
DQSB II, Inc. Delaware (1)
Cruise America Travel, Incorporated Delaware (1)
Great River Cruise Line, L.L.C. Delaware (2)
Great Ocean Cruise Line, L.L.C. Delaware (2)
Great AQ Steamboat, L.L.C. Delaware (2)
Great Hawaiian Cruise Line, Inc. Delaware 100%
Great Independence Ship Co. Delaware (3)
Oceanic Ship Co. Delaware (3)
Great Hawaiian Properties Corporation Delaware (3)
American Hawaii Properties Corporation Delaware (3)
CAT II, Inc. Delaware (3)
</TABLE>
(1) 100% owned subsidiaries of The Delta Queen Steamboat Co.
(2) 99% owned subsidiaries of The Delta Queen Steamboat Co. and 1% owned
subsidiaries of DQSB II, Inc.
(3) 100% owned subsidiaries of Great Hawaiian Cruise Line, Inc.
<PAGE> 1
EXHIBIT 23
Consent of KPMG LLP
The Board of Directors and Stockholders
American Classic Voyages Co.
We consent to incorporation by reference in the registration statements No.
33-80614 on Form S-3 and No. 333-44225 on Form S-8 of American Classic Voyages
Co. of our report dated February 19, 1999, relating to the consolidated balance
sheets of American Classic Voyages Co. and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998, and the related financial statement schedule,
which report appears in the December 31, 1998 annual report on Form 10-K of
American Classic Voyages Co.
/s/ KPMG LLP
KPMG LLP
Chicago, Illinois
March 31, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 27,064<F1>
<SECURITIES> 0
<RECEIVABLES> 1,989
<ALLOWANCES> 0
<INVENTORY> 2,413
<CURRENT-ASSETS> 38,106
<PP&E> 237,922
<DEPRECIATION> 75,793
<TOTAL-ASSETS> 212,792
<CURRENT-LIABILITIES> 73,390
<BONDS> 77,388
0
0
<COMMON> 143
<OTHER-SE> 61,871
<TOTAL-LIABILITY-AND-EQUITY> 212,792
<SALES> 0
<TOTAL-REVENUES> 192,225
<CGS> 0
<TOTAL-COSTS> 125,595
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,639
<INCOME-PRETAX> 264
<INCOME-TAX> 107
<INCOME-CONTINUING> 157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 157
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<FN>
<F1>Includes restricted short-term investments of $60.
</FN>
</TABLE>
<PAGE> 1
Exhibit 99.(i)
ACTION BY SHAREHOLDERS OF
AMERICAN CLASSIC VOYAGES CO.
The undersigned shareholders, owning beneficially and of record in the
aggregate 7,405,747 shares or 51.8% of the outstanding shares of the Common
Stock of American Classic Voyages Co., a Delaware corporation (the
"Corporation"), hereby adopt, by this unanimous written consent (which may be
executed in counterparts), in accordance with Section 228 of the General
Corporation Law of the State of Delaware, the following resolutions, with the
same force and effect as if they had been unanimously adopted at a duly convened
meeting of the shareholders of the Corporation, as of the date consent to the
following actions by the shareholders of Directors of the Corporation:
WHEREAS, the Board of Directors of the Corporation has approved a
resolution amending the Corporation's Amended and Restated Certificate of
Incorporation to provide that the maximum number of shares of capital stock
which the Corporation is authorized to have outstanding at any time is
45,000,000 shares of which 40,000,000 shall be Common Stock and 5,000,000 of
which shall be Preferred Stock;
WHEREAS, the Board of Directors of the Corporation directed that said
amendment be submitted to the undersigned for approval;
RESOLVED, that Article FOURTH of the Corporation's Amended and Restated
Certificate of Incorporation shall be amended and restated in its entirety to
read as follows:
"FOURTH: The maximum number of shares of capital stock which the
Corporation is authorized to issue or to have outstanding at any time
shall be 45,000,000 shares of which 40,000,000 shall be Common Stock of
$.01 (one cent) par value, and 5,000,000 shall be Preferred Stock of
$.01 (one cent) par value. The Preferred Stock may be issued from time
to time in one or more series, upon resolution or resolutions providing
for such series adopted by the Board of Directors, with such
distinctive designations as shall be stated in such resolution or
resolutions. The resolution or resolutions providing
<PAGE> 2
for the issue of shares of a particular series shall fix, subject to
the applicable laws and provisions of this Article FOURTH, the
designation, rights, preferences and limitations of the shares of each
such series. The authority of the Board of Directors with respect to
each series shall include, but not be limited to, the determination of
the following:
(a) The number of shares constituting such series, including the
authority to increase or decrease such number, and the distinctive designation
of such series;
(b) The dividend rate of the shares of such series, whether the
dividends shall be cumulative and, if so, the date from which they shall be
cumulative, and the relative rights of priority, if any, of payment of dividends
on shares of such series;
(c) The right, if any, of the Corporation to redeem shares of such
series and the terms and conditions of such redemption including the redemption
price;
(d) The rights of shares in case of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment of shares of such series;
(e) The voting rights, if any, for such series and the terms and
conditions under which such voting rights may be exercised;
(f) The obligation, if any, of the Corporation to retire shares of such
series pursuant to a retirement or sinking fund or fund of a similar nature and
the terms and conditions of such obligation;
(g) The terms and conditions, if any, upon which shares of such series
shall be convertible into or exchangeable for shares of stock of any other class
or classes or of any other series of preferred stock, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any; and
(h) Any other rights, preferences or limitations of the shares of such
series as may be permitted by law."
<PAGE> 3
FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed to (i) file with the Secretary of State of the State of
Delaware a Certificate of Amendment to the Corporation's Certificate as soon as
practicable on or after, but in no event before, 20 calendar days following the
mailing of the Information Statement, and (ii) provide prompt notice to the
Corporation's shareholders of the taking of corporate action described herein;
RESOLVED, that the officers of the Corporation are hereby authorized
and directed to do and perform, or cause to be done or performed, all such acts,
deeds and things and to make, execute and deliver, or cause to be made, executed
or delivered, all such documents, instruments or certificates in the name of,
for and on behalf of the Corporation or otherwise as he or she may deem
necessary or appropriate to effectuate or carry out fully the purpose and intent
of the foregoing resolutions and to comply with all applicable laws and rules in
connection therewith.
This Written Consent may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which when taken
together will constitute but one and the same instrument.
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Action as of the
22 day of February, 1999.
EGI HOLDINGS, INC., an Illinois corporation
(3,641,873 shares)
By: /s/ SHELI Z. ROSENBERG
----------------------------------
Name: Sheli Z. Rosenberg
Its: Vice President
EGIL INVESTMENTS, INC., an Illinois corporation
(3,641,874 shares)
By: /s/ MARK SLEZAK
----------------------------------
Name: Mark Slezak
Its: Vice President
SAMSTOCK, L.L.C., a Delaware limited liability company
(52,500 shares)
By: /s/ SHELI Z. ROSENBERG
----------------------------------
Name: Sheli Z. Rosenberg
Its: Vice President
ANDA PARTNERSHIP, an Illinois general partnership
(52,500 shares)
By: Ann Only Trust, a general partner
By: /s/ MARK SLEZAK
------------------------------------
Name: Mark Slezak
Its: Trustee
By: Ann and Descendants Trust, a general partner
By: /s/ MARK SLEZAK
------------------------------------
Name: Mark Slezak
Its: Trustee
ANN LURIE REVOCABLE TRUST
(17,000 shares)
By: /s/ ANN LURIE
-------------------------------
Name: Ann Lurie
Its: Trustee
<PAGE> 1
EXHIBIT 99.(ii)
AMERICAN CLASSIC VOYAGES CO.
Amended and Restated 1995 Employee Stock Purchase Plan
FINANCIAL STATEMENTS
As of and for the year Ended December 31, 1998
CONTENTS PAGE
Independent Auditors' Report........................................... 1
Statement of Financial Condition....................................... 2
Statement of Changes in Plan Equity.................................... 3
Notes to Financial Statements.......................................... 4
Signatures............................................................. 6
Consent of KPMG LLP.................................................... 7
<PAGE> 2
Independent Auditors' Report
Compensation Committee of the Board of Directors
American Classic Voyages Co.
We have audited the accompanying statement of financial condition of the
American Classic Voyages Co. Amended and Restated 1995 Employee Stock Purchase
Plan (the "Plan") as of December 31, 1998, and the related statement of changes
in plan equity for the year ended December 31, 1998. These financial statements
are the responsibility of the Plan'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 financial condition of the Plan at December 31, 1998
and the Plan's changes in plan equity for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
February 26, 1999
1
<PAGE> 3
AMERICAN CLASSIC VOYAGES CO.
Amended and Restated 1995 Employee Stock Purchase Plan
Statement of Financial Condition
December 31, 1998
<TABLE>
<CAPTION>
Assets:
<S> <C>
Cash............................................................... $ 953
American Classic Voyages Co. stock options, at fair market
value (3,664 options, total cost of $46,716)................. 54,960
---------
Total assets....................................................... 55,913
=========
Plan equity................................................................ $ 55,913
=========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
2
<PAGE> 4
AMERICAN CLASSIC VOYAGES CO.
Amended and Restated 1995 Employee Stock Purchase Plan
Statement of Changes in Plan Equity
For the Year Ended December 31,1998
<TABLE>
<CAPTION>
<S> <C>
Plan equity at the beginning of the year................................. $ 41,922
Additions
Participant contributions........................................... 155,446
Unrealized discount................................................. 27,373
-----------------------
Total additions.................................... 182,819
Deductions
Purchase and distribution of common stock
to participants................................................. 168,612
Cash distributed to terminated participants......................... 216
-----------------------
Total deductions..................................... 168,828
Plan equity at the end of the year....................................... $ 55,913
-----------------------
</TABLE>
The accompanying notes are an
integral part of these financial statements.
3
<PAGE> 5
AMERICAN CLASSIC VOYAGES CO.
Amended and Restated 1995 Employee Stock Purchase Plan
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
The financial statements of the American Classic Voyages Co. Amended and
Restated 1995 Employee Stock Purchase Plan (the "Plan") have been prepared under
the accrual basis of accounting.
All administrative expenses of the Plan are paid by American Classic Voyages Co.
(the "Company").
(2) Description of Plan
The Plan was adopted by the Company's Board of Directors during March 1995 and
became effective on June 15, 1995. The Plan was amended and restated on July 1,
1998. The Plan is a voluntary contribution plan that meets the requirements of
Section 423(b) of the Internal Revenue Code ("IRC") and is designed to enable
eligible employees (the participants) of the Company to purchase common stock in
the Company at a discount by exercising options to purchase common stock
(options). The Plan is administered by the Company which has delegated certain
administrative responsibilities to the Compensation Committee of the Board of
Directors of the Company. The Plan provides for a series of quarterly purchase
periods (offering period). An offering period is a period of three months
beginning each January 1, April 1, July 1 and October 1 and ending on the last
day of each quarter, respectively.
The Company has reserved 500,000 shares of common stock for participants under
the Plan. For the year ended December 31, 1998, 11,622 shares of common stock
were issued. At December 31, 1998, 460,542 shares remain issuable under the
Plan.
Eligibility
Full time employees who have completed 90 days of service with the Company are
eligible to participate in the Plan's next offering period by contributing
payroll withholdings during each offering period. Participants elect to
participate in the Plan by completing and submitting an election form to the
Plan administrator.
Grant of Options
Under the Plan, the Company grants options to all eligible employees at the
beginning of each offering period. The number of shares subject to option for
each participant is the quotient of the aggregate payroll deductions authorized
by the participant for the option period plus any remaining cash balance from
the prior offering period in the participant's account divided by the applicable
option price per share; provided, however, that the maximum number of shares for
which options may be granted to a participant for any option period shall not
exceed $25,000 of fair market value (as provided by Section 423(b) of the IRC).
For purposes of the Plan, "fair market value" of the common stock on each of the
date of grant, the date of exercise or other applicable date is determined on
the basis of the per share closing price of the last sale of the common stock on
the applicable date as reported by The Nasdaq Stock Market.
4
<PAGE> 6
Exercise of Options
Each participant is considered to have exercised his or her option on the last
business day of each offering period to the extent of the maximum number of
whole shares of the Company's common stock that may be purchased with the
balance on that date in the participant's account under the Plan for such
option. Unless a participant elects otherwise, the Company carries the remaining
balance of his or her account to the next offering period; provided that only
amounts less than the price of a single share in an offering period are carried
over from the offering period to the next offering period. The option price per
share is equal to 85 percent of the lesser of (i) the closing price of such
shares on the last business day of each offering period, or (ii) the greater of
(a) the average closing price for the offering period and (b) the closing price
on the first business day of each offering period.
Contributions to the Plan
Eligible employees may contribute annually to the Plan up to the smaller of (1)
20% of their annual compensation (not including commissions, bonuses, overtime,
other or special payments, fees or allowances) or (2) an amount which complies
with the $25,000 limitation discussed previously.
Participant Accounts
All payroll deductions during the offering period are held in the general assets
of the Company and credited to a special account established under the Plan in
the employee's name. No interest is paid or credited to amounts accumulated in
the special account under the Plan. On the last business day of an offering
period, the Company issues whole shares of common stock in return for the funds
accumulated in the special account under the Plan.
Unrealized Discount
Unrealized discount represents the discount or aggregate difference between the
market value price of the Company's common stock and the established discount
purchase price for the offering period.
Withdrawals
An employee can withdraw from the Plan at any time with proper notice. Employees
are entitled to a full refund of monies previously withheld under the Plan
during the current Plan offering period upon withdrawal. Withdrawal from the
Plan is also effected by termination of service with the Company, other than
because of death, disability or retirement, at which time the cash balance in
the participant's account is returned to him or her.
Distributions
The Company's transfer agent issues shares of stock in the form of a book entry
to each participant's account upon receipt of authorization from the Company.
The transfer agent issues stock certificates, which are registered in the
participant's name, to the participant upon their written request or upon
termination of employment with the Company. All shares purchased under the
provisions of the Plan are deemed to be immediately distributed to the
participants as of the last business day of each offering period.
(3) Internal Revenue Service Status
The Plan meets the requirements of Section 423(b) of the IRC.
5
<PAGE> 7
AMERICAN CLASSIC VOYAGES CO.
Amended and Restated 1995 Employee Stock Purchase Plan
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administration Committee has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
AMERICAN CLASSIC VOYAGES CO.
Amended and Restated 1995 Employee Stock Purchase Plan
Dated: March 31, 1999 By: /s/Mark Slezak
-------------------------------------------
Member of the Compensation Committee of the
Board of Directors of American Classic
Voyages Co.
6
<PAGE> 8
Consent of KPMG LLP
Compensation Committee of the Board of Directors
American Classic Voyages Co.
We consent to incorporation by reference in the previously filed registration
statement (No. 33-92382) on Form S-8 of American Classic Voyages Co. of our
report dated February 26, 1999, relating to the statement of financial condition
of the American Classic Voyages Co. Amended and Restated 1995 Employee Stock
Purchase Plan as of December 31, 1998 and the related statement of changes in
plan equity for the year ended December 31, 1998 which report appears in Exhibit
99.(ii) of the December 31, 1998 Annual Report on Form 10-K of American Classic
Voyages Co.
/s/ KPMG LLP
KPMG LLP
Chicago, Illinois
March 31, 1999
7
