<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1996
Registration No. 333-01270
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COMMODORE HOLDINGS LIMITED
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
Bermuda 4400 N/A
- --------------------------------- ---------------------------- ----------------------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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4000 Hollywood Boulevard
Suite 385, South Tower
Hollywood, Florida 33021
(954) 967-2100
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Mr. Frederick A. Mayer
Vice Chairman of the Board
Commodore Holdings Limited
4000 Hollywood Boulevard
Suite 385, South Tower
Hollywood, Florida 33021
(954) 967-2100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies To:
P. Michael Segal, P.A. Jay M. Kaplowitz
Kathleen L. Deutsch Gersten, Savage,
Broad and Cassel Kaplowitz & Curtin, LLP
Miami Center 575 Lexington Avenue
201 South Biscayne Boulevard New York, N.Y. 10022-6102
Suite 3000 (212) 752-9700
Miami, Florida 33131
(305) 373-9400
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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Title of Proposed
Each Class Maximum Maximum
of Securities Amount Offering Aggregate Amount of
To Be To Be Price Per Offering Registration
Registered Registered Share/(1)/ Price/(1)/ Fee
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units/(2)/ 1,150,000 $ 4.60 $ 5,290,000 $ 1,824.14
Common Stock
underlying Units/(2)/ 1,150,000 $ /(2)/ $ /(2)/ $ None
Warrants
underlying Units/(3)/ 1,150,000 $ 6.00/(3)/ $ 3,450,000/(3)/ $ 1,189.66
Common Stock
underlying Warrants/(4)/ 575,000 $ /(4)/ $ /(4)/ $ None
Underwriter's Warrant/(5)/ 1 $ 10.00 $ 10 $ 0
Units underlying Under-
writer's Warrants 100,000 $ 6.90 $ 690,000 $ 237.93
Common Stock
underlying Under-
writer's Warrant 100,000 $ /(5)/ $ /(5)/ $ None
Warrants underlying
Underwriter's Warrant/(3)/ 100,000 $ 6.00/(3)/ $ 300,000/(3)/ $ 103.45
Common Stock
underlying Warrants
contained in Under-
writer's Warrant 50,000 $ /(4)/ $ /(4)/ $ None
Common Stock offered
by Selling Stock-
holders 4,331,933 $ 4.50 $19,493,699 $ 6,721.82
Convertible Series A
Preference Shares 1,006,979 $ 4.50 $ 4,531,406 $ 1,562.55
Common Stock reserved for
Conversion of Convertible
Series A Preference Shares 1,006,979 $ /(6)/ $ /(6)/ $ None
--------------
Total $ 11,639.55
==============
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(ii)
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/(1)/ Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
/(2)/ Units are composed of one share of Common Stock and one Warrant to
purchase one-half share of Common Stock. The amount to be registered
includes 150,000 shares of Common Stock, 150,000 Warrants and 75,000
shares of Common Stock underlying the Warrants, which may be purchased by
the Underwriter to cover over-allotments, if any. This amount includes
500,000 shares of Common Stock being offered by certain Initial Selling
Stockholders.
/(3)/ The exercise price of the Warrants has been included for purposes of
calculating the registration fee. Each Warrant entitles the holder to
purchase one-half share of Common Stock.
/(4)/ Shares of Common Stock issuable upon the exercise of Warrants. Pursuant
to Rule 457(i), no additional registration fee is required.
/(5)/ The Underwriter's Warrant is composed of the option to purchase 100,000
Units.
/(6)/ Shares of Common Stock issuable upon the conversion of the Series A
Preference Shares, including such indeterminate number of shares of Common
Stock as may be required for issuance upon conversion of the Series A
Preference Shares being registered hereunder, and including such
additional shares as may be issuable as a result of adjustments to the
conversion price. Pursuant to Rule 457, no additional registration fee is
required.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(iii)
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering of 1,000,000 Units (the "Prospectus") and
one to be used in connection with the sale of Common Stock by certain selling
stockholders (the "Selling Stockholder Prospectus"). The Prospectus and the
Selling Stockholder Prospectus will be identical in all respects except for the
alternate pages for the Selling Stockholder Prospectus included herein which are
labeled "Alternate Page for Selling Stockholder Prospectus."
(iv)
<PAGE>
COMMODORE HOLDINGS LIMITED
CROSS-REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
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REGISTRATION STATEMENT CAPTION OR
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
----------------------- ----------------------
<S> <C> <C>
1. Forepart of Registration Outside Front Cover Page
Statement and Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back Cover
Cover Pages of Prospectus Pages of Prospectus
3. Summary Information, Risk Factors Prospectus Summary; Summary Financial
and Ratio of Earnings to Fixed Information; Risk Factors
Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Front Page of Prospectus; Risk
Factors; Underwriting
6. Dilution Dilution
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Underwriting
9. Description of Securities to be Description of Securities
Registered
10. Interests of Named Experts and Not Applicable
Counsel
11. Information with Respect to the Risk Factors; Dividend Policy;
Registrant Management; Certain Tax
Considerations; Business; Certain
Foreign Issuer Considerations;
Management's Discussion and Analysis
of Results of Operations and
Financial Condition
12. Disclosure of Commission Not Applicable
Position on Indemnification for
Securities Act Liabilities
13. Other Expenses of Issuance and Other Expenses
Distribution
14. Indemnification of Officers and Indemnification of Directors and
Directors Officers
15. Recent Sales of Unregistered Recent Sales of Unregistered
Securities Securities
16. Exhibits and Financial Statement List of Exhibits; Financial Statement
Schedules Schedules
17. Undertakings Undertakings
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(v)
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED May 28, 1996
--
PROSPECTUS
1,000,000 UNITS
[COMMODORE LOGO]
COMMODORE HOLDINGS LIMITED
Commodore Holdings Limited, a Bermuda corporation (the "Company"), hereby
offers for sale (the "Offering") 1,000,000 units (the "Units") of the Company.
Each Unit consists of one share of Common Stock, $.01 par value per share (the
"Common Stock") and one redeemable warrant to purchase one-half share of Common
Stock (the "Warrants") for $6.00 per share. The Warrants are exercisable only
in pairs, with two Warrants entitling the registered holder to purchase one
share of Common Stock. The Warrants are exercisable for a period of four years
commencing one year from the date of issuance, subject to prior redemption. The
Warrants may be redeemed by the Company on 25 days' notice at any time after one
year from the date of issuance for $.05 per Warrant if the closing bid price of
the Common Stock exceeds $9.00 per share for 20 consecutive trading days ending
not more than 15 days prior to the date of any redemption notice. See
"Description of Securities - Warrants." The Common Stock and Warrants will be
detachable and separately tradeable at such time as the Underwriter (as
hereinafter defined) determines, in its sole discretion. See "Underwriting" and
"Description of Securities - Warrants."
Of the 1,000,000 shares of Common Stock underlying the Units, 500,000
shares are being sold by the Company and 500,000 shares are being sold by
certain of the selling stockholders (the "Initial Selling Stockholders"). The
Company will not receive any of the proceeds from the sale of Common Stock by
the Initial Selling Stockholders. The share of Common Stock underlying each
Unit accounts for $4.50 of the $4.60 price of each Unit.
Prior to the Offering, there has been no public market for the Units,
Common Stock or Warrants, and there can be no assurance that any such market
will develop. The offering price for the Units has been determined by
negotiations between the Company and First Hanover Securities, Inc. (the
"Underwriter") and is not necessarily related to the Company's asset value, net
worth or other established criteria of value. See "Underwriting." The Company
has applied to The Nasdaq National Market for inclusion, respectively, of the
Units, Common Stock and Warrants. The proposed trading symbols for the Units,
Common Stock and Warrants are __________, __________ and __________,
respectively. See "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE UNITS.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS PROCEEDS TO INITIAL SELLING
PUBLIC AND COMMISSIONS/(1)/ COMPANY/(2)/ STOCKHOLDERS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Unit $ 4.60 $ .46 $ 4.14/(3)/ $ 4.05
Total/(4)/ $ 4,600,000 $ 460,000 $ 2,115,000 $ 2,025,000
==========================================================================================
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____________________
/(1)/ Does not include additional compensation to the Underwriter consisting of:
(a) a non-accountable expense allowance equal to 3% of the gross proceeds
of the Offering; (b) a five-year warrant, exercisable after one year, to
purchase 100,000 Units at $6.90 per Unit; (c) a management and financial
consulting agreement for a period of twenty-four months for an aggregate
consideration of $48,000 payable on the closing of the Offering; and (d) a
right of first refusal with respect to certain public or private sales of
securities by the Company during the next one year. The Company has also
agreed to pay to the Underwriter, a warrant solicitation fee of 5% under
certain circumstances and to indemnify the Underwriter against certain
liabilities including those arising under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
/(2)/ After deducting discounts and commissions payable to the Underwriter, but
before payment of the Underwriter's non-accountable expense allowance and
other expenses of the Offering (estimated at $449,716), payable by the
Company. See "Underwriting."
/(3)/ The Company will receive $4.14 in proceeds from the sale of Units in which
newly issued shares constitute the underlying Common Stock, and $.09 in
proceeds from the sale of Units in which the Initial Selling Stockholders'
shares constitute the underlying Common Stock. Such $.09 represents the
proceeds from the Warrant underlying each Unit.
/(4)/ The Company has granted the Underwriter an option, exercisable for 30
calendar days after the closing of the Offering (the "Closing"), to
purchase up to 150,000 additional Units, upon the same terms and
conditions set forth above, solely for the purpose of covering over-
allotments, if any (the "Over-Allotment Option"). If the Over-Allotment
Option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to the Company will be $3,040,000,
$304,000 and $2,736,000, respectively. All shares of Common Stock
underlying the Units comprising the Over-Allotment Option will be sold by
the Company. Accordingly, no proceeds from the sale therefrom will be paid
to the Initial Selling Stock holders. See "Underwriting."
The Units are offered by the Underwriter on a firm commitment basis,
subject to prior receipt and acceptance, the approval of certain legal matters
by counsel and prior sale, when, as and if issued. The Underwriter reserves the
right to withdraw, cancel or modify the Offering and to reject any order, in
whole or in part. It is expected that delivery of the certificates representing
the Units will be made against payment therefor at the offices of the
Underwriter, 100 Wall Street, New York, New York on or about ____________, 1996.
FIRST HANOVER SECURITIES, INC.
LOGO
The date of this Prospectus is ____________, 1996
<PAGE>
[INSIDE FRONT COVER PAGE]
This Prospectus also relates to the offer and sale by certain persons (the
"Selling Stockholders") of up to 5,338,912 shares of Common Stock, which include
1,006,979 shares of Common Stock, which presently may be issued upon the
conversion of the Company's Convertible Series A Preference Shares (the "Series
A Preference Shares"). All of the Selling Stockholders are prohibited from
selling any of such shares for a period of one year without the prior written
consent of the Underwriter. See "Concurrent Registration of Common Stock."
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
ENFORCEABILITY OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
The Company is a Bermuda company and certain of its directors are residents
of jurisdictions outside the United States. All or a substantial portion of the
assets of such directors and of the Company are or may be located in
jurisdictions outside the United States. Therefore, it ordinarily could be
difficult for investors to effect service of process within the United States on
any of these parties who reside outside the United States or to recover against
them on judgments of U.S. courts predicated upon civil liability under the U.S.
federal securities laws.
The Company has been advised by its legal advisor in Bermuda, Richards,
Francis & Francis, that the United States and Bermuda do not have a treaty
providing for the reciprocal recognition and enforcement of judgments (other
than arbitration awards) in civil and commercial matters. Therefore, a final
judgment for the payment of money rendered by any federal or state court in the
United States based on civil liability, whether or not predicated solely upon
the U.S. federal securities laws, would not be automatically enforceable in
Bermuda. However, a final and conclusive judgment of a state or federal court
of the United States under which a sum of money is payable (not being a sum
payable in respect of taxes or other charges of a like nature, in respect of a
fine or penalty, or in respect of multiple damages as defined in The Protection
of Trading Interests Act 1981 Bermuda) may be the subject of enforcement
proceedings in the Supreme Court of Bermuda under the common law doctrine of
obligation by action for the debt evidenced by the United States court's
judgment. On general principles, such proceedings should be successful upon
proof that the sum of money is due and payable, and without having to prove the
facts supporting the underlying judgment, provided that (i) such court had
proper jurisdiction over the parties subject to such judgment, (ii) such court
did not contravene the rules of natural justice of Bermuda, (iii) such judgment
was not obtained by fraud, (iv) the enforcement of the judgment would not be
contrary to the public policy of Bermuda, (v) no new admissible evidence
relevant to the action is submitted prior to the rendering of the judgment by
the courts of Bermuda and (vi) due compliance was made with the correct
procedures under the laws of Bermuda. Based on the foregoing, there can be no
assurance that U.S. investors will be able to enforce in Bermuda judgments in
civil and commercial matters obtained in any federal or state court in the
United States. A Bermuda court may impose civil liability on the Company or the
Company's directors or officers in a suit brought in the Supreme Court of
Bermuda against the Company or such persons with respect to a violation of U.S.
federal securities laws, provided that the facts surrounding such violation
would constitute or give rise to a cause of action under Bermuda law.
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information and
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus. As used in this Prospectus, (i) all references to "U.S." mean the
United States of America, its states, its territories, its possessions and all
areas subject to its jurisdiction; (ii) references to a "fiscal" year or
references to the Company's operating results and other data in respect of a
specific year shall be references to the year ended September 30; and (iii) the
source of all industry data except where otherwise indicated is as reported by
Cruise Lines International Association ("CLIA"), an industry trade group,
without any independent verification. References in this Prospectus to the
Company include references to the Company's subsidiaries whenever appropriate.
THE COMPANY
GENERAL
Commodore Holdings Limited, a Bermuda exempted company (the "Company"),
owns two cruise ships, the S/S Enchanted Isle (the "Enchanted Isle") and the S/S
Universe Explorer (formerly the S/S Enchanted Seas) (the "Universe Explorer" or
the "Enchanted Seas"). The Enchanted Isle offers Caribbean cruises from New
Orleans and the Universe Explorer is chartered to Sea-Comm, Ltd., a Liberian
corporation ("Sea-Comm"), a joint venture between the Company and Seawise
Foundation, Inc. ("Seawise"), which in turn has space-chartered the vessel to
Seawise, which operates the educational "Semester at Sea" program during a
portion of the year. Sea-Comm will operate cruises to Alaska aboard the
Universe Explorer during the balance of the year. The Company acquired the
Enchanted Isle and the Enchanted Seas in July 1995 from Commodore Cruise Line
Limited, a Cayman Islands Company and certain of its subsidiaries ("Old
Commodore").
Since April 1995, the Enchanted Isle has offered seven day cruises from New
Orleans to the Western Caribbean with ports-of-call at Cancun, Cozumel, Grand
Cayman and Montego Bay (alternately, Key West). It is a 23,395 gross registered
ton cruise vessel, has nine passenger decks, a capacity of approximately 729
passengers in 366 cabins (on a double occupancy basis), is of Panamanian
registry and was built in 1958. The Enchanted Isle is designed to be a seagoing
resort containing a casino, nightclub, movie theater, swimming pool,
restaurants, workout room, sundeck and deck activities. Old Commodore acquired
the Enchanted Isle in May 1989, and from May 1989 until May 1993, the Enchanted
Isle was operated as a cruise ship. From May 1993 until August 1994, Old
Commodore chartered the Enchanted Isle to an entity which operated it as a
floating hotel in St. Petersburg, Russia. The ship was then removed from
service before being renovated between August 1994 and December 1994 and
returned to Caribbean cruise service. In December 1994, while on a cruise to
Barbados, the cruise vessel caught fire near San Juan, Puerto Rico and was out
of service for repair until February 1995 when it began an itinerary from
Barbados to ports-of-call in the Caribbean. In April 1995, the Enchanted Isle
was repositioned to New Orleans.
Revenues from the Enchanted Isle are derived from ticket sales and from
certain on-board activities and services operated by the Company including
casino gambling, liquor sales in a variety of bars, restaurants, lounges, and a
discotheque. Additional revenue is earned from the sale of pre-
3
<PAGE>
and post-cruise packages in the vessel's city of embarkation. The Company earns
concession revenue from duty-free shops, gift shops, the sale of photographs to
passengers, shore excursions and from the beauty salon. See "Business - On-
Board and Other Revenues."
The Universe Explorer is a 23,900 gross registered ton cruise vessel, has
nine passenger decks, a capacity of approximately 739 passengers in 363 cabins
(on a double occupancy basis), is of Panamanian registry and was built in 1958.
The Universe Explorer was designed to be a seagoing resort containing a casino,
discotheque, movie theater, library, reading room, restaurants, full service
communication facilities, two pools, jogging course, aerobic classes, workout
room, sun deck areas and deck activities. Old Commodore acquired the Enchanted
Seas in May 1989. The Enchanted Seas operated as a cruise ship on different
itineraries between May 1989 and April 1995. The Enchanted Seas was then laid
up and placed in drydock for maintenance and refurbishing between April 1995 and
January 1996. During this time, the Company renovated portions of it to prepare
it for use both as a cruise vessel and for use in the Semester at Sea program.
The Company removed the vessel's casino to install a library, and installed
various partitions so that certain lounges and dining areas could be easily
converted to classrooms when needed for the Semester at Sea program and returned
to their prior state when used for cruises. The Company also renamed the vessel
the "Universe Explorer." See "Business - The Joint Venture."
Revenues from the Universe Explorer are derived from charter revenue. Sea-
Comm derives revenues from different sources depending on whether the vessel is
being used as a cruise vessel or for the Semester at Sea program. Cruise
revenues include those from ticket sales and certain on-board activities and
services such as beverage sales, shore excursions, and concession revenue.
Revenues from the Semester at Sea program are derived from space charter fees
and ticket sales to adult (non-student) passengers, who may represent up to 24%
of the passengers on each voyage. Seawise has guaranteed ticket sales to 60
adult passengers on each voyage during 1996, which number increases in
subsequent years. Additional revenue is earned from beverage and snack bar
sales and from other miscellaneous on-board services. See "Business - The Joint
Venture", "Business - Ticket Revenues" and "Business - On-Board and Other
Revenues."
Cruises in general are differentiated primarily by cruise cost, length and
itinerary. Segments within the cruise industry include the standard, premium
and luxury cruises, each of which, the Company believes, appeals to different
population segments and attracts varying demographic groups. The standard
market, in which the Company competes, is the largest of the three segments,
comprising approximately 55% of industry-wide capacity. See "Business - Market
Position."
The Company believes that the Semester at Sea program is unique, and to its
knowledge, the Universe Explorer is the only such floating university in the
world. The program competes indirectly, however, with land-based semester or
year abroad programs offered to college students. See "Business - Competition."
The Company was incorporated in Bermuda on April 13, 1995. The executive
offices of the Company are located at 4000 Hollywood Boulevard, Suite 385, South
Tower, Hollywood, Florida 33021, and its telephone number is
(954) 967-2100.
4
<PAGE>
THE COMMODORE ACQUISITION
The Company and its wholly-owned subsidiaries were established for the
purpose of acquiring certain assets (the "Commodore Acquisition") of an existing
cruise line operation from Old Commodore. The Commodore Acquisition included
the trade names "Commodore" and "Commodore Cruise Line" ("Commodore"), as well
as certain related trade names and trademarks (collectively, the "Trademarks"),
the Enchanted Isle and the Enchanted Seas, and all of Old Commodore's existing
operations with regard to the Enchanted Isle and the Enchanted Seas (together
the "Cruise Ships"), including certain advance ticket sales, marketing and sales
information, and certain shoreside assets (collectively, the "Commodore
Assets").
The Company closed the Commodore Acquisition on July 14, 1995 (the
"Commodore Closing"). The purchase price for the Commodore Assets was
$33,500,000. The Company paid $5,000,000 to Old Commodore, which represented
the cash portion of the purchase price. In addition, the Company issued
1,000,000 shares of its convertible series A preference shares (the "Series A
Preference Shares") at an agreed value of $4.00 per share to EffJohn
International B.V. ("EffJohn"), the parent company of Old Commodore, as partial
payment of the purchase price. EffJohn International Cruise Holdings, Inc. (the
"Lender"), an affiliate of EffJohn, loaned the balance of the purchase price,
$24,500,000, to the Company (the "Loan"), which is secured by substantially all
of the assets of the Company's wholly-owned subsidiary New Commodore Cruise Line
Limited, a Bermuda exempted company ("New Commodore"), including first preferred
ship's mortgages on the Cruise Ships. For additional terms of the Commodore
Acquisition, see "Business - The Commodore Acquisition." References herein to
the operations of the Company are to the historical operations of Old Commodore
prior to the Commodore Closing and to those of the Company subsequent thereto.
THE OFFERING
Securities Offered............ 1,000,000 Units. Each Unit consists of one share
of Common Stock and one Warrant to purchase one-
half share of Common Stock. See "Description of
Securities."
Terms of Warrants............ The Warrants are exercisable only in pairs, with
two Warrants entitling the holder to purchase one
share of Common Stock for an exercise price of
$6.00 per share commencing one year after the
date of this Prospectus and terminating five
years after the date of this Prospectus (the
"Expiration Date"), subject, in certain
circumstances, to earlier redemption by the
Company. The exercise price and number of shares
issuable upon exercise of the Warrants are
subject to adjustment in certain circumstances.
The Warrants will be detachable from the Common
Stock and separately tradeable at such time as
the Underwriter
5
<PAGE>
determines, in its sole discretion. See
"Description of Securities - Warrants."
Common Stock Outstanding
Prior to Offering/(1)(2)/..... 4,931,933 shares of Common Stock.
Common Stock to be
Outstanding After the
Offering/(1)(2)(3)/........... 5,431,933 shares of Common Stock and warrants to
purchase 1,575,000 shares of Common Stock
(assuming the Underwriter does not exercise the
Over-Allotment Option.) See "Management,"
"Principal Stockholders" and "Certain
Transactions."
Warrants Outstanding Prior
to Offering/(4)/............. 1,075,000 warrants.
Warrants to be Outstanding
After the Offering/(5)/...... 1,000,000 Warrants and 1,075,000 warrants.
Series A Preference Shares
Outstanding/(6)/............. 1,006,979 shares.
Use of Proceeds............... The net proceeds to the Company from the sale of
the Units will be $1,665,284, after deducting
commissions and expenses of the Offering
estimated at $684,716. The Company intends to use
the net proceeds of this Offering for renovations
to its vessels and for working capital purposes.
See "Use of Proceeds."
Risk Factors.................. An investment in the Units is speculative and
involves a high degree of risk and should not be
purchased by anyone who cannot afford the loss of
his entire investment. See "Risk Factors" and
"Dilution."
Proposed Nasdaq National
Market Symbols/(7)/.......... Units - ____________
Common Stock - ____________
Warrants - ___________
____________________
/(1)/ Does not include an aggregate of 500,000 shares of Common Stock reserved
for issuance upon the exercise of options available for future grant under
the Company's stock option plan (the "Plan"). See "Management - Stock
Option Plan."
6
<PAGE>
/(2)/ Does not include the Series A Preference Shares, which are currently
convertible into shares of Common Stock at the conversion rate of the
higher of US$4.00 or eight times the annual primary earnings per share of
Common Stock for the previous fiscal year.
/(3)/ Does not include 225,000 shares of Common Stock issuable upon exercise in
full of the Over-Allotment Option and the Warrants and underlying shares
of Common Stock included therein, or 150,000 shares of Common Stock
issuable upon exercise of the Underwriter's Warrant and the shares of
Common Stock underlying the Warrants contained therein. See
"Underwriting."
/(4)/ These warrants do not contain the same terms as the Warrants offered
herein. See "Description of Securities."
/(5)/ Does not include 150,000 Warrants underlying the Units in the Over-
Allotment Option or 100,000 Warrants underlying the Units in the
Underwriter's Warrant.
/(6)/ Convertible into Common Stock at the conversion rate of the higher of
US$4.00 or eight times the annual primary earnings per share of Common
Stock for the previous fiscal year. See "Description of Securities -
Series A Preference Shares."
/(7)/ The proposed symbols do not imply that a liquid and active market will
develop or be sustained for the securities upon completion of the
Offering.
7
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary financial information has been extracted from, and
should be read in conjunction with, the Consolidated Financial Statements and
related Notes thereto of the Company and the Combined Financial Statements of
the S/S Enchanted Seas and S/S Enchanted Isle, operating units of EffJohn
International B.V. (the "Predecessor") included elsewhere in this Prospectus.
Pro forma information is presented assuming the acquisition of the Cruise Ships
and the associated secured indebtedness, and the elimination of the redemption
feature of the Series A Preference Shares, as of October 1, 1994.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
New Commodore New
Period Pro forma Predecessor Commodore
Predecessor Ended Year Ended Six Month Ended
Years Ended December 31, September 30, September 30, March 31,
----------------------------------------------- ------------- ------------- -----------------------
INCOME STATEMENT DATA: 1991 1992 1993 1994 1995(1) 1995 1995 1996
----------- ----------- ---------- ---------- ------------- ----------- ------------ -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 60,465 $ 54,368 $ 45,650 $ 41,860 $ 7,256 $ 35,075 $ 17,606 $ 19,174
Operating expenses 45,705 44,229 34,265 28,527 4,941 34,704 18,244 13,955
Selling & administrative
expenses 12,261 11,114 6,833 6,484 1,664 9,899 5,609 3,766
Depreciation and
amortization 5,139 5,530 4,903 3,599 198 1,693 1,780 620
Interest Expense, net 3,277 1,980 1,682 1,294 133 1,929 1,367 486
Write-off of goodwill - - 6,023 - - - - -
Other Income - - - - - 4 - (341)
Loss on Vessel Fire - - - 1,367 - - 1,367 -
Minority interest in earnings
of consolidated joint
venture - - - - - - - 412
Net earnings (loss) before
tax (5,917) (8,485) (8,056) 589 320 (13,154) (10,761) 276
Provision for taxes - - - - 8 - - -
Net earnings (loss) before $(5,917) $(8,485) $(8,056) $ 589 $ 312 $(13,154) $(10,761) $ 276
preferred stock dividend
Provision for preferred
stock dividend - - - - 60 280 - 140
Net earnings (loss) available
for Common Stockholders $(5,917) $(8,485) $(8,056) $ 589 $ 252 $(13,434) $(10,761) 136
======= ======= ======= ========= ======= ======== ======== =======
Net earnings (loss) per
share(2)(3) -- -- -- -- 0.06 (2.59) .03
======= ======= ======= ========= ======= ======== =======
Average shares outstanding
(000's) 4,378 5,185 5,185
======= ======== =======
BALANCE SHEET DATA:
Property and equipment,
net of depreciation $ 37,565 $33,085 $37,450
Total assets $ 40,232 $44,097 $47,751
Total borrowings $ 30,020 $28,500 $24,367
Total stockholders' equity (deficit) ($ 5,585) $ 8,519 $ 8,795
</TABLE>
____________________
(1) The period is from April 13, 1995 (date of inception) through September 30,
1995; however, the Company commenced cruise operations on July 15, 1995
when the Company acquired the vessels.
(2) Net earnings (loss) per common equivalent share is based upon the weighted
average number of shares and equivalents outstanding during each period
after giving effect for dividends on the Series A Preference Shares.
(3) Earnings per share does not apply to fiscal years 1991-1994 and the six
months ended March 31, 1995 because during such periods Old Commodore was
an operating unit of EffJohn International B.V.
8
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT IN THE
COMPANY. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, AS WELL AS ALL OTHER INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS.
1. LACK OF OPERATING HISTORY OF THE COMPANY; LACK OF EXPERIENCE OF
MANAGEMENT
The Company was formed in April 1995 for the purpose of acquiring the
Commodore Assets. Although certain members of the Company's management have
experience in the operation of cruise ship lines while in the employ of others,
a number of members of the Company's management lack such experience, and those
members of management with such experience have not necessarily worked together
as a management team previously. In addition, although the Cruise Ships have an
audited operating history, such operating history may not be indicative of the
results of the Company if the Company's cost structure and planned operations
vary from that of the Predecessor. Accordingly, prospective investors should
recognize that as a new venture, the Company lacks a substantial operating
history, as a result of which no assurance can be given as to its ability to
operate profitably or to sustain profitability if achieved. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
"Management," "Consolidated Financial Statements" and "Combined Financial
Statements."
2. HISTORY OF LOSSES; WORKING CAPITAL DEFICITS
During the six months ended March 31, 1996, the Company had net income
of $275,708 resulting, in large part, from $425,000 in revenue from the
cancellation of a charter agreement with an affiliate, as well as $340,000 in
other income. Absent such revenue, the Company would have incurred a net loss
for this period. During the five and one-half month period ended September 30,
1995, the Company had net income of $311,535, which also resulted, in large
part, from $425,000 in revenue from the cancellation of a charter agreement with
an affiliate. Absent such revenue, the Company would have incurred a net loss
for the five and one-half month period ended September 30, 1995 as well.
Moreover, for the six and one-half month period ended July 14, 1995,
the Predecessor incurred a net loss of $17,093,049. For the years ended
December 31, 1994 and 1993, the Predecessor earned income of $589,151, and
incurred a net losses of $8,056,183, respectively. Furthermore, the Company also
had a working capital deficiency at March 31, 1996 of $5,078,070. There can be
no assurance as to when, if ever, the Company will achieve profitability. See
"Business," "Consolidated Financial Statements" and "Combined Financial
Statements."
3. NEED FOR ADDITIONAL FINANCING
The Company estimates that the net proceeds of the Offering and
operating cash flow from the Cruise Ships will be sufficient to satisfy its
anticipated cash requirements for a period of approximately 12 months following
the consummation of the Offering. In the event that such proceeds prove to be
insufficient, and the Company does not generate sufficient cash flow from
operations to satisfy cash requirements, the Company may find itself in a
position in which it may
9
<PAGE>
be required to seek additional equity or debt financing to support its ongoing
operations. No assurance can be given that such funds, if required, will be
available on terms that are satisfactory to the Company, if they are available
at all. If the Company is unable to obtain such financing when needed, it might
default under the Loan, cause the Cruise Ships to be foreclosed upon and cease
its operations. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
4. SUBSTANTIAL INDEBTEDNESS; EXISTENCE OF LIENS ON ALL ASSETS
Upon the Commodore Closing, the Company became indebted to the Lender
in the amount of U.S. $24,500,000 (the "Acquisition Indebtedness"), which
indebtedness is secured by a lien on substantially all of New Commodore's
assets. While the Acquisition Indebtedness may increase the potential return on
invested capital, it also presents additional elements of risk, including the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, ship and other acquisitions,
general corporate purposes or other purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of the principal and interest on its indebtedness and if such funds are
insufficient the Company will be forced to raise additional funds or curtail
activities such as marketing; (iii) the Company's degree of leverage may make it
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures; and (iv) the Company's borrowing at variable rates of
interest will subject the Company to fluctuations in interest rates. Moreover,
to the extent that the Company's assets continue to be pledged to secure the
Acquisition Indebtedness, such assets will be unavailable to secure additional
debt financing, which may adversely affect the Company's ability to borrow in
the future. A substantial portion of the Company's cash flow will be used for
debt service. If the Company fails to satisfy obligations with respect to the
Acquisition Indebtedness, including without limitation making required payments
of principal and interest, the Acquisition Indebtedness could be declared in
default and the Company's assets foreclosed upon. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "The Company
- - The Commodore Acquisition."
5. EXEMPTION FROM CERTAIN U.S. INCOME TAXES
The Company is a foreign corporation which is engaged in a trade or
business in the United States. The Internal Revenue Code of 1986, as amended
(the "Code") provides a complex set of tax rules concerning the taxation of
foreign corporations engaged in business in the United States. Under these
rules, such a foreign corporation may be subject to various U.S. taxes,
including the regular U.S. corporation income tax (or alternative minimum tax);
an additional branch profits tax; a gross basis tax on certain gross rentals
derived from bareboat charters of ships to affiliated or unaffiliated companies;
and branch taxes on certain interest paid or accrued. The Company expects that,
unless and except to the extent that it qualifies for the tax exemption provided
by Code sec tion 883(a), it will be subject to these U.S. income taxes.
The Company anticipates that upon completion of this Offering it will
qualify for this exemption because Code section 883(c) generally makes eligible
for the Code section 883(a) exemption wholly-owned foreign subsidiaries of a
foreign corporation, provided that both the country of incorporation of the
foreign subsidiary, and the country of incorporation of the foreign parent,
reciprocally exempt the international shipping income of U.S. shipping
corporations, and the foreign
---
10
<PAGE>
parent's stock is primarily and regularly traded on an established securities
market in the United States or in certain foreign countries.
However, there is no assurance that the Company will successfully
complete this Offering. Even if this Offering is completed, there are certain
events, such as decline in the market value of the Company's Common Stock
relative to the value of its Series A Preference Shares, a de-listing from
Nasdaq, a change in the Bermuda or Panama tax laws governing shipping income, or
a change in Code section 883(a) or regulations issued thereunder, which could
cause the Company to not qualify for the reciprocal exemption provided by that
section. Therefore there can be no absolute assurance that the corporate tax
exemption provided by Code section 883(a) will be available. See "Certain Tax
Considerations - Taxation of the Company - Possible U.S. Tax Exemption under
Section 883(a) of the Code."
6. COMPETITION
The cruise line industry is extremely competitive. The Company
operates in the Gulf of Mexico, the Caribbean and in Alaska, and competition for
passengers in such geographic areas is intense. The Company competes with other
cruise ship lines in the standard segment that offer the same type of products
in several markets, and land-based resorts, many of which have significantly
greater financial resources and experience, and are more well known than the
Company. The Company competes with its competitors principally on the basis of
quality of service, type and variety of itineraries and price. In particular,
since the Company presently has only two vessels, with limited itineraries, it
may be disadvantaged in attracting passengers. Fixed costs represent the major
portion of a cruise line's operating expenses and cannot be reduced when
competition causes a reduction in load factors or ticket prices. In addition,
cruise demand declined slightly during 1994 and 1995 for the first time in
several years. As a result, there can be no assurance that satisfactory
occupancy percentages will be reached and maintained or that the Company will be
able to sustain or enhance any penetration and competitive position.
Recent statistics indicate that the larger cruise lines are increasing
existing capacity by acquiring new ships, making it very difficult for smaller
operators, such as the Company, to compete with the glamorous new ships for
passengers. Industry sources predict that the increase in capacity will not be
matched by a sufficient increase in passenger volume and that the older ships
will not operate at full capacity. Various articles concerning the cruise line
industry note that this trend is expected to continue in the foreseeable future.
If this trend continues, the Company's ability to compete with these larger
operators may be substantially impaired.
Although the Company believes that the Universe Explorer offers the
only ocean-going accredited educational program, such as the Semester at Sea
program, this program competes for student passengers with operators of land-
based university programs, such as semesters abroad. Many of these universities
have substantially greater experience and resources than the operators of the
Semester at Sea program. In addition, the Semester at Sea program competes for
adult passengers with extended cruise providers, such as freighters which offer
passenger quarters. In the event such programs are not successful, the operator
could, in certain circumstances, cancel the charter of the Universe Explorer,
and the Company would have to seek another use of this vessel. There can be no
assurance that the Company could successfully identify a profitable alternative
for such vessel.
11
<PAGE>
7. THE CRUISE SHIPS; PURCHASE OF COMMODORE ASSETS "AS IS"
The Enchanted Isle underwent an overhaul and refitting from August
1994 until December 1994. The Company just completed a substantial overhaul on
the Universe Explorer to prepare it for the Semester at Sea program. There can
be no assurance, however, that required drydock maintenance will be completed in
the future on a timely basis. Delays in completing future maintenance may be
caused by technical matters, strikes, acts of God, or negligence. The Cruise
Ships were built in 1958. Their age makes them particularly susceptible to this
risk. In the event of any such delay, the Company would likely lose substantial
revenue while such vessel was out of service. Although the Company has obtained
insurance to recover lost revenues when either of the Cruise Ships is out of
service due to a covered event for more than two weeks, there can be no
assurance that insurance proceeds will be adequate to cover the Company's
losses.
Moreover, the Company acquired the Commodore Assets "AS IS", and thus
did not receive any assurances from EffJohn as to the condition of the Commodore
Assets. The Company did, however, have a professional surveyor survey the
Cruise Ships and EffJohn was obligated to deliver them to the Company in
substantially the same condition as each vessel was in at the time of its
inspection. In addition, EffJohn was obligated to perform specified maintenance
and repairs on the Universe Explorer and deliver this vessel to the Company upon
satisfactory completion of such repairs as confirmed by the vessel's
classification society. Each vessel was inspected by its respective
classification society prior to delivery to the Company and was delivered up to
its class standards. Despite these inspections, deficiencies in one or both of
the vessels may exist which were not noted by the surveyor. In addition,
although management of the Company has attempted to review the operations of Old
Commodore and the other assets of Old Commodore which the Company acquired, it
may not have uncovered all material problems or defects which exist with respect
to the Commodore Assets. If the Company discovers any such defects or
deficiencies with respect to the Commodore Assets, including the vessels, in the
future, it will not have any recourse against EffJohn or Old Commodore, and will
have to bear any such loss without contribution from such entities. See
"Business - The Commodore Acquisition."
8. GOVERNMENT REGULATION
The Cruise Ships are registered in Panama, and are subject to
regulations issued by Panama, including regulations issued pursuant to
international treaties governing the safety of the ships and its passengers.
The country of registry will conduct periodic inspections to verify compliance
with these regulations. The United States Coast Guard periodically carries out
Port State control verification of the condition of the Cruise Ships and their
compliance with international and Panama regulations, as permitted under
international treaties. The Company believes that the Cruise Ships are in
substantial compliance with all applicable regulations and that they have the
licenses necessary to conduct their business; however, there can be no assurance
that the Cruise Ships comply with all such regulations.
The Company is also subject to international treaties prohibiting
ocean dumping and to various U.S. laws and regulations relating to environmental
protection. Under such laws and regulations, the Company will be prohibited
from, among other things, discharging materials, such as petrochemicals and
plastics, into the waterways. The Company has obtained insurance against the
costs of environmental damage due to oil pollution occasioned at, or in transit
to, sea. However,
12
<PAGE>
the civil and criminal fines that may be imposed for environmental damage or for
illegal ocean dumping are not and cannot be insured against and the Company
remains exposed to this risk although the Company does have and expects to
continue regular training and to maintain established procedures to prohibit and
prevent the discharge or dumping of prohibited substances. Although the
financial costs relating to U.S. environmental laws and regulations are not
expected to have a material adverse impact on the Company's results of
operations, financial condition or liquidity, there can be no assurance that an
uninsured loss will not occur.
The Company believes that it is in substantial compliance with all
regulations applicable to the operation of the Cruise Ships and has the licenses
necessary to conduct its business, however, there can be no assurance thereof.
From time to time, legislation has been introduced and new regulations proposed
which could have an impact upon the Company's operations. During recent years,
the International Convention on Safety of Life at Sea ("SOLAS") has been amended
and will, among other things, require most passenger vessels not fitted with
sprinkler systems to install such systems and other safety arrangements,
including smoke detection systems, low-location lighting and enclosed escape
stairwells, by October 1997. In the event a vessel meets certain requirements
under SOLAS as amended through 1974, but without reference to any subsequent
amendments thereto ("SOLAS 1974"), it will not be required to be fitted with a
sprinkler system or to make other required safety modifications until on or
before October 1, 2005. The Cruise Ships are not currently fitted with
sprinkler systems. The Company believes that the Cruise Ships meet the
necessary requirements under SOLAS 1974 and thus that it will not have to fit
them with sprinkler systems or make other modifications until October 1, 2005.
Neither the U.S. Coast Guard nor either of the Cruise Ships' classification
societies has definitely confirmed that the Cruise Ships meet the SOLAS 1974
requirements. Thus, there is a risk that the Company will have to install such
systems and make such modifications aboard the vessels in 1997. The cost of
such installation and modifications is presently estimated to be approximately
$3,000,000 per vessel. The Company has not set aside or otherwise anticipated
where it will obtain such funds if it must meet the 1997 deadline. In addition,
the installation of the sprinkler systems could require that the Cruise Ships be
out of service for approximately three months with the attendant loss of
revenue. The installation of sprinkler systems aboard the Cruise Ships in 1997,
if required, could have a material adverse effect on the financial condition of
the Company.
There have been efforts in prior Congresses to adopt bills that would
apply United States labor laws to non-resident alien crews of foreign registered
ships sailing from U.S. ports and to exclude certain foreign-built ships from
U.S. ports if they received construction subsidies of a particular type. With
respect to the ship construction subsidies, the Cruise Ships are U.S. built and
thus would be at risk to such legislation only if it were to apply to conversion
and maintenance work performed on the vessels in foreign countries. The
application of U.S. labor laws to foreign-registered passenger ships would have
a very substantial impact on the cruise industry as a whole and the Company
cannot predict the implications on its operations. Such proposed legislation is
not presently under consideration by the 104th Congress, but there can be no
assurance that it will not be re-introduced. See "Business - Government
Regulation."
13
<PAGE>
9. INTERNATIONAL FACTORS
The Company's itineraries typically include ports outside the U.S.
Thus, the Company and its business may be affected by the risks of doing
business abroad, including changes in foreign governments, foreign laws and
regulations, economic and political conditions, restrictions on currency
transfer, exchange fluctuations, currency devaluations, customs duties, tariffs,
import quotas and other possible adverse regulations, which could result in
increased costs, delayed or reduced revenues from foreign operations, adverse
effects on the Company's ability to generate revenue and other adverse
consequences. See "Business - Government Regulation."
10. NO DIVIDENDS
To date, the Company has not paid any dividends on its Common Stock
and does not expect to declare or pay dividends on the Common Stock in the
foreseeable future. The Loan documents and the terms of the Series A Preference
Shares contain additional restrictions on the Company's ability to pay a
dividend on the Common Stock. See "Business", "Description of Securities -
Series A Preference Shares" and "Dividend Policy."
11. JOINT VENTURE RISKS
Pursuant to the agreement governing the joint venture between the
Company and Seawise (the "Agreement"), Seawise has the right to terminate the
Agreement, and thus the Company's charter of the Universe Explorer for use in
the Semester at Sea and Alaska cruise programs, on 15 months' notice at any time
after January 14, 1999. In the event Seawise terminates the Agreement, there
can be no assurance that the Company will find an acceptable alternate use for
the Universe Explorer. See "Business - The Joint Venture."
12. DAMAGE TO OR DESTRUCTION OF THE CRUISE SHIPS
The Company's profitability is dependent on the operation of the
Cruise Ships. If either of the Cruise Ships were to be damaged due to a
hurricane, storm, or other natural disaster or for some other reason, the
Company's operations could be terminated until such Cruise Ship was repaired or
replaced. Furthermore, such repairs or replacement could be delayed if funds
are not available to pay for such repairs or replacement. The Company maintains
hull and machinery insurance as well as increased value insurance on both the
Universe Explorer and the Enchanted Isle, as required by the terms of the Loan,
as well as loss of hire insurance to cover loss of revenues in certain
situations. See "Business - Insurance." Despite such insurance coverage, there
can be no assurance that the insurance proceeds will be sufficient to fully
compensate the Company for its losses. See "Business - Insurance."
13. CERTAIN BUSINESS RISKS
The Company's operations may be adversely affected by numerous other
factors, including, among others, labor disturbances or strikes, either by
shipboard employees or land based personnel, government regulatory orders or
rules, or the failure of its reservations system. The Company's activities will
also be subject to risks generally associated with the operation of a business,
including changes in general and local economic conditions, fiscal policies
affecting the
14
<PAGE>
business and related industries, acts of God and other factors which are beyond
the control of the Company. Finally, the Company's business will be faced with
risks generally found in the cruise business, such as fluctuations in the cost
of fuel, claims for property damage or personal injury to passengers or crew.
The Company has obtained insurance to protect it against these types of claims,
but there can be no assurance that such insurance will provide coverage for all
types of claims or that the amount of coverage will be sufficient in all cases.
See "Business-Insurance."
14. TRADEMARK PROTECTION
The Company owns the Trademarks, which include Commodore Cruise Line
and the distinctive Commodore logo. The Company believes that the Trademarks
are widely recognized and have considerable value, of which no assurance can be
given. The Company has not yet recorded the transfer of certain of its foreign
Trademarks to it due to the substantial cost involved and the potentially
limited value of certain of such Trademarks. The Company is not aware of any
actions against its Trademarks and, to the Company's knowledge, no notice or
claim of infringement in respect of its Trademarks exists. There can be no
assurance that the Company's Trademarks do not violate the proprietary rights of
others, that they would be upheld if challenged, that the Company would not, in
such an event, be prevented for using the Trademarks or that its failure to
record the transfer of certain of its foreign Trademarks will not have an
adverse effect on the Company. See "Business - Trademark Protection."
15. RELIANCE ON CURRENT MANAGEMENT
The Company's operations and future success are greatly dependent upon
certain members of its senior management, particularly the services of its Vice-
Chairman, Frederick A. Mayer, New Commodore's President, James R. Sullivan, and
New Commodore's Chief Financial Officer, Alan Pritzker. Mr. Mayer, Mr. Sullivan
and Mr. Pritzker have executed employment agreements with New Commodore;
however, the Company does not maintain key-man life insurance on any of their
lives. The termination of any of their employment or loss of any of their
services for any other reason could have a significant adverse effect upon the
Company's operations.
The Company's success is also dependent upon the ability of the
Company to hire and retain additional financial and marketing personnel.
Competition for qualified employees among cruise line companies is intense, and
the inability to attract, retain and motivate additional highly skilled
employees, could adversely affect the Company's business and prospects. There
can be no assurance that the Company will be able to retain its existing
personnel or attract additional qualified employees. See "Business - Employees"
and "Management."
16. BROAD DISCRETION IN APPLICATION OF PROCEEDS
A substantial portion of the net proceeds from this Offering will be
applied to working capital and general corporate purposes. Accordingly, the
Company will have broad discretion as to the application of such proceeds. See
"Use of Proceeds."
15
<PAGE>
17. CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
After completion of the Offering, the Company's officers and directors
will own, in the aggregate, approximately 29.2% of the issued and outstanding
shares of Common Stock of the Company, excluding any Common Stock which may be
issued upon the conversion of the Series A Preference Shares, the exercise of
the Warrants or the exercise of certain outstanding warrants to purchase Common
Stock. Mr. Binder, the Chairman of the Company, and Mr. Mayer, the Vice-
Chairman of the Company, will beneficially own approximately 20.3% and 9.7% of
the outstanding Common Stock of the Company, respectively, excluding any shares
of Common Stock which may be issued upon the conversion of the Series A
Preference Shares, the exercise of the Warrants or the exercise of certain
outstanding warrants to purchase Common Stock. The foregoing computations
assume that none of the Company's officers or directors will purchase any Units
in the Offering. In the event that any of such persons purchase Units, such
ownership percentages will increase. Accordingly, management will be able to
substantially influence the election of the Company's board of directors and
have the ability to influence the Company's affairs and the conduct of its
business. See "Management" and "Securities Ownership of Principal and Initial
Selling Stockholders."
18. RIGHTS OF SECURITY HOLDERS UNDER BERMUDA LAW MAY BE LESS THAN UNDER
U.S. JURISDICTIONS
The Company's corporate affairs are governed by its Memorandum of
Association, Bye-laws, and the corporate law of Bermuda. Principles of law
relating to such matters as the validity of company procedures, the fiduciary
duties of management and the rights of the Company's security holders may differ
from those that would apply if the Company were incorporated in a jurisdiction
within the United States. The rights of security holders under Bermuda law are
not as extensive as are the rights of security holders under the law or judicial
precedent in many United States jurisdictions. Thus, the holders of securities
of the Company may have more difficulty in protecting their interests from
actions by the Company's Board of Directors than they might have as security
holders of a company incorporated in many United States jurisdictions. In
addition, there is uncertainty whether the courts of Bermuda would enforce
judgments of the courts of the United States and of other foreign jurisdictions.
There is also uncertainty whether the courts of Bermuda would entertain actions
brought in Bermuda which are predicated upon the securities laws of the United
States. See "Enforceability of Civil Liabilities," "Description of Securities"
and "Certain Foreign Issuer Considerations."
19. AUTHORIZATION OF PREFERENCE SHARES
The Company's Bye-Laws authorize the issuance of 10,000,000 preference
shares, including 9,000,000 "blank check" preference shares with such
designations, rights and preferences as may be determined from time to time by
the Company's Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue additional preference shares
with dividend, liquidation, conversion, voting, or other rights which could
adversely affect the voting power or other rights of the holders of the Common
Stock. In the event of issuance, the preference shares could be utilized, under
certain circumstances, as a method of discouraging, delaying, or preventing a
change in control of the Company. The Company issued 1,000,000 Series A
Preference Shares to EffJohn in connection with the Commodore Acquisition.
The Series A Preference Shares are convertible into Common Stock and have other
rights which could discourage a takeover
16
<PAGE>
of the Company and which could dilute the Common Stock. See "Description of
Securities -Series A Preference Shares."
20. CERTAIN RIGHTS OF SERIES A PREFERENCE SHARES
The Series A Preference Shares are entitled to a preference with
respect to liquidation or the distribution of assets of the Company over any
other shares of capital stock of the Company. In the event of any such
liquidation or distribution of assets, the holders of the Series A Preference
Shares will receive any accrued but unpaid dividends and USD$4.00 per Series A
Preference Share before the holders of other series of preferred stock or the
Common Stock receive any distribution of the Company's assets. In addition, the
holders of the Series A Preference Shares are entitled to receive a dividend
equal to seven percent of the issuance price of the Series A Preference Shares
per annum before the Company may pay any dividends on the Common Stock. See
"Dividend Policy" and "Description of Securities - Series A Preference Shares."
21. SUBSTANTIAL AND IMMEDIATE DILUTION
Purchasers of Units in the Offering will suffer immediate dilution of
$2.37 per share, or 52.7%, in the net tangible book value of their Common Stock
from the initial public offering price of $4.60 per Unit, or $4.50 per share of
Common Stock (assuming that the Warrants are valued at $.10 as of the date
hereof). See "Dilution."
22. DETERMINATION OF OFFERING PRICE AND EXERCISE PRICE; NO ASSURANCE OF
PUBLIC MARKET
Prior to the Offering, there has been no public trading market for the
Company's securities. Consequently, the initial public offering price of the
Units, and the exercise price of the Warrants was determined through
negotiations between the Company and the Underwriter, and bears no relationship
whatsoever to the Company's asset value, book value or other such criteria of
value. Factors considered in determining the offering price included, among
other things, the prospects for the industry in which the Company operates, the
Company's management, the general condition of the securities markets and the
demand for securities in similar industries. There can be no assurance that an
active trading market for any of the Company's securities will develop after the
Offering or that, if developed, it will be sustained. The exercise price of the
Warrants also has been determined by the Company and the Underwriter and does
not relate to any recognized criteria of value. In no event should the exercise
price of the Warrants be considered an indication of the future market price of
the Common Stock, should a market develop therefor. See "Underwriting."
23. UNDERWRITER'S LIMITED UNDERWRITING EXPERIENCE
While certain of the officers of the Underwriter have significant
experience in corporate finance and the underwriting of securities, the
Underwriter has previously underwritten only one public offering. Accordingly,
there can be no assurance that the Underwriter's limited public offering
experience will not affect the Company's Offering of the Units and subsequent
development of a trading market, if any, in the Company's securities. See
"Underwriting."
17
<PAGE>
24. STOCK OPTIONS AND WARRANTS
As of the date of this Prospectus, there are 500,000 shares of Common
Stock reserved for issuance upon the exercise of stock options under the Plan,
of which no options have been granted to date, and 1,075,000 shares of Common
Stock reserved for issuance upon the exercise of outstanding warrants. In
addition, the Company plans to issue 1,000,000 Warrants in connection with this
Offering (an aggregate of 1,150,000 Warrants if the Over-Allotment Option is
exercised in full and 100,000 Warrants which will underlie the Underwriter's
Warrant). Each two Warrants entitle the holder to purchase one share of Common
Stock. Exercise of any such options or warrants could have an adverse effect on
the terms upon which the Company may be able to obtain additional equity, since
the holders of the options and warrants can be expected to exercise them, if at
all, at a time when the Company would, in all likelihood, be able to obtain any
needed capital on terms more favorable to the Company than those provided in the
options or warrants. See "Description of Securities" and "Underwriting."
25. SHARES ELIGIBLE FOR FUTURE SALE
All of the 4,931,933 shares of Common Stock outstanding as of the date
of this Prospectus are restricted securities, as that term is defined in Rule
144, promulgated under the Securities Act, and 4,831,933 of such shares have
been registered for sale concurrently herewith. Except for the 500,000 shares
being offered by the Initial Selling Stockholders herein as part of the Units,
such shares may not be sold, transferred or otherwise disposed of for a period
of one year without the prior written consent of the Underwriter. Of the
4,931,933 shares, 1,300,000 shares are owned by affiliates of the Company, as
that term is defined under the Securities Act. Absent registration under the
Securities Act, the sale of such shares is subject to Rule 144, as promulgated
under the Securities Act. In general, under Rule 144, subject to satisfaction
of certain other conditions, a person, including an affiliate of the Company,
who has beneficially owned restricted shares of Common Stock for at least two
years, is entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of 1% of the total number of outstanding shares
of the same class, or if the Common Stock is quoted on Nasdaq, the average
weekly trading volume during the four calendar weeks preceding the sale. A
person who has not been an affiliate of the Company for at least three months
immediately preceding the sale and who has beneficially owned the shares of
Common Stock for at least three years is entitled to sell such shares under Rule
144 without regard to any of the volume limitations described above. No
prediction can be made as to the effect, if any, that sales of shares or the
availability of such shares for sale will have on the market prices prevailing
from time to time. Nevertheless, the possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect prevailing
market prices for the Common Stock and could impair the Company's ability to
raise capital in the future through the sale of equity securities. See "Shares
Eligible For Future Sale."
26. NASDAQ MAINTENANCE REQUIREMENTS; POSSIBLE DE-LISTING OF SECURITIES
FROM NASDAQ SYSTEM; RISKS OF LOW-PRICED STOCKS
The Securities and Exchange Commission (the "Commission") has approved
rules imposing stringent criteria for the listing of securities on Nasdaq,
including standards for maintenance of such listing. The Company has applied
for listing on The Nasdaq National Market, although it has not yet been accepted
for listing on Nasdaq. Assuming the Company's securities are
18
<PAGE>
accepted on Nasdaq, it still must meet certain maintenance criteria. If the
Company is unable to satisfy Nasdaq's maintenance criteria in the future, its
securities will be subject to being de-listed and trading, if any, would
thereafter be conducted in the over-the-counter market in the so-called "pink
sheets," or the "electronic bulletin board" of the National Association of
Securities Dealers, Inc. ("NASD"). As a consequence of such de-listing, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Commission recently
adopted regulations that generally define a penny stock to be any equity
security that has a market value of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on
Nasdaq, and any equity security issued by an issuer that has: (i) net tangible
assets of at least $2 million, if such issuer has been in continuous operation
for three (3) years; (ii) net tangible assets of at least $5 million, if such
issuer has been in continuous operation for less than three (3) years; or (iii)
average annual revenue of at least $6 million, for the last three (3) years.
Unless an exception is available, the regulations require delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.
In addition, if the Company's securities are not quoted on Nasdaq, or
the Company does not have $2 million in net tangible assets, trading in the
Common Stock would be covered by Rule 15g-9, promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), for non-Nasdaq and non-Exchange-
listed securities. Under such Rule, broker-dealers who recommend such
securities to persons other than established customers and accredited investors
must make a special written suitability determination for the customer, and
receive the purchaser's written agreement to a transaction prior to sale.
Securities are also exempt from this Rule if the market price is at least $5.00
per share.
Although the Company's Common Stock should be, as of the date of this
Prospectus, outside the definitional scope of the penny stock rules, as it is
proposed to be listed on Nasdaq, in the event the Common Stock is not accepted
for listing on Nasdaq, or was subsequently to become characterized as a penny
stock, the market liquidity for the Company's securities could be severely
affected. In such an event, the regulations on penny stocks could limit the
ability of broker-dealers to sell the Company's securities, and thus the ability
of purchasers of the Company's securities to sell their securities in the
secondary market.
27. SELLING STOCKHOLDER RISKS
The Initial Selling Stockholders will sell their Common Stock pursuant
to this Prospectus for $4.50 per share of Common Stock underlying each Unit,
less underwriting discounts of approximately $.45 per share of Common Stock.
The other Selling Stockholders may not sell their Common Stock for up to one
year in the discretion of the Underwriter. As a result of such timing
differences, the price per share of Common Stock received by the Initial Selling
Stockholders could be materially higher or lower than that which the other
Selling Stockholders receive. See "Selling Stockholders."
19
<PAGE>
28. REQUIREMENTS TO EXERCISE WARRANTS; ADVERSE EFFECT OF REDEMPTION OF
WARRANTS
The Warrants, which are part of the Units offered hereby, will be
detachable from the Units and separately tradeable at such time as the
Underwriter determines, in its sole discretion. Although the Units will not
knowingly be sold to purchasers in jurisdictions in which the Units are not
registered or otherwise qualified for sale, purchasers may buy Units (or the
components thereof) in the aftermarket who so reside in or move to jurisdictions
in which the securities underlying the Warrants are not so registered or
qualified during the period that the Warrants are exercisable. In this event,
the Company would be unable to issue securities to those persons desiring to
exercise their Warrants unless and until the underlying securities could be
qualified for sale in the jurisdictions in which such purchasers reside, or an
exemption to such qualification exists in such jurisdictions. No assurance can
be given that the Company will be able to effect any such required registration
or qualification.
Additionally, purchasers of the Units will be able to exercise the
Warrants included therein only if a current prospectus relating to the
securities underlying the Warrants is then in effect under the Securities Act
and such securities are qualified for sale or exempt from qualification under
the applicable securities or "blue sky" laws of the states in which the various
holders of the Warrants then reside. Although the Company has undertaken to use
reasonable efforts to maintain the effectiveness of a current prospectus
covering the securities underlying the Warrants, there can be no assurance that
the Company will be able to do so. The value of the Warrants may be greatly
reduced if a current prospectus covering the securities issuable upon the
exercise of the Warrants is not kept effective or if such securities are not
qualified or exempt from qualification in the states in which the holders of the
Warrants then reside.
The Warrants are also subject to redemption by the Company, commencing
on the date one year from the date of this Prospectus, on at least 25 days'
prior written notice if the closing bid price of the Common Stock for 20
consecutive business days ending not more than 15 days prior to the date any
redemption notice exceeds $9.00 per share. If the Warrants are redeemed,
holders of Warrants will lose their right to exercise the Warrants, except
during such 25-day notice of redemption period. Upon the receipt of a notice of
redemption of the Warrants, the holders thereof would be required to exercise
the Warrants and pay the exercise price at a time when it may be disadvantageous
for them to do so; sell the Warrants at the then market price (if any) when they
might otherwise wish to hold the Warrants; or accept the redemption price, of
$.05 per Warrant, which is likely to be substantially less than the market value
of the Warrants at the time of redemption. See "Description of Securities - The
Warrants."
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Units
after deducting underwriting discounts and commissions and other expenses of the
Offering (estimated to be
20
<PAGE>
$449,716), are estimated to be approximately $1,665,284. The Company
anticipates that the net proceeds of the Offering will be utilized substantially
as follows:
<TABLE>
<CAPTION>
Application of Proceeds Amount Percentage
- ----------------------- ------ ----------
<S> <C> <C>
Renovations to Cruise Ships (1) $1,500,000 90%
Working capital and general
corporate purposes(2) $ 165,284 10%
</TABLE>
__________________
(1) The Company plans to upgrade its vessels, cosmetically and mechanically, so
that they will remain in compliance with applicable law, be more
aesthetically pleasing, and operate more efficiently with the intent that
they will ultimately be more profitable to the Company.
(2) Working capital includes, but is not limited to, fees and expenses
associated with marketing, promotion and advertising.
The foregoing table represents the Company's best estimate of its
allocation of the net proceeds of this Offering based upon the Company's current
plans and estimates regarding its anticipated expenditures. Actual expenditures
may vary substantially from these estimates, and the Company may find it
necessary or advisable to use portions of the net proceeds for other purposes.
The foregoing gives effect to the sale of the Units offered hereby, and the
receipt of $1,665,284 of net proceeds therefrom.
Pending utilization, the net proceeds of this Offering will be invested in
short-term bank certificates of deposit, interest bearing savings accounts,
United States government obligations or other short-term interest bearing
investments.
The Company believes that the net proceeds from the Offering, along with
the cash flow from its operations, will be sufficient to meet its anticipated
cash requirements for a period of approximately 12 months following the
consummation of the Offering.
DIVIDEND POLICY
The payment by the Company of dividends, if any, rests within the
discretion of its Board of Directors and, among other things, will depend upon
the Company's earnings, capital requirements and financial condition, as well as
other relevant factors. The Company has not declared any dividends on its Common
Stock since its inception, has no present intention of paying any dividends on
its Common Stock in the foreseeable future, and intends to use its earnings, if
any, to generate increased growth.
Pursuant to the terms of the Series A Preference Shares, the Company is
required to pay the holders of the Series A Preference Shares a cumulative
dividend equal to seven per cent per annum before it may pay dividends on the
Common Stock. In addition, the terms of the Loan prohibit the Company from
paying a dividend that exceeds 50% of the Company's net profits
within eighteen
21
<PAGE>
months following the Commodore Closing, unless the Common Stock has first been
listed on Nasdaq.
DILUTION
At March 31, 1996, the Company had a net tangible book value of $8,330,216,
or approximately $1.61 per share of Common Stock. The net tangible book value
per share is equal to the Company's tangible assets less its total liabilities,
divided by the number of shares of Common Stock outstanding on such date
(attributing $4.50 of the Unit purchase price to each share of Common Stock sold
as a component of the Unit). Assuming that the 1,006,979/(1)/ Series A
Preference Shares were included in stockholders equity, the net tangible book
value would be $12,330,216 or $1.99 per share. For purposes of calculating
dilution, all Warrants offered hereby were deemed not to have been exercised
because exercise would be anti-dilutive. The net tangible book value after the
Offering (after deducting the underwriting discount and other expenses of the
Offering) will be $14,235,422, or $2.13 per share, representing an immediate
increase in net tangible book value of $0.14 per share of Common Stock to the
existing stockholders and an immediate dilution of $2.37 per share of Common
Stock, or 52.7%, to new investors. "Dilution" is the difference between the
initial public offering price and the net tangible book value per share.
The following table illustrates the per share dilution to the new investors
as of March 31, 1996:
<TABLE>
<S> <C> <C>
Public offering price per share of Common Stock..... $ 4.50
----
Net tangible book value............................. 1.61
Increase attributable to elimination of redemption
feature of Series A Preference Shares.............. 0.38
Increase attributable to new investors.............. 0.14
-----
Net tangible book value per share of Common Stock
after Offering..................................... 2.13
----
Dilution(to new investors)(2)....................... 2.37
====
</TABLE>
____________________
(1) Includes 6,979 shares issued on April 1, 1996 as partial payment of the
dividend on the Series A Preference Shares.
(2) Does not include; (i) 500,000 shares of Common Stock reserved for issuance
under the Plan; (ii) 750,000 shares of Common Stock reserved for issuance
upon the exercise of outstanding warrants; (iii) 225,000 shares of Common
Stock received for issuance upon the exercise of the Over-Allotment Option
(including the shares of Common Stock underlying the Warrants); (iv) 500,000
shares of Common Stock reserved for issuance upon exercise of the Warrants;
and (v) 150,000 shares of Common Stock reserved for issuance upon exercise
of the Underwriter's
22
<PAGE>
Warrant and the Warrants underlying the Underwriter's Warrant. The
calculation includes 325,000 shares of Common Stock issuable upon exercise
of the warrants held by certain executives officers as they are dilutive.
See "Management - Stock Option Plan," "Management - Employment Agreements,"
"Certain Transactions" and "Underwriting."
The following table summarizes the number of shares of Common Stock
purchased from the Company, the total consideration and the average price per
share paid to the Company by existing stockholders or their predecessors and to
be paid by purchasers in the Offering:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING PERCENT OF
SHARES OF TOTAL TOTAL AVERAGE PRICE
SHARES OF COMMON CONSIDERATION CONSIDERATION PER SHARE OF
COMMON STOCK STOCK PAID PAID COMMON STOCK
<S> <C> <C> <C> <C> <C>
Existing 5,938,912 92.2% $12,207,895 88.6% $2.06
Stockholders(1)
New Investors(2) 500,000 7.8% $ 1,575,284/(3)/ 11.4% $3.15
--------- ----- ---------- -----
Total 6,438,912 100.0% $13,783,179 100.0% $2.14
========= ===== ========== =====
</TABLE>
____________________
(1) Assumes that the holders of the Series A Preference Shares converted their
stock into 1,006,979 shares of Common Stock.
(2) The exercise of the Underwriter's Over-Allotment Option would reduce the
dilution to purchasers in the Offering by increasing the net tangible book
value after the Offering from $14,235,422 to $14,856,422.
(3) Does not include consideration paid for Warrants.
23
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996, and as adjusted to give effect to the sale of Units pursuant to the
Offering and the application of the net proceeds therefrom and the elimination
of the redemption feature of the Series A Preference Shares. See "Use of
Proceeds." The information set forth below should be read in conjunction with
the Company's Consolidated Financial Statements and related notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------
(AMOUNTS IN
THOUSANDS, EXCEPT
PER SHARE DATA)
ACTUAL AS ADJUSTED/(1)(2)/
------ -----------
<S> <C> <C>
Current portion of long-term debt.............................. $ 201 $ 201
====== ======
Long-term debt:
Total long-term debt..................................... $ 24,166 $ 24,166
Series A Preference Shares..................................... $ 4,000 --
Stockholders' equity:
Series A Preference Shares ($.01 par value, 10,000,000 shares
authorized; 1,006,979 shares of Series A issued and
outstanding)............................................... $ -- $ 10
Common Stock ($.01 par value; 100,000,000 shares
authorized; 4,931,933 shares outstanding,
actual; 5,431,933 shares outstanding, pro forma)........... $ 49 $ 54
Paid in capital............................................. $ 8,159 $ 13,837
Retained earnings........................................... $ 587 $ 587
Total stockholders' equity.................................. $ 8,795 $ 14,488
Total capitalization........................................... $ 36,961 $ 38,654
</TABLE>
____________________
(1) Gives effect to the elimination of the right of the holders of the Series A
Preference Shares to require redemption of the Series A Preference Shares.
See Note D to the consolidated financial statements.
(2) Gives effect to the sale of the Units offered hereby, and the receipt of
$1,665,284 of net proceeds therefrom. Assumes that the Over-Allotment Option
is not exercised.
24
<PAGE>
SELECTED FINANCIAL DATA
The following is a summary of the Company's financial information extracted
from the indicated year-end audited Combined or Consolidated Financial
Statements of the Predecessor and the Company, and is qualified in its entirety
by the detailed financial information appearing in the Combined and Consolidated
Financial Statements and the Notes thereto. The unaudited Combined and
Consolidated Financial Statements of the Predecessor and the Company for the
interim periods ended March 31, 1995 and 1996, respectively, have been prepared
by management from the books and records of each of the Predecessor and the
Company, respectively, and reflect, in the opinion of management, all
adjustments (consisting of normally occurring accruals), necessary for a fair
presentation of the financial position and results of operations of each of the
Predecessor and the Company, as at the periods indicated therein. Results for
interim periods are not necessarily indicative of results which can be expected
for the entire year.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Predecessor
Years Ended December 31,
---------------------------------------------------------
INCOME STATEMENT DATA: 1991 1992 1993 1994
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Total revenues $ 60,465 $ 54,368 $ 45,650 $ 41,860
Operating expenses 45,705 44,229 34,265 28,527
Selling & administrative expenses 12,261 11,114 6,833 6,484
Depreciation and amortization 5,139 5,530 4,903 3,599
Interest Expense, net 3,277 1,980 1,682 1,294
Write-off of goodwill - - 6,023 -
Other Income - - - -
Loss on Vessel Fire - - - 1,367
Minority interest in earnings
of consolidated joint venture - - - -
Net earnings (loss) before tax (5,917) (8,485) (8,056) 589
Provision for taxes - - - -
Net earnings (loss) before $ (5,917) $ (8,485) $ (8,056) $ 589
preferred stock dividend
Provision for preferred stock dividend - - - -
Net earnings (loss) available
for Common Stockholders $ (5,917) $ (8,485) $ (8,056) $ 589
======= ======= ======= ======
Net earnings (loss) per share(3)(4) -- -- -- --
======= ======= ======= ======
Average shares outstanding (000's)
OPERATING DATA (Unaudited):
Sailings 94 98 64 53
Traffic days(5) 715 673 466 371
Passenger days(6) 461,672 452,394 316,157 271,075
Load factor(7) 88.57% 92.21% 92.67% 100.22%
BALANCE SHEET DATA:
Property and equipment,
net of depreciation $37,565
Total assets $40,232
Total borrowings $30,020
Total stockholders' equity (deficit) ($ 5,585)
<CAPTION>
New Commodore New
Period Pro forma Predecessor Commodore
Ended Year Ended Six Months Ended
September 30, September 30, March 31,
------------- ------------- ----------------------------
INCOME STATEMENT DATA: 1995 (2) 1995(1) 1995 1996
--------- ------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Total revenues $ 7,256 $35,075 $ 17,606 $19,174
Operating expenses 4,941 34,704 18,244 13,955
Selling & administrative expenses 1,664 9,899 5,609 3,766
Depreciation and amortization 198 1,693 1,780 620
Interest Expense, net 133 1,929 1,367 486
Write-off of goodwill - - - -
Other Income - 4 - (341)
Loss on Vessel Fire - - 1,367 -
Minority interest in earnings of
consolidated joint venture - - - 412
Net earnings (loss) before tax 320 (13,154) (10,761) 276
Provision for taxes 8 - - -
Net earnings (loss) before $ 312 $(13,154) $(10,761) $ 276
preferred stock dividend
Provision for preferred
stock dividend 60 280 - 140
Net earnings (loss) available
for Common Stockholders $ 252 $(13,434) $(10,761) 136
======== ======== ======== ========
Net earnings (loss) per share(3)(4) 0.06 (2.59) .03
======== ======== ========
Average shares outstanding (000's) 4,378 5,185 5,185
======== ======== ========
OPERATING DATA (Unaudited):
Sailings 11 64 34 26
Traffic days(5) 77 444 234 239
Passenger days(6) 53,221 271,171 137,065 163,833
Load factor(7) 94.81% 83.78% 80.35% 94.03%
BALANCE SHEET DATA:
Property and equipment,
net of depreciation $33,085 $37,450
Total assets $44,097 $ 47,751
Total borrowings $28,500 $24,367
Total stockholders' equity (deficit) $ 8,519 $ 8,795
</TABLE>
25
<PAGE>
__________________
(1) Assumes the Commodore Acquisition occurred and the redemption feature of
the Series A Preference Shares was eliminated.
(2) Such period begins April 13, 1995 (date of inception) and terminates on
September 30, 1995; however, the Company commenced cruise operations July
15, 1995, immediately following the Commodore Closing.
(3) Net earnings (loss) per common equivalent share is based upon the weighted
average number of shares and equivalents outstanding during each period
after giving effect for dividends on the Series A Preference Shares.
(4) Earnings per share does not apply to fiscal years 1991-1994 and the six
months ended March 31, 1995 because during such periods Old Commodore was
an operating unit of EffJohn International B.V.
(5) Represents the number of sailings, multiplied by the number of days per
cruise.
(6) Represents the number of passengers, multiplied by the number of days of
their respective cruises.
(7) In accordance with cruise industry practice, total capacity is calculated
based on double occupancy per cabin even though some cabins accommodate
three or four passengers. A percentage in excess of 100% indicates that
more than two passengers occupied some cabins.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Company's Consolidated
Financial Statements and the Predecessor's Combined Financial Statements and the
related matters thereto contained elsewhere in the Prospectus.
GENERAL
With respect to the Company's cruise operations, the Company earns revenues
primarily from: (i) the sale of passenger tickets, which include accommodations,
meals, substantially all shipboard activities, and airfare and hotel packages,
if applicable; and (ii) the sale of goods and services on board the Cruise Ships
including, but not limited to, casino gambling, liquor sales and concession
income.
The Company's operating expenses include travel agency commissions,
shipboard costs of goods sold and all shipboard operating expenses, including
food, fuel, port charges, crew wages and benefits, cabin consumables,
entertainment, ship insurance, ship maintenance expenses, vessel management fees
and transportation and lodging (airfare, hotel, and transfer costs), if
applicable. Travel agency commissions, passenger food, port charges and air
transportation and hotel lodging expenses generally vary directly with the
number of passengers while most of the shipboard operating expenses are fixed
per voyage.
The Company's marketing, selling and administrative expenses include media
advertising, brochures and promotional materials, costs of the Company's direct
sales force and related selling activities, all shoreside activities such as
reservations, inventory control, air transportation coordination, human
resources, finance and information technology. Other income (expense) includes
interest expense and interest income. The majority of the Company's transactions
are in U.S. dollars.
With respect to Sea-Comm's (as hereafter defined) operations, the Company
earns revenue primarily from: (i) reimbursements from Sea-Comm for all operating
costs, food costs and all of the principal and interest due on the portion of
the Loan attributable to the Universe Explorer during the approximately 320 days
each year the vessel is used in the Semester at Sea and Alaska programs; and
(ii) approximately 50% of Sea-Comm's net profits, which Sea-Comm net distributes
to its shareholders. See "Business - The Joint Venture."
27
<PAGE>
The following table presents statements of operations data as a percentage
of total revenues:
<TABLE>
<CAPTION>
Predecessor New
Predecessor and the Company New Commodore Predecessor Commodore
For the Year Ended For the Six Months Ended
---------------------------------------------------
December 31, Pro Forma Period Ended March 31,
---------------------- --------------------------
1993 1994 September 30, 1995 September 30, 1995 1995 1996
---- ---- ------------------ ------------------ -------- --------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Expenses:
Operating 75.06 68.15 98.94 68.1 111.4 72.8%
Selling and
Administrative 14.97 15.49 28.22 22.9 31.9 19.6%
Depreciation and
Amortization 10.74 8.60 4.83 2.7 4.8 3.2%
Loss on Vessel-fire 3.27
------ ------ ------ ----- ----- ----
Total 100.77 95.51 131.99 93.7 148.1 95.6%
===== ===== ====
Operating Income (loss) (.77) 4.49 (31.99) 6.3 (48.1) 4.4%
Other Income (Expenses) (16.88) (3.09) (5.51) (2.0) (5.2) (.8%)
Minority Interest
in Earnings (2.2%)
Net Earnings (Loss)
before Provision for Pre-
ferred Stock Dividend (17.65)% 1.40% (37.50) 4.3% (53.3) 1.4%
======= ==== ===== ==== ==== ===
</TABLE>
Due to its New Orleans point of embarkation, the Company's revenues are more
seasonal than other cruises with similar itineraries that depart from Florida
ports. The greatest demand for the Company's cruises occurs in June through
August, and demand from February through May and November through December is
also very good. The Company's slowest months are January, September and
October.
The Company's operations began on July 15, 1995, following the Commodore
Closing. For the two and one-half months ended September 30, 1995, revenues
from the operation of one cruise vessel were $7,256,000 including charter
cancellation fees of $425,000. In January 1996, the Company placed its second
vessel into service. As a result, for the six months ended March 31, 1996,
revenues from the operation of two cruise vessels increased to $19,174,089,
which included charter cancellation fees of $425,000.
The results of operations for the years ended December 31, 1993 and
December 31, 1994 are of the Predecessor. The Company's fiscal year ends on
September 30. As a result, the results of operations for the pro forma year
ended September 30, 1995 include the fourth calendar quarter of 1994, which is
also included in the December 31, 1994 fiscal year. The pro forma 1995 fiscal
year includes results of operations of the Predecessor from September 30, 1994
until July 14, 1995, and those of the Company for the balance of such fiscal
year. Old Commodore operated two vessels during the 1995 fiscal year. Old
Commodore operated the Enchanted Seas primarily on the New Orleans itinerary
during fiscal 1995 and placed this vessel in drydock just prior to the Commodore
Closing. Concurrently therewith, Old Commodore placed the Enchanted Isle on the
New Orleans itinerary.
28
<PAGE>
Prior to such time in fiscal 1995, Old Commodore operated the Enchanted
Isle for 73 days on a Barbados itinerary, and before that, chartered the vessel
to a company that operated it as a floating hotel in St. Petersburg, Russia. All
of these activities occurred during fiscal 1995. The Company, however, operated
only one vessel on the New Orleans itinerary during the 1995 fiscal year. As a
result of the differences in the number of ships operated, the itinerary served,
and the use of each ship by each of Old Commodore and the Company, a comparison
of the 1995 fiscal year to the 1994 and 1993 fiscal years may not be
representative of the Company's future performance. The historical operating
results for the Predecessor were prepared by management from the books and
records of Old Commodore. Revenues and ship operating expenses are specifically
those of the Cruise Ships. However, Old Commodore operated up to five ships
during the period since January 1, 1993. As a result, administration and
marketing expenses were commingled and have been allocated to the Predecessor
based on the number of traffic days of all of Old Commodore's ships. This may
not be indicative of actual expenses which would have been incurred in
connection with the operation of one ship by the Company. In addition, the
Predecessor's depreciation expenses vary from those of the Company primarily due
to its higher cost basis on the vessels. Accordingly, such expenses are not
comparable.
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996, COMPARED TO SIX MONTHS ENDED MARCH 31, 1995
Revenues increased by $1,568,133, or 8.9%, for the first half of fiscal
1996 compared to the first half of fiscal 1995, primarily due to the Company's
profitable joint venture for the Universe Explorer in fiscal 1996 as compared to
the unprofitable Barbados cruise operation, which commenced during the first
half of 1995. Included in the fiscal 1996 revenues are non-recurring charter
cancellation fees of $425,000. See "Business - The Commodore Acquisition -
Settlement Agreement."
The Company's operating expenses decreased by $5,655,767, or 28.8%, for the
first half of fiscal 1996 compared to the first half of fiscal 1995. This
decline was due in part to the termination of the Barbados itinerary in April
1995, as well as the impact of the fire aboard the Enchanted Isle in December
1994, which resulted in a loss of $1,367,347, and which also had a negative
impact on the selling and marketing of this itinerary.
Marketing, selling and administrative expenses decreased by $1,842,009, or
32.8%, for the first six months of fiscal 1996 compared to the first six months
of fiscal 1995 due to the introduction of the Barbados program in February 1995.
The foregoing results may not be representative of the Company's future
performance due to the different manner in which Old Commodore and the Company
report expenses. In addition, in the first half of fiscal 1995, Old Commodore
operated the Enchanted Seas on the New Orleans itinerary. In the first half of
fiscal 1996, the Company operated the Enchanted Isle on this route. Although
these two ships were built as "sister ships," and are similar, they are not
identical either with respect to number of cabins or costs of operation. As a
result, a comparison of their results from operations may not be
meaningful.
29
<PAGE>
PRO FORMA FOR THE YEAR ENDED SEPTEMBER 30, 1995, COMPARED TO THE YEAR ENDED
DECEMBER 31, 1994
Revenues decreased by $6,785,649, or 16.2%, for fiscal 1994 compared to pro
forma 1995 primarily due to (i) an 11.9% reduction in the number of passengers
carried as well as a reduction in the average rate per passenger on the
Company's New Orleans itinerary, and (ii) low load factors and average rates on
Old Commodore's Barbados itinerary. This decrease was partially offset by the
receipt of $425,000 in pro forma 1995 from the cancellation of a charter
agreement. The Company received an additional cancellation fee of $425,000 in
fiscal 1996, but does not anticipate that it will receive such fees in future
years. See "Business - The Commodore Acquisition - Settlement Agreement." The
load factor for the New Orleans itinerary decreased to 89.54% in pro forma 1995
from 100.23% in 1994.
The Company's operating expenses increased by $6,176,847, or 21.7%, in pro
forma 1995 compared to fiscal 1994. This increase was due to a fire on the
Enchanted Isle on December 28, 1994, the termination of Old Commodore's Barbados
itinerary, which operated for only 73 days in 1995, as well as increased
competition in the New Orleans market. The Barbados itinerary was cancelled in
April 1995, in connection with the Commodore Acquisition.
Marketing, selling and administrative expenses increased by $3,414,416, or
52.7%, in pro forma 1995 to fiscal 1994 due to a variation in the way Old
Commodore and the Company attribute such expenses. Given that the Company
acquired the vessels in the fourth quarter of pro forma 1995, the full effect of
such variations is not reflected herein.
Depreciation and amortization decreased by $1,905,975, or 53.0%, in pro
forma 1995 compared to fiscal 1994 due to the difference in cost basis of the
assets acquired by the Company as compared to Old Commodore. Interest expenses
increased by $635,960 from fiscal 1994 to pro forma 1995 due to the Company's
acquisition of Commodore Cruise Line and the financing procured to consummate
the acquisition.
FOR THE YEAR ENDED DECEMBER 31, 1994, COMPARED TO THE YEAR ENDED DECEMBER 31,
1993
Total revenues decreased by $3,789,643, or 8.3%, in fiscal 1994 compared to
fiscal 1993. This decrease is attributable primarily to the Enchanted Isle being
out of cruise service for most of 1994 while under charter as a floating hotel
in St. Petersburg, Russia. Old Commodore received charter income of $10,000 per
day from an affiliate during such period. This decline was offset in part by an
increase in revenues related to the New Orleans itinerary of $4,710,908, or
14.4%, from fiscal 1993 to fiscal 1994. This increase is attributable primarily
to an increase in the number of passengers on that itinerary as well as higher
ticket prices. The load factor for the New Orleans itinerary increased to
100.2% in 1994 from 95.4% in 1993. In 1994, New Orleans passenger loads totaled
271,075 passenger days, 12.4% above the volume who sailed from New Orleans in
1993.
Operating expenses decreased by $5,738,041, or 16.7% in fiscal 1994
compared to fiscal 1993, due to the Enchanted Isle's withdrawal from cruise
service. On the New Orleans itinerary, operating expenses increased by
$1,158,517, or 4.7%, from 1993 to 1994. This increase in costs was due to
increases in the variable costs of the Company, such as food and port charges,
which increase when the number of passengers aboard a vessel increases.
30
<PAGE>
Marketing, selling and administrative expenses decreased by $348,982, or
5.1%, in fiscal 1994 compared to fiscal 1993 resulting from a decrease in
marketing expenses.
Depreciation and amortization decreased by $1,303,253, or 26.6%, in fiscal
1994 compared to fiscal 1993 in part due to a one-time write-off of goodwill in
the amount of $6,023,118 during 1993. In connection with the anticipated sale
of the vessels, the Predecessor determined that the goodwill was not recoverable
and accordingly wrote-off the remaining goodwill balance.
Interest expenses decreased by $388,930, or 23.1%, in fiscal 1994 compared
to fiscal 1993 due to a reduction in the principal amount due by the
Predecessor. In addition, other income increased in fiscal 1994 since the
Predecessor had a one-time write-off of goodwill, described previously, during
1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficiency was $5,078,070 and $916,161 at
March 31, 1996 and September 30, 1995, respectively. The Company's working
capital deficit at March 31, 1996 and September 30, 1995 was primarily due to
the inclusion, in non-current assets, of a $4,629,000 deposit securing the
Company's FMC bond. The corresponding liability, customer deposits, is included
in current liabilities. The other increases in working capital at March 31, 1996
and September 30, 1995 were the result of cash flow provided by operations, and
particularly the $425,000 in income from the cancellation of the charter
agreement. The Company also received working capital from the proceeds of its
Private Offering (as hereinafter defined) during its 1995 fiscal year. See
"Business - The Private Offering."
Cash flows from operations provided $3,451,324 and $661,137, for the first
half of fiscal 1996, and fiscal 1995, respectively. Cash flows for the first
half of fiscal 1996 consisted primarily of increases in customer deposits,
accounts payable and accrued liabilities.
At March 31, 1996, the Company owed $24,366,985 to the Lender in connection
with the Commodore Acquisition. The Loan is secured by substantially all of the
assets of New Commodore, including preferred ships mortgages on both Cruise
Ships, and bears interest at LIBOR plus 2%. The Loan must be repaid in 12 semi-
annual installments of principal and interest beginning January 14, 1997.
Interest which accrues during the first year following the Commodore Closing
will be paid to the Lender on a monthly basis. See "Business - The Commodore
Acquisition." On November 15, 1995, the Company and the Lender amended the
terms of the Loan to require the Company to remit monthly installments of
principal and interest toward the January 14, 1997 payment. Such monthly
payment schedule will end on January 14, 1997. See "Business - The Commodore
Acquisition." In the event that the Company is required to withhold income tax
on any amounts due to the Lender, the Company has agreed to pay the required
amount to be withheld and pay the Lender the full amount of interest due under
its agreements with the Company.
The terms of the Loan place certain restrictions on the Company. First, the
Company is not permitted to place any additional liens on any of its assets
(including the Cruise Ships) without the prior consent of the Lender. Second,
the Company is prohibited from paying any dividends on its Common Stock until
the earlier of such time as its Common Stock becomes traded on Nasdaq or a U.S.
stock exchange, or 18 months after the Commodore Closing and, after such time,
the Company
31
<PAGE>
may not pay more than 50% of its net profits as dividends. Third, beginning in
February 1997, the Company must make monthly payments into a restricted
retention account in an amount estimated to pay the next installment of
principal and interest under the Loan, divided by the number of months before
the next installment is due. In addition to the foregoing, New Commodore must
maintain a minimum cash balance in its operating accounts of $1 million, after
deducting amounts of principal and interest due to the Lender.
The Universe Explorer was in drydock between the Commodore Closing and
January 1996. Because the Company received charter cancellation fees for
charters scheduled between the Commodore Closing and December 1995, the time the
vessel was out of service is not expected to have an adverse effect on the
Company's fiscal 1996 revenues. In November 1995, the Company began to prepare
the vessel for use in the Semester at Sea program. See "Business - the Joint
Venture." The Company used approximately $535,000, which it received from
EffJohn, to repair certain technical items aboard the vessel. The Company also
paid the first $200,000 of renovations to the ship to convert it for use in the
Semester at Sea program. Any excess amounts which the Company requires for such
conversion will be paid by Seawise. The vessel departed on its first Semester at
Sea voyage in January 1996.
The Enchanted Isle was sent to drydock in February 1996 for approximately
two weeks to repair its propeller and complete certain other repairs. EffJohn
reimbursed the Company for approximately $140,000 of such costs. See "Business-
The Commodore Acquisition - The Settlement Agreement." The time the vessel was
out of service for such repairs is not expected to have a material adverse
effect on the Company's fiscal 1996 net income.
INFLATION
The impact on the Company's operations has not been significant to date.
There can be no assurance that a high rate of inflation in the future would not
have an adverse effect on the Company's operations.
32
<PAGE>
BUSINESS
GENERAL
The Company owns two Cruise Ships. The Enchanted Isle offers Caribbean
cruises from New Orleans and the Universe Explorer is chartered to Sea-Comm,
which in turn has space-chartered the vessel to an organization which operates
the educational "Semester at Sea" program during a portion of the year. Sea-Comm
will operate cruises to Alaska aboard the Universe Explorer during the balance
of the year.
THE COMMODORE ACQUISITION
The Acquisition Agreements. The Company entered into definitive agreements
--------------------------
with EffJohn, Old Commodore, and its subsidiaries on April 28, 1995 (the
"Acquisition Agreements"). Pursuant to the Acquisition Agreements, the Company
acquired the Trademarks, two cruise vessels known as the Enchanted Seas (now
known as the "Universe Explorer") and the Enchanted Isle, substantially all of
Old Commodore's existing operations, certain advance ticket sales, marketing and
sales personnel and information and certain shoreside assets from EffJohn and
its subsidiaries. The Commodore Acquisition closed on July 14, 1995. The
Company purchased all of the Commodore Assets "AS IS", and thus did not receive
any assurances from, EffJohn as to the condition of the Commodore Assets. See
"Risk Factors - The Cruise Ships;" and "Risk Factors -Purchase of Commodore
Assets "AS IS"." The Company did, however, have a professional surveyor survey
the Cruise Ships and EffJohn was obligated to deliver them in substantially the
same condition as each vessel was in at the time of its inspection. In
addition, EffJohn was obligated to perform specified maintenance and repairs on
the Enchanted Seas and deliver this vessel to the Company following the
satisfactory completion of such repairs, as confirmed by the vessel's
classification society. Each vessel was inspected by its respective
classification society prior to delivery to the Company and was delivered up to
its class standards.
The purchase price (the "Purchase Price") for the Commodore Assets was
$33,500,000 payable at the Commodore Closing as follows: $5,000,000 in cash;
$4,000,000 through the Company's issuance of 1,000,000 redeemable Series A
Preference Shares at an agreed value of $4.00 per share; and $24,500,000 in
promissory notes issued by the Company. The promissory notes are secured by
substantially all of the assets of New Commodore, including first preferred
ships mortgages on the Cruise Ships.
Pursuant to the Acquisition Agreements, Old Commodore and EffJohn agreed
not to compete with the Company for up to ten years with respect to all routes
in and out of the Port of New Orleans, and for up to eight years with respect to
all routes commencing and terminating in any North American port at which port
the Company operates or has publicly announced an intention to operate.
Customer Deposits and the FMC Certificates of Financial Responsibility. As
----------------------------------------------------------------------
part of the Commodore Assets, the Company received customer deposits for future
cruises and related items such as hotel and airfare packages. The Company placed
$4,629,000 on deposit with a bank to secure the U.S. Federal Maritime Commission
("FMC") Certificate of Financial Responsibility in the Event of Non-Performance
of Obligations to Passengers as required by the FMC (the "Certificate
33
<PAGE>
of Financial Responsibility"). The FMC requires companies to establish a
Certificate of Financial Responsibility in amounts and through methods set by
the FMC. Since the Universe Explorer does not depart from any U.S. port, the
Company presently needs to post a bond with the FMC only with respect to the
Enchanted Isle's customer deposits. See "Business - The Joint Venture."
Consumable Items. The Commodore Assets included consumable items intended
----------------
for use on board the Cruise Ships, regardless of where such items were stored or
located as of the Commodore Closing. At the Commodore Closing, Old Commodore
supplied consumables for use on the Enchanted Isle to the Company in the amount
of $500,000, calculated by reference to the cost thereof to Old Commodore.
Subsequent to the Commodore Closing, Old Commodore provided the Company with an
adjustment to the Purchase Price in exchange for the cancellation of its
obligation to provide consumables for use on the Enchanted Seas to the Company
in an amount not less than $500,000. The Company did not pay any additional
consideration for such consumables.
Drydock of Enchanted Seas. As of April 15, 1995, EffJohn caused the
-------------------------
Enchanted Isle to discontinue its cruises from Barbados and delivered the
Enchanted Isle to New Orleans to replace the Enchanted Seas so that the
Enchanted Seas could undergo maintenance while at drydock. EffJohn bore all
costs relating to the termination of the Barbados itinerary as well as all costs
associated with the Enchanted Seas while it remained out of service during
drydock, including the costs of insurance. EffJohn paid for maintenance and
repairs to the Enchanted Seas while it was in drydock up to certain agreed upon
limits. The required repairs are set forth in detail in the Acquisition
Agreements. Once the repairs were completed, the vessel was returned to New
Orleans. The Company then refitted the vessel to prepare it for the Semester at
Sea program.
The Loans. The Lender loaned the Company $24,500,000 for purposes of
---------
acquiring the Cruise Ships. The Loan is secured by substantially all of the
assets of New Commodore including first preferred ships mortgages on both Cruise
Ships. The Loan bears interest at LIBOR plus 2% (currently 7.875%) and must be
repaid in 12 semi-annual installments of principal and interest beginning on
January 14, 1997. On November 15, 1995, the Company and the Lender amended the
terms of the Loan to require the Company to remit monthly installments of
principal and interest toward the January 14, 1997 payment. Such monthly
payment schedule will end on January 14, 1997. In connection with the Loan, the
Company also paid, at the Commodore Closing, $50,000 of duties, stamp fees and
attorneys' fees rendered in connection with the Commodore Acquisition and the
Loan, and an arrangement fee of $100,000 to the Lender. In the event that the
Company is required to withhold income tax on any interest due to the Lender,
the Company has agreed to pay the required amount to be withheld and pay the
Lender the full amount of interest due under its agreements with the Company.
The terms of the Loan place certain restrictions on the Company. First, the
Company is not permitted to place any additional liens on any of the Commodore
Assets (including the Cruise Ships) without the prior consent of the Lender.
Second, the Company is prohibited from paying any dividends on its Common Stock
until the earlier of such time as its Common Stock becomes traded on Nasdaq or a
U.S. Stock Exchange, or 18 months after the Commodore Closing and, after such
time, the Company cannot pay more than 50% of its net profits as dividends.
Third, the Company was required to make a monthly payment into a restricted
retention account, in an amount estimated to pay the next installment of
principal and interest under the Loan, divided by the number of months before
the installment is due. In November 1995, the Company and the Lender amended the
Loan
34
<PAGE>
to temporarily eliminate the segregated account and require the Company to pay
the monthly retention amount directly to the Lender until January 1997. In
February 1997, the Company must resume setting aside monthly payments in the
retention account. Fourth, in addition to the foregoing requirement, New
Commodore must maintain a minimum cash balance in its operating accounts of $1
million throughout the term of the Loan. If the Company fails to meet any of
the foregoing requirements or cure any defaults within the permitted time
periods, the Lender could declare the Company in default under the Loan, and
potentially foreclose upon the Cruise Ships and the Company's other assets.
Series A Preference Shares. As part of the consideration for the Commodore
--------------------------
Assets, the Company issued EffJohn 1,000,000 of its Series A Preference Shares.
The Series A Preference Shares are entitled to a cumulative 7% dividend on an
annual basis. This dividend is payable from a maximum of 10% of New Commodore's
net profits for such year. EffJohn, as holder of the Series A Preference
Shares, is entitled to elect one member of the Board of Directors of the
Company, as long as it owns at least 125,000 Series A Preference Shares.
EffJohn may convert its Series A Preference Shares into Common Stock of the
Company at any time at a conversion rate equal to the greater of USD$4.00 per
share or a price per share equal to 8 times the Company's earnings per share for
its prior fiscal year. EffJohn may sell to third parties up to a maximum of
approximately 45,000 Series A Preferred Shares in any 90 day period at any time
after the Commodore Closing, subject to compliance with applicable securities
laws. The Company has the option to redeem all or any part of the Series A
Preference Shares at USD$4.00 per share at any time commencing three years after
their issuance. EffJohn may not sell, transfer, or otherwise dispose of shares
of Common Stock issued upon conversion of the Series A Preference Shares for a
period of one year from the date of this Prospectus without the prior consent of
the Underwriter, except that EffJohn may sell, transfer or dispose of up to
45,454 of such shares without the Underwriter's consent. See "Description of
Securities - Series A Preference Shares."
Settlement Agreement. At the Commodore Closing, the Company and EffJohn
--------------------
entered into a settlement agreement (the "Settlement Agreement") to resolve
certain issues with respect to repairs to the Cruise Ships and with respect to
EffJohn's prior agreement to charter the Enchanted Seas. EffJohn agreed to pay
the Company a total of $535,000 for repairs to be made to the Enchanted Seas,
which amount was paid in two installments: $460,000 on July 31, 1995, and
$75,000 on September 15, 1995. Of this amount, $189,000 was allocated to
specific repairs to the vessel. EffJohn further agreed to pay the Company
$50,000 to offset insurance costs from July 14, 1995 until December 14, 1995,
while the Enchanted Seas was to be under charter by EffJohn.
Pursuant to the Settlement Agreement, EffJohn also paid $140,000 for damage
to the propeller of the Enchanted Isle, the costs associated with the initial
damage survey and temporary repairs, and the cost of agreed repairs to shafting,
bearings, and struts. EffJohn also paid $53,750 to the Company for the cost of
additional fuel required as a result of the lost efficiency due to the damaged
propeller. The Enchanted Isle was placed in drydock for two weeks in February
1996 for such repairs.
With respect to the charter of the Enchanted Seas, EffJohn agreed that if
it did not enter into a bareboat charter for the vessel by September 1, 1995, it
would pay the Company $425,000 within 15 days thereafter. EffJohn did not
charter the vessel, and paid this sum in fiscal 1995. EffJohn further agreed
that if it did not enter into a bareboat charter for the vessel by October 15,
1995, it
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<PAGE>
would pay the Company an additional $425,000. EffJohn paid this additional sum
to the Company in October 1995.
THE PRIVATE OFFERING
Contemporaneously with the Commodore Closing, the Company consummated a
private offering of 1,500,000 shares of the Company's Common Stock at a price of
$4.00 per share (the "Private Offering"). The Company used the proceeds of the
sale of Common Stock in the Private Offering primarily to consummate the
Commodore Acquisition.
Pursuant to the terms of the Private Offering, the Company agreed to effect
an initial public offering of its Common Stock as soon as possible after the
Commodore Closing. The Company also agreed to register in such public offering
the sale of the Common Stock purchased by investors in the Private Offering. As
a result, the Company has registered such shares, subject to a 12 month "lock-
up" period. Thus, the investors may not sell such Common Stock prior to the
expiration of such period without the consent of the Underwriter. See
"Concurrent Registration of Common Stock."
INDUSTRY OVERVIEW
Cruise lines compete intensely for consumer disposable leisure time dollars
with other vacation alternatives, such as land based resort hotels and
sightseeing destinations. Public demand for such activities is influenced by
general economic conditions.
The Company believes that the modern passenger cruise industry has
experienced substantial growth over the past 25 years. The industry has evolved
from a trans-ocean carrier service into a vacation alternative to land-based
resorts and sightseeing destinations. According to CLIA, an industry trade
group, in 1982 approximately 1.5 million North American passengers took cruises
for two days or more. In comparison, the following table sets forth data
regarding industry growth over the past five years.
<TABLE>
<CAPTION>
CALENDAR YEAR NORTH AMERICAN CRUISE PASSENGERS/(1)/
------------- --------------------------------
(IN MILLIONS)
<S> <C>
1990 3.6
1991 4.0
1992 4.1
1993 4.5
1994 4.4
1995 4.5
</TABLE>
______________________
/(1)/ SOURCE: CLIA
The North American cruise industry accounts for approximately 80% of the
world market. According to CLIA, the number of overall industry North American
cruise passengers in 1994 was
36
<PAGE>
.7% below the 1993 figure, with demand increasing only slightly during 1995.
The average growth rate for North American cruise passengers from 1980 through
1994 was approximately 9.2% per year.
The Company believes that "repeat cruising" is a large source of business
in the cruise industry. Of all passengers who have cruised in the past five
years, CLIA estimates that the average number of cruises per person is 2.4.
CLIA has estimated that, in 1982, the capacity of Cruise Ships serving the
North American markets offering voyages of two or more days was approximately
43,848 berths. According to CLIA's most recent estimate, in 1995, the North
American market was served by 39 cruise lines, operating 133 vessels. Aggregate
1995 market capacity is estimated at 112,869 berths, an increase of 7.4% over
the previous year. In addition, according to an article in Lloyd's List dated
------------
February 22, 1996, an estimated 29 new cruise vessels offering 50,000 additional
berths will be added to the market by 1998.
Numerous industry analysts, as reported in various newspaper articles,
predict a trend toward the continued growth of the large cruise lines and
decline of the smaller ones in the North American cruise industry. The larger
lines such as Carnival Cruise Lines, Royal Caribbean Cruise Lines and Princess
Cruises, with whom the Company competes, have been purchasing new vessels and
thereby adding to their fleets. These larger lines benefit from increased
economies of scale and have historically operated at higher capacity than the
smaller lines. In addition, the smaller lines, such as the Company, own older
ships with fewer amenities. Such ships will require costly renovations and
retrofitting in order to meet new industry safety guidelines. See "Risk
Factors - Regulation." Industry analysts predict that discounting of fares will
play a large part in cruise ticket sales in response to the relatively flat
growth of the North American market and the substantial increases in capacity
planned over the next few years. Despite the recent softening in demand and
future increase in capacity, the Company believes that the cruise industry
should continue to represent an attractive growth segment of the leisure market.
MARKET POSITION
The cruise industry is generally viewed as the composite of three partially
overlapping segments, differentiated primarily by cruise cost, length and
itinerary. The standard, premium and luxury segments provide a wide assortment
of cruise experiences, appeal to different population segments and attract
varying demographic groupings. CLIA's luxury segment of the cruise industry
represents 10% of the total industry capacity. With list per diem rates in
excess of $400, the Company believes this market caters to the most affluent
segment of the population. Luxury market cruises are generally ten nights or
more. CLIA's premium segment is somewhat more up-scale than the standard
market, but not as up-scale as the luxury segment, and represents 32% of the
total cruise capacity. The Company believes this market attracts an older, more
affluent and experienced clientele, with list per diem rates in the range of
$291-$399 and itineraries which typically range from seven to 14 days. CLIA's
standard market, in which market the Company competes, is the largest segment
within the cruise industry, comprising 55% of industry-wide capacity. The
remaining 3% can be attributed to non-CLIA member lines. The Company believes
the standard market is characterized by affordable, shorter cruises primarily
serving first-time passengers with
37
<PAGE>
list per diem rates generally of $290 or less. Standard market cruises range
from three to ten days in the most popular cruising areas. The Company believes
that the standard segment represents the greatest opportunity for growth,
although no assurance can be given that this will prove to be correct.
The Company seeks to position itself within the standard market to capture
the first-time cruising passenger with list per diem rates for its Caribbean
cruises that range from $84-$208. In accordance with industry practice, such
prices may be discounted by the Company. The Company believes that the Commodore
name appeals to both first-time cruising passengers and repeat passengers due to
its presence in the Gulf of Mexico, Caribbean and embarkation from the Port of
New Orleans. The Port of New Orleans is a port offering many alternatives,
particularly for those who prefer to drive, rather than fly, to begin their
cruise vacation.
OPERATING STRATEGIES
The Company believes that Old Commodore consistently delivered an
innovative, value-oriented standard market cruise product. The Company seeks to
maintain such standard by providing maximum value, emphasizing "old world"
tradition and a friendly and informal atmosphere combined with value and
service.
Fleet configuration is a primary distinguishing variable in the cruise
industry, differentiating competitors serving a common passenger base. The
Company's vessels are older and smaller than those of most of its competitors.
The Company believes that these smaller vessels will enable it to provide value-
oriented service and a more personalized maritime environment than the Company's
giant vessel competitors. The Company believes that good service, coupled with
a reputation for more personalized attention, will enable the Company to command
prices comparable to its competitors. Although the Company's older vessels will
probably cost more to operate than new vessels, the Company believes that its
cost savings in debt service payments will more than offset the higher
maintenance and operating expenses. There can be no assurance, however, that
the Company can operate its vessels profitably.
Both the Universe Explorer and the Enchanted Isle were constructed in the
United States. As a result, the Company may, in the future, be able to change
the flag of the Cruise Ships from that of a foreign country to the U.S. A U.S.
flag vessel may carry passengers between U.S. ports, an option which is
unavailable to foreign flag vessels. If the Company is able to change the flags
of its fleet, and chooses to do so, it could offer seminars at sea and other
off-shore activities between U.S. ports. Companies who choose to provide
seminars or meetings aboard the Company's ships could, under current tax laws,
deduct a portion of the cost of such seminars or meetings, and individual
participants could, under current tax laws and subject to certain limits, deduct
the cost of attending such seminars. The Company has not yet determined whether
it wishes to incur the additional costs associated with operating a U.S.
subsidiary and U.S. flag vessels, which include potential additional labor,
insurance and income tax costs. Accordingly, there can be no assurance that the
Company will change the flags of any of its vessels.
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CRUISE OPERATIONS
FACILITIES, ON-BOARD SERVICES AND PROGRAMS
The Enchanted Isle was originally constructed by Ingals Shipbuilding
Corporation in the United States in 1958 and was most recently refurbished in
1994. The Enchanted Isle is designed to be a seagoing resort with restaurants,
discotheques, movie theaters, libraries, reading rooms, full service
communication facilities, jogging courses, aerobic classes, workout rooms,
numerous bars, two pools, sun deck areas and deck activities. The Enchanted
Isle has a complete casino with various gaming opportunities. Entertainment is
provided nightly and includes shipboard productions of Broadway show tunes and
Las Vegas-style revues, as well as performances by a variety of celebrity
entertainers. In addition, all passengers may take shore excursions provided at
various ports-of-call, including guided tours, visits to local attractions and
free time to explore on their own. Although the Enchanted Isle may not be as
modern, as large or contain all the amenities of newer ships, the Company
believes that it provides the cruise environment that its passengers expect.
MARKETING AND PROMOTION
The Company has committed significant resources to marketing and promotion
through advertising, public relations, and additional sales personnel. To
enhance the Company's awareness in, and coverage of travel agents and consumer
marketplaces, the Company employs a variety of complementary marketing and
promotional programs incorporating media, direct marketing and sales aids,
public relations, special events and strategic business alliances, with special
emphasis on trade and consumer advertising. The Company has initiated a new
advertising campaign to reestablish its image as a provider of value-oriented
cruises with high quality service at sea in a larger geographic region than Old
Commodore has solicited in the past few years. This new advertising campaign is
based upon travel agent and consumer research and is placed in media reaching a
wider audience than those historically employed. In the past, Old Commodore
advertised mainly in the five-state area around Louisiana, including Texas. The
Company's new marketing plan extends such advertis ing to at least five
additional states in which residents have historically purchased the most
cruises. These states are California, New York, Pennsylvania, New Jersey and
Florida.
The Company focuses on consumer and trade advertising, particularly through
the use of newspaper advertising. The Company believes that this media is
equally effective in reaching both consumers and the travel agency trade. In
addition, the Company places advertisements on radio stations and television.
Developing a strong cooperative marketing programs directly links travel agent
marketing and promotional efforts to those of the Company.
The Company places a strong emphasis on collateral development and
distribution to key producing travel agents for the Company. The Company
believes that detailed descriptions of the Company's ships, services,
itineraries and activities, pre- and post-cruise land package opportunities and
various elements of the product programs, are a significant factor in converting
the initial interest of consumers into actual cruise sales. The Company may use
direct marketing to target past passengers and various affinity organizations.
The Company views past Commodore passengers and leisure travelers using travel
organizations as persons with a high propensity to cruise with the
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Company. The Company may also place travel trade advertising via the most
popular trade publications, expanding the awareness of the Company's product and
services.
The foregoing marketing strategy requires a significant amount of the
Company's cash resources. In the event that the Company is short on working
capital, the Company may delay or cancel certain components of the foregoing
marketing plan.
TRAVEL AGENCY RELATIONSHIPS
The Company sells cruise vacations in the United States and Canada almost
exclusively through the travel agency distribution system. According to CLIA,
an estimated 95% of cruise packages are sold with the assistance of travel
agents, who normally receive commissions in the range of 10-15% of the sale.
Additional commission incentives are made available for volume producers that
consistently support the cruise line. In order to maintain personal contact
with travel agency owners, managers and front-line retail agents, the Company
maintains a field sales staff of at least eight, supported by an in-house
service staff.
The Company's cruises, consistent with industry trends, are marketed to
passengers via travel agents in the United States. Well informed travel
agencies are therefore crucial to the Company's effort in maintaining and
expanding its customer base. Accordingly, the Company places considerable
emphasis on its contacts with travel agencies and fostering goodwill towards the
Company's products, maximizing this efficient and productive relationship
although there can be no assurance that the Company will succeed in its efforts.
RESERVATIONS AND PASSENGER SERVICES
Reservations are taken by trained reservations sales agents on a computer
and software system, capable of accepting reservations for a fleet of at least
10 vessels. The Company purchased this reservations system and software from
EffJohn as part of the Commodore Assets. Staffing levels are maintained per
industry standards to ensure that calls are taken promptly. Reservations are the
first point of contact for most travel agents and, as such, play a key role in
the sales process. A full time staff of approximately 18 people assist agents in
securing passenger reservations, arranging flights for air/sea passengers,
coordinating ground transportation and pre- and post-cruise tour hotel packages.
In the event the Company does not have sufficient working capital to implement
the foregoing plan, it may reduce the number of people it employs in
reservations. Accordingly, there can be no assurance that the Company will be
able to maintain optimum staffing levels.
INTERNATIONAL SALES
The Company intends to devote a portion of its sales resources to
developing sales from the European and Latin American marketplaces. Although the
North American market is static, the European cruise market has been growing.
According to industry publications, in 1995 the European cruise market reached 1
million passengers, up from 300,000 in 1988. Europe is, by far, the largest
market outside of North America, with Germany and the U.K. comprising the
largest constituent parts. Management has begun discussions with several major
European travel operators. The Company's president, Mr. Sullivan, has
substantial previous experience developing the cruise market in England. See
"Management." The Company is also considering expanding its sales to Latin
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America, which is also a significant resource for potential passengers to the
Company due to an established network of tour operators.
MARKET PRESENCE
The Company intends to continue to expand Commodore's image as an operator
of value-oriented cruises in the standard market. The selection of a cruise line
for travel agents and passengers depends upon the reputation of the line and
recommendations. The Company believes that Commodore has a 28-year history of
serving travel agents and passengers with friendly service and consistent
quality. The Company believes that the Caribbean itinerary, intimacy and grace
of "old world" service, combined with a Port of New Orleans embarkation are
significant factors supporting a strong foundation for attracting passengers
seeking an affordable cruise vacation product. The Company's choice of New
Orleans as its point of embarkation will allow it access to passengers who might
not otherwise choose to take a cruise. Although not considered a traditional
cruise port, both the allure of New Orleans as a vacation destination, and the
convenience for local residents make New Orleans an attractive alternative to
Florida and New York based cruises. However, since Commodore provides one of
only three regularly scheduled cruises from New Orleans, New Commodore will
continue to devote significant resources to develop consumer awareness and
acceptance.
FACILITIES, ON-BOARD SERVICES AND PROGRAMS
The Enchanted Isle was originally constructed by Ingals Shipbuilding
Corporation in the United States in 1958 and was most recently refurbished in
1994. The Enchanted Isle is designed to be a seagoing resort with restaurants,
discotheques, movie theaters, libraries, reading rooms, full service
communication facilities, jogging courses, aerobic classes, workout rooms,
numerous bars, two pools, sun deck areas and deck activities. The Enchanted Isle
has a complete casino with various gaming opportunities. Entertainment is
provided nightly and includes shipboard productions of Broadway show tunes and
Las Vegas-style revues, as well as performances by a variety of celebrity
entertainers. In addition, all passengers may take shore excursions provided at
various ports-of-call, including guided tours, visits to local attractions and
free time to explore on their own. Although the Enchanted Isle may not be as
modern, as large or contain all the amenities of newer ships, the Company
believes that it provides the cruise environment that its passengers expect.
TICKET REVENUES
New Commodore's cruises are list-priced per person per day (based on double
occupancy) from $84 to $208, excluding commissions to travel agents. The
Company offers discounts, particularly during off-season periods, as is the
practice in the industry. Prices vary depending on size and location of cabin
and the time of year in which the trip occurs. The cruise price includes
shipboard accommodations, use of all of the shipboard amenities and all meals.
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ON-BOARD AND OTHER REVENUES
Revenues from the Enchanted Isle are derived from certain on-board
activities and services operated by the Company including, casino gambling,
liquor sales in a variety of bars, restaurants, lounges and discotheques.
Additional revenue is earned from pre- and post-cruise packages in each vessels'
point of embarkation. The Company also earns concession revenue from sales at
duty-free shops, gift shops, the sale of photographs to passengers, shore
excursions and from the beauty salon.
COMPETITION
Competition in the industry in which the Company competes is intense. The
Company competes with other cruise ship lines in the standard segment that offer
the same type of products in several markets and land-based resorts, many of
which have significantly greater financial resources and experience, and are
more well known than the Company. The Company also competes for consumer
disposable leisure time dollars with other vacation alternatives such as land
based resort hotels and sight-seeing destinations, in addition to approximately
25 other cruise lines operating in the standard segment. In addition, public
demand for such activities is influenced by general economic conditions. The
Company operates in the Caribbean where its principal competitors are Carnival
Cruise Lines, Royal Caribbean Cruise Lines, Norwegian Cruise Lines and Dolphin
Cruise Line. However, the Enchanted Isle is currently one of only three
regularly scheduled cruise vessels, including one Carnival Cruise Lines ship,
that embarks passengers from the Port of New Orleans.
According to CLIA, prior to the end of 1996, eight additional ships
(representing approximately 14,040 berths) will be placed in service by the
Company's competitors and eight additional ships (representing approximately
10,114 berths) will be placed in service by other cruise lines in the North
American market. The number of ships which will be retired from service during
the next two years cannot accurately be predicted. In addition, CLIA reported
that cruise demand declined by .7% during 1994 and increased only slightly in
1995. While there can be no assurance that the cruise ship industry will not
experience an imbalance between supply and demand following the introduction of
such additional capacity, the aforementioned currently known level of capacity
increases through 1996 is lower on a percentage increase basis than the industry
experienced over the past 12 years.
Competition in the standard cruise market is highly concentrated, with
three companies accounting for an estimated 71% of the available berths. Recent
statistics indicate that the large cruise lines are growing increasingly larger
and running at full capacity while the smaller lines, such as the Company's, are
forced to discount and run at approximately 70% of capacity. The three largest
cruise operators in the North American cruise industry are increasing market
share by adding new vessels to their fleets. Various articles concerning the
cruise line industry note that this trend is expected to continue for at least
the next few years. If this trend continues, the Company's ability to compete
with these larger operators may be substantially impaired.
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THE JOINT VENTURE
On October 30, 1995, the Company entered into the Agreement with Seawise
establishing Sea-Comm. Pursuant to the Agreement, the Company purchased 50.005%
of Sea-Comm's Common Stock, and 50% of Sea-Comm's outstanding Preferred Stock.
Seawise purchased 49.995% of Sea-Comm's Common Stock and 50.0% of Sea-Comm's
Preferred Stock.
The purpose of Sea-Comm is to space charter the Universe Explorer to an
entity who operates the Semester at Sea program, an educational program
conducted by the Institute for Shipboard Education, a Delaware not-for-profit
corporation ("ISE"), and the University of Pittsburgh. Seawise has a contract
with the ISE pursuant to which it has operated the Semester at Sea program
aboard its own vessel for the last 20 years. In addition, Sea-Comm will operate
cruises to Alaska (the "Alaska Program") through World Explorer Cruises and
Tours Inc. ("WEC") and Hemisphere Cruises & Tours, Inc. ("Hemisphere"), during
summer periods when the Universe Explorer is not being used for the Semester at
Sea program. Seawise is party to a tripartite agreement with WEC and Hemisphere
pursuant to which it has operated the Alaska Program for the past 19 years (the
"Alaska Agreement"). As part of the joint venture, Seawise has assigned its
rights under the Alaska Agreement to Sea-Comm.
Pursuant to the Agreement, the Company has chartered the Universe Explorer
to Sea-Comm. Sea-Comm, in turn, has chartered the Universe Explorer to Seawise
so that it may operate the Semester at Sea program exclusively aboard the
vessel. In return for such charter, Seawise reimburses Sea-Comm for 76% of its
operating costs, 100% of food costs and 76% of the principal and interest due on
the portion of the Loan attributable to the Universe Explorer. Sea-Comm also
earns revenue from the sale of the other 24% of the cabins on the vessel, which
hold approximately 176 persons, to non-student passengers. Seawise has
guaranteed the sale of tickets to 60 non-student passengers on each voyage at
pre-determined rates during 1996. The number of guaranteed non-student
passengers increases in subsequent years.
During a portion of the year when the Semester at Sea program is not
operating (approximately 49 days), Sea-Comm operates the Universe Explorer under
the Alaska Agreement. WEC enjoys certain permits issued by the U.S. Parks
Service to cruise in the Glacier Bay, Alaska area. Pursuant to the Alaska
Agreement, Sea-Comm will earn revenues from ticket sales for all cabins and pay
license fees to WEC and Hemisphere for providing certain services to Sea-Comm.
For the use of the Universe Explorer in both the Semester at Sea and Alaska
programs, Sea-Comm has agreed to reimburse the Company for all of its operating
costs, all food costs and all of the principal and interest due on the portion
of the Loan attributable to the Universe Explorer which is incurred during the
approximate 320 days each year that the Universe Explorer is under charter to
Sea-Comm. Seawise also reimbursed the Company for $250,000 in expenses it
incurred due to the cancellation by the Company of other arrangements for the
use of the vessel. The Company used approximately $535,000, which it received
from EffJohn pursuant to the Settlement Agreement, to repair certain technical
items aboard the vessel. The Company also paid the first $200,000 of
renovations to the ship to convert it for use in the Semester at Sea program.
Any excess amounts which the Company requires for such conversion will be paid
by Seawise.
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Sea-Comm is managed by a board of directors, which consists of five people,
three of which are appointed by the Company and two of which are appointed by
Seawise. Two of the Company's executive officers, Messrs. Frederick A. Mayer
and Alan Pritzker, the Company's Chief Executive officer and Chief Financial
Officer, respectively, act as directors of Sea-Comm. Mr. Mayer and Mr. Pritzker
also act as Sea-Comm's President and Secretary, respectively. Sea-Comm's
Treasurer was appointed by Seawise.
Pursuant to the Agreement, the Company granted Seawise warrants to purchase
250,000 shares of the Company's Common Stock. The warrants are presently
exercisable at $6.00 per share and expire on January 7, 2001.
THE SEMESTER AT SEA PROGRAM
The Semester at Sea, which is administered by the ISE and academically
sponsored by the University of Pittsburgh, is a program that takes approximately
500 students from colleges and universities across the United States and abroad
around the world each fall and spring semester. Since 1963, over 28,000 students
have studied and traveled to 60 countries around the world through this program.
Seawise is operating the Semester at Sea program for the first time beginning in
the Spring of 1996 aboard the Universe Explorer. The first Semester at Sea
voyage operated by Seawise sailed on February 3, 1996 on a 100-day around the
world voyage with approximately 580 students. Semester at Sea gives students an
opportunity to broaden their horizons through educated travel. Students will
travel around the world aboard the Universe Explorer and participate in a unique
and dynamic learning environment. A limited number of "non-student passengers"
will also participate in each Semester at Sea voyage.
Students can choose from approximately 50 lower and upper division courses
in a variety of disciplines, including such offerings as anthropology, biology,
English, geology, history, fine arts, music, political science, religious
studies and theater arts. A number of one-credit courses are also available.
Non-student passengers may also attend courses. Courses are accredited by the
University of Pittsburgh and are fully transferable to most institutions.
Students are required to enroll in a minimum of 12 semester credits during the
fall and spring semesters and two courses, or 6 credits, during the summer
semester. Each program includes a mandatory three-credit core course which
provides an overview of the culture, environment, geography, history and
politics of the regions visited.
The fall and spring Semester at Sea programs last approximately 100 days.
The spring semesters begin in late January or early February and end in early
May, and fall voyages depart in mid-September and return in mid-December. A new
summer session will be offered in 1996 and will last approximately 56 days. The
Universe Explorer will stop at approximately nine ports during the regular
semesters and seven ports during the summer session. The summer 1996 itinerary
includes the ports of Ensenada, Mexico; Papeete, Tahiti; Auckland, New Zealand;
Sydney, Australia; Suva, Fiji; Hilo, Hawaii; and San Diego, California. Ports
change with each voyage.
While in port, students take advantage of field trips which provide both
structured and informal activities enabling them to observe, interact and
participate in the local culture. Students may also choose to travel
independently. Excursions typically include university visits, cultural
performances, visits to archeological sites, museums, orphanages and rural
areas. Students are also
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frequently given opportunities to interact with students and faculty at local
universities. Stays in port typically range from two to six days.
THE ALASKA PROGRAM
Sea-Comm plans to operate one 7-day and three 14-day Alaska cruises in the
summer of 1996 onboard the Universe Explorer. All Alaska cruises will begin and
end in Vancouver, British Columbia. Ports of call for the 7-day cruise are
Ketchikan, Juneau, Wrangell, and Glacier Bay. The 14-day cruises will call at
the same ports as well as Sitka, Yakutat Bay/Hubbard Glacier, Seward, Skagway,
and Victoria.
WEC has been operating Alaska cruises for 19 years. The Company believes
that Sea-Comm's operation of WEC's established program will offer a unique
opportunity to cruise to Alaska due to its unmatched educational seminars and
over 40 optional shore excursions. Although the Alaska program is not part of
the Semester at Sea program, the 15,000 volume library will remain on board the
Universe Explorer in place of a casino. The passengers are free to use the
library to enhance the presentations by guest lecturers or simply to relax and
enjoy a quiet place to read. Passengers are also offered unique presentations
and educational lectures by guest professors and nature experts from around the
world. These presentations provide information about the art, culture, geology
and history of the ports-of-call and the region in general. The Company believes
that Sea-Comm will be the only operator of Alaska cruises that offers
educational seminars in conjunction with a cruise experience.
MARKETING AND PROMOTION
The ISE promotes the Semester at Sea program through its own network. The
ISE recruits campus volunteers on over 200 campuses in the United States and
abroad and such volunteers distribute brochures and respond to questions from
interested students. In addition, the ISE maintains a list of Semester at Sea
alumni and encourages such persons to recruit students for the program. Because
of the way Sea-Comm earns revenue from the Semester at Sea program (through a
charter), its revenue will not vary materially based on the number of students
aboard the vessel. As a result, marketing to student passengers is not of
material importance to Sea-Comm.
Seawise, on behalf of Sea-Comm, markets Semester at Sea voyages, primarily
through the ISE, to non-student passengers through college alumni associations
and other education-related groups. Of the 176 berths available for non-student
passengers, Seawise has guaranteed that it will procure at least 60 non-student
passengers for each voyage during 1996 at pre-set rates. This number will
increase in subsequent years.
With respect to the Alaska program, Sea-Comm anticipates that WEC will
market its cruises through travel agents, and, in general, through the same
avenues that the Company markets its Caribbean cruises.
WEC's cruise experience can be differentiated from that of its competitors
both based on the length of the cruise and on its focus. Although WEC's Alaska
cruises will feature all of the cuisine, entertainment and services that cruise
passenger have come to expect, they will offer a unique educational
undercurrent, which WEC promotes as a unique adventure for the body and soul.
The
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Universe Explorer will feature an extensive library in place of the casino and
allow passengers to study the ports the ship visits in depth if they so desire.
FACILITIES, ON-BOARD SERVICES AND PROGRAMS
The Universe Explorer is a 23,900 gross ton registered vessel, which has
nine passenger decks and a capacity for approximately 860 passengers in 363
cabins (based on double occupancy). During the Semester at Sea program, the
shipboard campus consists of classrooms with closed circuit television
capabilities, a student union, a theater, a 15,000 volume core library, study
lounges, and a cafeteria, in addition to standard facilities of any oceangoing
vessel. Living areas are supervised by a support team which includes a complete
student life staff. The physical set-up on the Universe Explorer has been
specifically designed for academic ventures and includes classrooms with
blackboards, not substantially different from land-based campuses. A closed-
circuit video system further supports classroom instruction. At the students'
disposal are also a computer lab, exercise room, swimming pool, campus store,
snack bar, and a sports deck for volleyball, basketball and aerobics. Laundry
facilities and satellite phone calls and faxes are also available on board.
Cabins are available in double, triple and quadruple occupancy for students and
single and double occupancy for non-students.
The amenities on the Universe Explorer during the Semester at Sea program;
however, are not necessarily the same as those aboard the Enchanted Isle. There
are no formal dinners (except on a few special occasions), no ballroom and no
professional entertainers. However, the program staff includes an adult
coordinator who organizes a program of activities specifically geared for the
student/adult community. Cabin stewards provide daily limited cleaning and
linen services and all meals are served cafeteria-style for students, faculty
and staff. Attire is generally casual. The Universe Explorer houses 4 lounges
and 2 bars available for students, with alcoholic beverage service limited to
beer and wine, and an additional 2 lounges for faculty, staff and adult
passengers, which serve a full range of alcoholic beverages.
During the months when the Universe Explorer sails on its Alaska itinerary,
it is easily transformed back into a luxury cruise chip. Classrooms are restored
to lounges and dining areas, and the crew resumes formal meals, maid service and
room service. In addition, the ship features all of the amenities and
entertainment offered by the Company's other Cruise Ship, the Enchanted Isle,
except for casino gambling. Even during the Alaska program, the Universe
Explorer retains its substantial library offering passengers the opportunity to
learn all about the ports they will visit during their voyage.
TICKET REVENUES
The cost of Semester at Sea tuition ranges from $12,580 to $14,880 for
standard accommodations during the full semesters, and ranges from $6,775 to
$8,275 for standard accommodations during the summer semester. Such rates are
per person and include tuition, passage fare, room, board, and student fees.
Travel to and from ports of embarkation and debarkation, text books, in-country
travel, personal expenses and incidental fees are additional. Financial aid is
available to some students. Because the Semester at Sea is operated by Seawise,
neither the Company nor Sea-Comm earn revenue from student ticket sales. Sea-
Comm does, however, earn revenue from ticket sales to non-student passengers.
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WEC's Alaska cruises are list-priced per person (based on double occupancy)
from $1,145 to $1,995 for the 7-day cruise and $2,295 to $3,995 for the 14 day
cruises, excluding commissions to travel agents, which will be paid by Sea-Comm.
Prices vary depending on size and location of cabin. The cruise price includes
shipboard accommodations, use of all the shipboard amenities and all meals.
ON-BOARD AND OTHER REVENUES
Sea-Comm earns revenues from the Universe Explorer during the Semester at
Sea program from beverage and snack bar sales and miscellaneous services. While
the vessel is used in the Alaska program, Sea-Comm earns on-board revenue from
certain on-board activities and services including beverage sales in a variety
of bars, restaurants and lounges, and shore excursions. Additional concession
revenue is earned from gift ship sales and the sale of photographs to
passengers.
COMPETITION
Seawise is the exclusive operator of the Semester at Sea program. To the
Company's knowledge, there is no other entity which operates a similar shipboard
educational program. Seawise competes for student passengers with operators of
land-based international educational programs, such as semesters abroad. With
respect to adult passengers, Sea-Comm competes with long cruise providers, such
as freighters with passenger accommodations and world cruises, and to a lesser
degree with traditional world cruises and land-based vacation alternatives.
With respect to the Alaska program, Sea-Comm competes with other cruise
operators who operate cruises to this region. Some of these operators carry
passengers from Canadian ports to Alaska and then return them by air, while
other operators carry passengers on a round trip voyage. Sea-Comm also competes
for consumer disposable leisure time dollars with other vacation alternatives.
SHIP MAINTENANCE AND OPERATION
In addition to routine maintenance and repairs performed on an ongoing
basis, a vessel is generally taken out of service once every two or three years
for a period ranging from one to two weeks, during which time more substantial
maintenance work, repairs and improvements are performed in drydock. The
Universe Explorer was last taken out of service for maintenance in April 1995
and the Enchanted Isle was last taken out of service for maintenance in February
1996. This work typically is performed during non-peak periods to minimize
disruption of the Company's operations and any adverse effect on revenues. To
the extent practicable, the ship's crew, catering and hotel staff remain with
the ship during such period and assist in performing maintenance and repair
work.
The Company placed the Universe Explorer in drydock for the purpose of
carrying out the repairs detailed in the Settlement Agreement at the Commodore
Closing. All such repairs were performed at EffJohn's expense. While the
Universe Explorer was in drydock, the Enchanted Isle operated on the itinerary
previously served by the Universe Explorer. Following the completion of the
repairs, the Universe Explorer commenced operations for Sea-Comm.
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Due to the age of the Cruise Ships, they are expected to require more
maintenance than new vessels. In addition, they are more likely to break down
and be removed from service at unscheduled times, which could result in loss of
revenue for the Company. During 1994, however, the Universe Explorer was not
out of service for unscheduled maintenance. Because the Enchanted Isle was used
as a floating hotel during most of 1994, comparable statistics for this vessel
are unavailable.
SUPPLIERS
The Company purchases air transportation, bunker and diesel fuel, food and
related products and hotel supplies from independent suppliers and does not
expect difficulties in obtaining adequate supplies of these items. The Company
is not dependent upon any one supplier for its needs.
EMPLOYEES
The Company employs approximately 562 people, of whom 505 serve as officers
and crew on the Cruise Ships and approximately 57 are employed shoreside in
various sales and marketing, as well as administrative and management positions.
Pursuant to the terms of the Commodore Acquisition, the Company renewed Old
Commodore's contract with the employees who work aboard the Enchanted Isle and
Universe Explorer for three month renewable terms.
INSURANCE
The Company has procured protection and indemnity coverage and oil
pollution coverage, as well as other coverage through its insurers for the
Cruise Ships. The Company maintains insurance on the hull and machinery of the
Cruise Ships in an amount equal to the greater of 100% of the market value of
the ship, as such value is agreed upon with the insurer and the mortgage holder
of the vessel, or 120% of the outstanding amount of the Loan on the vessel.
Coverage for hull and passenger interests (which includes earnings and increased
value) is maintained in amounts related to the value of the ship and its
anticipated revenues. In addition, the Company maintains war risk insurance on
the ship in amounts in excess of the market value of the ship as agreed upon
with the insurer. War risk insurance includes protection against liability
claims by passengers and crew, as well as other indemnity risks for which
coverage would be excluded under the Company's protection and indemnity coverage
by reason of war exclusion clauses.
The Company also maintains coverage on the Cruise Ships in various amounts
for the loss of revenue in the event that either such vessel is unable to
operate during scheduled cruise periods as a result of an accident, mechanical
failure, or certain additional covered perils. In such event, the Company's
insurance would pay up to $53,000 and $60,000 per day of lost service for the
Enchanted Isle and Universe Explorer, respectively, up to a maximum of 90 days,
subject to a 14-day waiting period. The Company, as required by the FMC, has
established insurance coverage in connection with liability for death or injury
to passengers with respect to the Enchanted Isle. Such coverage has no
limitation, but is subject to a deductible equal to $50,000 per occurrence. The
Company also provides a guaranty in respect of liability for non-performance of
transportation as required by the FMC with respect to the Enchanted Isle. The
Universe Explorer does not sail from U.S. ports, and as such, the Company is not
required to maintain such coverages for this vessel.
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GOVERNMENT REGULATION
The Company's vessels are registered in Panama, and are subject to
regulations issued by Panama, including regulations issued pursuant to
international treaties governing the safety of the ships and its passengers. The
country of registry conducts periodic inspections to verify compliance with
these regulations.
Every five years, the Cruise Ships are subject to an inspection of the hull
structure and plating. In addition, ships operating out of U.S. ports are
subject to control verification by the U.S. Coast Guard for compliance with
international treaties, and by the U.S. Public Health Service for sanitary
conditions. The Universe Explorer and The Enchanted Isle will be inspected at
least annually by the Panamanian authorities and quarterly by the U.S. Coast
Guard, and on a regular basis by the U.S. Public Health Service. The Company
believes that the Cruise Ships are in substantial compliance with all applicable
regulations and that they have the licenses necessary to conduct their business.
The Company has obtained certificates from the FMC relating to its ability
to meet obligations to passengers for non-performance of cruises. The Company
received certain passenger deposits as part of the Commodore Assets necessary to
obtain this certificate. In the future, the Americans with Disabilities Act
("ADA") may be applied to the Cruise Ships to make the Cruise Ships more
accessible to disabled persons. The Company cannot project how the ADA will be
applied to the Cruise Ships or the costs of compliance.
The Company is also subject to various U.S. laws and regulations relating
to environmental protection. Under such laws and regulations, the Company will
be prohibited from, among other things, discharging materials, such as
petrochemicals and plastics, into the waterways. The Company has obtained
insurance against the costs of oil pollution occasioned at, or in transit to,
sea. The financial costs relating to U.S. environmental laws and regulations are
not expected to have a material adverse impact on the Company's results of
operations, financial condition or liquidity.
The Company believes that it is in compliance with all regulations
applicable to the Cruise Ships and has the licenses necessary to conduct its
business, however, there can be no assurance thereof. From time to time,
legislation and proposed regulations have been introduced which could have an
impact upon the Company's operations. During recent years, SOLAS has been
amended and will, among other things, require most passenger vessels not fitted
with sprinkler systems to install such systems and other safety arrangements,
including the addition of smoke detector systems, low-location lighting and
enclosed escape stairwells by October 1997. In the event a vessel meets the
SOLAS 1974 requirements (without reference to any subsequent amendments
thereto), it will not be required to be fitted with a sprinkler system and other
safety equipment until on or before October 1, 2005. The Cruise Ships are not
currently fitted with any sprinkler systems. The Company believes that the
Cruise Ships comply with the SOLAS 1974 requirements, and thus that it will not
have to fit them with sprinkler systems and other safety equipment until 2005.
Neither the U.S. Coast Guard nor either of the Cruise Ships' classification
societies has definitely confirmed that the Cruise Ships meet the SOLAS 1974
requirements. Thus, there is a risk that the Company will have to install such
systems aboard the vessels in 1997. The cost of such installation is presently
estimated to be approximately $3,000,000 per vessel. The Company has not set
aside or otherwise anticipated where it will obtain such funds if it must meet
the 1997 deadline. In addition, the
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installation of the sprinkler systems could require that the Cruise Ships be out
of service for as long as three months.
There have been efforts in prior Congresses to adopt bills that would apply
United States labor laws to non-resident alien crew of foreign registered ships
sailing from U.S. ports and to exclude certain foreign-built ships from U.S.
ports if they received construction subsidies of a particular type. With
respect to the ship construction subsidies, the Cruise Ships are U.S. built and
thus would be at risk to such legislation only if it were to apply to conversion
and maintenance work performed on the vessels in foreign countries. The
application of U.S. labor laws to foreign-registered passenger ships would have
a very substantial impact on the cruise industry as a whole and the Company
cannot predict the implications on its operations. Such proposed legislation is
not presently under consideration by the 104th Congress.
The Cruise Ships have been built and they maintain the standards of design,
construction and maintenance appropriate to their trades and they are operated
and maintained under the continuous maintenance survey system of the American
Bureau of Shipping and Lloyds Register of Shipping, respectively. In order for
the Company to insure the Cruise Ships, it must comply with the survey and
maintenance requirements of each ship's respective classification society. The
cost of such required maintenance for older vessels, such as the Cruise Ships,
could be high.
LEGAL PROCEEDINGS
Except as described herein, neither of the Cruise Ships nor the Company is
a party to any material legal proceedings, whether pending or known to be
contemplated, and the Company knows of no material legal proceedings, pending or
threatened, or judgments entered against any director or officer of the Company
in his capacity as such.
In October 1995, Kristian Stensby filed an action in the Circuit Court in
Dade County, Florida against EffJohn, the Lender, the Company, Mr. Mayer and
others, alleging that due to the tortious acts or breaches of agreements by
various defendants, he did not receive certain fees and/or commissions to which
he was allegedly entitled upon the consummation of the sale of the Commodore
Assets or use of such assets in a joint venture. Mr. Stensby has not alleged the
amount of damages to which he believes he is entitled as a result of the alleged
behavior of the various defendants. Recently, the court denied the motion of the
Company and its subsidiaries to dismiss this action; however, the Company does
not believe that the ultimate resolution of this action will have a material
adverse effect on its financial condition.
The Company anticipates that it will be subject to claims and suits in the
ordinary course of its business in the future, including those arising from
personal injury to its passengers. The Company believes that it has obtained
insurance in the proper types and amounts to cover such anticipated claims. See
"Risk Factors - Certain Business Risks."
DESCRIPTION OF PROPERTY
New Commodore subleases from EffJohn, on a pass thru basis, approximately
16,000 square feet of office space in Hollywood, Florida. The sublease
terminates in June 2000. The Company uses such space for its administrative and
management operations. The annual lease payment of
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approximately $13.50 per square foot does not include taxes, utilities, or
certain other operating costs. The base rent will increase by 4% each year
during the term of the lease. Taxes, utilities and operating costs amount to
approximately an additional $8.22 per square foot.
The Company also utilizes a pier at the Port of New Orleans, pursuant to a
written agree ment, from which one of its Cruise Ships will depart, and port
facilities at various Caribbean locations, pursuant to oral agreements with the
respective authorities, as is the custom in the Caribbean. The agreement with
the Port of New Orleans, which was assigned to the Company, permits the Company
to operate a vessel from New Orleans for six years. The Company has priority
use of the terminal on weekends. In the event the Company does not complete 300
sailings during such period (or 50 sailings per year), the Company may extend
the agreement for one year, pay a predetermined cancellation fee, or place
another vessel in service in New Orleans. No assurance can be given that the
Company will be able to continue to use the Caribbean ports under oral
agreements, or that if such oral agreements are terminated, the Company will be
able to locate acceptable substitute ports.
TRADEMARK PROTECTION
At the Commodore Closing, the Company acquired domestic and foreign
trademark registrations relating to the name "Commodore" and the distinctive
Commodore logo. Pursuant to the Acquisition Agreement, the Company has agreed to
allow EffJohn to use the name Commodore in connection with a class of ferry
service it provides. The Company does not believe that such use will materially
interfere with its proposed use of the Trademarks. The Company believes such
trademarks are widely recognized throughout North America, although it has not
independently verified this belief. The Company has not yet recorded the
assignment of certain of the foreign Trademarks due to the costs involved and
the potentially limited benefit of certain of such Trademarks, and has not yet
determined whether it will do so. As a result, there can be no assurance that
the Trademarks do not or will not violate the proprietary rights of others, that
the Trademarks would be upheld if challenged or that the Company would not be
prevented from using the Trademarks, any of which could have an adverse effect
on the Company. In addition, there can be no assurance that the Company will
have the financial resources necessary to enforce or defend the Trademarks. The
Company is not aware of any actions against the Trademarks and has not received
any notice or claims of infringement in respect of the Trademarks.
CERTAIN TAX CONSIDERATIONS
The following discussion summarizes certain U.S. Federal income tax
consequences to the Company and to U.S. persons holding the Company's Common
Stock. This discussion is a summary for general information only, and is not a
complete analysis of the tax considerations that may be applicable to the
Company or to a prospective investor. This discussion also does not address the
tax consequences that may be relevant to income of the Company other than from
the international operation of ships, as defined in the Code, nor to particular
categories of Company stockholders subject to special treatment under certain
Federal income tax laws, such as dealers in securities, tax-exempt entities,
banks, insurance companies and foreign individuals and entities. In addition,
it does not describe any tax consequences arising out of the tax laws of any
state, locality or foreign jurisdiction. The discussion is based upon currently
existing provisions of the Code, existing and proposed regulations thereunder
and current administrative rulings and court decisions. All of the
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foregoing are subject to change and any such change could affect the continuing
validity of this discussion. In connection with the foregoing, investors should
be aware that the Tax Reform Act of 1986, as amended (hereinafter, the "1986 Tax
Act") changed significantly the U.S. Federal income tax rules applicable to the
Company and, in certain cases, to certain holders of its Common Stock (including
the Principal Stockholders). Although the relevant provisions of the 1986 Tax
Act are discussed herein, those provisions have not yet been the subject of
extensive administrative or judicial interpretation. Accordingly, there can be
no assurance that such interpretation will not have an adverse impact on an
investment in the Company's Common Stock.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF ANY INVESTMENT IN THE COMPANY'S COMMON
STOCK, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
TAXATION OF THE COMPANY - POSSIBLE U.S. TAX EXEMPTION UNDER SECTION 883(A) OF
THE CODE.
Code section 883(a) generally exempts from U.S. corporate tax the shipping
income derived by a foreign corporation whose country of incorporation
reciprocally exempts from foreign tax the income of U.S. corporate shipping
companies. The Company anticipates that substantially all its income will be
from its subsidiaries', that is from New Commodore's, Almira's and Azure's,
international operation of ships, as described in Code section 883(a).
The Company and New Commodore are incorporated in Bermuda, and New
Commodore's subsidiaries, Almira and Azure, are incorporated in Panama. With
respect to New Commodore's separate income, Bermuda counsel has advised that
there is no corporate income tax in Bermuda. U.S. Treasury regulations indicate
that countries that do not impose a corporate income tax such as Bermuda, are
viewed as providing a reciprocal exemption. With respect to the bareboat charter
income of Almira and Azure from their leases of the vessels to New Commodore,
Panama counsel has advised the Company that Panama's exemption from corporate
income tax for income earned by a U.S. corporation from maritime activities is
broad enough to cover both charter income and operating income. Based upon this
advice from Bermuda and Panamanian counsel, the Company believes that Bermuda
and Panama will be viewed as providing a reciprocal exemption. Because
substantially all the Company's income is anticipated to be derived from foreign
corporations whose countries of incorporation, Bermuda and Panama, reciprocally
exempt from U.S. tax the income of U.S. corporate shipping companies, the
Company would qualify under Section 883(a) for an exemption from U.S. corporate
tax on substantially all its income.
Section 883(c), however, generally provides that the corporate tax
exemption provided by Section 883(a) does not apply unless the stock of the
foreign corporate parent or grandparent of the foreign corporation earning the
shipping income is "primarily and regularly traded on an established securities
market...in the United States" or the corporation is a "Controlled Foreign
Corporation" ("CFC") as described below in the section "Taxation of the
Company's Stockholders," or certain other criteria are met. Prior to the
completion of this Offering, the Company Common Stock has not been "primarily
and regularly traded on an established securities market...in the United
States"; nor has any of the alternative methods of avoiding the restrictions of
Section 883(c) been met. Therefore, since its formation, the Company has been
subject to U.S. taxation, although it believes its U.S. tax liability to date
has not been material.
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The Company anticipates, however, that upon completion of this Offering,
its Common Stock will be viewed as "primarily and regularly traded on an
established securities market...in the United States." In that case, the
restrictions of Code section 883(c) would be avoided, and Code section 883(a),
which generally exempts from U.S. corporate tax the shipping income derived by a
foreign corporation whose country of incorporation reciprocally exempts from its
foreign tax the income of U.S. corporate shipping companies, should apply to
exempt the shipping income of the Company's subsidiaries.
Although no Treasury regulations have been promulgated that explain when a
foreign corporation's stock will be considered "primarily and regularly traded
on an established securities market" for purposes of Code section 883(c),
Treasury regulations have been promulgated interpreting a similar phrase under
Section 884 of the Code which, like the phrase in Code section 883, was enacted
in the Tax Reform Act of 1986. Under these regulations, the stock exchange must
be a U.S. over-the-counter market, such as Nasdaq, or meet certain other
criteria. In addition, the stock listed on the exchange must represent 80
percent or more of the total combined voting power and value of the
corporation's stock. Thus, for example, if the Series A Preference Shares were
to represent more than 20% of the Company's total stock value (due to a decline
in value of the listed Common Stock relative to the Series A Preference Shares)
during a year, the Company would not be viewed as meeting the "primarily and
regularly traded on an established securities market" test. The regulation
further generally requires that the stock is regularly quoted by brokers or
dealers holding themselves out to buy or sell the stock at the quoted prices, or
that trades in the shares take place on at least 60 days during the year and
that the annual trading volume is at least 10 percent of the average number of
shares outstanding. The regulations further require that 50% or more of the
outstanding shares of the listed stock are not owned, directly or indirectly,
for more than 30 days during the relevant year by persons who each own 5% or
more of the value of the outstanding shares of stock and (a) are not "qualifying
stockholders" for purposes of Code section 884 or (b) fail to provide to the
Company the required proof of their qualifying status.
The Company believes that upon completion of this Offering and the trading
of its Common Stock on Nasdaq NMS, its Company Stock will meet the requirements
set forth in Code section 883(c) that it be "primarily and regularly traded on
an established securities market...in the United States." This will qualify the
Company for the tax exemption provided by Code section 883(a), if the quoted
phrase in Code section 883(c) is interpreted similarly to the way it is
interpreted in the regulations under Code section 884. However, because there
are no regulations to date interpreting Code section 883(c), and because
satisfying the Regulations under Code section 884 depends upon meeting certain
factual tests (e.g., that the Company's Common Stock represents at least 80
percent of the combined value of the Company's Common Stock and Series A
Preference Shares) there is no assurance that the Company will qualify for the
tax exemption provided by Code section 883(a). Also, other factors could lead to
a loss of the reciprocal exemption, such as a de-listing of the Common Stock
from Nasdaq (NMS and the Small Cap Market), a change in foreign corporate tax
law on shipping income, or a change in Code section 883.
In the event that the Company were not eligible for the Code section 883(a)
exemption, its international shipping income would be subject to a complex set
of tax rules concerning the taxation of foreign corporations engaged in business
in the United States. Under these rules, such a foreign corporation may be
subject to various U.S. taxes, including the regular U.S. corporation income tax
(or alternative minimum tax); an additional branch profits tax; a gross basis
tax on certain gross
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rentals derived from bareboat charters of ships to affiliated or unaffiliated
companies; and branch taxes on certain interest paid or accrued. The Company
expects that, unless and except to the extent that the Company qualifies for the
tax exemption provided by Code section 883(a), it will be subject to these U.S.
income taxes.
Sea-Comm, the Company's majority owned subsidiary, is incorporated in
Liberia. Counsel familiar with Liberian law has advised that Liberia provides a
corporate income tax exemption for income earned by a U.S. corporation from the
international operating and chartering of ships, including passenger operations,
and chartering on a bareboat, time or voyage basis. Based on this advice from
counsel familiar with Liberian law, the Company believes that Liberia will be
viewed as providing a reciprocal exemption. The Company therefore believes that
under Section 883(a) it will be eligible for the exemption from U.S. corporate
income tax based on its income from international shipping income. The Section
883(a) exemption should extend to the payments received from Seawise, in the
nature of time-charter payments, and also to the passenger revenue derived by
Sea-Comm with respect to non-student passengers, during the approximately 258
days per year that the Universe Explorer is used in connection with the Semester
at Sea Program. The Section 883(a) exemption should also extend to the passenger
revenues from the Universe Explorer's Vancouver to Alaska route.
Under Section 883(c), however, the U.S. corporate tax reciprocal exemption
otherwise provided to Sea-Comm for its international shipping income under
Section 883(a), will not be available unless either the Common Stock of the
Company, which is the indirect majority shareholder of Sea-Comm, is "primarily
and regularly traded on an established securities market in the United States,"
or certain alternative tests, which may not be met here, are satisfied. The
Company believes that, to date, Sea-Comm's potential U.S. corporate tax
liability is not material. Moreover, as discussed above, the Company believes
that, upon completion of this Offering and the trading of its Common Stock on
Nasdaq NMS, its stock will be viewed as being "primarily and regularly traded on
an established securities market in the United States," thereby permitting Sea-
Comm to qualify for the U.S. corporate tax exemption under Section 883(a).
Nevertheless, as discussed above, there are certain risk factors concerning the
ability of the Company's stock to be qualified as "primarily and regularly
traded on an established securities market in the United States." If the
Company's stock is unable to qualify as being "primarily and regularly traded on
an established securities market in the United States," then the Company expects
that Sea-Comm, like the Company itself, could be liable for significant U.S.
taxes on its international shipping income.
Moreover, the Internal Revenue Service has ruled that, in any case, the tax
exemption provided under Section 883(a) does not include income from voyages
that begin and end in the U.S. and do not stop at any foreign ports. Therefore,
the income of Sea-Comm from the approximately 49 days that it is on the Alaska
route, which route involves stops only at U.S. ports, will be subject to full
U.S. corporate tax as well as U.S. branch tax, even if the Company's stock does
qualify as being "primarily and regularly traded on an established securities
market in the United States. As a consequence, Sea-Comm's effective U.S.
corporate tax rate on such income may be very high.
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FOREIGN INCOME TAXATION
The Company and New Commodore are incorporated in Bermuda. Bermuda counsel
has advised the Company that Bermuda does not impose a corporate income tax.
Almira and Azure are incorporated in Panama. Panama counsel has advised the
Company that Panama does not impose a corporate income tax on the non-Panamanian
source income of a Panamanian corporation. The Company does not expect that
itself or any of its subsidiaries will have an office in Panama, or that its
ships will visit ports in Panama. In that case, Panama counsel has advised that
the Company and its subsidiaries will have no Panama source income, and
therefore not be subject to Panamanian corporate income tax.
Panama counsel has also advised that dividends and interest paid by a
Panamanian corporation with no Panamanian source income are not subject to
Panamanian withholding tax. Accordingly, New Commodore should not be subject to
Panama withholding tax on dividends and interest received from Almira or Azure.
Counsel familiar with Liberian law has advised that the Company will not be
subject to Liberian tax on its charter payments from Sea-Comm, if, as the
Company expects, the Universe Explorer does not make any trips between two
Liberian ports. Liberian counsel has also advised that Sea-Comm will not be
subject to Liberian tax on its either its direct passenger revenue, or on the
receipt of its charter payments from WEC, Hemisphere, or Seawise, if, as the
Company expects, the Universe Explorer does not make any trips between two
Liberian ports. Counsel familiar with Liberian law has also advised that the
Company will not be subject to Liberian tax on any preferred or common dividends
received from Sea-Comm, if, as the Company expects, the Universe Explorer does
not make any trips between two Liberian ports.
The vessels leased by Almira and Azure, and operated or chartered by New
Commodore, may visit ports in different foreign countries. In addition, New
Commodore may have some incidental business contacts in those or other foreign
countries. When the Company is finalizing its routes and related business plan,
it will then review the corporate tax laws of those foreign countries to
determine how much, if any, corporate income tax liability may be imposed on the
Company and its subsidiaries by reason of activities in the those foreign
countries. At present, such corporate tax liability cannot be estimated.
TAXATION OF THE COMPANY'S STOCKHOLDERS
Dividends; Undistributed Income of the Company. A United States person
----------------------------------------------
whose holdings of the Company's Common Stock (including shares such person is
considered to own under applicable constructive ownership rules) are less than
ten percent of the Company's outstanding Common Stock generally is not required
to recognize income by reason of the Company's earnings until such earnings are
distributed. Dividends paid by the Company to such a stockholder will be taxable
to such stockholder as dividend income to the extent of the Company's current or
accumulated earnings and profits. Such dividends generally will not be eligible
for any dividends-received deduction. The Company's ability to pay dividends to
the holders of its Common Stock is restricted by the terms of the Series A
Preference Shares and the Loan. See "Description of Securities Series A
Preference Shares" and "Business - the Commodore Acquisition." Regardless
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of such restrictions, the Company does not anticipate that it will pay dividends
on the Common Stock in the foreseeable future.
The Company also does not anticipate that it will be a CFC. This is because
the Company does not believe that, at any time, United States Ten Percent
Stockholders will own a majority in vote or value of its stock. However, due to
inter-stockholder purchases and sales, it is conceivable that at some future
time the Company will become a CFC.
If, contrary to its expectation, the Company is a CFC for an uninterrupted
period of 30 days during any taxable year of the Company, a United States Ten
Percent Stockholder who owns (or is considered to own) 10% or more of the
Company's voting power on the last day of such taxable year on which the Company
is a CFC, will generally be required to include in ordinary income his pro rata
share of the Company's "subpart F income" for that taxable year and, in
addition, certain other items, including, under certain circumstances, the
Company's increase in earnings invested in United States property, and amounts
of previously excluded subpart F income withdrawn by the Company from investment
in certain shipping and related assets, whether or not any amounts are actually
distributed to stockholders. Even if, contrary to the Company's expectations,
the Company is a CFC, Company stockholders who are not United States Ten Percent
Stockholders will not be affected by the CFC and subpart F income provisions.
"Subpart F income" includes, among other things, "foreign base company shipping
income," which is defined to include income derived from using or chartering a
vessel in foreign commerce or from the sale, exchange or other disposition of a
vessel. Accordingly, if the Company is a CFC, all but an insubstantial part of
the Company's earnings is expected by the Company to be "subpart F income,"
which will be taxable currently to the Company's United States Ten Percent
Stockholders to the extent of their pro rata share. Earnings and profits of the
Company already included in income by a United States Ten Percent Stockholder by
reason of the CFC provisions discussed above are not again included in income by
such United States Ten Percent Stockholder or his assignee when an actual
distribution is made. Other distributions by the Company by way of dividends
with respect to the Common Stock out of current or accumulated earnings and
profits will be taxed to United States Ten Percent Stockholders as ordinary
income. In the event that a United States Ten Percent Stockholder is required
to include his pro rata share of the Company's "subpart F income" in his
ordinary income, the Company will declare a dividend on its Common Stock, if
permitted to do so, equal to the highest U.S. income tax rate multiplied by the
Company's "subpart F income" for such year. The dividend will be paid pro rata
to all Common Stock holders, whether they are United States Ten Percent
Stockholders or not. The ability of the Company to pay any such dividend could
be limited by the Company's obligations to pay dividends to the holders of the
Series A Preference Shares. See "Description of Securities - Series A Preference
Shares."
Dispositions of Company Common Stock. In general, any gain or loss on the
------------------------------------
sale or exchange of Common Stock of the Company by a stockholder will be capital
gain or loss, provided such stock is held as a capital asset. However, if,
contrary to the Company's expectations, the Company has been a CFC, any person
who was a United States Ten Percent Stockholder of the Company at any time
during the five-year period ending on the date of sale or exchange (or a
distribution liquidation) when the Company was a CFC may be required to treat
all or a portion of the gain from a sale or exchange of Common Stock as ordinary
income (to the extent of his proportionate share of certain earnings and profits
of the Company) rather than as capital gain. Any
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capital gain or loss recognized on a sale or exchange of Common Stock will be
long-term capital gain or loss if the stockholder has held the Common Stock for
more than one year.
Other Anti-Deferral Rules. The U.S. also imposes various anti-tax-deferral
-------------------------
rules to passive foreign investment companies, personal holding companies,
foreign personal holding companies, foreign investment companies, and foreign
corporations unreasonably accumulating taxable U.S. earnings. These rules can
apply to the foreign corporation, and to U.S. stockholders of a foreign
corporation, even if the foreign corporation is not a CFC, and even if the
foreign corporation is publicly traded. Where applicable, these rules can
directly cause the stockholder to be taxed on the undistributed income of the
foreign corporation, or they can impose an interest charge on a U.S.
stockholder's deferred tax liability when dividends are actually received or the
foreign corporation's stock is sold; or they can impose an additional tax on the
foreign corporation on its undistributed income, thereby practically forcing
current dividend distributions. However, these rules generally do not apply
where substantially all the foreign corporation's activities consist of
conducting an active business rather than earning passive income. The Company
therefore does not believe that any of these rules will apply to the Company.
However, these rules are quite technical and depend heavily on factual
determinations, and thus conceivably could apply at some time in the future.
ABSENCE OF BERMUDA TAXATION
Bermuda counsel has advised that Bermuda does not impose a dividend
withholding tax, a capital gains tax, or other type of income tax. Therefore
dividends received on the Company's Common Stock will not be subject to any
Bermuda dividend withholding tax, and gains on sales of the Company's Common
Stock will not be subject to Bermuda capital gains tax. Bermuda counsel has
also advised that Bermuda does not impose a gift tax, inheritance tax, or estate
tax.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Term as
Name Age Position Director Expires
- ---- --- -------- ----------------
<S> <C> <C> <C>
Jeffrey I. Binder 49 Chairman of the Board 1998
Frederick A. Mayer 62 Vice Chairman of the Board 1998
James R. Sullivan 59 President N/A
Alan Pritzker 41 Chief Financial Officer N/A
Arnold Adolphus Francis, Q.C./(1)/ 74 Director 1996
A. Robert Miller/(1)/ 55 Director 1996
Hon. Wayne L. Furbert, C.P.A.,
J.P., M.P./(1)/ 40 Alternate Director 1996
Robin L. Todd/(1)/ 29 Alternate Director 1996
</TABLE>
__________________
/(1)/ Under Bermuda law, the Company must have two directors who reside in
Bermuda. Accordingly, Messrs. Francis and Miller are Bermuda residents who
were appointed to satisfy the requirements of the Companies Act 1981 of
Bermuda, and Hon. Furbert and Ms. Todd are their respective alternates.
Neither of them nor their alternates has expertise in U.S. law or in the
cruise line industry.
Jeffrey I. Binder has been Chairman of the Board of the Company since its
inception. Since 1991, he has also been Chairman of the Board and a director of
TelMed, Inc., a publicly traded company which develops medical products and
provides medical related services. From 1989 to the present, he has been the
Chairman of the Board and a director of JeMJ Financial Services, Inc., a private
holding company. Mr. Binder also served as a director of NAL Financial Group,
Inc., a publicly traded company that acquires and services auto leases and
loans, from November 1994 until July 1995. Between March 1989 and October 1993,
he was the President and a director of Sector Associates, Ltd., a public company
engaged, at the time, in the furniture retail business. Due to Mr. Binder's
involvement with TelMed, Inc., he will not devote his full time to the Company.
Frederick A. Mayer has been Vice-Chairman of the Board and Chief Executive
Officer of the Company since its inception. Mr. Mayer has 40 years of experience
in the travel and cruise industry. He was a co-founder and Vice Chairman of
Regency Cruises, Inc. ("Regency"), which
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was a publicly traded cruise line company between 1985 and 1993, until March
1995 when he joined the Company. Beginning in 1955, and concurrently with his
association with Regency, Mr. Mayer was also President of Exprinter
International USA, a travel organization affiliated with Exprinter Panama. He
has developed and marketed over 200 theme cruises. Mr. Mayer is also Chairman
of the Board and President of Marmara Marine, Inc., which owns the S/S United
States. In November 1995, Regency filed for Chapter 11 bankruptcy protection.
James R. Sullivan was appointed President of the Company in May 1995. Prior
to such time he was President of the Sullivan Group, a marketing consulting
company located in Weston, Connecticut, which he formed in 1993. Prior to 1993,
Mr. Sullivan was a senior executive with Cunard Line Ltd. ("Cunard") for 20
years in the company's cruise and hotel/resort sectors. He joined Cunard as Vice
President of Marketing and Sales of Cunard's hotels and resorts in 1973, and
became Vice President of Sales for Ships and Hotels in 1977. In 1981, he became
Senior Vice President of Marketing and Sales and was named to Cunard's Board of
Directors in London. During this period, Cunard acquired Norwegian American
Cruises and Sea Goddess Cruises. He also served two different terms as Vice
Chairman of CLIA, the national cruise industry trade group, during the 1980's,
and was Chairman of CLIA's marketing committee during this period. From 1989 to
1993, Mr. Sullivan was Senior Vice President, Director of Cunard's Eastern
Hemisphere, headquartered in London.
Alan Pritzker was appointed Chief Financial Officer of the Company in May
1995. Prior to such time, Mr. Pritzker was employed by Regency. Mr. Pritzker
acted as Regency's Controller between 1985 and 1989, and then as its Senior Vice
President Finance, until joining the Company. While at Regency, he was
responsible for all accounting and financing functions, information filings as
well as the quarterly filings with the Securities and Exchange Commission. In
November 1995, as described previously, Regency filed for Chapter 11 bankruptcy
protection. Prior to joining Regency, Mr. Pritzker was employed by Holland
America Line and Vacation Travel Concepts, a travel wholesaler, in various
positions.
Arnold Adolphus Francis, CBE, Q.C., J.P. has been a Director of the Company
since its formation. Mr. Francis has been a partner in Richards, Francis &
Francis, a law firm based in Bermuda since 1980. Richards, Francis & Francis
acts as Bermuda counsel to the Company.
A. Robert Miller has been a Director of the Company since its formation.
Mr. Miller has been an associate in Richards, Francis & Francis. Prior to 1992,
Mr. Miller was self-employed as an attorney.
Robin L. Todd was appointed as an Alternate Director for Mr. Miller upon
the Company's formation. Ms. Todd has been an associate in Richards, Francis &
Francis. From 1993 until 1994, she was an attorney with Jacques & Lewis in
London. Prior to 1993, Ms. Todd was a student.
Honorable Wayne L. Furbert, C.P.A., J.P., M.P. was appointed as an
Alternate Director for Mr. Francis upon the Company's formation. Mr. Furbert has
been the financial controller of Richards, Francis & Francis, since 1983. He has
also been Chairman of the Finance Committee of the Bermuda Hospitals Board since
1982 and is Minister of Community and Cultural Affairs in Bermuda.
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<PAGE>
For as long as it holds at least 125,000 Series A Preference Shares,
EffJohn has the right to designate one member of the Company's Board of
Directors. To date, EffJohn has not exercised that right. The Company has also
agreed to appoint a representative of the Underwriter as an advisor to, or in
lieu thereof, as a member of, the Company's Board of Directors for three years
after the date of this Prospectus. In addition to the foregoing, the Company
plans to appoint up to three additional directors, including two non-employee
directors, to its Board. The identities of such persons are unknown as of the
date of this Prospectus.
CLASSIFIED BOARD OF DIRECTORS
The Board of Directors is divided into three classes. One class holds
office initially for a term expiring at the annual meeting of stockholders to be
held in 1996, a second class will hold office initially for a term expiring at
the annual meeting of stockholders to be held in 1997 and a third class holds
office initially for a term expiring at the annual meeting of stockholders to be
held in 1998. Each Director will hold office for the term to which he is elected
and until his successor is duly elected and qualified. Messrs. Francis and
Miller have terms expiring in 1996, the directors to be appointed will have
terms expiring in 1997, and Messrs. Binder and Mayer have terms expiring in
1998. At each annual meeting of the stockholders of the Company, the successors
to the class of Directors whose terms expire at such meeting will be elected to
hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election. The Board of Directors
elects officers annually and such officers serve at the discretion of the Board
of Directors. At present the Board of Directors has not established any
committees. After the completion of this Offering, the Board of Directors plans
to establish both an audit committee and a compensation committee. The majority
of the members of each such committee will be outside directors.
COMPENSATION OF DIRECTORS
Members of the Company's Board of Directors currently do no receive any
compensation for service as members of the Board. Directors, however, are
entitled to reimbursement for reasonable expenses incurred in connection with
attending any Board meeting.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth information with respect to total
compensation earned or paid by the Company to the Chief Executive Officer of the
Company during the fiscal year ended
60
<PAGE>
September 30, 1995. Because the Company was only formed in April 1995, none of
the Company's other executive officers earned cash compensation in excess of
$100,000 during such fiscal year.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation(1) Awards
-------------------------- -----------
Number of
Name and Principal Position Year Salary Bonus Warrants
- --------------------------- ---- ------ ----- --------
<S> <C> <C> <C> <C>
Frederick A. Mayer, Vice- 1995 $37,019(2) $ -- 200,000
Chairman of the Board and
Chief Executive Officer
</TABLE>
____________________
(1) The Company was formed in April 1995. As a result, the compensation shown
in this table reflects amounts paid to the Company's executive officers for
only a portion of a fiscal year. If the Company's current executive officers
had been employed for a full fiscal year as of September 30, 1995, the
following additional officers would have been included in this table at the
following annualized salaries: Jeffrey I. Binder, Chairman of the Board,
$150,000; and James A. Sullivan, President, $150,000. See "Employment
Agreements" below.
(2) Reflects amounts earned by Mr. Mayer since he began his employment with the
Company in May 1995. Mr. Mayer's annualized salary is $175,000. See
"Employment Agreements" below.
WARRANT GRANTS IN LAST FISCAL YEAR
The following table provides information regarding the grant of stock
warrants to the Chief Executive Officer in fiscal 1995. In addition,
hypothetical gains of 5% and 10% are shown for these stock warrants. These
hypothetical gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the stock warrants were granted over
the full warrant term. No stock warrants were exercised in fiscal year 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF WARRANTS GRANTED EXERCISE APPRECIATION FOR
WARRANTS TO EMPLOYEES IN PRICE PER EXPIRATION WARRANTS TERM(3)
---------------------
NAME(1) GRANTED(2) FISCAL YEAR 1995 SHARE(3) DATE 5% 10%
- ------- ---------- ---------------- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Frederick A. Mayer 200,000 24% $1.00 May 4, 2002 $81,420 $189,743
</TABLE>
_________________________
(1) If the Company's current executive officers had been employed for a full
fiscal year as of September 30, 1995, the following additional officers
would have been included in this table: Jeffrey I. Binder and James A.
Sullivan. See "Compensation of Executive Officers." The terms of the stock
warrants granted to such officers are summarized elsewhere herein. See
"Employment Agreements."
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<PAGE>
(2) All warrants are fully vested.
(3) If the 5% or 10% annual compound stock price appreciation shown in the table
were to occur, the per share price of the Common Stock would be $1.40, and
$1.95, on May 4, 2002, respectively.
FISCAL YEAR-END WARRANT VALUES
The following table provides information regarding the warrants held by the
named executive officer as of September 30, 1995. The named executive officer
did not exercise any warrants in fiscal 1995.
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised Unexercised in-the-Money
Warrants at Fiscal Warrants at Fiscal
Name(1) Year-End(2) Year-End
- ---- -------- --------
<S> <C> <C>
Frederick A. Mayer 200,000 $600,000
</TABLE>
____________________
(1) If the Company's current executive officers had been employed for a full
fiscal year as of September 30, 1995, the following additional executive
officers would have been included in this table: Jeffrey I. Binder and
James A. Sullivan. Mr. Binder and his affiliates own warrants to purchase
500,000 shares of Common Stock. All of such warrants are presently
exerciseable, but none of such warrants is in-the-money. Mr. Sullivan owns
warrants to purchase 100,000 shares of Common Stock. None of Mr. Sullivan's
warrants is exercisable but their value at 1995 fiscal year-end was
$300,000.
(2) All warrants are presently exercisable.
EMPLOYMENT AGREEMENTS
As of May 3, 1995, the Company entered into a five year employment
agreement with its Chairman of the Board, Mr. Jeffrey I. Binder. Pursuant to
such employment agreement, Mr. Binder receives an annual salary of $150,000, to
be increased 4% annually, and certain perquisites. Mr. Binder's employment
agreement is renewable, at the option of the Company, for two additional years.
Upon termination of Mr. Binder's employment, he has agreed not to compete with
the Company for one year under certain circumstances described therein. In the
event a change of control of the Board of Directors of the Company occurs, he
shall receive compensation for the greater of one year or the remainder of his
employment term.
As of May 3, 1995, the Company entered into a two year employment agreement
with Mr. Frederick A. Mayer, its Chairman of the Board of Directors, and Chief
Executive Officer. Pursuant to the employment agreement, Mr. Mayer receives an
annual salary of $175,000, to be increased 4% annually, and certain perquisites.
Mr. Mayer also received a seven year warrant to purchase 200,000 shares of
Common Stock at an exercise price of $1.00 per share. Mr. Mayer has certain
rights to demand registration of the shares of Common Stock underlying his
warrant;
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<PAGE>
however, the sale of such shares is subject to a 12 month lock-up period. The
Company has the option to renew Mr. Mayer's employment agreement for two
additional years. Upon termination of Mr. Mayer's employment, he has agreed not
to compete with the Company for one year under certain circumstances described
therein. In the event a change of control of the Board of Directors of the
Company occurs, he shall receive compensation for the greater of one year or the
remainder of his employment term.
As of May 3, 1995, the Company entered into a two year employment agreement
with Mr. James A. Sullivan, its President. Pursuant to the employment agreement,
Mr. Sullivan receives an annual salary of $150,000 and certain perquisites. Mr.
Sullivan also received a seven year warrant to purchase 100,000 shares of Common
Stock at an exercise price of $1.00 per share. The Company has the option to
renew Mr. Sullivan's employment agreement for two additional years. Upon
termination of Mr. Sullivan's employment, he has agreed not to compete with the
Company for one year under certain circumstances described therein. In the event
a change of control of the Board of Directors of the Company occurs, he shall
receive compensation for the greater of one year or the remainder of his
employment term.
As of May 3, 1995, the Company entered into a two year employment agreement
with Mr. Alan Pritzker, its Vice President, Finance and Chief Financial Officer.
Pursuant to the employment agreement, Mr. Pritzker receives an annual salary of
$99,000. Mr. Pritzker also received a seven year warrant to purchase 25,000
shares of Common Stock at an exercise price of $1.00 per share. The Company has
the option to renew Mr. Pritzker's employment agreement for two additional
years. Upon termination of Mr. Pritzker's employment, he has agreed not to
compete with the Company for one year under certain circumstances described
therein.
STOCK OPTION PLAN
In April 1995, the Company adopted the Plan pursuant to which 500,000
shares of Common Stock have been reserved for issuance upon exercise of options
designated as "incentive stock options" or "non-qualified options" within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"). The purpose of the Plan is to encourage stock ownership by certain
officers and employees of the Company, and give them a greater personal interest
in the success of the Company. The Plan is administered by the Board of
Directors of the Company, or a committee appointed by the Board of Directors,
which determines among other things, the persons to be granted options under the
Plan, the number of shares subject to each option and the option price.
The exercise price of any stock option granted under the Plan may not be
less than the fair market value of the shares subject to the option on the date
of grant, provided, however, that the exercise price of any incentive option
granted to an eligible employee owning more than 10% of the outstanding Common
Stock may not be less than 110% of the fair market value of the shares
underlying such option on the date of grant.
The term of each option and the manner in which it may be exercised is
determined by the Board of Directors, or a committee appointed by the Board of
Directors, provided that no option may be exercisable more than 10 years after
the date of grant and, in the case of an incentive option granted to an eligible
employee owning more than 10% of the Common Stock, such option shall be
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<PAGE>
exercisable no more than five years after the date of grant. Options may be
granted to officers and employees. In the event of death or disability, options
may be exercised during a twelve month period following such event. In the
event of retirement of an option holder who is an officer or employee of the
Company, an option must be exercised within three months of the date of
termination. In the event that an option holder is terminated other than
pursuant to death, disability or retirement, all options must be exercised by
the date of termination. Options will not be transferable, except upon death of
the optionee.
As of the date of this Prospectus, there were no outstanding options under
the Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors sets the compensation for the Company's
executive officers. At present, the Board has not appointed a separate committee
to perform this function. Two executive officers of the Company, Messrs. Binder
and Mayer, are members of the Company's Board of Directors. Each of Mr. Binder
and Mr. Mayer, respectively, abstains from voting on issues concerning his own
proposed compensation.
SECURITIES OWNERSHIP OF
PRINCIPAL AND INITIAL SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock, as of the date of this
Prospectus, and as adjusted to reflect the sale of all the Common Stock offered
by the Initial Selling Stockholders as part of the Units offered hereunder, by:
(i) each of the Company's directors and named executive officers, (ii) each
person who is known by the Company to own beneficially more than 5% of the
outstanding Common Stock, (iii) all of the Company's directors and executive
officers as a group, and (iv) each Initial Selling Stockholder. Except as
indicated below, the address for each 5% stockholder is c/o Commodore Holdings
Limited, 4000 Hollywood Boulevard, Suite 385, South Tower, Hollywood, Florida
33021.
64
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(2) OFFERED AFTER THE OFFERING(2)
--------------------- ------- --------------------
NAME AND ADDRESS OF
BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ---------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Eff-Shipping, Ltd./(1)/ 1,006,979 17.0% 0 1,006,979 15.6%
c/o EffJohn North America
Suite 108, The Atrium Center
1515 N. Federal Highway
Boca Raton, Florida 33432
Jeffrey I. Binder, 1,000,000 20.2% 0 1,000,000 18.4%
Rosalie Binder and
JeMJ Financial Services, Inc./(3)/
Frederick A. Mayer/(4)/ 500,000 9.7% 0 500,000 8.8%
Arnold Adolphus Francis, Q.C. 0 0% 0 0 0%
Hon. Wayne L. Ferbert, 0 0% 0 0 0%
C.P.A., J.P., M.P.
A. Robert Miller 0 0% 0 0 0%
Robin L. Todd 0 0% 0 0 0%
[ADD INITIAL SELLING STOCKHOLDERS]
Directors and Officers as a 1,500,000 29.2% 0 1,500,000 26.6%
Group/(5)/
(6 persons)
</TABLE>
____________________
/(1)/ Represents Series A Preference Shares, which Eff-Shipping may convert into
1,006,979 shares of Common Stock. In the event the Company's earnings per
share increase, this number may decrease accordingly. See "Description of
Securities - Series A Preference Shares."
/(2)/ Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. The percentages beneficially
owned assume that none of the Series A Preference Shares has been
converted into Common Stock and that the Over-Allotment Option is not
exercised.
/(3)/ Mr. Binder owns 500,000 shares of Common Stock together with his wife, as
tenants-by-the-entireties. JeMJ Financial Services, Inc., a company
controlled by Mr. Binder, owns 500,000 shares of Common Stock. This amount
excludes 500,000 shares of Common Stock which Mr. Binder, his wife and
JeMJ have a right to purchase at $6.00 per share pursuant to warrants,
which warrants are presently exercisable.
/(4)/ Includes a warrant to purchase 200,000 shares of Common Stock, which is
presently exercisable.
/(5)/ Excludes 500,000 shares of Common Stock which such persons may acquire
pursuant to warrants which are presently exercisable at $6.00 per share.
65
<PAGE>
CERTAIN TRANSACTIONS
In April 1995, the Company issued 12,000 shares of its Common Stock to
Jeffrey I. Binder, the Company's Chairman, for $12,000 in conjunction with the
organization of the Company. On April 26, 1995, the Company authorized the split
of its Common Stock, and each share of its outstanding Common Stock was
exchanged for 100 shares of Common Stock. Subsequent to such date, Mr. Binder
contributed approximately an additional $988,000 for such Common Stock and
transferred half of such Common Stock to an affiliate. On May 12, 1995, the
Company repurchased 200,000 shares of Common Stock from Mr. Binder for par
value.
On May 4, 1995, the Company issued warrants at what it considered present
market value to purchase a total of 325,000 shares of Common Stock to Messrs.
Mayer, Sullivan and Pritzker, who are executive officers of the Company and/or
its subsidiaries. Such warrants were issued pursuant to each such officer's
respective employment agreement and are exercisable at $1.00 per share, at
varying vesting periods. The Company also issued 300,000 shares of Common Stock
to Mr. Mayer on May 12, 1995 for $200,000.
On July 14, 1995, the Company issued warrants to its Chairman, Mr. Jeffrey
I. Binder and his wife, Rosalie Binder, as well as to JeMJ Financial Services,
Inc., a company controlled by Mr. Binder (the "Binder Warrants"). The Binder
Warrants entitle the holders to purchase collectively up to 500,000 shares of
Common Stock at an exercise price of $6.00 per share. The Binder Warrants expire
seven years after the date of their issuance. The Binder Warrants became
exercisable upon issuance, and contain certain anti-dilution and registration
rights provisions and other terms as were determined by the Board of Directors
of the Company. The sale of the Common Stock underlying the Binder Warrants is
subject to a 12 month lock-up period.
As part of the Purchase Price for the Commodore Assets, the Company paid
$5,000,000 to EffJohn and issued it 1,000,000 Series A Preference Shares. In
addition, the Lender loaned the Company $24,500,000 pursuant to the Loan. The
Loan is secured by substantially all of the assets of the Company, including
first preferred ship's mortgages on the Cruise Ships. See "Business -The
Commodore Acquisition."
Several of the Company's stockholders are principals in International
Marine Carriers ("IMC"), a vessel manager employed by the Company. The Company
has entered into an agreement with IMC to act as manager for the Cruise Ships
for two years, subject to successive one year renewals at the written request of
the Company. The Company paid IMC $130,235 for services rendered during the
partial fiscal year ended September 30, 1995 and has agreed to pay IMC $585,000
during the 1996 fiscal year for the management of the Enchanted Isle and
$219,000 for the management of the Universe Explorer.
During fiscal 1995, the Company used several bank facilities, primarily for
credit card processing and deliveries of cash to and from the Company's vessels,
that belonged to affiliates of EffJohn. The Company has since arranged for its
own processing services.
On July 14, 1995, the Company and EffJohn entered into the Settlement
Agreement related to the Commodore Acquisition. In this agreement, EffJohn
agreed to fix certain technical deficiencies in both the Universe Explorer and
the Enchanted Isle and to pay the Company charter
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<PAGE>
fees if EffJohn did not charter the Universe Explorer. EffJohn paid the Company
$425,000 pursuant to this agreement in fiscal 1995 and paid the Company an
additional $425,000 in fiscal 1996.
As part of the Commodore Acquisition, the Company entered into a sublease
agreement with Old Commodore to lease an IBM AS/400 computer system. The lease
is treated as a capital lease for financial statement purposes, and the Company
owed $223,960 at September 30, 1995.
DESCRIPTION OF SECURITIES
GENERAL
The Company is a Bermuda "exempted company," which means that it is exempt
from the requirement of the Companies Act 1981, as amended (the "Companies
Act"), that "local" companies be at least 60% owned and controlled by Bermudans.
The following summary is a description of certain provisions of the Company's
Memorandum of Association ("Memorandum") and Bye-laws. Such summary does not
purport to be complete and is subject to, and is qualified in its entirety by,
all of the provisions of the Memorandum and Bye-laws, including the definitions
therein of certain terms.
UNITS
Each Unit consists of one share of Common Stock and one redeemable Warrant
to purchase one-half share of Common Stock for $6.00 per share. The Warrants are
exercisable only in pairs, with each two Warrants entitling the registered
holder to purchase one share of Common Stock. The Common Stock and Warrants,
which constitute a Unit, will be detachable and separately tradeable at such
time as the Underwriter determines, in its sole discretion. The Units will not
be quoted on any stock exchange or automated quotation system.
COMMON STOCK
The Company is authorized to issue 100 million shares of Common Stock.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more
than 50 percent of the shares who vote in the election of directors can elect
all of the directors except the director that may be elected by EffJohn during
the time it owns at least 125,000 Series A Preference Shares. Holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors of the Company out of funds legally available therefor
and after payments to holders of the Series A Preference Shares and any other
series of preferred stock outstanding. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
ratably the net assets of the Company after payment of all debts and liabilities
and payments to holders of the Company's Series A Preference Shares and any
other series of preferred stock outstanding. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights.
The Company's Bye-laws provide that the quorum required for a meeting of
stockholders is stockholders representing more than 50% of the total votes able
to be cast. An amalgamation of the
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<PAGE>
Company, which includes a merger or consolidation, requires the approval of
stockholders representing more than 50% of the total votes cast at a meeting at
which a quorum is established. The Company's Bye-laws further provide that the
approval of stockholders representing more than 50% of the total votes able to
be cast is required to amend the Memorandum and Bye-laws with respect to certain
matters, including, without limitation, the voting provisions and other matters
set forth above.
The outstanding shares of Common Stock are, and the Shares of Common Stock
offered by the Company in this Offering, when issued and paid for, will be,
fully paid and non-assessable. Prior to the Offering, there were 4,931,933
shares of Common Stock outstanding held by 130 stock holders of record.
WARRANTS
The Company proposes to issue an aggregate of 1,000,000 Warrants to
purchase up to an aggregate of 500,000 shares of Common Stock in this Offering.
The Warrants are exercisable only in pairs, with each two Warrants entitling the
registered holder to purchase one share of Common Stock. The Warrants will be
issued pursuant to an agreement (the "Warrant Agreement") between the Company
and Stock Trans, Inc., as warrant agent (the "Warrant Agent"). None of the
Warrants have been issued prior to the Offering. The following discussion of
certain terms and provisions of the Warrants is qualified in its entirety by
reference to the detailed provisions of the Warrant Agreement and the Warrant
certificates, the forms of which have been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
Each two Warrants entitle the holder to purchase one share of Common Stock
at an exercise price of $6.00 per share. The Warrants may be exercised at any
time commencing one year after the date of this Prospectus until they expire
five years after the date of this Prospectus. The Warrants may be redeemed by
the Company at any time, commencing one year after the date of this Prospectus,
at a redemption price of $.05 per Warrant upon 25 days prior written notice,
provided the average closing bid price of the Common Stock for 20 consecutive
trading days ending not more than 15 days prior to the date of any redemption
notice is in excess of $9.00 per share. Warrant holders shall have exercise
rights until the close of the business day preceding the date fixed for
redemption.
In order for a holder to exercise a Warrant, and as required in the Warrant
Agreement, there must be a current registration statement on file with the
Securities and Exchange Commission pertaining to the shares of Common Stock
underlying the Warrants, and such shares must be registered or qualified for
sale under the securities laws of the state in which such Warrant holder resides
or such exercise must be exempt from registration in such state. The Company
will be required to file post-effective amendments to the Registration
Statement, of which this Prospectus forms a part, during the nine-month period
from the date hereof, when events require such amendments. In addition, the
Company has agreed with the Underwriter to use its best efforts to keep the
Registration Statement covering the shares underlying the Warrants current and
effective. There can be no assurance however, that such Registration Statement
(or any other Registration Statement filed by the Company to cover shares of
Common Stock underlying the Warrants) can be kept current. If a Registration
Statement covering such shares of Common Stock is not kept current
68
<PAGE>
for any reason, of if the shares underlying the Warrants are not registered in
the state in which a holder resides, the Warrants will not be exercisable and
will be deprived of any value.
Holders of the Warrants will be protected against dilution upon the
occurrence of certain events, including, but not limited to the issuance of any
Common Stock or other securities convertible or exercisable for Common Stock at
a price per share less than the exercise price or the market price of the Common
Stock, or in the event of any stock dividend, stock split, reclassification,
recapitalization, stock combination or similar transaction. However, holders of
the Warrants will have no voting rights and will not be entitled to dividends.
In the event of liquidation, dissolution or winding up of the Company, holders
of Warrants will not be entitled to participate in any distribution of the
Company's assets.
The purchase price payable upon exercise of the Warrants is to be paid in
lawful money of the United States. The Company is not required to issue
certificates representing fractions of shares of Common Stock upon the exercise
of Warrants, but with respect to any fraction of a share, it will make payment
in cash based upon the market price of the Common Stock as determined by the
Warrant Agent.
TRANSFER AGENT AND WARRANT AGENT
The transfer agent and registrar for the Common Stock and the Warrants is
Stock Trans, Inc., 7 East Lancaster Avenue, Ardmore, Pennsylvania 19003.
PREFERRED STOCK
The Company is authorized to issue 10 million shares of preferred stock.
The Bye-laws authorize the Board of Directors (without stockholder approval),
among other things, to issue such preferred stock, with such rights and
limitations as the Board of Directors may subsequently determine. Among other
designations, the Board of Directors may determine (i) the dividend rate and
conditions and the dividend preferences, if any; (ii) whether dividends would be
cumulative and, if so, the date from which dividends on such series would
accumulate; (iii) whether, and to what extent, the holders of such series would
enjoy voting rights, if any, in addition to those prescribed by law; (iv)
whether, and upon what terms, such series would be convertible into or
exchangeable for shares of any other class of capital stock or other series of
preferred shares; (v) whether, and upon what terms, such series would be
redeemable; (vi) whether or not a sinking fund would be provided for the
redemption of such series and if so, the terms and conditions thereof; and (vii)
the preference, if any, to which such series would be entitled in the event of
voluntary or involuntary liquidation, dissolution or winding up of the Company.
Any particular series of preferred shares may rank junior to, on a parity with
or senior to any other class of the Company's capital stock, including any other
series of preferred shares, except that no such series of preferred stock may
rank senior to or on a parity with the Series A Preference Shares, without the
approval of the holders of the Series A Preference Shares. Thus, the Board of
Directors, without the approval of the holders of Common Stock, could authorize
the issuance of a series of preferred shares with voting, conversion and other
rights that could affect the voting power and other rights of the holders of
Common Shares or that could have the effect of delaying, deferring or preventing
a change in control of the Company.
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<PAGE>
SERIES A PREFERENCE SHARES
In July 1995, the Company issued 1,000,000 Series A Preference Shares to
EffJohn at the Commodore Closing in partial payment for the Commodore
Assets. On April 1, 1996, the Company issued an additional 6,979 Series A
Preference Shares to EffJohn in satisfaction of a dividend obligation. The
following is a summary of the principal features of the Series A Preference
Shares. This summary does not address all of the rights and preferences of the
Series A Preference Shares.
The Series A Preference Shares are entitled to a preference with respect to
dividends, liquidation or a distribution of assets of the Company over any other
shares of capital stock of the Company. In the event of any such liquidation or
distribution of assets, the holders of the Series A Preference Shares will
receive any accrued but unpaid dividends and USD$4.00 per Series A Preference
Share before the holders of other series of preferred stock or the Common Stock
receive any distribution of the Company's assets.
The holders of the Series A Preference Shares are entitled to receive a
dividend equal to seven (7) percent of the issuance price of the Series A
Preference Shares prior to the payment of dividends on the Common Stock. Unpaid
dividends will accumulate from year to year, and the maximum amount which may be
paid to the holders of the Series A Preference Shares in any year is 10 percent
of the net profits of the Company for such year. Dividends in excess of this
amount may be paid in additional Series A Preference Shares or Common Stock.
The Series A Preference Shares are not entitled to vote except on the
following matters: (i) matters relating to the winding up of the Company, (ii)
matters relating to the alteration of the terms of the Series A Preference
Shares, or (iii) in the event that the Company has not paid any part of the
dividend on the Series A Preference Shares for two consecutive years, on all
matters on which holders of Common Stock would be entitled to vote. When voting,
each Series A Preference Share receives one vote.
The holders of the Series A Preference Shares shall have the option, at any
time, to convert any or all of their Series A Preference Shares into Common
Stock of the Company at a conversion rate equal to the greater of USD$4.00 per
share or a price per share equal to 8 times the Company's earnings per share for
its prior fiscal year. In addition, the holders of the Series A Preference
Shares may sell up to approximately 45,000 such shares in any 90-day period to
third parties at any time after the Commodore Closing and prior to the date upon
which the Common Stock becomes listed on Nasdaq, subject to compliance with
applicable securities laws.
The Company has the option to redeem all or any part of the Series A
Preference Shares at USD$4.00 per share at any time commencing three years after
their issuance subject to the right of EffJohn to convert its Series A
Preference Shares upon receipt of the notice. As long as EffJohn holds at
least 125,000 Series A Preference Shares, it has the nontransferable right to
appoint one person to the Company's Board of Directors.
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DIFFERENCES IN CORPORATE LAW
The Companies Act of Bermuda differs in certain respects from laws
generally applicable to U.S. corporations and their stockholders. Set forth
below is a summary of certain significant provisions of the Companies Act
(including any modifications adopted pursuant to the Company's Bye-laws)
applicable to the Company, which differ in certain respects from provisions of
Delaware corporate law. The comparison of the Companies Act to Delaware law
provides only a basis of comparison and in no way means that the corporate law
of Delaware is the same as that of other U.S. states. The following statements
are summaries of some of the provisions of the Companies Act, and do not purport
to deal with all aspects of Bermuda law that may be relevant to the Company, its
officers, directors and its stockholders. See "Risk Factors - Rights of
Security Holders Under Bermuda Law May Be Less Than Under U.S. Jurisdictions."
Interested Directors. The Bye-laws provide that any transaction entered
into by the Company in which a director has an interest is not voidable by the
Company nor can such director be liable to the Company for any profit realized
pursuant to such transaction provided the nature of the interest is disclosed at
the first opportunity: (i) at a meeting of directors or in writing to the
directors, and (ii) to the Company's auditors, upon their request. Under
Delaware law no such transaction would be voidable if (i) the material facts as
to such interested director's relationship or interests are disclosed or are
known to the board of directors and the board in good faith authorizes the
transaction by the affirmative vote of a majority of the disinterested
directors, (ii) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the stockholders or (iii) the
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified.
Loans to Directors. The Companies Act generally forbids loans to directors
without the prior approval of stockholders who hold 90% of the Common Stock of
the Company at a general meeting of stockholders. Delaware law does not contain
a similar provision.
Mergers and Similar Arrangements. The Company may acquire the business of
another Bermuda company similarly exempt from Bermuda taxes or a company
incorporated outside Bermuda and carrying on such business when it is within the
objects of its Memorandum. The Company may "amalgamate" (merge or consolidate)
with another Bermuda company or a foreign corporation if such amalgamation is
approved by the board of directors and the holders of a majority of the Common
Stock at a meeting at which a quorum is established. While a dissenting
stockholder may have the right to express to a Bermuda court his view that the
transaction sought to be approved would not provide the stockholders with the
fair value of their shares, the court ordinarily would not disapprove the
transaction on such ground absent evidence of fraud or bad faith. The Bermuda
court would, however, assess the fair value of such dissenting stockholder's
Common Stock, and the dissenting stockholder would be entitled to receive this
amount, in cash, in lieu of the consideration such dissenting stockholder would
otherwise receive in the transaction. Under Delaware law, with certain
exceptions, any merger, consolidation or sale of all or substantially all the
assets of a corporation must be approved by the board of directors and a
majority of the outstanding shares entitled to vote. Under Delaware law, a
stockholder of a corporation participating in certain major corporate
transactions may, under varying circumstances, be entitled to appraisal rights
pursuant to which such stockholder may receive cash in the amount of the fair
market value of the shares held by such stockholder (as determined by a court or
by agreement of the corporation and the stockholder) in lieu
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of the consideration such stockholder would otherwise receive in the
transaction. Delaware law does not provide stockholders of a corporation with
voting or appraisal rights when the corporation acquires another business
through the issuance of its stock or other consideration (i) in exchange for the
assets of the business to be acquired, (ii) in exchange for the outstanding
stock of the corporation to be acquired or (iii) in a merger of the corporation
to be acquired with a subsidiary of the acquiring corporation.
Takeovers. Bermuda law provides that where an offer is made for shares of
another company and, within four months of the offer the holders of not less
than 90% of the shares which are the subject of the offer accept, the offeror
may by notice require the nontendering stockholders to transfer their shares on
the terms of the offer. Dissenting stockholders may apply to the court within
one month of the notice objecting to the transfer. The burden is on the
dissenting stockholders to show that the court should exercise its discretion to
enjoin the required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion as between the offeror and
the holders of the shares who have accepted the offer as a means of unfairly
forcing out a minority stockholder. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any stockholder
vote, may merge with any 90% or more owned subsidiary. Upon any such merger,
dissenting stockholders of the subsidiary would have appraisal rights.
Acquisition of Minority Shares. The holders of at least 95% of the Common
Stock (the "Majority Stockholders") may force the holders of 5% or less of the
Common Stock (the "Remaining Stockholders") to sell their Common Stock to the
Majority Stockholders under Bermuda law. If the Remaining Stockholders are
dissatisfied with the price offered by the Majority Stockholders, they may apply
to a Bermuda court for an appraisal of their shares. The appraisal is binding on
the Remaining Stockholders.
Stockholder's Suit. Class action and derivative actions are generally not
available to stockholders under the laws of Bermuda. However, the Bermuda courts
ordinarily would be expected to follow English case law precedent, which would
permit a stockholder to commence an action in the name of the Company to remedy
a wrong done to the Company where the act complained of is alleged to be beyond
the corporate power of the Company or is illegal or would result in the
violation of the Memorandum and Bye-laws. Furthermore, consideration would be
given by the court to acts that are alleged to constitute a fraud against the
minority stockholders or where an act requires the approval of a greater
percentage of the Company's stockholders than actually approved it. The winning
party in such an action generally would be able to recover a portion of its
attorney fees incurred in connection with such action. Class actions and
derivative actions generally are available to stockholders under Delaware law
for, among other things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions, the court has
discretion to permit the winning party to recover attorney fees incurred in
connection with such action.
Indemnification of Directors. The Company has agreed to indemnify its
directors or officers in their capacity as such in respect of any loss arising
or liability attaching to them by virtue of any rule of law in respect of any
negligence, default, breach of duty or breach of trust of which a director or
officer may be guilty in relation to the Company other than in respect of his
own wilful default, wilful neglect, fraud or dishonesty. Under Delaware law, a
corporation may adopt a provision eliminating or limiting the personal liability
of a director to the corporation or its
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stockholders for monetary damages for breach of fiduciary duty as a director,
except for breaches of the director's duty of loyalty, for acts or omissions not
in good faith or which involve intentional misconduct or knowing violations of
law, for improper payment of dividends or for any transaction from which the
director derived an improper personal benefit. Delaware law has provisions and
limitations similar to Bermuda regarding indemnification by a corporation of its
directors or officers, except that under Delaware law the statutory rights to
indemnification may not be as limited. Both Bermuda and Delaware law allow a
company to obtain directors and officers liability insurance. The Company has
not yet decided whether it will purchase such insurance.
Inspection of Corporate Records. Members of the general public have the
right to inspect the public documents of the Company available at the office of
the Registrar of Companies in Bermuda, which will include the Memorandum
(including its objects and powers) and any alteration to the Memorandum, and
documents relating to an increase or reduction of authorized capital. The
stockholders have the additional right to inspect the Bye-laws, minutes of
general meetings and audited financial statements of the Company, which must be
presented to the annual meeting of stockholders. The register of stockholders of
the Company is also open to inspection by stockholders without charge, and to
members of the public for a fee. The Company is required to maintain its share
register in Bermuda but may establish a branch register outside of Bermuda. The
Company is required to keep at its registered office a register of its directors
and officers which is open for inspection by members of the public without
charge.
Local Directors. The Companies Act requires that a quorum of a company's
directors be residents of Bermuda unless a company's common shares are listed on
an appointed stock exchange (including Nasdaq), in which case a company may have
a resident representative in Bermuda instead of resident directors. Accordingly,
at this time, two of the Company's directors, Messrs. Francis and Miller, are
Bermuda residents and the Company's Bye-Laws establish a quorum for meetings of
directors at two members.
Warrants. Under the provisions of the Companies Act, it is unlawful for
any company to issue "bearer" shares of stock, which are defined as shares that
may be transferred by delivery of the warrant or certificate relating thereto.
The term "warrant" is used in Bermuda law only in this bearer stock context.
Accordingly, under Bermuda law, any reference to "warrant" must be construed as
an option, which is an instrument entitling the holder to subscribe to the
Common Stock in accordance with the terms of the instrument. References herein
to either the Binder Warrant or the Warrants should not be construed as enabling
the underlying Common Stock to be transferred upon delivery of such certificate
alone.
ANTI-TAKEOVER PROVISIONS
Although the Board of Directors is not presently aware of any takeover
attempts, the Bye-laws of the Company contain certain provisions which may be
deemed to be "anti-takeover" in nature in that such provisions may deter,
discourage or make more difficult the assumption of control of the Company by
another corporation or person through a tender offer, merger, proxy contest or
similar transaction or series of transactions. These provisions were adopted
unanimously by the Board of Directors and approved by the stockholders of the
Company.
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Authorized but Unissued Shares. The Company has authorized 100 million
shares of Common Stock and ten million shares of preferred stock. These shares
of Common Stock were authorized for the purpose of providing the Board of
Directors of the Company with as much flexibility as possible to issue
additional shares for proper corporate purposes including equity financing,
acquisitions (including the Commodore Acquisition), stock dividends, stock
splits, the Plan, stock options (including the Binder Warrants and the
Warrants), and other purposes. The Company has no agreements, commitments or
plans at this time for the sale or use of the additional shares of Common Stock
or preferred stock except for potential conversion of the Series A Preference
Shares into Common Stock. The issuance of shares of preferred stock may have an
adverse effect on the Company's stockholders. See "Preferred Stock."
Stockholders of the Company do not have preemptive rights with respect to the
purchase of these shares. Therefore such issuance could result in a dilution of
voting rights and book value per share as to Common Stock of the Company. See
"Business - Commodore Acquisition" and "Description of Securities - Series A
Preference Shares."
No Cumulative Voting. The Company's Bye-laws do not contain any provisions
for cumulative voting. Cumulative voting entitles stockholders to as many votes
as equal the number of shares owned by such holder multiplied by the number of
directors to be elected. A stockholder may cast all these votes for one
candidate or distribute them among any two or more candidates. Thus, cumulative
voting for the election of directors allows a stockholder or group of
stockholders who hold less than 50 percent of the outstanding shares voting to
elect one or more members of a Board of Directors. Without cumulative voting for
the election of directors, the vote of holders of a plurality of the shares
voting is required to elect any member of a Board of Directors and would be
sufficient to elect all the members of the board being elected.
Classified Board of Directors. The Board of Directors is divided into
three classes. One class holds office initially for a term expiring at the
annual meeting of stockholders to be held in 1996, a second class will hold
office initially for a term expiring at the annual meeting of stockholders to be
held in 1997 and a third class holds office initially for a term expiring at the
annual meeting of stockholders to be held in 1998. Approximately one-third of
the total number of directors will serve as members of each such class. As a
result, it would take a person who wanted to gain control of the Company a
minimum of two annual meetings of stockholders before he could gain control of
the Company's Board of Directors.
General Effect of Anti-Takeover Provisions. The overall effect of these
provisions may be to deter a future tender offer or other takeover attempt that
some stockholders might view to be in their best interest as the offer might
include a premium over the market price of the Company's Common Stock at that
time. In addition, these provisions may have the effect of assisting the
Company's current management in retaining its position and place it in a better
position to resist changes which some stockholders may want to make if
dissatisfied with the conduct of the Company's business.
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SHARES ELIGIBLE FOR FUTURE SALE
All of the 4,931,933 shares of Common Stock of the Company outstanding as
of the date of this Prospectus are restricted securities, as that term is
defined in Rule 144 promulgated under the Securities Act and 4,831,933 shares
have been registered for sale concurrently herewith. Except for the 500,000
shares being sold by the Initial Selling Shareholders herein, such shares may
not be sold, transferred or otherwise disposed of for a period of one year
without the prior consent of the Underwriter. Of the 4,931,933 shares, 1,300,000
shares are owned by affiliates of the Company, as that term is defined under the
Securities Act. Absent registration under the Securities Act, the sale of such
shares is subject to Rule 144, as promulgated under the Securities Act. In
general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted shares of Common Stock for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or if the Common Stock is quoted on Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned the shares of Common Stock for
at least three years is entitled to sell such shares under Rule 144 without
regard to any of the volume limitations described above. No prediction can be
made as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices prevailing
from time to time. Nevertheless, the possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect prevailing
prices for the Common Stock and could impair the Company's ability to raise
capital in the future through the sale of equity securities.
CERTAIN FOREIGN ISSUER CONSIDERATIONS
The Company has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority, Foreign Exchange Control.
THE BERMUDA MONETARY AUTHORITY AND THE REGISTRAR OF COMPANIES IN BERMUDA
WILL ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF ANY SCHEMES OR FOR
THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED WITH REGARD
TO THEM.
There are no limitations on the rights of non-Bermuda owners of the
Company's Common Stock to hold or vote their voting shares. Because the Company
has been designated as a non-resident for Bermuda exchange control purposes,
there are no restrictions on its ability to transfer funds into and out of
Bermuda or to pay dividends to United States residents who are holders of the
Company's Series A Preference Shares or Common Stock, other than in respect of
local Bermuda currency.
In accordance with Bermuda law, share certificates are only issued in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any
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such estate or trust. The Company will take no notice of any trust applicable
to any of its securities whether or not it had notice of such trust.
As an "exempted company," the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted company, the Company may not participate in certain business
transactions, including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years) without the express authorization of the
Bermuda legislature; (2) the taking of mortgages on land in Bermuda to secure an
amount in excess of $50,000 without the consent of the Minister of Finance of
Bermuda; (3) the acquisition of securities created or issued by, or any interest
in, any local company or business, other than certain types of Bermuda
government securities or securities of another "exempted company," partnership
or other corporation resident in Bermuda but incorporated abroad; or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or under a license granted by
the Minister of Finance of Bermuda.
The Bermuda government actively encourages foreign investment in "exempted"
entities like the Company that are based in Bermuda, but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign ownership, the Company is subject neither to taxes on its
income or dividends nor to any foreign exchange controls in Bermuda. In
addition, there is no capital gains tax in Bermuda, and profits can be
accumulated by the Company, as required, without limitation under Bermuda law.
The Company is required to pay certain annual government fees based upon
its assessable capital (i.e., its authorized share capital and share premium).
The fees are based upon a sliding scale. The maximum fee payable by an exempt
company is USD$25,000 based upon an assumed capital of USD$500,000,000 or more.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, the Underwriter has agreed to purchase 500,000
Units and 1,000,000 Warrants from the Company and 500m000 shares of Common Stock
from the Selling Stockholders, less the underwriting discounts set forth on the
cover page of this Prospectus. The Underwriting Agreement provides that the
Underwriter will be obligated to purchase all of the Units offered on a "firm
commitment" basis, if any are purchased.
The Underwriter has advised the Company that it proposes initially to offer
the Units to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such prices less
concessions not in excess of $__________ per Unit. After the Offering, the
offering price and the concessions may be changed at the discretion of the
Underwriter.
The Company has granted to the Underwriter an option exercisable during the
30-day period after the Closing, to purchase from the Company at the initial
public offering price less underwriting discounts and the non-accountable
expense allowance, up to an aggregate of 150,000 additional Units, for the sole
purpose of covering over-allotments, if any.
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The Company has agreed to pay to the Underwriter a non-accountable expense
allowance of 3% of the gross proceeds of the Offering. Further, the Company has
agreed to reimburse the Underwriter and its counsel for certain accountable
expenses relating to the Offering.
All of the Company's current stockholders, except for the Initial Selling
Stockholders, have agreed not to sell or otherwise dispose of any of their
shares of Common Stock, or shares of Common Stock issuable upon conversion or
exercise of securities convertible into Common Stock, for a period of 12 months
from the date of this Prospectus without the prior written consent of the
Underwriter. Notwithstanding these lock-up agreements, such persons may make
intra-family transfers. An appropriate legend will be marked on the face of
stock certificates representing all such shares of Common Stock.
In connection with the Offering, the Company has agreed to sell to the
Underwriter, for nominal consideration, non-redeemable warrants to purchase from
the Company 100,000 Units (the "Underwriter's Warrants"). The Underwriter's
Warrants are exercisable at a price of $6.90 per Unit (150% of the initial
public offering price per Unit) for a period of four years commencing one year
from the date of this Prospectus. The Units contained in the Underwriter's
Warrants will be identical to the Units being offered hereby. The Underwriter's
Warrants contain anti-dilution provisions providing for adjustment of the
exercise price upon the occurrence of certain events, including the issuance of
any Common Stock or other securities convertible into or exercisable for Common
Stock at a price per share less than the exercise price or the market price of
the Common Stock, or in the event of any recapitalization, reclassification,
stock dividend, stock split, stock combination or similar transaction. The
Underwriter's Warrants provide that for a period of four years commencing one
year from the date of this Prospectus, at the request of the holders of a
majority of the total Underwriter's Warrants, the Company will register, in
whole or in part, at the Company's sole cost and expense, the Underwriter's
Warrants and/or the underlying Common Stock and Warrants. In addition, the
holders of the Underwriter's Warrants have the right to "piggyback" all or any
part of the Underwriter's Warrants, or the underlying Common Stock or Warrants,
on any registration statement filed by the Company or its principal stockholders
at any time during the stated term of the Underwriter's Warrants.
During the term of the Underwriter's Warrants, the holders of the
Underwriter's Warrants are given the opportunity to profit from a rise in the
market price of the Units, the Common Stock or the Warrants. To the extent that
the Underwriter's Warrants are exercised, dilution of the interest of the
Company's stockholders will occur. Furthermore, the terms upon which the Company
will be able to obtain additional equity capital may be adversely affected since
the holders of the Underwriter's Warrants can be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain any needed
capital on the terms more favorable to the Company than those provided in the
Underwriter's Warrants. See "Risk Factors - Stock Options and Warrants."
The Company has agreed to retain the Underwriter for two years as a
management and financial consultant for a fee of $48,000, which is payable at
the Closing of the Offering. The Company has also agreed to appoint a
representative of the Underwriter as an advisor to, or in lieu thereof, as a
member of, the Company's Board of Directors for three years.
The Company has granted the Underwriter a right of first refusal for two
years to underwrite any public or private securities offering of the Company
which does not exceed $5,000,000. The
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Company has also agreed to pay the Underwriter a commission of five percent (5%)
of the exercise price of any Warrants offered herein which are exercised more
than one year after the date of this Prospectus.
The Underwriting Agreement provides for reciprocal indemnification among
the Company, the Underwriter and the Initial Selling Stockholders against
certain liabilities in connection with the Registration Statement of which this
Prospectus forms a part, including liabilities under the Securities Act. To the
extent this section may purport to provide exculpation from possible liabilities
arising under the federal securities laws, it is the opinion of the Securities
and Exchange Commission that such indemnification is against public policy and
is therefore unenforceable.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and the Underwriter's Warrants, and does not purport to be complete.
Reference is made to the copies of the Underwriting Agreement and the
Underwriter's Warrant Agreement, which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
Prior to the Offering, there has been no public market for the Company's
securities offered hereby. Consequently, the initial public offering price of
the Units has been determined by the Company and the Underwriter and is not
related to the Company's asset value, earnings, book value or other such
criteria of value. Factors considered in determining the initial public offering
price of the Units include principally, the prospects for the industry in which
the Company operates, the Company's management, the general condition of the
securities markets and the demand for securities in similar industries. The
exercise price of the Warrants also has been determined by the Company and the
Underwriter and does not relate to any recognized criteria of value.
Although certain of the officers of the Underwriter have significant
experience in corporate finance and the underwriting of securities, the
Underwriter has previously acted as the principal underwriter in only one "firm
commitment" offering. Such limited experience could adversely affect the
Offering as well as the future development of a trading market for the Common
Stock and Warrants. See "Risk Factors - Underwriter's Limited Underwriting
Experience."
CONCURRENT REGISTRATION OF COMMON STOCK
Concurrently with this Offering, 4,331,933 shares of Common Stock have been
registered under the Securities Act. Such shares may not be sold, transferred or
otherwise disposed of for a period of one year without the prior written consent
of the Underwriter.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the securities
offered hereby will be passed upon for the Company by Broad and Cassel, a
partnership including professional associations, Miami Center, 201 South
Biscayne Boulevard, Suite 3000, Miami, Florida 33131 and, with respect to
Bermudan law, by Richards, Francis & Francis. Gersten, Savage, Kaplowitz &
Curtin, LLP has acted as counsel for the Underwriter in connection with the
Offering.
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EXPERTS
The financial statements of the Company from April 13, 1995 (date of
inception) through September 30, 1995 are included herein and in the
registration statement in reliance upon the report of Grant Thornton LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in auditing and accounting. The combined
financial statements of the S/S Enchanted Seas and the S/S Enchanted Isle
(operating units of EffJohn International B.V.) for each of the two years in the
two-year period ended December 31, 1994, and for the period from January 1, 1995
through July 14, 1995, are included herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission, a Registration Statement on Form
S-1 with respect to the securities being offered hereby. This Prospectus does
not contain all the information set forth in such Registration Statement, as
permitted by the Rules and Regulations of the Commission. For further
information with respect to the Company and such securities, reference is made
to the Registration Statement and to the exhibits and schedules filed herewith.
Each statement made in this Prospectus referring to a document filed as an
exhibit to the Registration Statement is qualified by reference to the exhibit
for a complete statement of its terms and conditions. The Registration
Statement, including exhibits thereto, may be inspected, without charge, by
anyone at the principal office of the Commission in Washington, D.C. and copies
of all or any part thereof may be obtained from the Commission's principal
office in Washington, D.C. upon payment of the Commission's charge for copying.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Commodore Holdings Limited and Subsidiaries
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets - September 30, 1995 and
March 31, 1996 (Unaudited) F-3
Consolidated Statements of Earnings - April 13, 1995 through
September 30, 1995, Six Months Ended March 31, 1995 (Predecessor
Company, Unaudited), Six Months Ended March 31, 1996 (Unaudited) F-4
Consolidated Statements of Stockholders' Equity - April 13, 1995
through September 30, 1995, Six Months Ended March 31, 1996
(Unaudited) F-5
Consolidated Statements of Cash Flows - April 13, 1995 through
September 30, 1995, Six Months Ended March 31, 1995 (Predecessor
Company, Unaudited), Six Months Ended March 31, 1996 (Unaudited) F-6
Notes to consolidated financial statements F-8
S/S Enchanted Seas and S/S Enchanted Isle (Predecessor Company)
Report of Independent Certified Public Accountants F-19
Combined Balance Sheet December 31, 1994 F-20
Combined Statements of Operations Years Ended December 31,
1993, 1994, Period from January 1 through July 14, 1995 F-21
Combined Statements of Operating Units Equity
Year Ended December 31, 1994 F-22
Combined Statements of Cash Flows Years Ended December 31,
1993, 1994, Period from January 1 through July 14, 1995 F-23
Notes to Combined Financial Statements F-25
Pro forma Condensed Financial Statement
Pro forma Condensed Statement of Earnings F-30
Notes to Pro forma Condensed Statement of Earnings F-31
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Commodore Holdings Limited and Subsidiaries
We have audited the accompanying consolidated balance sheet of Commodore
Holdings Limited and Subsidiaries as of September 30, 1995 and the related
consolidated statements of earnings, stockholders' equity, and cash flows from
April 13, 1995, (date of inception), through September 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of Commodore Holdings
Limited and Subsidiaries as of September 30, 1995 and the consolidated results
of their operations and their consolidated cash flows from April 13, 1995
through September 30, 1995 in conformity with generally accepted accounting
principles.
Miami, Florida
November 28, 1995
F-2
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, March 31,
1995 1996
------------- ------------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,274,993 $ 1,937,805
Restricted cash 363,462 252,076
Trade and other receivables, net 79,069 264,941
Due from Affiliate 456,878 166,541
Inventories 691,001 935,101
Prepaid expenses 592,664 1,690,549
Other current assets 700,000 -
----------- -----------
Total current assets 6,158,067 5,247,013
Property and equipment, net 33,085,209 37,450,152
Investments restricted 4,629,000 4,629,000
Other assets 225,000 425,000
----------- -----------
$44,097,276 $47,751,165
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ - $ 201,301
Accounts payable 1,868,415 4,026,674
Accrued liabilities 219,683 892,149
Customer and other deposits 4,344,657 5,035,652
Accrued interest 412,672 72,603
Income taxes payable 4,841 4,841
Capital lease obligations 223,960 91,863
----------- -----------
Total current liabilities 7,074,228 10,325,083
Long-term debt 24,500,000 24,165,684
Deferred income taxes 3,618 3,618
Minority interest in subsidiary - 461,642
Preferred stock 4,000,000 4,000,000
Stockholders' equity
Preferred stock - authorized 10,000,000 shares
of $.01 par value; issued 1,000,000 - -
Common stock - authorized 100,000,000 shares
of $.01 par value; issued 4,931,933 49,319 49,319
Paid-in capital 8,158,576 8,158,576
Retained earnings 311,535 587,243
----------- -----------
Total stockholders' equity 8,519,430 8,795,138
----------- -----------
$44,097,276 $47,751,165
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
(Predecessor
Company)
April 13, Six Months Six Months
1995 through Ended Ended
September 30, March 31, March 31,
1995 1995 1996
-------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $ 7,255,830 $ 17,605,955 $19,174,089
Expenses
Operating 4,940,637 18,243,713 13,955,294
Marketing, selling and administrative 1,664,478 5,608,586 3,766,577
Depreciation and amortization 197,926 1,780,141 620,099
Loss on Vessel Pire - 1,367,347 -
------------- ------------ -----------
6,803,041 26,999,787 18,341,970
------------- ------------ -----------
Operating income (loss) 452,789 (9,393,832) 832,119
Other income (expense)
Other income - - 340,641
Interest income 79,054 40,836 194,130
Interest expense (211,849) (1,408,105) (679,535)
Minority interest in earnings of
consolidated joint venture - - (411,647)
------------- ------------ -----------
(132,795) (1,367,269) (556,411)
------------- ------------ -----------
Earnings (loss) before provision for
income taxes and provision for
preferred stock dividend 319,994 (10,761,101) 275,708
Provision for income taxes 8,459 - -
------------- ------------ -----------
Net earnings (loss) before provision
for preferred stock dividend 311,535 (10,761,101) 275,708
Provision for preferred stock dividend 60,000 - 140,000
------------- ------------ -----------
Net earnings (loss) available for
common stockholders $ 251,535 $(10,761,101) $ 135,708
============= ============ ===========
Earnings per share $ 0.06 $ 0.03
============= ===========
Weighted average number of common
stock outstanding 4,377,593 5,184,711
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
APRIL 13, 1995 THROUGH SEPTEMBER 30, 1995,
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional
--------------------
Number Paid-In Retained
of Shares Par Value Capital Earnings Total
--------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Balance at April 13, 1995 - $ - $ - $ - $ -
Issuance of common stock (Note G) 4,931,933 49,319 8,158,576 - 8,207,895
Net income - - - 311,535 311,535
--------- --------- ---------- -------- ----------
Balance at September 30, 1995 4,931,933 49,319 8,158,576 311,535 8,519,430
Net income - - - 275,708 275,708
--------- --------- ---------- -------- ----------
Balance at March 31, 1996 (Unaudited) 4,931,933 $ 49,319 $8,158,576 $587,243 $8,795,138
========== ========== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Predecessor
Company)
April 13, Six Months Six Months
1995 through Ended Ended
September 30, March 31, March 31,
1995 1995 1996
-------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 311,535 $(10,761,101) $ 275,708
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation of property and equipment 197,926 1,652,612 620,099
Amortization of deferred drydock - 841,212 -
Changes in operating assets and liabilities
(Increase) decrease in restricted cash (363,462) (512,109) 111,386
(Increase) in investments - restricted (4,629,000) - -
(Increase) in trade and other receivables (79,069) (122,149) (185,872)
(Increase) decrease in due from affiliate (375,950) - 290,337
Decrease (increase) in inventory 69,271 (327,928) (244,100)
(Increase) in prepaid expenses and
other current assets (892,663) (236,217) (397,885)
(Increase) in other assets (225,000) - (200,000)
Increase in accounts payable 1,868,415 - 2,158,259
Increase in accrued liabilities 219,683 - 672,466
Increase in due to affiliate - 13,758,326 -
Increase in income taxes payable
- current 4,841 - -
Increase in income taxes payable
- deferred 3,617 - -
Increase in advance deposits 4,344,657 (413,571) 690,995
Increase in accrued interest 206,336 - (340,069)
----------- ------------ -----------
Net cash provided by
operating activities 661,137 3,879,075 3,451,324
Cash flows from investing activities:
Capital expenditures (672,960) (3,789,278) (4,985,042)
(Decrease) in capital leases obligation (53,079) - (132,097)
Cost of acquisition, net of cash acquired (4,868,000) - 461,642
----------- ------------ -----------
Net cash used in investing
activities (5,594,039) (3,789,278) (4,655,497)
Cash flows from financing activities:
Proceeds from debt - 369,327 -
Proceeds from initial issuance
of common stock 8,207,895 - (133,015)
----------- ------------ -----------
Net cash provided by
financing activities 8,207,895 369,327 (133,015)
----------- ------------ -----------
</TABLE>
(continued)
F-6
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
(Predecessor
Company)
April 13, Six Months Six Months
1995 through Ended Ended
September 30, March 31, March 31,
1995 1995 1996
------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net increase in cash and cash equivalents $ 3,274,993 $ 459,124 $ (1,337,188)
Cash and cash equivalents at beginning of period - 522,319 3,274,993
------------- ------------ ------------
Cash and cash equivalents at end of period $ 3,274,993 $ 981,443 $ 1,937,805
============= ============ ============
Supplemental disclosure of cash
flow information:
Cash paid during the period for interest $ - $ - $ 1,320,834
============= ============ ============
Cash paid during the period for taxes $ - $ - $ -
============= ============ ============
</TABLE>
Supplemental schedule of noncash investing and financing activities:
As part of the purchase price of acquisition (see Note A), the Company
issued notes payable totalling $24,500,000 and 1,000,000 shares of
redeemable preferred convertible stock totalling $4,000,000.
QIn 1995 and the six months ended March 31, 1996, the Company capitalized
$206,336 and $294,766 of interest to property and equipment, respectively.
Interest was not paid as of September 30, 1995 and is recorded in accrued
interest.
In 1995, the Chairman of the Board and a company he controls, paid
approximately $1,000,000 of the Company's costs in exchange for 1,000,000
shares of the Company's common stock.
Simultaneously to the acquisition, the Company assumed a capital lease
obligation of $277,039 from a related party (see Note F). The Company recorded
$277,039 in equipment and $277,039 in capital lease obligations.
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Commodore Holdings Limited ("CHL") and its wholly-owned subsidiary New
Commodore Cruise Lines Limited ("NCCL") were organized under the laws of
Bermuda on April 13, 1995. Almira Enterprises Inc. ("Almira") and Azure
Investments Inc. ("Azure"), owners of the cruise vessels Enchanted Isle and
Enchanted Seas (the "Vessels"), respectively, were organized under the laws of
the Republic of Panama on January 18, 1995 and are the wholly-owned
subsidiaries of NCCL. CHL, NCCL, Almira and Azure are collectively referred
to as the ("Company") or ("New Commodore").
Acquisition of Commodore Cruise Line
------------------------------------
On July 14, 1995, the Company completed an acquisition, through the purchase
of the assets, of Commodore Cruise Lines Limited, a business consisting of two
ships, certain shoreside assets, trademarks, passenger lists and advance
ticket sales, from EffJohn International B.V. ("EffJohn"). The Company
completed the transaction, for a total consideration of $33,500,000 by paying
$5,000,000 in cash, entering into a loan agreement with EffJohn for
$24,500,000 and granting EffJohn 1,000,000 7% Cumulative Convertible
Redeemable Series A Preferred Stock at an agreed value of $4.00 per share. Of
the $33,500,000 purchase price, $31,600,000 was allocated to the vessels and
the remaining $1,900,000 was allocated to cash, inventory, prepaids and
shoreside assets.
At the closing, EffJohn transferred to the Company approximately $5,300,000 of
cash representing the balance of customer deposits outstanding for future
sailings. Additionally, the Company reimbursed EffJohn for certain advances
made prior to the closing and paid EffJohn fees and expenses totaling
$150,000.
The operations of the Enchanted Isle from July 15, 1995 through September 30,
1995, are included in the accompanying financial statements. The Enchanted
Seas was undergoing significant renovations and had no operations for that
period, and began operations in January 1996.
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of CHL and its
subsidiaries. All material intercompany balances and transactions have been
eliminated.
(continued)
F-8
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Revenue and Expense Recognition
-------------------------------
Deposits received on sales of passenger cruises are recorded as customer
deposits and are recognized, together with revenues from shipboard activities
and all associated direct costs of a voyage upon completion of voyages with
durations of 10 days or less and on a pro rata basis for voyages in excess of
10 days. In addition, the Company received non-recurring charter cancellation
fees of $425,000 in September 1995, and $425,000 in October 1995. Revenues in
the accompanying statement of earnings include the first $425,000. (Note F).
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with original maturities
of three months or less when purchased to be cash equivalents.
Restricted Cash
---------------
As part of the loan agreement with EffJohn, the Company is required to place
approximately $181,731 each month in a retention account to be applied to the
first principal and interest payment due in January 1997. At September 30,
1995, this amounted to $363,462. In November 1995, the loan agreement was
amended to pay the monthly retention amount directly to the lender. The
balance of the retention account was paid to the lender in November 1995.
Inventories
-----------
Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first out method.
Dry-Docking
-----------
Costs associated with the dry-docking of the vessels will be charged to
prepaid expenses when incurred and expensed over the estimated period until
the next scheduled dry-dock (not to exceed two years).
(continued)
F-9
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Other Current Assets
-------------------
Other current assets represents a deposit securing the Company's FMC Bond for
the Enchanted Seas (See Note E).
Property and Equipment
----------------------
Ship, property and equipment are stated at cost. Significant vessel
refurbishing costs are capitalized as additions to the vessel, while costs of
repairs and maintenance are charged to expense as incurred. Depreciation has
been provided using the straight-line method over useful lives of 18 years
after a reduction for estimated salvage value for vessels and five years for
furniture and fixtures, and other property and equipment.
Investments - Restricted
------------------------
The Company placed $4,629,000 on deposit with a bank, securing its Federal
Maritime Commission ("FMC) Bond for the Enchanted Isle (See Note E).
Advertising Costs
-----------------
Advertising costs are expensed as incurred and are included in marketing,
selling and administrative expenses.
Income Taxes
------------
Deferred tax assets and liabilities are recorded based on the difference
between the tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes. In addition, the current or deferred tax
consequences of a transaction are measured by applying the provisions of
enacted tax laws to determine the amount of taxes payable currently or in
future years. The former operating entity was not subject to U.S. income
taxes. No provision had been recorded in prior years due to an international
shipping exemption and no income taxes its country of incorporation.
Earnings Per Share
------------------
Net earnings (loss) per common equivalent share is based upon the weighted
average number of shares and equivalentsF-4 outstanding during each period
after giving effect for dividends on the Class A Preference Stock.
(continued)
F-10
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Earnings Per Share - Continued
------------------
The weighted average number of common and common equivalent shares outstanding
for the period year ended September 30, 1995 is 4,377,593. Weighted average
shares includes the effect of the warrants issued with exercise prices below
the IPO price, as calculated under the treasury stock method. The calculation
also gives retroactive effect (as if to the beginning of the period) to those
shares issued to founders at par value.
Interim Financial Statements
----------------------------
The interim financial statements included herein have been prepared by
Commodore Holdings Limited (the "Company") and S/S Enchanted Seas and S/S
Enchanted Isle (Operating Units of EffJohn International B.V. (the predecessor
company see Note 1a on page F-25)) and are unaudited, pursuant to the rules
and regulations of the Securities and Exchange Commission. All adjustments
which are, in the opinion of management, necessary for a fair statement for
the results of the six months have been included. Certain information and
footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. These interim financial
statements should be read in conjunction with the financial statements for the
year ended September 30, 1995 and the predecessor company's financial
statements on F-19 through F-29. The interim financial statements are not
comparable to the predecessor company's interim financial statements for the
six months ended March 31, 1995 due to the changes in the entity as a result
of the acquisition of the vessels by the Company in July 1995. The historical
operating results of the six months ending March 31, 1995 were prepared from
the books and records of the predecessor company which included certain
commingled expenses which were allocated to these vessels on an estimated
basis. Also, the Company's cost basis in the vessels and its debt structure
is significantly different than that in the previous period.
NOTE B - PROPERTY AND EQUIPMENT
<TABLE>
<S> <C>
Vessels $ 32,272,960
Equipment and other 803,839
Capitalized interest 206,336
--------------
33,283,135
Accumulated depreciation (197,926)
--------------
$ 33,085,209
==============
</TABLE>
F-11
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE C - INVENTORIES
<TABLE>
<S> <C>
Food, beverage and supplies $ 482,273
Fuel 208,728
------------
$ 691,001
============
</TABLE>
NOTE D - LONG-TERM DEBT AND PREFERRED STOCK
Long-Term Debt
--------------
In July, 1995 the Company entered into a loan agreement with an affiliate of
EffJohn (the "Lender") in the amount of $24,500,000. The loan is secured by
first preferred ship mortgages on both the Enchanted Isle and the Enchanted
Seas. In addition the loan is guaranteed by CHL and NCCL. The loan bears
interest at LIBOR plus 2% and will be repaid in 12 semi-annual installments
beginning in January, 1997. However, the interest is fixed at 7.875% for the
first 18 months.
In the event that the Company is required to pay tax on any interest due to
the Lender, the Company has agreed to pay the required amount to be withheld
and pay the Lender the full amount of interest due. The loan agreement
includes covenants as defined, including a requirement that the Company
maintain a minimum amount of $1,000,000 in the operating bank account.
Preferred Stock
---------------
As part of the consideration for the sale of the cruise line, EffJohn received
1,000,000 7% Cumulative Convertible Redeemable Series A Preferred Stock at a
value of $4.00 per share totalling $4,000,000. This payment of the dividend
is limited to 10% of the Company's net profits for such year. At September
30, 1995, dividends in arrears amounted to approximately $60,000.
Preferred Stock is convertible at any time at the option of the holder into
common stock at the higher rate of $4.00 or eight times the annual earnings
per common share of the Company for the previous fiscal year.
(continued)
F-12
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE D - LONG-TERM DEBT AND PREFERRED STOCK - Continued
Preferred Stock - Continued
---------------
In the event the Company is not listed on a major exchange, as defined, before
January 1997, the holders of the Preferred Stock may submit the shares to the
Company for redemption limited to 10 percent of the Company's net profits for
each previous fiscal year. During the period between January 7, 1997 and the
date the Company is listed on a major exchange as defined the preferred
shareholders may submit the Preferred Stock for redemption at the rate of
$45,454 per fiscal quarter. Upon the receipt of a redemption notice the
Company may arrange for a third party to purchase these shares at a price
equal to the redemption price. In addition, for such time as the preferred
shareholders have at least 125,000 shares of Preferred Stock the listing shall
not be cancelled by the Company without prior approval of the preference
shareholder. All redemption rights are terminated when the Company is first
listed on said exchange.
The minimum required principal payments as of September 30, 1995 on long-term
debt and Preferred Stock are as follows:
<TABLE>
<CAPTION>
September 30,
1995
------------
<S> <C>
1997 $ 4,446,964
1998 4,810,590
1999 4,810,590
2000 4,810,596
Thereafter 9,621,260
------------
$ 28,500,000
============
</TABLE>
NOTE E - COMMITMENTS AND CONTINGENCIES
Employment Agreements
---------------------
In May 1995, the Company signed employment agreements with four of its
executive employees with terms ranging from 2 - 5 years. These agreements
contain provisions for compensation, benefits, and covenants not-to-compete
for the longer of one year from termination, or the unexpired term of the
agreement.
(continued)
F-13
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE E - COMMITMENTS AND CONTINGENCIES - Continued
Litigation
----------
In September 1995 the Company, along with its vice-chairman and EffJohn were
named in a lawsuit brought by an individual who had made an offer to buy the
cruise line from EffJohn in 1993. The Company believes that it has no
liability in this case and that the lawsuit is frivolous. The Company is
vigorously defending itself in this lawsuit and management believes that this
case will not have a material impact on the Company's results of operations or
financial position.
The Company is subject to other legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the amount
of ultimate liability, if any, with respect to these actions will either be
covered by insurance or will not materially affect the financial position of
the Company.
Federal Maritime Commission Bond
--------------------------------
In order to operate a passenger cruise vessel from U.S. ports, the Company is
required to post a bond with the FMC. The amount of the bonds is $5,329,000.
To guarantee its FMC Bonds, the Company has deposited funds in favor of the
Company's Protection and Indemnity Club, the Steamship Mutual Underwriting
Association (Bermuda) Limited, which has in turn issued its guaranty to the
FMC. These deposits are included, on the Company's Balance Sheet under
Investments - Restricted and Other Current Assets (See Note A).
Premises
--------
As part of its acquisition, the Company agreed to the assignment, by EffJohn,
of its rights to a lease for approximately 16,000 square feet of office space
in Hollywood, Florida where the Company maintains its corporate headquarters.
Additionally, the Company's computerized reservations system hardware was
subleased to the company by EffJohn (see Note F).
(continued)
F-14
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE E - COMMITMENTS AND CONTINGENCIES - Continued
Premises - Continued
--------
Future minimum annual lease commitments at September 30, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 164,166
1997 169,760
1998 236,120
1999 244,268
2000 187,920
------------
$ 1,002,234
============
</TABLE>
Rental and lease expense for the period ending September 30, 1995 amounted to
approximately $75,000.
Port of New Orleans
-------------------
As part of the acquisition, the Company had EffJohn assign it the rights to an
agreement with the Port of New Orleans. The agreement committed Commodore
Cruise Lines Limited to operate a vessel from New Orleans for six years for
which the Company received priority use of the cruise terminal on Saturdays
and Sundays. In the event the Company does not complete a total of 300
required sailings, it may at its option:
a) extend the term of the agreement up to one additional year before
expiration of the agreement;
b) pay a cancellation fee equivalent to the Port's principal balance
remaining on the capital expenditures of $895,000 incurred to construct
the terminal at the Port; or
c) place another vessel in service in New Orleans.
The Company had its commitment reduced for each call of other cruise vessels
at the terminal. At September 30, 1995, the Company's commitment was
approximately $313,000. The Company expects that its commitment will be
completed within the next year and a half.
(continued)
F-15
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE E - COMMITMENTS AND CONTINGENCIES - Continued
Stock Option Plan
-----------------
In 1995, the Company adopted a Stock Option Plan (the "Plan") pursuant to
which 500,000 shares of Common Stock have been reserved for issuance upon
exercise of options designated as "incentive stock options" or "qualified
options" within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"). The purpose of the Plan is to encourage stock
ownership by certain officers and employees of the Company, and give them a
greater personal interest in the success of the Company. The Plan is
administered by the Board of Directors of the Company, or a committee
appointed by the Board of Directors, which determines among other things, the
persons to be granted options under the Plan, the number of shares subject to
each option and the option price.
Warrants
--------
In July 1995, the Company issued 250,000 warrants to a company controlled by
the Chairman of the Board and 250,000 warrants to the Chairman of the Board.
These warrants were issued at $6.00 per share and are exercisable through July
14, 2002.
In May 1995, certain employees were issued warrants to acquire a total of
325,000 shares of the Company's common stock. These warrants were issued with
an exercise price of $1.00 per share and become exercisable at various future
dates and expire in the year 2002.
NOTE F - RELATED PARTIES
The Chairman of the Board personally and through a company he controls,
invested approximately $1,000,000 in the Company by funding its cash needs
prior to and during its formation in exchange for 1,000,000 shares of the
Company's common stock.
Several of the Company's shareholders are principals in International Marine
Carriers (IMC), a vessel manager employed by the Company to manage the
Enchanted Isle and the Enchanted Seas at a rate of $585,000 and $219,000 per
annum, respectively. During the period ended September 30, 1995, this
amounted to $130,235.
The Company used several bank facilities, primarily for credit card processing
and deliveries of cash to and from the Company's vessels, that belong to
affiliates of EffJohn. Accordingly, the Company has reflected a net
receivable from EffJohn under the heading due from affiliate. The Company has
since arranged for its own processing services. This receivable has been paid
subsequent to year end.
(continued)
F-16
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE F - RELATED PARTIES - Continued
The Company and EffJohn entered into an agreement that amended certain of the
conditions of the original sale of the cruise line from EffJohn. Originally
EffJohn was to charter the Enchanted Seas for up to six months at which time
the Company would put the Enchanted Seas back into service. EffJohn, in this
agreement, agreed to fix certain technical deficiencies in both the Enchanted
Seas and the Enchanted Isle and agreed to pay the Company charter fees if
EffJohn did not charter the vessel in July or in October. The amount of the
charter fee received is included on the Company's statement of operations
under Revenues (see Note A).
As part of the original acquisition agreement, it was agreed that EffJohn
would sub-charter the Enchanted Seas to an unrelated third party, and the
Company would receive 50% of the charter income. In July 1995, the Company
and EffJohn were informed that the sub-chartered had reneged on their offer
for the Enchanted Seas. Accordingly, the Company and EffJohn entered into a
settlement agreement whereas, EffJohn agreed that if it did not re-charter the
vessel by September 1, 1995, it would pay the Company a $425,000 cancellation
fee, and if it did not charter the vessel by October 15, 1995, it would pay
the Company an additional $425,000 cancellation fee. As EffJohn did not
charter the vessel, the Company received $425,000 in September 1995 from
EffJohn, and recorded these damages as part of operating income in the 1995
statement of earnings. In October 1995, the Company received the remaining
$425,000 and it will be recorded as operating income in fiscal 1996.
Simultaneously to the acquisition, the Company entered into a sublease
agreement with Commodore Cruise Line Limited to lease an IBM AS/400 computer
system. The lease is treated as a capital lease for financial statement
purposes, and the obligation is $223,960 at September 30, 1995. The related
cost of $277,039 and accumulated amortization of $13,852 of computer equipment
is recorded in property and equipment at September 30, 1995. The lease expires
in 1996.
NOTE G - COMMON STOCK
The Company issued 3,431,933 shares of Common Stock for a total consideration
of approximately $3,012,000 which was used to finance the start-up of the
Company. On July 15, 1995, the company closed on its private placement of
equity having sold 1,500,000 shares of its common stock for net proceeds of
approximately $5,196,000.
F-17
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 1995
NOTE H - INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
----------- ----------- ----------
<S> <C> <C> <C>
1995
Federal $ 4,841 $ 3,618 $ 8,459
========== =========== ==========
</TABLE>
The temporary differences that gives rise to a significant portion of the
deferred tax liability is the excess of tax over book depreciation.
The provision for federal income taxes for the year ended September 30, 1995
differs from that computed at the statutory federal corporate tax rate as
follows:
<TABLE>
<CAPTION>
Amount
----------
<S> <C>
Provision at statutory rate $ 108,800
Statutory tax exempted due to foreign source income (89,625)
Effect of graduated tax rates (10,716)
----------
Total tax provision $ 8,459
==========
</TABLE>
As of September 30, 1995, the Company has net operating loss carryforwards for
federal income tax purposes of $5,244 and alternative minimum tax credits of
$1,786 which are available to offset taxable income and income taxes, if any,
through the year 2010.
NOTE I - SUBSEQUENT EVENTS
In October 1995, the Company entered into a joint venture (Sea-Comm) agreement
with a Liberian Corporation. The Company has chartered the Universe Explorer
(formerly the Enchanted Seas) to the joint venture for a fee equivalent to all
operating costs plus principal and interest on its first mortgage.
The joint venture (Sea-Comm) has chartered the ship to Seawise. The terms of
the charter provide that Seawise Foundation has the use of 76% of the cabins
in exchange for payment of 76% of the operating costs, including 76% of the
labor, 100% of food costs and 76% of the principal and interest due on its
first mortgage. Sea-Comm will earn additional revenue from the sale of the
24% of the cabins on the vessel and other onboard revenues. Seawise has
guaranteed the sale of 60 adults on each voyage in addition to the 76% of the
cabins they will purchase.
F-18
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
EffJohn International B.V.:
We have audited the accompanying combined balance sheet of the S/S Enchanted
Seas and S/S Enchanted Isle, (operating units of EffJohn International B.V.),
as of December 31, 1994, and the related statements of operations, operating
units' equity and cash flows for the period from January 1, 1995 through July
14, 1995 and for each of the years in the two-year period ending December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the S/S Enchanted Seas
and S/S Enchanted Isle, (operating units of EffJohn International B.V.), as of
December 31, 1994, and results of its operations and its cash flows for the
period from January 1, 1995 through July 14, 1995 and for each of the years in
the two-year period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in note 3, the Company and EffJohn International B.V. have incurred
significant accumulated losses and a working capital deficit. The company and
Effjohn will remain economically dependent on its parent for additional
advances until they achieve profitable operations.
Fort Lauderdale, Florida /s/ KPMG Peat Marwick LLP
May 7, 1996
F-19
<PAGE>
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
COMBINED BALANCE SHEET
December 31, 1994
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Current assets:
Cash and cash equivalents 824,870
Restricted cash 234,966
Accounts receivable:
Trade 138,351
Other 525,699
-----------
664,050
-----------
Inventories 728,363
Prepaid expenses and other current assets 215,431
-----------
Total current assets 2,667,680
---------
Property and equipment 60,324,248
Less accumulated depreciation and amortization (22,759,478)
----------
37,564,770
----------
40,232,450
==========
Liabilities and Operating Units' Equity
---------------------------------------
Current liabilities:
Due to affiliates 10,564,903
Passenger deposits 5,231,861
Current maturities of affiliate long-term debt 7,713,546
----------
Total current liabilities 23,510,310
Affiliate long-term debt 22,306,802
----------
Total liabilities 45,817,112
----------
Operating units' equity (5,584,662)
----------
Commitments and contingencies -
------
Total liabilities and operating units' equity 40,232,450
==========
</TABLE>
See accompanying notes to combined financial statements.
F-20
<PAGE>
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
STATEMENTS OF OPERATIONS
For the years ended December 31, 1993 and 1994 and
for the period from January 1, 1995 to July 14, 1995
<TABLE>
<CAPTION>
For the period
January 1
Year ended December 31, through July 14,
----------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Passenger fares $ 31,660,394 26,493,185 13,241,158
Port charges 3,450,607 3,313,599 1,926,605
On board revenues 8,015,525 7,531,592 3,972,362
Charter revenue 2,420,000 4,511,224 -
Miscellaneous revenues 103,530 10,813 -
---------- ---------- ------
Total revenues 45,650,056 41,860,413 19,140,125
---------- ---------- -----------
Operating expenses:
Technical and running costs 16,951,387 14,201,427 11,188,132
Ships operating expenses 14,258,345 12,368,986 6,771,538
Repairs and maintenance 3,055,405 1,956,683 2,168,105
---------- ---------- -----------
Total operating expenses 34,265,137 28,527,096 20,127,775
---------- ---------- -----------
Gross profit (loss) 11,384,919 13,333,317 (987,650)
Other operating expenses:
Administrative expenses 4,664,866 3,798,194 3,175,947
Marketing expenses 2,168,286 2,685,976 2,704,143
Depreciation and amortization 4,902,487 3,599,234 1,910,413
Loss on vessel fire - 1,367,347 -
------ ---------- ------
Operating income (loss) (350,720) 1,882,566 (8,778,153)
Other income (expense):
Interest income 33,984 68,921 41,317
Interest expense (1,716,329) (1,362,336) (2,232,347)
Write-off of goodwill (6,023,118) - -
Loss on sale of assets - - (6,123,866)
------ ------ ----------
(7,705,463) (1,293,415) (8,314,896)
---------- ---------- ----------
Net income (loss) $ (8,056,183) 589,151 (17,093,049)
========== ========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-21
<PAGE>
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
STATEMENTS OF OPERATING UNITS' EQUITY
Year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31, 1992 (8,714,121)
Net loss (8,056,183)
Capital contributions - forgiveness of affiliate debt 10,596,491
-----------
Balance at December 31, 1993 (6,173,813)
Net income 589,151
-----------
Balance at December 31, 1994 (5,584,662)
Net loss (17,093,050)
-----------
Balance at July 14, 1995 (22,677,712)
===========
</TABLE>
See accompanying notes to combined financial statements.
F-22
<PAGE>
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
CASH FLOW STATEMENTS
For the years ended December 31, 1993 and 1994 and
for the period from January 1, 1995 to July 14, 1995
<TABLE>
<CAPTION>
For The Period
January 1
Year ended December 31, through July 14,
----------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Net income (loss) $ (8,056,183) 589,151 (17,093,049)
Depreciation and amortization 4,902,487 3,599,234 1,910,413
Loss on sale of assets - - 6,123,866
Amortization of deferred drydock 1,778,407 1,116,367 1,254,921
Write-off of goodwill 6,023,118 - -
Changes in:
Restricted cash (1,158) (10,404) 234,965
Accounts receivable (293,573) 15,621 (625,476)
Inventories 398,952 (231,094) (371,637)
Prepaids and other assets (128,267) (10,145) 215,431
Passenger deposits 1,794,478 (676,606) (5,231,861)
Due to/from affiliates 836,339 4,076,254 2,299,934
---------- ---------- -----------
Net cash (used in) provided by
operations 7,254,600 8,468,378 (11,282,493)
--------- ---------- -----------
Proceeds from sale of assets 149,415 42,000 5,000,000
Capital expenditures (1,177,642) (2,508,024) (1,448,017)
---------- ---------- -----------
Net cash provided by (used in)
investing activities (1,028,227) (2,466,024) 3,551,983
---------- ---------- -----------
Proceeds from debt 1,021,272 184,126 8,985,735
Repayments of debt (7,943,713) (5,800,202) (1,127,551)
---------- ---------- -----------
Net cash provided by (used in)
financing activities (6,922,441) (5,616,076) 7,858,184
---------- ---------- -----------
Net change in cash and cash equivalents (696,068) 386,278 127,674
Beginning cash and cash equivalents 1,134,660 438,592 824,870
---------- ---------- -----------
Ending cash and cash equivalents $ 438,592 824,870 952,544
========== ========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-23
<PAGE>
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
Cash Flow Statements (Continued)
For the years ended December 31, 1993 and 1994 and
for the period from January 1, 1995 to July 14, 1995
Supplemental cash flow disclosure:
The following summarizes non-cash activities related to the sale of the
Company's assets:
<TABLE>
<S> <C>
Vessels $ (36,500,000)
Inventories (1,100,000)
Liabilities incurred (2,023,866)
Promissory note received 24,500,000
Preferred stock received 4,000,000
Cash received 5,000,000
----------
Loss on sale of assets $ 6,123,866
==========
</TABLE>
F-24
<PAGE>
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1993 and 1994, July 14, 1995
(1) BUSINESS ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ORGANIZATION
Brasil Caribean Shipping, Inc. ("Brasil") and Argentina Caribean
Shipping Inc. ("Argentina") (both Panamanian corporations) are wholly-
owned subsidiaries of EffJohn International B.V. ("EffJohn") (a Dutch
corporation). EffJohn is ultimately owned by Silja OY AB, a
Scandinavian publicly held entity.
Brasil owned the cruise vessel S/S Enchanted Seas ("Seas"), which
operated primarily in the Caribbean markets out of New Orleans,
Louisiana. Argentina owned the cruise vessel S/S Enchanted Isle
("Isle"), which operated out of San Diego to Mexico through April
1993, in the Caribbean market out of Barbados and out of New Orleans
in 1995 and also operated as a hotel in St. Petersburg, Russia from
May 1993 through August 1994. Both vessels were operated and managed
by Commodore Cruise Line Limited ("Commodore"), a wholly-owned
subsidiary of EffJohn. Commodore also operates or operated the
vessels Caribe I, Crown Monarch, Crown Jewel and Crown Dynasty.
These financial statements have been prepared on a combined basis
representing the activities of Brasil and Argentina and the revenues
and direct and allocated expenses of Commodore from operations of the
Seas and Isle. The combined operations are herein referred to as the
"Company." All material intercompany balances and transactions have
been eliminated in combination.
(B) REVENUE AND EXPENSE RECOGNITION
Passenger ticket revenue, onboard revenues and related expenses are
recognized as earned when voyages are completed. Fares received from
customers for future voyages are recorded as liabilities. Onboard
revenues consist of income from concession agreements (note 9),
casino, bar operation and shore tour activities.
Travel agent commissions, air transportation and land excursions
costs, and onboard cost of sales and expenses are included in ships
operating expenses in the accompanying combined financial statements.
Certain expenses common to vessels operated by Commodore have been
allocated to the Seas and Isle, primarily based on a pro rata share of
the number of traffic days of each vessel. Allocated expenses consist
principally of marketing and advertising, shore payroll, benefits, and
other administrative costs. See note 6 as to allocation of interest
expense.
Management believes that the methodology used in allocating expenses
is reasonable. As all expenses of EffJohn have been subject to
allocation, management believes that the expenses of the Company would
not be materially different on a stand alone basis.
(Continued)
F-25
<PAGE>
-2-
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(C) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method.
(D) PROPERTY AND EQUIPMENT
Vessels, property and equipment are recorded at cost. Major renewals and
improvements which extend the useful lives of the assets are capitalized.
Drydocking costs are deferred and amortized over 24 months.
(E) INCOME TAXES
The operations of the Isle and Seas are not subject to U.S. income taxes
due to an international shipping exemption and no income taxes in the
country of incorporation. Accordingly, no provision for income taxes has
been recorded.
(F) CASH AND CASH EQUIVALENTS
Cash includes purser funds, casino cash and bank account used solely for
the Seas and Isle. The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
(G) DUE TO AFFILIATES
Due to affiliates consists principally of amounts owed to Commodore and
EffJohn for various operating and administrative activities. Commodore
manages certain cash disbursements, including payments to vendors. Cash
balances and transactions recorded through operating cash accounts used by
Commodore for the operations of vessels are reflected in due to affiliates.
(H) RESTRICTED CASH
The Company placed $234,966 on deposit with a bank to secure a letter of
credit with a United States government agency.
(I) 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 assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
(Continued)
F-26
<PAGE>
-3-
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(2) SALE OF THE SEAS AND THE ISLE AND RELATED ASSETS
On July 14, 1995, the Company sold the S/S Enchanted Seas and the S/S
Enchanted Isle, certain shoreside assets, trademarks, passenger lists and
advanced ticket sales to Commodore Holdings Limited and Subsidiaries, an
unrelated entity. Total proceeds received for the transaction were
$33,500,000, which consisted of $5,000,000 in cash, a loan made to the
purchasers of $24,500,000 and 1,000,000 shares of seven percent cumulative
convertible redeemable Series A Preferred Stock at value of $4.00 per
share. The loss associated with this sale was $6,123,866.
(3) LIQUIDITY
The Company's current liabilities exceed current assets and total
liabilities exceed total assets. Although the Company recognized a profit
in 1994, it incurred losses in 1995 and 1993 and has received capital
contributions and loans from EffJohn to cover its operating cash needs. The
parent company of EffJohn has agreed to provide additional cash advances or
obtain external financing, if required, in 1996. The Company and EffJohn
will remain economically dependent on its parent for additional advances
until it achieves sustained profitable operations.
(4) INVENTORIES
At December 31, 1994, inventories consist of:
<TABLE>
<CAPTION>
1994
----
<S> <C>
Food, beverage and supplies 633,952
Fuel 94,411
-------
728,363
=======
</TABLE>
(5) PROPERTY AND EQUIPMENT
At December 31, 1994, property and equipment consist of:
<TABLE>
<CAPTION>
Estimated
1994 Useful Lives
---- ------------
<S> <C> <C>
Vessels 53,839,340 15 years
Equipment 2,957,367 3 to 5 years
Dry/Wet docking 3,527,541 2 years
----------
60,324,248
==========
</TABLE>
Depreciation expense for the years ended December 31, 1993 and 1994 and for
the period January 1 through July 14, 1995 amounted to $3,586,654,
$3,567,550 and $1,771,035, respectively.
(Continued)
F-27
<PAGE>
-4-
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(6) AFFILIATE LONG-TERM DEBT
EffJohn provides financing to the vessels operated by Commodore through
external loans obtained from third parties. Debt amounts have been
allocated to the Seas and Isle based on acquisition debt, funding of
capital improvements and working capital needs. Debt repayments and
interest expense have been allocated based on a pro rata share of
outstanding debt and capital contributions made by EffJohn. Certain debt
incurred by EffJohn to fund the Company is secured by the Seas and the
Isle. Interest rates on the external debt range from 4.18 percent to 7.82
percent.
The allocated minimum annual repayment requirements as of December 31,
1994, are as follows:
<TABLE>
<CAPTION>
Long-term
Year ending December 31, debt, affiliate
------------------------ ---------------
<S> <C>
1995 7,713,546
1996 7,215,243
1997 6,436,345
1998 4,841,173
Thereafter 3,814,041
----------
30,020,348
==========
</TABLE>
(7) WRITE-OFF OF GOODWILL
The Company recorded goodwill in 1989 resulting from the excess of the
purchase cost of the Company over fair market value of net assets acquired,
which was amortized over ten years on a straight-line basis. The Company
continually evaluated the existence of goodwill impairment on the basis of
whether goodwill was fully recoverable from projected, undiscounted net
cash flows. In 1993, in connection with the anticipated sale of the
vessels, the Company determined that goodwill no longer had continuing
value based on the expected future cash flows from the sale of the vessel
and from operations. Accordingly, the Company recorded a charge to income
in the accompanying statement of operations sufficient to fully write-off
all goodwill.
(8) COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various lawsuits incidental to its operation.
Such claims are generally covered by insurance, less a deductible payable
by the Company. In the opinion of management, the ultimate resolution of
these matters will not have a material effect on the Company's financial
position, results of operations or liquidity.
(Continued)
F-28
<PAGE>
-5-
S/S ENCHANTED SEAS
AND S/S ENCHANTED ISLE
(Operating Units of EffJohn International B.V.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(9) CONCESSION AGREEMENTS
The Company had entered into concession agreements with independent third
parties for the operations of the gift shop, beauty shop and photography
services.
Fringe revenues from concessions were computed based upon information
contained in each specific agreement. Generally, such agreements call for
payments to the Company based upon number of passengers or a percentage of
sales.
(10) FIRE LOSS ON THE ISLE
On December 28, 1994, a fire occurred on the S/S Enchanted Isle. The
Company incurred expenses for damages arising out of the incident of
approximately $1.4 million. The loss is included in other operating
expenses in the accompanying statement of operations for the year ended
December 31, 1994.
(11) CHARTER REVENUE
From May 1993 through August 1994, the Isle was chartered to an affiliated
company and operated as a hotel in St. Petersburg, Russia. Charter revenue
received amounted to $2,420,000 and $4,036,224 and in 1993 and 1994,
respectively. Charter revenue from a third-party amounted to $475,000 in
1994.
F-29
<PAGE>
COMMODORE HOLDINGS, LIMITED AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF EARNINGS
YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
<S> New Old
Commodore Commodore Pro Forma Pro Forma
Total revenues ----------- ----------- ------------ -------------
Operating expenses <C> <C> <C> <C>
Marketing, selling and administrative
Depreciation and amortization $ 7,255,830 $ 27,818,934 $ - $ 35,074,764
Interest expense, net 4,940,637 29,763,306 - 34,703,943
Other 1,664,478 8,234,108 - 9,898,586
197,926 2,832,666(1) (1,337,333)(1) 1,693,259
132,795 2,700,855 (904,275)(2) 1,929,375
Net earnings (loss) - 4,000 - 4,000
---------- ------------ ------------ -----------
Discontinued operations
319,994 (15,716,001) 2,241,608 (13,154,399)
Provision for taxes
- 6,123,866 (6,123,866)(5) -
Net earnings (loss) before provision for 8,459 - (8,459)(4) -
preferred stock dividend ---------- ------------ ----------- ------------
Provision for preferred stock dividend
311,535 (21,839,867) 8,373,933 (13,154,399)
Net earnings 60,000 - 220,000(3) 280,000
---------- ------------ ----------- ------------
Net income (loss) per share $ 251,535 $(21,839,867) $ 8,153,933 $(13,434,399)
========== ============ =========== ============
Weighted average number of common 0.06 (2.59)
stock outstanding ========== ============
4,377,593 5,184,711
========== ============
</TABLE>
F-30
<PAGE>
COMMODORE HOLDINGS, LIMITED AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENTS OF EARNINGS
YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
NOTE A - PROFORMA CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed statements of earnings have
been derived from the audited statement of earnings of the company for the
period from April 13, 1995 (date of inception) through September 30, 1995
and the revenues and expenses of Old Commodore from October 1, 1994 through
July 14, 1995 (date of acquisition of Old Commodore by New Commodore).
Although the date of inception of New Commodore was April 13, 1995 actual
operations of New Commodore began on July 15, 1995.
The unaudited pro forma condensed financial statements are presented for
informational purposes only and do not purport to be indicative of the
operating results that actually would have occurred if the acquisition had
been consummated as of October 1, 1994, nor which may result from future
operations. The pro forma adjustments are based upon available information
and certain assumptions that the Company believes are reasonable. The 1994
acquisition has been accounted for using the purchase method of accounting.
These pro forma financial statements should be read in conjunction with the
historical financial statements in related notes of the Company, the
acquisition information included elsewhere in this document.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings Per Share
------------------
Net earnings (loss) per common equivalent share is based upon the weighted
average number of shares and common stock equivalents outstanding during
each period after giving effect for dividends on the Class A preferred
stock.
The weighted average number of common and common equivalent shares
outstanding for the pro forma year ended September 30, 1995 is 5,184,611.
Weighted average shares includes the effect of the warrants issued with
exercise prices below the IPO price, as calculated under the treasury stock
method. The calculation also gives retroactive effect (as if to the
beginning of the period) to those shares issued to founders at par value.
F-31
<PAGE>
COMMODORE HOLDINGS, LIMITED AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENTS OF EARNINGS - CONTINUED
YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
NOTE C - PRO FORMA ADJUSTMENTS
(1) Adjustment to depreciation expense resulting from the difference in
cost basis of the assets acquired by the Company as compared to Old
Commodore .
(2) Adjustment to interest expense for lower borrowings of approximately
$4,617,000 of the Company as compared to Old Commodore. The actual
interest rate at the time of acquisition was used to determine these
amounts.
(3) Adjustment to reflect the cumulative preferred stock dividend on
$4,000,000 of 7% Series A cumulative preferred stock.
(4) No provision for income taxes is reflected due to the pro forma net
operating loss. The Company expects that once it becomes primarily and
regularly traded on an established securities market in the U.S. such
as NASDAQ, it will be able to claim the shipping exemption under
Section 883(a) of the Internal Revenue Code. Accordingly, the
Company's effective tax rate will then be zero.
(5) This amount represent the loss on sale of the vessels and has been
adjusted to reflect the Company as a going concern.
F-32
<PAGE>
Until ____________, 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ENFORCEABILITY OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS..................................... 2
PROSPECTUS SUMMARY.......................................................... 3
SUMMARY FINANCIAL INFORMATION............................................... 8
RISK FACTORS................................................................ 9
USE OF PROCEEDS............................................................. 21
DIVIDEND POLICY............................................................. 21
DILUTION.................................................................... 22
CAPITALIZATION.............................................................. 24
SELECTED FINANCIAL DATA..................................................... 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................. 27
BUSINESS.................................................................... 33
CERTAIN TAX CONSIDERATIONS.................................................. 52
MANAGEMENT.................................................................. 58
SECURITIES OWNERSHIP OF
PRINCIPAL AND INITIAL SELLING STOCKHOLDERS.................................. 64
CERTAIN TRANSACTIONS........................................................ 65
DESCRIPTION OF SECURITIES................................................... 67
SHARES ELIGIBLE FOR FUTURE SALE............................................. 74
CERTAIN FOREIGN ISSUER CONSIDERATIONS....................................... 75
UNDERWRITING................................................................ 76
CONCURRENT REGISTRATION OF COMMON STOCK..................................... 78
LEGAL MATTERS............................................................... 78
EXPERTS..................................................................... 79
ADDITIONAL INFORMATION...................................................... 79
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
</TABLE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER,
SOLICITATION OR SALE MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THE PROSPECTUS.
1,000,000 UNITS
COMMODORE HOLDINGS LIMITED
______________________
PROSPECTUS
______________________
________________________
____________, 1996
80
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PROSPECTUS Subject to Completion, dated May 28, 1996
--
COMMODORE HOLDINGS LIMITED
5,338,912 SHARES
OF COMMON STOCK
This Prospectus relates to the sale by certain selling shareholders (the
"Selling Stockholders") of 5,338,912 shares of common stock, $.01 par value per
share (the "Common Stock") of Commodore Holdings Limited (the "Company"). This
amount includes 1,006,979 shares of Common Stock, which presently may be issued
upon conversion of the Series A Preference Shares into Common Stock. All the
Selling Stockholders have agreed not to sell or otherwise dispose of or exercise
any of their shares of Common Stock or shares of Common Stock issuable upon
conversion or exercise of securities convertible into Common Stock for a period
of one year from the date of this Prospectus without the prior written consent
of the Underwriter. None of the proceeds from the sale of the Common Stock by
the Selling Stockholders will be received by the Company. The Company will bear
all expenses (other than selling commissions and fees and expenses of counsel or
other advisors to the Selling Stockholders) in connection with the registration
and sale of the Common Stock being offered by the Selling Stockholders. See
"Selling Stockholders."
Prior to this offering (the "Selling Stockholders Offering"), there has
been no public market for the Common Stock, and there can be no assurance that
any such market will develop. The Common Stock will be offered by the Selling
Stockholders in transactions in the over-the-counter market, in negotiated
transactions or a combination of such methods of sale, at fixed prices which may
be changed, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Common Stock to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Common Stock for whom such broker-dealers may act
as agent or to whom they sell as principal, or both. The Selling Stockholders
may be deemed to be "underwriters" as defined in the Securities Act of 1933 (the
"Securities Act"). If any broker-dealers are used by the Selling Stockholders,
any commissions paid to broker-dealers and, if broker-dealers purchase any
shares of Common Stock as principals, any profits received by such broker-
dealers on the resales of the shares of Common Stock, may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition,
any profits realized by the Selling Stockholders may be deemed to be
underwriting commissions. All costs, expenses and fees in connection with the
registration of the shares offered by Selling Stockholders will be borne by the
Company. Brokerage commissions, if any, attributable to the sale of the shares
will be borne by the Selling Stockholders. The Selling Stockholders may not
sell, transfer, or otherwise dispose of any of their of Common Stock for a
period of one year without the prior written consent of the underwriter. See
"Selling Stockholders" and "Plan of Distribution."
The Company has applied to the Nasdaq National Market System ("Nasdaq NMS")
for inclusion and listing for trading, respectively, of the Common Stock. The
proposed trading symbol for the Common Stock is CCLH.
Concurrently with the commencement of this offering, the Company and the
Initial Selling Stockholders offered by separate Prospectus, 1,000,000 units
(the "Units") of the Company. Each Unit consists of one share of Common Stock
and one redeemable warrant to purchase one-half share of Common Stock (the
"Warrants"). The Warrants are exercisable only in pairs, with each two
Warrants entitling the registered holder to purchase one share of Common Stock
for $6.00 per share. The Company's offering (the "Offering") is being offered
through First Hanover Securities, Inc. (the "Underwriter").
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is ____________, 1996
<PAGE>
(ALTERNATE PAGE FOR SELLING STOCKHOLDERS PROSPECTUS)
THE OFFERING
Securities offered........................... 4,331,933 shares of Common
Stock, $.01 par value. See
"Description of Securities."
Common Stock Outstanding/(1)/................ 4,931,933 shares.
Risk Factors................................. The securities offered hereby
involve a high degree of risk.
See "Risk Factors."
Proposed Nasdaq NMS Symbol(2)................ Common Stock - CCLH
____________________
/(1)/ Does not include up to 500,000 shares of Common Stock reserved for
issuance upon the exercise of options; 500,000 shares of Common Stock
underlying the Units being concurrently issued by the Company; 500,000
shares of Common Stock reserved for issuance upon exercise of the Warrants
underlying the Units being offered by the Company; 225,000 shares of
Common Stock reserved for issuance upon the exercise of the Over-Allotment
Option (and the shares of Common Stock underlying the Warrants contained
therein); and 150,000 shares of Common Stock reserved for issuance upon
the exercise of the Underwriter's Warrants (and the shares of Common Stock
underlying the Warrants contained therein).
/(2)/ The proposed symbols do not imply that a liquid and active market will
develop or be sustained for the securities upon completion of the
offering.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by each Selling Stockholder
as of May 1, 1996, without giving effect to the Offering, and as adjusted to
reflect the sale of all the Common Stock offered by the Selling Stockholders
hereunder. Unless otherwise stated, all shares are held with sole investment
and voting power.
<TABLE>
<CAPTION>
SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER THE OFFERING
----------------- ------- ------------------
SELLING STOCKHOLDER NUMBER PERCENT/(1)/ NUMBER PERCENT
- ------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Allen, Alvin B. 25,000 .5% 25,000 0 0%
Alperin, David 6,250 .1% 6,250 0 0%
Alu, James M. 15,000 .3% 15,000 0 0%
American Maple Leaf 125,000 2.5% 125,000 0 0%
Amoyelle, Biniamine as Trustee 37,500 .7% 37,500 0 0%
Amoyelle, Biniamine as Trustee 125,000 2.5% 125,000 0 0%
of the Wolfson Family Trust
Ancic, Stipe 6,250 .1% 6,250 0 0%
Barat, Douglas 6,250 .1% 6,250 0 0%
Bartolini, Robert R. 162,500 3.3% 162,500 0 0%
</TABLE>
2
<PAGE>
(ALTERNATE PAGE FOR SELLING STOCKHOLDERS PROSPECTUS)
<TABLE>
<CAPTION>
SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER THE OFFERING
----------------- ------- ------------------
SELLING STOCKHOLDER NUMBER PERCENT/(1)/ NUMBER PERCENT
- ------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Bear Stearns 12,500 .25% 12,500 0 0%
Account #7959587812
FBO Robert J. Heighley IRA
Bear Stearns 12,500 .25% 12,500 0 0%
Account #7959585915
FBO Ron H. Rust IRA
Block, Charles 6,250 .1% 6,250 0 0%
Bloom, Jonathan and Rachel Nel 6,250 .1% 6,250 0 0%
Brarrison Incorporated 12,500 .25% 12,500 0 0%
Braun, Elliot 6,250 .1% 6,250 0 0%
Brooks, John 6,250 .1% 6,250 0 0%
Buck, Timothy Paul 12,500 .25% 12,500 0 0%
Button, Richard T. 10,000 .2% 10,000 0 0%
Campagnuolo, Benjamin 6,250 .1% 6,250 0 0%
Capital Growth Trust 155,000 3.1% 155,000 0 0%
Centaur Financial Corp. 100,000 2.0% 100,000 0 0%
Cliff Associates 41,250 .8% 41,250 0 0%
Cohen, Susan I. 5,000 .1% 5,000 0 0%
Colella, John A. 6,250 .1% 6,250 0 0%
Costa, Neil and Ahren, Lynn 25,000 .5% 25,000 0 0%
Costa, Jose A. and Maria E. 5,000 .1% 5,000 0 0%
Cramer, Gerald B. 25,000 .5% 25,000 0 0%
Cranbourne Investments 36,918 .75% 36,918 0 0%
Cruise Finance, Inc. 150,000 3.0% 150,000 0 0%
CT Partnership 12,500 .25% 12,500 0 0%
Dumanic, Ivo 6,250 .1% 6,250 0 0%
Dunn, Arthur L. 12,500 .25% 12,500 0 0%
Edo, Roje 6,250 .1% 6,250 0 0%
Eff-Shipping Ltd./(2)/ 1,006,979 17.0% 1,006,979 0 0%
Eugene M. Eisner Pension Trust 12,500 .25% 12,500 0 0%
Etablissement Asamar, Ltd. 100,000 2.0% 100,000 0 0%
Fabrikant, Martin 6,250 .1% 6,250 0 0%
FAC Enterprises, Inc. 120,000 2.5% 120,000 0 0%
Farrauto, Charles 25,000 .5% 25,000 0 0%
Federman, Carole Ann 3,125 0 3,125 0 0%
Flam, Robert 100 0 100 0 0%
Forman, Michael 5,000 .1% 5,000 0 0%
Frankel, Richard G. 12,500 .25% 12,500 0 0%
Funkey, John P. as Trustee of the 6,250 .1% 6,250 0 0%
John P. Funkey Revocable Trust
Garnick, Michael & Denise 62,500 1.2% 62,500 0 0%
Geller, Paul 6,250 .1% 6,250 0 0%
Glicker, Harvey and Harolyn 6,250 .1% 6,250 0 0%
</TABLE>
3
<PAGE>
(ALTERNATE PAGE FOR SELLING STOCKHOLDERS PROSPECTUS)
<TABLE>
<CAPTION>
SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER THE OFFERING
----------------- ------- ------------------
SELLING STOCKHOLDER NUMBER PERCENT/(1)/ NUMBER PERCENT
- ------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Goldberg, Phyllis E. 19,000 .38% 19,000 0 0%
Goldberg, Paul K. 11,000 .22% 11,000 0 0%
Gooze, Daniel 12,500 .25% 12,500 0 0%
Greater Atlantic Casinos, Ltd. 25,000 .5% 25,000 0 0%
Gutfleish, Louis 6,250 .1% 6,250 0 0%
Haas, David S. 3,125 .05% 3,125 0 0%
Hickman, Lamoyne W. 12,500 .25% 12,500 0 0%
I.P. Corp. 50,000 1.0% 50,000 0 0%
JeMJ Financial Services, Inc./(3)/ 500,000 10.2% 500,000 0 0%
Kaplan, Susan 6,250 .1% 6,250 0 0%
Karp, Florence, Custodian 86,415 1.7% 86,415 0 0%
Kaufman, Adrienne 3,125 .05% 3,125 0 0%
Kaufman, Elliot 3,125 .05% 3,125 0 0%
Keenan, Thomas 75,000 1.5% 75,000 0 0%
Kenlee, Inc. 42,875 .87% 42,875 0 0%
Klass, Milton 6,250 .1% 6,250 0 0%
Koutcher, Martin on behalf of the 6,250 .1% 6,250 0 0%
Koutcher-Ginsberg Pension Plan
Lansker, Rita 12,500 .25% 12,500 0 0%
Levitin, Eli 6,250 .1% 6,250 0 0%
Love, Douglas A. 10,000 .2% 10,000 0 0%
Lozic, Arsen 6,250 .1% 6,250 0 0%
Manocherian, Fraydun 25,000 .5% 25,000 0 0%
Marcus, Howard 12,500 .25% 12,500 0 0%
Masucci, Robert N. 12,500 .25% 12,500 0 0%
Miller, Alan I. 75,000 1.5% 75,000 0 0%
Miller, Marc 12,500 .25% 12,500 0 0%
Miller, Robert A. 3,125 (1) 3,125 0 0%
Moderski, Joseph C. 6,250 .1% 6,250 0 0%
Muhlgeier, Jeffrey 6,250 .1% 6,250 0 0%
Nestico, Pasquale F. 15,000 .3% 15,000 0 0%
Novak, Sharon 5,000 .1% 5,000 0 0%
Orvieto, Brad, as Trustee 150,000 3.0% 150,000 0 0%
for the Merriman Trust
Oswald, Frederick J. 6,250 .1% 6,250 0 0%
Pavic, Boris 25,000 .5% 25,000 0 0%
Pavlovic, Ante 6,250 .1% 6,250 0 0%
Pavlovic, Giorgio Conte 12,500 .25% 12,500 0 0%
Pearlstein, Alan 12,500 .25% 12,500 0 0%
Piscitelli, Gene 12,500 .25% 12,500 0 0%
Prevor Marketing International 12,500 .25% 12,500 0 0%
Inc.
</TABLE>
4
<PAGE>
(ALTERNATE PAGE FOR SELLING STOCKHOLDERS PROSPECTUS)
<TABLE>
<CAPTION>
SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER THE OFFERING
----------------- ------- ------------------
SELLING STOCKHOLDER NUMBER PERCENT/(1)/ NUMBER PERCENT
- ------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Prudential Securities as Custodian 2,500 (1) 2,500 0 0%
Steven P. Margolis HCG 816744
Rabin, Jeffrey B. 130,000 2.7% 130,000 0 0%
Radway Investments Limited 145,000 2.95% 145,000 0 0%
Rambler, Louis E. 6,250 .1% 6,250 0 0%
Reisman, Theodore 5,000 .1% 5,000 0 0%
Repvic Partners 52,500 1.0% 52,500 0 0%
Resnick, Michael 6,250 .1% 6,250 0 0%
Romotski, Emil 10,000 .2% 10,000 0 0%
Rosen, Kenneth A. 20,000 .4% 20,000 0 0%
Rosen, Kenneth as Trustee of the 20,000 .4% 20,000 0 0%
Money Purchase Pension Plan
Rosner, Steven B. 136,000 2.78% 136,000 0 0%
Rozel International Holdings 155,000 3.1% 155,000 0 0%
Limited
Saker, Wayne 6,250 .1% 6,250 0 0%
Salomon, Edward 6,250 .1% 6,250 0 0%
Sato, Ken 12,500 .25% 12,500 0 0%
Schimmel, Lawrence 125,000 2.5% 125,000 0 0%
Sector Associates Ltd. 10,000 .2% 10,000 0 0%
Shapiro, Allan 12,500 .25% 12,500 0 0%
Smolen, Eric E. 6,500 .1% 6,500 0 0%
Some, Aaron 3,125 (1) 3,125 0 0%
Sorrentino, Andrew 3,125 (1) 3,125 0 0%
Speziale, Peter J. and Adam 6,250 .1% 6,250 0 0%
Brostovski, Joint Tenants with
Rights of Survivorship
Staller, Jerome M. 12,500 .25% 12,500 0 0%
Stanley, Michael C. 10,000 .2% 10,000 0 0%
Strassberg, David 6,250 .1% 6,250 0 0%
Strauss, Elaine J. 6,250 .1% 6,250 0 0%
Teitelbaum, Naftali and Gale B., 6,250 .1% 6,250 0 0%
Joint Tenants with Rights of
Survivorship
Tidwell, Gerald 6,250 .1% 6,250 0 0%
Visio, Mirko 12,500 .25% 12,500 0 0%
Walton, David M. 75,000 1.5% 75,000 0 0%
Ward, Dean T. 6,250 .1% 6,250 0 0%
Weisman, Lawrence S., 25,000 .25% 25,000 0 0%
Individual Retirement Account
Funds
Wellner, Robert G. 75,000 1.5% 75,000 0 0%
Wolfson, Aaron 25,000 .25% 25,000 0 0%
</TABLE>
5
<PAGE>
(ALTERNATE PAGE FOR SELLING STOCKHOLDERS PROSPECTUS)
<TABLE>
<CAPTION>
SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER THE OFFERING
----------------- ------- ------------------
SELLING STOCKHOLDER NUMBER PERCENT/(1)/ NUMBER PERCENT
- ------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Wray, Paul E. and Herron, Diane 6,250 .1% 6,250 0 0%
Wyllie, Kevin J. 6,250 .1% 6,250 0 0%
Yanni, Louis 6,250 .1% 6,250 0 0%
Yoga Trading Company 3,125 (1) 3,125 0 0%
Young, Robert 75,000 1.5% 75,000 0 0%
Zimmerman, Oscar 18,750 .38% 18,750 0 0%
Zobian, Edward Joseph 3,125 (1) 3,125 0 0%
</TABLE>
<TABLE>
<CAPTION>
SHARES BENEFICIAL
BENEFICIAL OWNERSHIP BEING OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER THE OFFERING/(4)/
----------------- ------- ------------------
SELLING STOCKHOLDER
(SHARES OF COMMON STOCK
UNDERLYING WARRANTS NUMBER PERCENT/(1)/ NUMBER PERCENT
- ------------------- ------ ------------ ------ -------
<S> <C> <C> <C> <C> <C>
Binder, Jeffrey I., 1,500,000 27.6% 500,000/(5)/ 500,000/(7)/ 9.2%
Rosalie G. and
JeMJ Financial Services, Inc./(6)/
Mayer, Frederick/(8)/ 500,000 9.7% 200,000 300,000 3.7%
</TABLE>
____________________
/(1)/ Owns less than .1% of the Common Stock.
/(2)/ Eff-Shipping Ltd is an affiliate of EffJohn, the parent company of Old
Commodore. The Company acquired certain assets of Old Commodore and its
subsidiaries, including the Cruise Ships, in July 1995. See "Business -The
Commodore Acquisition" and "Certain Transactions." Eff-Shipping received
Series A Preference Shares in connection with the Commodore Acquisition.
These Series A Preference Shares may currently be converted into shares of
Common Stock at the conversion rate of the higher of US $4.00 or eight
times the annual primary earnings per share of Common Stock for the
previous fiscal year. See "Description of Securities - Series A Preference
Shares." At present, the Series A Preference Shares may be converted into
1,006,979 shares of Common Stock.
/(3)/ JeMJ Financial Services, Inc. is controlled by Jeffrey I. Binder, the
Chairman of the Board of the Company. This amount excludes warrants to
purchase 250,000 shares of Common Stock owned by JeMJ Financial Services,
Inc.
/(4)/ Assumes that the 1,000,000 Units in the concurrent offering by the Company
are sold, and that neither the Over-Allotment Option nor the Underwriter's
Warrant are exercised.
/(5)/ Excludes shares of Common Stock being offered and listed elsewhere herein.
6
<PAGE>
(ALTERNATE PAGE FOR SELLING STOCKHOLDERS PROSPECTUS)
/(6)/ Jeffrey I. Binder is the Chairman of the Board of the Company. This amount
includes 500,000 shares of Common Stock and warrants to purchase 250,000
shares of Common Stock owned by JeMJ Financial Services, Inc. an affiliate
of Mr. Binder. This amount also includes warrants to purchase 250,000
shares of Common Stock owned by Mr. and Mrs. Binder.
/(7)/ This amount takes into account shares of Common Stock being offered and
listed elsewhere herein.
/(8)/ Frederick Mayer is the Vice-Chairman of the Board of the Company and the
Chairman of the Board of New Commodore.
7
<PAGE>
(ALTERNATE PAGE FOR SELLING STOCKHOLDERS PROSPECTUS)
PLAN OF DISTRIBUTION
All the Selling Stockholders have agreed not to sell or otherwise dispose
of or exercise any of their shares of Common Stock or shares of Common Stock
issuable upon conversion or exercise of securities convertible into Common Stock
for a period of one year from the date of this Prospectus without the prior
written consent of the Underwriter. An appropriate legend will be marked on the
face of stock certificates representing all such shares of Common Stock. See
"Securities Ownership of Principal and Initial Selling Stockholders" and
"Certain Transactions."
After a period of one year from the date of this Prospectus has elapsed,
each Selling Stockholder is free to offer and sell his or her shares of Common
Stock at such times, in such manner and at such prices as he or she shall
determine. Such shares may be offered by the Selling Stockholders in one or
more types of transactions, which may or may not involve brokers, dealers or
cash transactions. The Selling Stockholders may also use Rule 144 under the
Securities Act of 1933 (the "Securities Act"), to sell such securities, if they
meet the criteria and conform to the requirements of such rule. There is no
underwriter or coordinating broker acting in connection with the proposed sale
of shares by the Selling Stockholders.
The Selling Stockholders have advised the Company that sales of shares may
be effected from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Common Stock, or a combination of such
methods of sale, at fixed price which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. After a period of one
year from the date of this Prospectus has elapsed, the Selling Stockholders may
effect such transactions by selling Common Stock directly to purchasers or to or
through broker-dealers which may act as agents or principals. Such broker-
dealers may receive compensation in the form of discounts, concessions, or
commissions from the Selling Stockholders and/or the purchasers of Common Stock
for whom such broker-dealers may act as agents or to whom they sell as
principal, or both (which compensation as to a particular broker-dealer might be
in excess of customary commissions). The Selling Stockholders and any broker-
dealers that act in connection with the sale of the Common Stock might be deemed
to be "underwriters" within the meaning of Section 2(11) of the Securities Act,
and any commissions received by them and any profit on the resale of the shares
of Common Stock as principal might be deemed to be underwriting discounts and
commissions under the Securities Act. The Selling Stockholders may agree to
indemnity any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
arising under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Stockholders will be
subject to prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a "distribution" of shares, any Selling
Stockholders, any selling broker-dealer and any "affiliated purchasers" may be
subject to Rule 10b-7 under the Securities Exchange Act of 1934 which prohibits
any "stabilizing bid" or "stabilizing purchase" for the purpose of pegging,
fixing or stabilizing the price of Common Stock in connection with this
offering. In addition, the State of New Jersey requires that the Selling
Stockholders who sell their Common Stock in New Jersey use a registered broker-
dealer or conduct their sale in reliance upon an exemption from registration.
<PAGE>
(ALTERNATE PAGE FOR SELLING STOCKHOLDERS PROSPECTUS)
Until ____________, 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ENFORCEABILITY OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS...................................... 2
PROSPECTUS SUMMARY........................................................... 3
SUMMARY FINANCIAL INFORMATION................................................ 8
RISK FACTORS................................................................. 9
USE OF PROCEEDS............................................................. 21
DIVIDEND POLICY............................................................. 21
DILUTION.................................................................... 22
CAPITALIZATION.............................................................. 24
SELECTED FINANCIAL DATA..................................................... 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................. 27
BUSINESS.................................................................... 33
CERTAIN TAX CONSIDERATIONS.................................................. 52
MANAGEMENT.................................................................. 58
SECURITIES OWNERSHIP OF
PRINCIPAL AND INITIAL SELLING STOCKHOLDERS.................................. 64
CERTAIN TRANSACTIONS........................................................ 65
DESCRIPTION OF SECURITIES................................................... 67
SHARES ELIGIBLE FOR FUTURE SALE............................................. 74
CERTAIN FOREIGN ISSUER CONSIDERATIONS....................................... 75
UNDERWRITING................................................................ 76
CONCURRENT REGISTRATION OF COMMON STOCK..................................... 78
LEGAL MATTERS............................................................... 78
EXPERTS..................................................................... 79
ADDITIONAL INFORMATION...................................................... 79
INDEX TO FINANCIAL STATEMENTS............................................... F-1
</TABLE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER,
SOLICITATION OR SALE MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THE PROSPECTUS.
5,338,912 SHARES
COMMODORE HOLDINGS LIMITED
_____________________
PROSPECTUS
_____________________
_____________________
____________, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee...................... $ 11,469
NASD Filing Fee........................... $ 3,200
Listing Fees*............................. $ 31,080
Transfer and Warrant Agent Fees*.......... $ 2,000
Printing Costs*........................... $ 30,000
Legal Fees and Expenses*.................. $ 100,000
Accounting Fees and Expenses*............. $ 75,000
Blue Sky Fees and Expenses*............... $ 55,000
Additional Underwriting Compensation...... $ 138,000
Miscellaneous*............................ $ 3,967
Total...................................... $ 449,716
=======
</TABLE>
____________________
*Indicates expenses that have been estimated for the purpose of filing.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 98 of The Companies Act provides generally that a Bermuda
company may indemnify its directors, officers and auditors against any
liability, which by virtue of Bermuda law otherwise would be imposed on them,
except in cases where such liability arises from the willful negligence, willful
default, fraud or dishonesty of which such officer, director, or auditor may be
guilty in relation to the company. Section 98 further provides that a Bermuda
company may indemnify its directors, officers and auditors against any liability
incurred by them in defending any proceedings, whether civil or criminal, which
judgment is awarded in their favor or they are acquitted or in which they are
acquitted or granted relief by the Supreme Court of Bermuda in certain
proceedings arising under Section 281 of the Act.
The Company has adopted provisions in its Bye-laws that provide that
the Company shall indemnify its officers and directors to the maximum extent
permitted under the Act. The Company has also entered into indemnification
agreements with certain of its officers and directors. Such agreements provide
that each director shall be indemnified to the maximum extent permitted by law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In April 1995, the Company issued 12,000 shares of its Common Stock to
its initial founder, Mr. Jeffrey I. Binder, for $12,000 in conjunction with the
organization of the Company. On April 26, 1995, the Company authorized the split
of its Common Stock, and each share of its outstanding Common Stock was
exchanged for 100 shares of Common Stock. Subsequent to such date, Mr. Binder
contributed approximately an additional $988,000 for such Common Stock and
transferred half of such Common Stock to an affiliate. On May 12, 1995, the
Company repurchased 200,000 shares from Mr. Binder for
II-1
<PAGE>
par value. The sale of such Common Stock was exempt from registration pursuant
to Section 4(2) of the Securities Act.
In May 1995, the Company issued a total of 2,406,833 shares of its
Common Stock to 23 of its initial founders, for the aggregate amount of
$2,115,000. These sales of Common Stock were exempt from registration pursuant
to Rules 505 and 506 of Regulation D promulgated under the Securities Act.
In May 1995, the Company granted warrants to purchase a total of
325,000 shares of Common Stock to Messrs. Mayer, Sullivan and Pritzker, who are
executive officers of the Company and/or its subsidiaries. Such warrants were
issued pursuant to each such officer's respective employment agreement and are
exercisable for $1.00 per share, at varying vesting periods. The grant of such
warrants was exempt from registration pursuant to Section 4(2) of the Securities
Act.
In connection with a private placement of the Company's securities,
the Company issued an additional 1,500,000 shares of Common Stock, for $4.00 per
share, to 104 persons. The private placement closed in July 1995. These sales of
Common Stock were exempt from registration pursuant to Rules 505 and 506 of
Regulation D promulgated under the Securities Act.
In July 1995, the Company issued 1,000,000 shares of its Series A
Preference Shares to Eff-Shipping, at an agreed upon value of $4.00 per share,
as partial consideration for the Company's acquisition of the Commodore Assets.
The sale of such Common Stock was exempt from registration pursuant to Section
4(2) of the Securities Act.
On July 14, 1995, the Company issued warrants to purchase 250,000
shares of Common Stock to each of Jeffrey I. Binder and Rosalie Binder jointly,
and to JeMJ Financial Services, Inc., a company controlled by Jeffrey I. Binder,
in exchange for services provided by each of them in connection with the
Commodore Acquisition. The warrants are exercisable at $6.00 per share until
July 14, 2002. The grant of such warrants was exempt from registration pursuant
to Section 4(2) of the Securities Act.
On October 30, 1995, the Company issued warrants to purchase 250,000 shares
of Common Stock to Seawise, the Company's partner in Sea-Comm, pursuant to the
terms of the Agreement. The warrants are exercisable at $6.00 per share until
October 30, 2000. The grant of such warrants was exempt from registration
pursuant to Section 4(2) of the Securities Act.
ITEM 16. LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT PAGE NO.
------- ---------------------- --------
<S> <C> <C>
1a Form of Underwriting Agreement. ................... ___
3a Memorandum of Association of the Company,
as amended*........................................ ___
3b Bye-Laws*.......................................... ___
4a Form of Common Stock Certificate*.................. ___
4b Series A Preference Share Terms*................... ___
4c Form of Warrant Certificate*....................... ___
4d Form of Warrant Agent Agreement.................... ___
4e Form of Underwriter's Warrant Agreement............ ___
5a Opinion of Broad and Cassel**...................... ___
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT PAGE NO.
------- ---------------------- --------
<S> <C> <C>
10a Employment Agreement dated May 3, 1995
between the Company and Jeffrey I. Binder*......... ___
10b Employment Agreement dated May 3, 1995
between New Commodore and Frederick A. Mayer,
as amended*........................................ ___
10c Employment Agreement dated May 3, 1995
between New Commodore and James R. Sullivan,
as amended*........................................ ___
10d Employment Agreement dated May 3, 1995
between New Commodore and Alan Pritzker,
as amended*........................................ ___
10e USD$ 24,000,000 Loan Facility Agreement,
dated July 14, 1995 among the Lender,
Almira, Azure, New Commodore and the
Company*........................................... ___
10f Agreement for the Sale and Purchase of
the Business and Assets of Old Commodore
dated April 29, 1995 between Old
Commodore, EffJohn and New Commodore*.............. ___
10g Master Agreement dated May 28, 1995
between EffJohn, BCS, ACS, Old
Commodore, New Commodore and the
Company*........................................... ___
10h 1995 Stock Option Plan*............................ ___
10i Joint Venture Agreement dated October
30, 1995 between the Company, Seawise
and Sea-Comm*...................................... ___
10j Management Services Agreement dated July
5, 1995 between New Commodore and IMC.............. ___
10k Sublease for Office Space at 4000
Hollywood Boulevard dated June 30, 1995
between EffJohn and New Commodore.................. ___
10l Software Agreement between Reservations
Technology, Inc. and New Commodore................. ___
10m Sublease of computer equipment and
software between Old Commodore and New
Commodore (IBM Sublease)........................... ___
10n Assignment of Financing and Berthing
Agreement dated June 29, 1995 between
New Commodore and Old Commodore as
consented to by the Board of
Commissioners of the Port of New Orleans........... ___
10o Warrant Certificate for 250,000 Shares
of Common Stock of the Company dated
July 14, 1995 in favor of JeMJ Financial
Services, Inc...................................... ___
10p Warrant Certificate for 250,000 Shares
of Common Stock of the Company dated
July 14, 1995 in favor of Jeffrey and
Rosalie Binder..................................... ___
10q Warrant Certificate for 250,000 shares
of Common Stock of the Company dated
October 30, 1995 in favor of Seawise............... ___
10r First Priority Panamanian Mortgage on
the Enchanted Seas dated July 14, 1995
between Azure and the Lender....................... ___
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT PAGE NO.
------- ---------------------- --------
<S> <C> <C>
10s First Priority Panamanian Mortgage on
the Enchanted Isle dated July 14, 1995
between Almira and the Lender...................... ___
10t First Priority Charge over the shares of
Azure dated July 14, 1995 between the
Lender and New Commodore........................... ___
10u First Priority Charge over the shares of
Almira dated July 14, 1995 between the
Lender and New Commodore........................... ___
10v First Priority Tripartite Deed in
respect of the Enchanted Seas dated July
14, 1995 between the Azure, New
Commodore and the Lender........................... ___
10w First Priority Tripartite Deed in
respect of the Enchanted Isle dated July
14, 1995 between the Almira, New
Commodore and the Lender........................... ___
11 Computation of Earnings per share of
Common Stock, as amended........................... ___
21 Subsidiaries of the Company*....................... ___
23a Consent of Grant Thornton, LLP..................... ___
23b Consent of KPMG Peat Marwick, LLP.................. ___
23c Consent of Broad and Cassel**...................... ___
23d Consent of Richards, Francis and Francis**......... ___
24 Power of Attorney (included on signature
page)*............................................. ___
</TABLE>
____________________
*Previously filed
** To be filed by amendment
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; (iii) to
II-4
<PAGE>
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of Regulation S-X at the start of any delay
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements
and information are contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the Form
F-3.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-1 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Hollywood in the State of Florida on the 23 day of May, 1996.
COMMODORE HOLDINGS LIMITED
By:/s/ Jeffrey I. Binder, Chairman
----------------------------------
Jeffrey I. Binder, Chairman
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey I. Binder Chairman of the Board May 23, 1996
- ----------------------------------
Jeffrey I. Binder
/s/ Frederick A. Mayer* Vice-Chairman of the Board May 23, 1996
- ----------------------------------
Frederick A. Mayer (Principal Executive Officer)
/s/ James R. Sullivan* President May 23, 1996
- ----------------------------------
James R. Sullivan
/s/ Alan Pritzker* Vice President, Finance and May 23, 1996
- ----------------------------------
Alan Pritzker Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Arnold Adolphus Francis, Q.C.* Director May 23, 1996
- ----------------------------------
Arnold Adolphus Francis, Q.C.
/s/ A. Robert Miller* Director May 23, 1996
- ----------------------------------
A. Robert Miller
*By:/s/ Jeffrey I. Binder
------------------------------
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
COMMODORE HOLDINGS LIMITED
AMENDMENT NO. 1 TO
FORM S-1
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Page
- ----------- ----
<S> <C> <C>
1a Form of Underwriting Agreement................................................................. ___
4d Form of Warrant Agent Agreement................................................................ ___
4e Form of Underwriter's Warrant Agreement....................................................... ___
10j Management Services Agreement dated July 5, 1995 between New Commodore and IMC
10k Sublease for Office Space at 4000 Hollywood Boulevard dated June 30,
1995 between EffJohn and New Commodore......................................................... ___
10l Software Agreement between Reservations Technology, Inc. and New Commodore..................... ___
10m Sublease of computer equipment and software between Old Commodore and New
Commodore (IBM Sublease)....................................................................... ___
10n Assignment of Financing and Berthing Agreement dated June 29, 1995
between New Commodore and Old Commodore as consented to by the
Board of Commissioners of the Port of New Orleans.............................................. ___
10o Warrant Certificate for 250,000 Shares of Common Stock of the Company
dated July 14, 1995 in favor of JeMJ Financial Services, Inc.................................. ___
10p Warrant Certificate for 250,000 Shares of Common Stock of the
Company dated July 14, 1995 in favor of Jeffrey and Rosalie Binder............................. ___
10q Warrant Certificate for 250,000 shares of Common Stock of the Company
dated October 30, 1995 in favor of Seawise..................................................... ___
10r First Priority Panamanian Mortgage on the Enchanted Seas dated
July 14, 1995 between Azure and the Lender .................................................... ___
10s First Priority Panamanian Mortgage on the Enchanted Isle dated July 14,
1995 between Almira and the Lender ............................................................ ___
10t First Priority Charge over the shares of Azure dated July 14, 1995
between the Lender and New Commodore........................................................... ___
10u First Priority Charge over the shares of Almira dated July 14, 1995
between the Lender and New Commodore........................................................... ___
10v First Priority Tripartite Deed in respect of the Enchanted Seas dates
July 14, 1995 between the Azure, New Commodore and the Lender.................................. ___
10w First Priority Tripartite Deed in respect of the Enchanted Isle dated
July 14, 1995 between the Almira, New Commodore and the Lender................................. ___
11 Computation of Earnings per share of Common Stock..............................................
23a Consent of Grant Thornton, LLP................................................................. ___
23b Consent of KPMG Peat Marwick, LLP.............................................................. ___
27 Selected Financial Data Schedule............................................................... ___
</TABLE>
<PAGE>
EXHIBIT 1A
COMMODORE HOLDING LIMITED
UNDERWRITING AGREEMENT
----------------------
New York, New York
___________, 1995
First Hanover Securities, Inc.
100 Wall Street
New York, N.Y. 10005
Dear Sirs:
The undersigned, Commodore Holdings Limited, a Bermuda corporation
(the "Company"), hereby confirms its agreement with First Hanover Securities,
Inc. (being referred to herein alternatively as "you" or the "Underwriter"), as
follows:
1. INTRODUCTION. Pursuant to this Underwriting Agreement
------------
("Agreement"), (i) the Company proposes to issue and sell to you an aggregate to
500,000 shares (the "Company Firm share") of the common stock, par value $.01
per share, of the Company (the "Common Stock") and 1,000,000 shares Redeemable
Common Stock Purchase Warrants (the "Redeemable Warrants"), each exercisable to
purchase one half share of Common Stock, but only exercisable in pairs, at any
time commencing one year after the date on which the Registration Statement (as
defined in Section 2(a) hereof) shall have become, or declared, effective (the
"Effective Date"), and ending five years thereafter (the Company Firm Shares and
Redeemable Warrants are called the "Company Firm Securities"); and each of the
stockholders of the Company named in Schedule A hereto (the "Selling
Stockholders"), acting severally and not jointly, proposes to sell to you the
respective number of shares of Common Stock set forth opposite the Selling
Stockholders' names on Schedule A for an aggregate of 500,000 shares of Common
Stock (the "Selling Stockholder Shares; and together with the Company Firm
Shares, the "Firm Securities"). The Redeemable Warrant exercise price, subject
to adjustment as described in the agreement providing for the Redeemable
Warrants (the "Public Agreement"), shall be $6.00 per share. The Common Stock
and Redeemable Warrants will be sold in units each consisting of one share of
Common Stock Share and one Redeemable Warrant (the "Unit"). The Units will be
detachable and separately tradable at such time as the Underwriter determines in
its sole discretion.
<PAGE>
Commencing one year from the date of issuance, the Redeemable Warrants
are subject to redemption by the Company at $.05 per Redeemable Warrant, if the
closing bid price of the Common Stock exceeds $9.00 per share for twenty
consecutive trading days ending not more than 15 days prior to the date of the
redemption notice.
Upon your request, as provided in Section 3 of this Agreement, the
Company shall also issue and sell to you up to an additional 75,000 Units for
the purpose of covering over-allotments in the sale of the Firm Securities (the
"Over-allotment Option"). Such additional securities are hereinafter referred to
as the "Option Securities." The Firm Securities and the Option Securities are
hereinafter sometimes referred to as the "Securities." The Company also proposes
to issue and sell to you, pursuant to the terms of the warrant agreement, dated
______________, 1996 between you and the Company (the "Underwriter's Warrant
Agreement") warrants (the "Underwriter's Warrants") to purchase up to 50,000
Units. The Underwriter's Warrants shall be exercisable during the 4-year period
commencing one (1) year from the date of the Prospectus (as defined in Section
2(a) hereof) at a price of $6.90 per Unit, subject to adjustment in certain
events to protect against dilution. The Securities issuable upon exercise of the
Underwriter's Warrants are hereinafter sometimes referred to as the
"Underwriter's Securities." The Securities, the Underwriter's Warrants and the
Underwriter's Securities are more fully described in the Registration Statement
and the Prospectus referred to below.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLING
----------------------------------------------------------
SHAREHOLDERS.
- ------------
I. The Company represents and warrants to the Underwriter as of the date
hereof that:
a. The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Registration Statement"), and
an amendment or amendments thereto, on Form S-1 (No. 33-01270), including any
related preliminary prospectus (the "Preliminary Prospectus"), for the
registration of the Securities and the Underwriter's Securities, under the
Securities Act of 1933, as amended (the "Act"), which registration statement and
amendment or amendments have been prepared by the Company in conformity with the
requirements of the Act, and the rules and regulations (the "Regulations") of
the Commission promulgated under the Act. Before the Registration Statement
becomes effective, the Company will not file any amendment to such Registration
Statement to which you shall have reasonably objected after having been
furnished with a copy thereof. Except as the context may otherwise require, such
Registration Statement, as amended, on file with the Commission at the time the
Registration Statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein and all information deemed to be a part thereof as of
such time pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement," and the form of prospectus, in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations (or included in the Registration Statement, if no filing under Rule
424 is required), is hereinafter called the "Prospectus."
2
<PAGE>
b. On the Effective Date and at all times subsequent thereto up to
Closing Date I and Closing Date II, if any (as such terms are defined in Section
3(d) hereof), the Registration Statement and the Prospectus will comply in all
material respects with the applicable provisions of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The representation and warranty made in this Section 2(b)
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
c. This Agreement, the Underwriter's Warrant Agreement and the
Financial Advisory and Investment Banking Agreement (as defined in Section 5(s)
hereof), have been duly and validly authorized by the Company, and this
Agreement constitutes, and the Public Warrant Agreement, the Underwriter's
Warrant Agreement and the Financial Advisory and Investment Banking Agreement,
when executed and delivered pursuant to this Agreement, will (assuming due
execution by the Underwriter) each constitute a valid and binding agreement of
the Company, enforceable against the Company in accordance with its respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification, contribution or exculpation provision may be limited under
applicable Federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The Securities and the
Underwriter's Warrants to be issued and sold by the Company pursuant to this
Agreement, the Underwriter's Securities issuable upon exercise of the
Underwriter's Warrants and payment therefor, have been duly authorized and, when
issued and paid for, will be validly issued, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal liability by reason
of being such holders; the Securities, the Underwriter's Warrants and the
Underwriter's Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to be taken for
the authorization, issuance and sale of the Securities, the Underwriter's
Warrants and the Underwriter's Securities has been duly and validly taken. The
Underwriter's Warrants constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms, to issue and sell, upon exercise in
accordance with the terms thereof, the number and type of the Company's
securities called for thereby; except (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification, contribution or exculpation provision may be limited under
applicable Federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
3
<PAGE>
d. All issued and outstanding securities of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; the
issuances and sales of all such securities complied in all material respects
with applicable Federal and state securities laws; the holders thereof have no
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company.
e. Except as set forth in the Registration Statement and the
Prospectus, the Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, respectively, free and clear of
all liens, encumbrances, claims, security interests, defects and restrictions of
any material nature whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable.
f. There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding pending or to the knowledge of the Company
or the Company's subsidiaries (the "Subsidiaries") threatened against, or
involving the properties or business of the Company which if adversely
determined could reasonably be expected to materially and adversely affect the
financial position, or prospects, or business of the Company or its
Subsidiaries, except as referred to in the Prospectus.
g. All contracts and other documents required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement have been described in the Registration Statement or the
Prospectus or filed with the Commission as Exhibits to the Registration
Statement, as required.
h. The financial statements of the Company and the Subsidiaries,
together with the related notes, included in the Registration Statement and
Prospectus fairly present the financial position and the results of operations
of the Company, at the dates and for the periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved.
There has been no material adverse change in financial condition or results of
operations of the Company, or to the knowledge of the Company, any development
involving a prospective change in the condition or prospects of the Company,
financial or otherwise, since the date of the financial statements included in
the Prospectus, except as disclosed therein.
i. Grant Thornton LLP and KPMG Peat Marwick LLP, whose reports are
filed with the Commission as a part of the Registration Statement, are
independent accountants as required by the Act and the Regulations.
j. Except as otherwise set forth in the Prospectus, the Company does
not own, directly or indirectly, an interest in any corporation, partnership,
joint venture, trust or other business entity. The Company and each Subsidiary
is duly qualified and licensed and in
4
<PAGE>
good standing as a foreign corporation in each jurisdiction in which its
operations require such qualification or licensing, except where the failure to
be so qualified or licensed would not have a material adverse affect on the
Company. The Company and each Subsidiary has all requisite corporate power and
authority, and all necessary material authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies, to own or lease its properties and conduct its business as
described in the Prospectus. The Company and each Subsidiary is and has been
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates and permits and with all applicable Federal, state and
local laws, rules and regulations, including but not limited to laws and
regulations relating to environmental matters and employee health and safety
matters, except where non-compliance would not have a material adverse effect on
the Company or any Subsidiary, and none of the aforementioned authorizations,
approvals, orders, licenses, certificates or permits have been suspended or
revoked, nor to the knowledge of the Company are there any proceedings pending
or threatened which could result in a suspension or revocation thereof. The
Company has all requisite corporate power and authority to enter into this
Agreement, the Underwriter's Warrant Agreement and the Financial Advisory and
Investment Banking Agreement and to carry out the provisions and conditions
hereof and thereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained. No consent, authorization
or order of, and no filing with, any court, government agency or other body is
required for the issuance of the Securities and the Underwriter's Securities,
pursuant to this Agreement and the Underwriter's Warrant Agreement, and as
contemplated by the Prospectus, except with respect to applicable Federal and
state securities laws.
k. The outstanding debt, the property and the business of the
Company conforms in all material respects to the descriptions thereof contained
in the Registration Statement and Prospectus.
l. The Securities, the Underwriter's Warrants, the Underwriter's
Securities and any other securities issued or to be issued by the Company on or
before the Closing Dates (as defined in Section 3(d) hereof) described herein
conform, or will conform when issued, in all material respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
m. Except as set forth in the Prospectus, no material default exists
in the due performance and observance of any term, covenant or condition of any
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the property or
assets of the Company are subject which default would reasonably be expected to
have a materially adverse effect on the financial condition or business of the
Company.
n. The Company and the Subsidiaries are not in violation of any term
or provision of their respective Certificates of Incorporation or By-Laws.
Neither the execution
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and delivery of this Agreement, nor the issuance and sale of the shares of
Common Stock, the Redeemable Warrants, the Underwriter's Warrants and the
Underwriter's Securities, nor the consummation of any of the transactions
contemplated herein, nor the compliance by the Company with the terms and
provisions hereof has materially conflicted with or will materially conflict
with, or has resulted in or will result in a material breach of, any of the
terms and provisions of, or has constituted or will constitute a material
default under, or has resulted in or will result in the creation or imposition
of any lien, charge or encumbrance upon the property or assets of the Company or
its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company or Subsidiary is a party, or by which the
Company is or may be bound, or to which any of the property or assets of the
Company or any Subsidiary is subject; nor will such action result in any
material violation of the provisions of the Certificates of Incorporation or the
By-Laws of the Company or the Subsidiaries or any contract or agreement, or any
statute or any order, rule or regulation applicable to the Company or the
Subsidiaries or any other regulatory authority or other governmental body having
jurisdiction over the Company or the Subsidiaries.
o. Except as disclosed in the Prospectus, all taxes which are due
and payable from the Company or any Subsidiary have been paid in full, unless
being contested in good faith by the Company or any Subsidiary, and the Company
or any Subsidiary does not have any tax deficiency or claim outstanding,
proposed or assessed against it.
p. Subsequent to the respective dates as of which information is
given in the most recently circulated Preliminary Prospectus included as a part
of the Registration Statement, and except as may otherwise be indicated or
contemplated herein or therein, (i) the Company has not issued any securities,
(ii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock; (iii) incurred any material liability or
obligation, direct or contingent, for borrowed money; or (iv) entered into any
transaction other than in the ordinary course of business.
q. To the Company's knowledge, the Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus or part
thereof.
r. On the Effective Date, (i) the authorization of capital stock of
the Company is as set forth in the Registration Statement; (ii) not more than
1,006,979 shares of the Company's Series A Preference Shares, par value $.01 per
share, will be issued and outstanding, and (iii) not more than an aggregate of
4,931,933 shares of Common Stock shall be issued and outstanding excluding: (A)
the 500,000 shares of Common Stock issuable upon the exercise of the Redeemable
Warrants; (B) up to an additional 75,000 shares of Common Stock issuable upon
the exercise of the Over-allotment Option or the 37,500 shares issuable upon the
exercise of the Redeemable Warrants issuable upon the exercise of the Over-
allotment Option; (C) the 50,000 shares of Common Stock issuable upon exercise
of the Underwriter's Warrants or the
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<PAGE>
25,000 shares of Common Stock issuable upon exercise of the Redeemable Warrants
issuable upon the exercise of the Underwriters Warrant (which warrants are
identical to the Redeemable Warrants); (D) 825,000 shares of Common Stock
issuable upon exercise of warrants issued and outstanding as of February 12,
1996; and (E) up to 500,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1995 Stock Option Plan (the "Stock Option Plan").
Other than the shares of Common Stock already issued (within the meaning of the
immediately preceding sentence), the Securities, the Underwriter's Warrant and
the Underwriter's Securities to be offered in or in connection with the public
offering, no other shares of capital stock or securities convertible into
capital stock shall be outstanding or reserved for issuance at the completion of
the proposed public offering without the consent of the Underwriter.
s. Except for the registration rights granted under the
Underwriter's Warrant Agreement, to the Selling Stockholders named in the
Registration Statement or as disclosed in the Prospectus, no holders of any
securities of the Company or of any options, warrants or convertible or
exchangeable securities of the Company exercisable for or convertible or
exchangeable for securities of the Company have the right to include any
securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company.
t. Assuming that there will be two "market makers" for the Common
Stock, at least 300 beneficial owners of the Common Stock and a sufficient
"public float" of the Shares, and that the Company's registration of the Common
Stock pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act") becomes effective (all as contemplated by the requirements of the National
Association of Securities Dealers, Inc.), the Common Stock is eligible for
quotation on the Nasdaq Stock Market ("Nasdaq"). The Company has filed a
registration statement with the Commission pursuant to Section 12(g) of the
Exchange Act, and has used its best efforts to have the same declared effective
by the Commission on an accelerated basis on the Effective Date.
u. Except as described in the Prospectus, to the Company's
knowledge, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, commitments, payments or issuances of securities
with respect to the Company that may affect the Underwriter's compensation, as
determined by the National Association of Securities Dealers, Inc. ("NASD").
v. Neither the Company, nor, to the knowledge of the Company, any of
its employees or officers or directors, agents or any other person acting on
behalf of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or agent
of a customer, supplier, or official or governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed
7
<PAGE>
transaction) which (i) could reasonably be expected to subject the Company to
any material damage or penalty in any civil, criminal or governmental litigation
or proceeding, (ii) if not given in the past, could reasonably be expected to
have had a materially adverse effect on the assets, business or operations of
the Company as reflected in any of the financial statements contained in the
Prospectus, or (iii) if not continued in the future, could reasonably be
expected to materially adversely affect the assets, business, operations or
prospects of the Company.
w. The Company owns or possesses the requisite licenses or rights to
use all trademarks, service marks, service names, trade names, patents and
patent applications, copyrights, methods, protocols, techniques, technologies,
procedures and other rights (collec tively the "Intangibles") described as owned
or used by the Company in the Registration Statement. To the Company's
knowledge, there is no claim, action or proceeding by any person, pending or
threatened, which pertains to or challenges the rights of the Company with
respect to any Intangibles used in the conduct of the business of the Company,
except as described in the Prospectus. To the Company's knowledge, current
products, services and processes of the Company and the Subsidiaries do not
infringe on any Intangibles held by any third party.
x. Except as set forth in the Registration Statement, the Company is
not under any obligation to pay royalties or fees of any kind whatsoever to any
third party with respect to Intangibles it has developed, uses, employs or
intends to use or employ.
y. The Company has generally enjoyed satisfactory employer/employee
relationships with its employees and is in material compliance in all material
respects with all Federal, state and local laws and regulations respecting the
employment of their respective employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. To the Company's
knowledge, there are no material pending or threatened investigations involving
the Company by the U.S. Department of Labor or corresponding foreign agency, or
any other governmental agency responsible for the enforcement of such Federal,
state or local laws and regulations. To the Company's knowledge, there is no
unfair labor practice charge or complaint against the Company pending before the
National Labor Relations Board or corresponding foreign agency or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company, or any predecessor entity, and none has occurred. No
representation question exists respecting the employees of the Company. No
collective bargaining agreement or modification thereof is currently in effect
or being negotiated by the Company and its employees. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company.
aa. Neither the Company, nor, to the Company's knowledge, any of its
officers or directors or any of its employees or stockholders, have taken,
directly or indirectly, any action designed to or which has constituted or which
could reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
8
<PAGE>
ab. The Company does not maintain nor has it maintained, sponsored or
contributed to any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan" or a "multiemployer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37), respectively of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans"),
except for the Stock Option Plan described in the Prospectus. The Company
neither presently maintains or contributes or at any time in the past,
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA. The Company has never completely or partially withdrawn from a
"multiemployer plan."
ac. Except as set forth in the Prospectus under "MANAGEMENT" or
"CERTAIN TRANSACTIONS," the Company is not a party to any agreement with any
officer, director or stockholder of the Company or any subsidiary or any
affiliate or associate of any such person or entity which is required to be
disclosed in the Prospectus pursuant to Regulation SK. Except as set forth in
the Prospectus, to the Company's knowledge, no officer, director or stockholder
of the Company or any "affiliate" or "associate" (as these terms are defined in
Rule 405 promulgated under the Regulations) of any such person or entity or the
Company or the Subsidiaries, has or has had, either directly or indirectly, (i)
an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficial interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected.
ad. The minute books of the Company have been made available to
counsel to the Underwriter and contain all available minutes of meetings and
actions by unanimous consent of directors and stockholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
ae. The statements in the Prospectus under "RISK FACTORS,"
"BUSINESS," "CERTAIN TRANSACTIONS," "MANAGEMENT" and "DESCRIPTION OF
SECURITIES," insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions are correct in all
material aspects.
II. Each of the Selling Stockholders, severally and not jointly,
represents and warrants to, the Underwriters as of the date hereof, as follows:
(a) The execution and delivery of this Agreement and the consummation
of the transactions herein contemplated will not result in a breach by such
Selling Stockholder of, or constitute a default by such Selling Stockholder
under, any material indenture, deed or trust, contract or other agreement or
instrument or any decree, judgment or order to which such Selling Stockholder is
a party or by which such Selling Stockholder may be bound.
(b) Such Selling Stockholder has and will have, at Closing Date I,
good and marketable title to the Selling Stockholder Shares to be sold by such
Selling Stockholder hereunder, free and clear of any pledge, lien, security
interest, encumbrance, claim or equity,
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<PAGE>
created by or arising through the Selling Stockholder other then pursuant to
this Agreement; such Selling Stockholder has full right, power and authority to
sell, transfer and deliver the Selling Stockholder Shares to be sold by such
Selling Stockholder hereunder; and upon delivery of the Selling Stockholders
Shares to be sold by such Selling Stockholder hereunder and payment of the
purchase price thereof as herein contemplated, the Underwriter will receive good
and marketable title to the Selling Stockholder Shares purchased by it from such
Selling Stockholder, free and clear of any pledge, lien, security interest,
encumbrance, claim or equity.
(c) Such Selling Stockholder has duly executed and delivered in the
form heretofore furnished to the Underwriters, a power of attorney and custody
agreement (the "Power of Attorney and Custody Agreement") with _____, as the
attorney-in-fact and the custodian (the "Attorney-in-Fact" and the "Custodian",
respectively); the Attorney-in-Fact is authorized to execute and deliver this
Agreement and the certificates referred to in Section 4(k) or that may be
required pursuant to Section 4(h) on behalf of such Selling Stockholder, to
authorize the delivery of the Selling Stockholder Shares to be sold by such
Selling Stockholder hereunder, to duly endorse (in blank or otherwise) the
certificate or certificates representing such Selling Stockholder Shares, to
accept payment therefor, and otherwise to act on behalf of such payment
therefor, and otherwise to act on behalf of such Seller in connection with this
Agreement.
(d) All authorizations, approvals and consents necessary for the
execution and delivery by such Selling Stockholder of the Power of Attorney and
Custody Agreement, the execution and delivery by or on behalf of such Selling
Stockholder of this Agreement, and the sale and delivery of the Selling
Stockholder Shares to be sold by such Selling Stockholder hereunder and
thereunder (other than, at the time of the execution hereof, the issuance of the
order of the Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under the state
securities laws), have been obtained and are in full force and effect; and such
Selling Stockholder has the full right, power and authority to enter into this
Agreement and the Power of Attorney and Custody Agreement to sell, transfer and
deliver the Selling Stockholder Shares to be sold by such Selling Stockholder
hereunder.
(e) For a period of ___ days from the date hereof, such Selling
Stockholder will not, without the prior written consent of the Underwriter,
directly or indirectly, offer to sell, grant any option for the sale of, or
otherwise dispose of, any Common Stock of the Company or any securities
convertible into Common stock owned by such Selling Stockholder or with respect
to which such Selling Stockholder has the power of disposition, other than to
the Underwriter pursuant to this Agreement.
(f) Such Selling Stockholder has not taken, and will not take,
directly or indirectly any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security or the Company to facilitate the sale
or exercise of the Shares.
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<PAGE>
(g) Certificates in negotiable form for all Selling Stockholder
Shares to be sold by such Selling Stockholder hereunder have been placed in
custody with the Custodian by or for the benefit of such Selling Stockholder for
the purposes or effecting delivery by such Selling Stockholder hereunder.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND UNDERWRITER'S
---------------------------------------------------------------
WARRANTS.
- --------
a. On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Under writer 500,000 shares of Common Stock and 1,000,000
Redeemable Warrants, the Selling Stockholders, severally and not jointly, agree
to sell to the Underwriter an aggregate of 500,000 shares of Common Stock and
the Underwriter agrees to purchase from the Company and the Selling Stockholders
severally, such Securities on a firm commitment basis at a purchase price of
$4.05 per share of Common Stock and $.09 per Redeemable Warrant, to be sold by
the Underwriter at an initial public offering price of $4.60 per Unit.
b. In addition, upon not less than two (2) days' notice from
the Underwriter to the Company, for a period of forty-five (45) days from the
date of the Prospectus, the Company agrees to sell to the Underwriter at a
purchase price of $4.14 all or any part of the Option Securities, to be sold by
the Underwriter hereunder at an initial public offering price of $4.60 per Unit.
Delivery of the Option Securities shall be made concurrently with tender of
payment therefor. Option Securities may be purchased by the Underwriter only for
the purpose of covering over-allotments in the sale of the Firm Securities, and
the Underwriter shall have no obligation to make any over-allotments. No Option
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
c. On Closing Date I (defined below in Section 3(d)), the
Company shall issue and sell to the Underwriter the Underwriter's Warrants,
which warrants shall entitle the holder thereof to purchase up to 50,000 Units.
The total purchase price of the Underwriter's Warrants shall be $10. The
Underwriter's Warrants shall be exercisable in whole or in part for up to an
additional 50,000 Units for a period of four (4) years commencing one (1) year
from the date of the Prospectus at a price of $6.40 per share (150% of the
initial public offering price of the Units). The Underwriter's Warrant Agreement
and form of Underwriter's Warrant Certificate shall be substantially in the form
filed as Exhibit __ to the Registration Statement.
d. Payment for the Underwriter's Warrant shall be made on
Closing Date I. Payment for the Firm Securities and the Option Securities shall
be made on each of Closing Date I and Closing Date II, respectively, at the
Underwriter's election by certified or bank cashier's checks in New York
Clearing House funds, payable to the order of the Company and the Selling
Stockholders in appropriate amounts at the offices of the Underwriter, or at
such other place as agreed upon by the Underwriter and the Company or by wire or
transfer, upon delivery of certificates (in form and substance reasonably
satisfactory to the Underwriter)
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<PAGE>
representing the Securities or by confirmation of electronic transfer of the
Securities to the Underwriter for the account of the Underwriter. Delivery and
payment for the Firm Securities shall be made at 10:00 A.M. New York time, on or
before the fifth business day following the public offering or at such earlier
time as the Underwriter shall determine, or at such other time as shall be
agreed upon by the Underwriter and the Company. The hour and date of delivery
and payment for the Firm Securities are called "Closing Date I." The Firm
Securities shall be registered in such name or names and in such authorized
denominations as the Underwriter may request in writing at least two (2) full
business days prior to Closing Date I. The Company will permit the Underwriter
to examine and package any certificates representing the Firm Securities for
delivery, at least one (1) full business day prior to Closing Date I. Delivery
for each of the Option Securities as provided above shall be made within the two
(2) business day period after notice of exercise to the Company, and against
payment therefor, as provided above. The hour and date of such delivery and
payment made subsequent to Closing Date I for Option Securities is referred to
as "Closing Date II." The Option Securities shall be registered in such name or
names and in such denominations as the Underwriter may request in writing at the
time of exercise of the Over-allotment Option.
e. The Company shall not be obligated to sell or deliver any
Firm Securities except upon tender of payment by the Underwriter for all the
Firm Securities.
4. PUBLIC OFFERING. The Underwriter is to make a public offering
---------------
of the Firm Securities and such of the Option Securities as it may determine.
The Securities are to be initially offered to the public at the offering price
set forth on the cover page of the Prospectus (such price being hereinafter
called the "Public Offering Price"). The Underwriter may, at its own expense,
enter into one or more agreements as the Underwriter, in its sole discretion,
deems advisable, with one or more broker-dealers who shall act as dealers or co-
underwriters in connection with such public offering.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees that
------------------------
it will:
a. Use its best efforts to cause the Registration Statement to
become effective and will notify the Underwriter immediately, and confirm the
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto becomes effective, (ii) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceeding for
that purpose, (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Securities and the
Underwriter's Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, and (iv) of
the receipt of any comments from the Commission. If the Commission or any state
securities commission shall enter a stop order or suspend such qualification at
any time, the Company will make every reasonable effort to obtain promptly the
lifting of such order.
b. File the Prospectus (in form and substance reasonably
satisfactory
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<PAGE>
to the Underwriter) or transmit the Prospectus by a means reasonably calculated
to result in filing with the Commission in accordance with Rule 424, if the
Prospectus is required to be so filed.
c. During the time when a prospectus is required to be
delivered under the Act, use all its reasonable best efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Regulations, as from time to time in force, so far
as necessary to permit the continuance of sales of or dealings in the Securities
and the Underwriter's Securities in accordance with the provisions hereof and
the Prospectus. If at any time when a prospectus relating to the Securities or
the Underwriter's Securities is required to be delivered under the Act, any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Underwriter, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act.
d. Deliver to the Underwriter, without charge, such number of
copies of each Preliminary Prospectus and the Prospectus as the Underwriter may
reasonably request and, as soon as the Registration Statement or any amendment
or supplement thereto becomes effective, deliver to the Underwriter two (2)
signed copies of the Registration Statement, including exhibits, and all post-
effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and signed copies of all consents of certified
experts.
e. Endeavor in good faith, in cooperation with the Underwriter,
and Gersten, Savage, Kaplowitz & Curtin at or prior to the time the Registration
Statement becomes effective, to qualify the Securities and the Underwriter's
Securities for offering and sale under the securities laws of such jurisdictions
as the Underwriter may reasonably designate, provided that no such qualification
shall be required in any jurisdiction where, as a result thereof, the Company
would be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Underwriter agrees
that such action is not at the time necessary or advisable, use its reasonable
best efforts to file and make such statements or reports at such times as are or
may reasonably be required by the laws of such jurisdiction.
f. Make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Act) covering a period of at least twelve
(12) consecutive months beginning after the Effective Date.
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<PAGE>
g. For a period of five (5) years from the Effective Date,
furnish to the Underwriter copies of such financial statements and other
periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities, and promptly furnish to the
Underwriter (i) a copy of each periodic report the Company shall file with the
Commission, (ii) a copy of every press release and every news item and article
with respect to the Company, any Subsidiary or their respective affairs which
was released by the Company or any Subsidiary, (iii) a copy of each Form 8-K
prepared by the Company, and (iv) such additional documents and information with
respect to the Company, the Subsidiaries and their respective affairs or any
future subsidiaries or affiliates of the Company or the Subsidiaries as the
Underwriter may from time to time reasonably request.
h. Apply the net proceeds from the offering received by it in a
manner consistent in all material respects with the caption "USE OF PROCEEDS" in
the Prospectus.
i. Deliver to the Underwriter, prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and not file any such amendment or supplement to which
the Underwriter shall reasonably object, after being furnished such copy, in
writing with reasonable specificity as to the nature and extent of any
objection.
j. For a period of three (3) years from Closing Date I, provide
the Underwriter, upon its request, at the Company's sole expense, (i) with
access to daily consolidated financial transfer sheets relating to the Common
Stock and designate American Securities Transfer, Inc. as transfer agent for the
Company's securities or such other transfer agent mutually agreeable by the
Company and the Underwriter and (ii) to cause the Company's depository to fax a
"special security position report" to the Underwriter on a daily basis.
k. For a period of three (3) years after Closing Date I,
nominate and use its best efforts to engage a designee of the Underwriter, as a
nonvoting advisor to the Company's Board of Directors (the "Advisor") or in lieu
thereof to designate an individual for election as a director, in which case the
Company shall use its best efforts to have such individual elected as a
director. The designee may be a director, officer, partner, employee or
affiliate of the Underwriter and the Underwriter shall designate such person in
writing to the Board. In the event the Underwriter shall not have designated
such individual at the time of any meeting of the Board or such person is
unavailable to serve, the Company shall notify the Underwriter of each meeting
of the Board. An individual, if any, designated by the Underwriter shall receive
all notices and other correspondence and communications sent by the Company to
members of the Board. Such Advisor or director, as the case may be, shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings including, but not limited to, food, lodging, and transportation.
In addition, such Advisor or Director shall be entitled to the same compensation
as the Company gives to other non-employee directors for acting in such
capacity. The Company further agrees that, during said three (3) year period, it
shall give the Advisor or Directors, as the case may be, the same notice of any
meeting of the Company's Board of Directors as it affords its other directors.
Further, during such three (3)
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<PAGE>
year period, the Company shall give notice to the Underwriter with respect to
any proposed acquisitions, mergers, reorganizations or other similar
transactions.
The Company agrees to indemnify and hold the Underwriter and such
Advisor harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of the Advisor at any such meeting described herein. In the event the Company
maintains a liability insurance policy affording coverage for the acts of its
officers and directors, it agrees, if possible to include the Advisor as an
insured under such policy.
l. Until the sooner of (i) seven (7) years from the date
hereof, or (ii) the sale to the public of the Underwriter's Securities, not take
any action or actions which are in the Company's direct control which may
prevent or disqualify the Company's use of Form SB-2 (or another appropriate
form) for the registration under the Act of the Underwriter's Securities and the
shares of Common Stock underlying the Redeemable Warrants.
m. For a period of five (5) years from the Effective Date, use
its best efforts to maintain the quotation by Nasdaq of the Securities.
n. Supply the Underwriter with two (2), and Gersten, Savage,
Kaplowitz & Curtin, counsel to the Underwriter, with three (3) bound volumes of
the underwriting materials within a reasonable time after the latest Closing
Date.
o. For a period of two (2) years from the Effective Date, not
issue any other shares of Common Stock or Preferred Stock or securities
convertible into or exercisable for Common Stock or Preferred Stock without the
prior written consent of the Underwriter, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the Company may issue
securities (A) upon (i) the exercise of any warrants or options outstanding on
the date hereof pursuant to the terms thereof, and (ii) the exercise of the
Underwriter's Warrant, and (B) pursuant to the Stock Option Plan described in
the Prospectus or subsequently adopted.
p. So long as the Securities or the Underwriter's Securities
are registered under the Exchange Act, hold an annual meeting of stockholders
for the election of directors within 180 days after the end of each of the
Company's fiscal years and, within 150 days after the end of each of the
Company's fiscal years, provide the Company's stockholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements shall be those required by
Rule 14a-3 under the Exchange Act and shall be included in an annual report
pursuant to the requirements of such Rule.
q. Engage a financial public relations firm reasonably
satisfactory to the Underwriter as soon as possible after Closing Date I, and
continuously engage such firm, or an acceptable substitute firm for at least the
period ending twelve (12) months after Closing Date I.
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r. Enter into the Underwriter's Warrant Agreement and the
Financial Advisory and Investment Banking Agreement (the "Consulting Agreement")
in substantially the form filed as Exhibits 4d and 10y, respectively, to the
Registration Statement.
s. As soon as possible after Closing Date I, take all necessary
and appropriate actions to be included in Standard and Poor's Corporation
Descriptions or other equivalent securities manual and to maintain its listing
therein for a period of five (5) years from the Effective Date.
t. Cause all of the Company's stockholders, to enter into
written agreements (the "Lock-up Agreements") that, for a period of two years
from the Effective Date, they will not, without the consent of the Underwriter,
(i) publicly sell any securities of the Company owned directly or beneficially
by them (as defined in the Exchange Act); or (ii) otherwise sell, or transfer
such securities unless the transferee agrees in writing to be bound by an
identical lock-up.
u. Use its best efforts to qualify, by the Effective Date, the
Units, Common Stock and Redeemable Warrants for listing on the NASDAQ Small Cap
System and Boston Stock Exchange (the "BSE") or another regional exchange
acceptable to you, or in the alternative the NASDAQ National Market System.
v. For a period of two years from the Effective Date, the
Company shall not issue any of its securities in any offering pursuant to
Regulation S under the 1933 Act, without the prior written consent of the
Underwriter, which consent shall not be unreasonably withheld.
w. (i) Grant to the Underwriter a preferential right on the
terms and subject to the conditions set forth in Sections 5(u) and 5(p), for a
period of two (2) years from the Effective Date, to purchase for its account, or
to sell for the account of the Company or its present affiliates or subsidiaries
or any of its stockholders listed in the Prospectus under the caption "PRINCIPAL
STOCKHOLDERS" (the "Principal Stockholders"), any securities of the Company, on
terms not more favorable to the Company or such present or future subsidiary or
affiliate or the Principal Stockholders than they can secure elsewhere, to
purchase or sell any such securities. The right of first refusal shall not be
applicable to any offering of more than $5,000,000. If the Underwriter fails to
notify the Company in writing of their intention to act as underwriter or
placement agent or otherwise participate or introduces a third party to
participate in such offering within fifteen (15) days after receipt of a notice
containing such proposal, then the Underwriter shall have no further claim or
right with respect to the proposal contained in such notice. If, thereafter,
such proposal is materially modified, the Company, and each present or future
affiliate or subsidiary or its Principal Stockholders shall in all respects have
the same obligations and adopt the same procedures with respect to such proposal
as are provided hereinabove with respect to the original proposal; (ii) If the
Underwriter acts as underwriters or placement agents with respect to such
offering or introduce a third party (other than an underwriter) which
participates in such offering, then the Underwriter shall receive, as
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compensation for services rendered, ten (10%) percent of the aggregate
consideration received by the Company through the Underwriter or the party
introduced by the Underwriter and warrant to purchase an amount of securities
equal to ten (10%) percent of the aggregate consideration received by the
Company through the Underwriter or the party introduced by the Underwriter and
warrant to purchase an amount of securities equal to ten (10%) percent of the
securities sold by the Company in such offering through the Underwriter or the
party introduced by the Underwriter at an exercise price per security equal to
the offering price of such securities. If the Underwriter introduce another
underwriter who acts as underwriter with respect to such offering, then the
Underwriter shall be entitled to receive two and one-half (2 1/2%) percent of
the aggregate consideration received by the Company through such underwriter and
warrant to purchase an amount of securities equal to two and one-half (2 1/2%)
percent of the securities sold by the Company in such offering through such
underwriter; (iii) If the Underwriter is offered the right of first refusal and
agree to perform such functions, but fail to perform, the Underwriter will not
be entitled to any such compensation, and waive their right of first refusal
with respect to future offerings unless such failure to perform is caused by the
Company; (iv) If the Underwriter does not perform any of the functions set forth
in (ii) above and (iii) does not apply to such transaction, the Underwriter
shall be entitled to receive an aggregate of two and one-half (2 1/2%) percent
of the aggregate consideration received by the Company and warrants to purchase
an amount of securities equal to two and one-half (2 1/2%) percent of the
securities sold by the Company in such offering at an exercise price per
security equal to the offering price of such securities.
x. Designate the Underwriter as the Company's exclusive Warrant
Solicitation Agents in the event of any solicitation of the exercise of the
Redeemable Warrants, in connection with a redemption of the Redeemable Warrants
or otherwise, and shall pay to the Underwriter a Warrant Solicitation fee of
five (5%) percent of the exercise price of all solicited Redeemable Warrants,
subject to the rules and regulations of the NASD with regard to such fees.
y. Neither the Company nor any representative of the Company
has made or shall make any written or oral representation in connection with the
Offering and sale of the Securities or the Underwriters' Warrant which is not
contained in the Prospectus, which is otherwise inconsistent with or in
contravention of anything contained in the Prospectus, or which shall constitute
a violation of the Act, the Rules and Regulations, the Exchange Act or the rules
and regulations promulgated under the Exchange Act.
z. For so long as any Redeemable Warrant is outstanding, the
Company shall, at its own expense: (i) use its reasonable best efforts to cause
post-effective amendments to the Registration Statement, or new registration
statements relating to the Redeemable Warrants and the Common Stock underlying
the Redeemable Warrants to become effective in compliance with the Act and
without any lapse of time between the effectiveness of the Registration
Statement and of any such post-effective amendment or new registration
statement; provided, however, that the Company shall have no obligation to
maintain the effectiveness of such Registration Statement or file a new
Registration Statement, or to keep
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available a prospectus at any time at which such registration or prospectus is
not then required; (ii) cause a copy of each Prospectus, as then amended, to be
delivered to each holder of record of a Redeemable Warrant; (iii) furnish to the
Underwriters and dealers as many copies of each such Prospectus as the
Underwriters or dealers may reasonably request; and (iv) maintain the "blue sky"
qualification or registration of the Redeemable Warrants and the Common Stock
underlying the Redeemable Warrants, or have a currently available exemption
therefrom, in each jurisdiction in which the Securities were so qualified or
registered for purposes of the Offering.
aa. The Company shall engage Gersten, Savage, Kaplowitz & Curtin
to provide the Underwriter, at the Closing and quarterly thereafter, until such
time as the Common Stock is listed on the New York Stock Exchange or the
American Stock Exchange or quoted on the Nasdaq National Market, with an opinion
setting forth those states in which the Common Stock may be traded in non-issuer
transactions under the blue sky laws of the 50 states. The Company shall pay
such counsel a one-time fee of $5,000 at the Closing for such opinions.
6. PAYMENT OF EXPENSES.
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a. The Company hereby agrees to pay all expenses (other than
fees of counsel to the Underwriter) in connection with the offering, including
but not limited to, (i) the preparation, printing, filing and mailing (including
the payment of postage and overnight delivery with respect to such mailing) of
the Registration Statement and the Prospectus and related documents, including
the cost of all copies thereof and of the Preliminary Prospectus and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Under writer in quantities as hereinabove stated, (ii) the printing, engraving,
issuance and delivery of the shares of Common Stock, the Redeemable Warrants,
and the Underwriter's Warrants, (iii) the qualification of the Securities, the
Underwriter's Warrants and the Underwriter's Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," and "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, and the fees and disbursements of counsel
for the Underwriter relating to Blue Sky matters (all of which fees under this
item (iii) shall be payable by the Company in the sum of $35,000 of which
$10,000 has previously been paid), (iv) advertising costs and expenses including
but not limited to the reasonable costs and expenses in connection with the
"road show," information meetings and presentations, bound volumes and
"tombstones" in the Wall Street Journal, New York Times, and Washington Post and
prospectus memorabilia, altogether in an amount not to exceed $15,000, (v) costs
and expenses in connection with due diligence investigations, including but not
limited to the reasonable fees of any independent counsel or consultant
retained, phone calls relating to due diligence investigations, and all
reasonable travel and lodging expenses incurred by you and/or counsel to the
Underwriter in connection with visits to, and examination of, the Company's
premises, (vi) fees and expenses of the transfer agent and warrant agent, (vii)
application and listing fees for inclusion in Moody's OTC Manual or Standard and
Poor's Corporation Descriptions or other equivalent securities manuals, and
(viii) the fees payable to the NASD and Nasdaq. The $35,000 payment to counsel
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for the Underwriter shall not include fees of special counsel if same is
required to be incurred in a merit review state which may require local counsel.
In this connection, Blue Sky applications shall be made in such states and
jurisdictions as shall be requested by the Underwriter. Payments due shall be
made on each Closing Date I.
b. The Company shall pay to the Underwriter an aggregate non-
accountable expense allowance, in addition to the expenses payable pursuant to
Section 6(a), equal to three (3%) percent of the gross proceeds received by the
Company from the sale of the Securities. In the event that the Underwriter
terminates the Offering or is unable to consummate the Offering within nine (9)
months of the date hereof, the advances toward the non-accountable expense
allowance shall become accountable and shall be returnable to the Company to the
extent the Underwriter's out-of-pocket expenses are less than the amount
advanced to the Underwriter, so that the Underwriter is reimbursed only for its
actual accountable out-of-pocket expenses.
7. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
---------------------------------------
Underwriter to purchase and pay for the Securities, as provided herein, shall be
subject to the continuing accuracy in all material aspects of the
representations and warranties of the Company as of the date hereof and as of
each of the Closing Dates, to the accuracy in all material respects of the
statements of officers of the Company made pursuant to the provisions hereof and
to the performance by the Company of its obligations hereunder in all material
respects and to the following conditions:
a. The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you, and, at each of the
Closing Dates, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Gersten, Savage, Kaplowitz &
Curtin, counsel to the Underwriter.
b. At Closing Date I, the Underwriter shall have received the
favorable opinion of Broad and Cassel, counsel to the Company, dated Closing
Date I, addressed to the Underwriter and in form and substance reasonably
satisfactory to Gersten, Savage, Kaplowitz & Curtin, counsel to the Underwriter,
in substantially the form attached as Exhibit A hereto.
c. On or prior to each of Closing Date I and Closing Date II,
counsel for the Underwriter shall have been furnished such documents,
certificates and opinions as it may reasonably require for the purpose of
enabling it to review or pass upon the matters referred to in Section 7(b), or
in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
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d. Prior to each of Closing Date I and Closing Date II, (i)
there shall have been no material adverse change, or development involving a
material adverse prospective change, in the condition or prospects of the
business activities, financial or otherwise, of the Company and its Subsidiaries
taken as a whole from the latest dates as of which such condition is set forth
in the Registration Statement and Prospectus; (ii) there shall have been no
transac tion, not in the ordinary course of business, entered into by the
Company or the Subsidiaries from the latest date as of which their respective
financial conditions are set forth in the Registration Statement and Prospectus
which is materially adverse to the Company; (iii) the Company or the
Subsidiaries shall not be in default under any provision of any instrument
relating to any outstanding indebtedness which default would have a material
adverse effect on the Company; (iv) no amount of the assets of the Company or
the Subsidiaries shall have been pledged or mortgaged, except as set forth in
the Registration Statement and Prospectus; (v) no action, suit or proceeding, at
law or in equity, shall be pending or threatened against the Company or the
Subsidiaries before or by any court or Federal or state commission, board or
other administrative agency wherein an unfavorable result, decision, ruling or
finding would adversely affect the business, prospects, operations, or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus and except where such a result is deemed remote by
counsel to the Company with respect to such action or proceeding; (vi) no stop
order shall have been issued under the Act and no proceedings with respect
thereto shall have been initiated or threatened by the Commission; (vii) the
market for securities in general or political, financial or economic conditions
shall not have materially adversely changed from those reasonably foreseeable as
of the date hereof as to render it impracticable in the Underwriter's reasonable
judgment to make a public offering of the Securities, and there has not been a
material adverse change in market levels for securities in general or financial
or economic conditions which render it inadvisable in the Underwriter's judgment
to proceed; and (viii) there shall not have commenced or occurred any war or Act
of God or other calamity which would have a material adverse effect on, or
result in a material loss to, the Company.
The Company agrees and acknowledges that the Underwriter shall be the
sole determining party as to the presence of any such conditions, events,
occurrences and provisions set forth in this Section 7(d).
e. At each of Closing Date I and Closing Date II, the
Underwriter shall have received a certificate of the Company signed by the
President and the Secretary of the Company, dated Closing Date I and Closing
Date II, respectively, to the effect that the conditions set forth in section
7(d)(i) through (vi) above have been satisfied and that, as of Closing Date I
and Closing Date II, respectively, the representations and warranties of the
Company set forth in Section 2 hereof are true and correct.
f. By the Effective Date, the Underwriter shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
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g. At the time this Agreement is executed, and at each of
Closing Date I and Closing Date II, the Underwriter shall have received a
letter, addressed to the Underwriter and in form and substance reasonably
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (3) below) to the Underwriter and to
Gersten, Savage, Kaplowitz & Curtin, counsel for the Underwriter, from Grant
Thornton LLP, dated, as of the date of this Agreement and as of each of Closing
Date I and Closing Date II:
(1) confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations;
(2) stating that in their opinion the financial statements
of the Company included in the Registration Statement and Prospectus comply as
to form in all material respects with the applicable accounting requirements of
the Act and the published Regulations thereunder;
(3) stating that, on the basis of a reading of the latest
available minutes of the stockholders and boards of directors and the various
committees of the boards of directors of the Company and any current or former
subsidiaries of the Company, consultations with officers and other employees of
the Company and the Subsidiaries responsible for financial and accounting
matters, a reading of the latest interim financial statements of the Company and
the Subsidiaries (which, with respect to the Company, shall be as of a date not
later than thirty (30) days prior to the Effective Date) and other specified
procedures and inquiries, nothing has come to their attention which would lead
them to believe that (A) the audited financial state ments for the years ended
September 30,1995 of the Company in the Registration Statement does not comply
as to form in all material respects with the applicable accounting requirements
of the Act, and the Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the Company included
in the Registration Statement, (B) at a date not more than five (5) days prior
to the Effective Date, there was any change in the capital stock or long-term
debt of the Company, or any decrease in the stockholders' equity of the Company
as compared with amounts shown in the September 30, 1995 balance sheet included
in the Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any decrease, setting forth the amount
of such decrease, and (C) during the period from September 30, 1995 to a
specified date not more than five (5) days prior to the Effective Date there was
any decrease in net revenues, increase in net losses or increases in net losses
per common share of the Company, in each case as compared with the corresponding
period ending August 31,1995 other than as set forth in or contemplated by the
Registration Statement, or, if there was any such increase or decrease, setting
forth the amount of such increase or decrease;
(4) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company and the Subsidiaries set
forth in the Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be
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derived from the general accounting records, including worksheets, of the
Company and the Subsidiaries and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and statements as to such other matters incident to the transaction
contemplated hereby as the Underwriter may reasonably request.
(5) all proceedings taken in connection with the
authorization, issuance or sale of the Securities, the Underwriter's Warrants
and the Underwriter's Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Underwriter and to Gersten, Savage,
Kaplowitz & Curtin, counsel to the Underwriter.
h. On each of Closing Date I and Closing Date II, there shall
have been duly tendered to you for your account the appropriate number of
Securities and individually for your own account the Underwriter's Warrants.
i. No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to Section 5(e) hereof shall have been
issued on either Closing Date I or Closing Date II, and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Underwriter or
the Company, shall be contemplated.
j. Prior to each of the Closing Date I and Closing Date II
there shall not have been received or provided by the Company's independent
public accountants or attorneys, qualifications to the effect of either
difficulties in furnishing certifications as to material items including,
without limitation, information contained within the footnotes to the financial
statements, or as affecting matters incident to the issuance and sale of the
Securities or as to corporate proceedings or other matters.
k. On or prior to Closing Date I, the Underwriter's Warrant
Agreement and the Financial Advisory and Investment Banking Agreement shall have
been executed and delivered by the Company, and the Lock-Up Agreements shall
have been executed and delivered by all of the Company's existing stockholders.
l. Any certificate signed by any officer of the Company and
delivered to the Underwriter or to counsel to the Underwriter shall be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein. If any condition to the Underwriter's obligations
hereunder to be fulfilled prior to or at any Closing Date is not so fulfilled,
the Underwriter may terminate this Agreement or, if the Underwriter so elects,
may waive any such conditions which have not been fulfilled or extend the time
for their fulfillment.
8. INDEMNIFICATION.
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a. The Company and the Selling Stockholders, severally and
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not jointly, shall indemnify and hold the Underwriter, and each controlling
person, if any, who controls the Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act), harmless against any and all
liabilities, claims, lawsuits, including any and all awards and/or judgments to
which it may become subject under the Act, the Exchange Act or any other Federal
or state statute, at common law or otherwise, insofar as said liabilities,
claims and lawsuits (including awards and/or judgments) arise out of or are in
connection with the Registration Statement, Prospectus and related Exhibits
filed under the Act, except for any liabilities, claims and lawsuits (including
awards and/or judgments), arising out of acts or omissions of the Underwriter.
In addition, the Company shall also indemnify and hold the Underwriter harmless
against any and all costs and expenses, including reasonable counsel fees,
incurred or relating to the foregoing liabilities, claims and lawsuits to which
the indemnity applies.
The Underwriter shall give the Company, and the Selling Stockholders
within two (2) business days of the time that the Underwriter first becomes
aware thereof notice of any such liability, claim or lawsuit which the
Underwriter contends is the subject matter of the Company's indemnification, and
the Company thereupon shall be granted the right to take any and all necessary
and proper action, at its sole cost and expense, with respect to such liability,
claim and lawsuit, including the right to settle, compromise and dispose of such
liability, claim or lawsuit.
The Underwriter shall indemnify and hold the Company, and each
controlling person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and the Selling
Stockholders , harmless against any and all liabilities, claims, lawsuits,
including any and all awards and/or judgments to which it may become subject
under the Act, the Exchange Act or any other Federal or state statute, at common
law or otherwise, insofar as said liabilities, claims and lawsuits (including
awards and/or judgments) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact required to be stated or necessary
to make the statement therein, not misleading, which statement or omission was
made in reliance upon information furnished in writing to the Company by or on
behalf of the Underwriter for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto. In addition, the Underwriter
shall also indemnify and hold the Company harmless against any and all costs and
expenses, including reasonable counsel fees, incurred or relating to the
foregoing.
The Company and the Selling Stockholders shall give to the Underwriter
prompt notice of any such liability, claim or lawsuit which the Company contends
is the subject matter of the Underwriter's indemnification and the Underwriter
thereupon shall be granted the right to take any and all necessary and proper
action, at its sole cost and expense, with respect to such liability, claim and
lawsuit, including the right to settle, compromise or dispose of such liability,
claim or lawsuit, excepting therefrom any and all proceedings or hearings before
any regulatory bodies and/or authorities.
b. In order to provide for just and equitable contribution
under the Act
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in any case in which (i) any person entitled to indemnification under this
Section 8 makes claim for indemnification pursuant hereto but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, or (ii) con tribution under the Act may be required on the part of
any such person in circumstances for which indemnification is provided under
this Section 8, then, and in each such case, the Company, the Selling
Stockholders and the Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after any
contribution from others) in such proportion taking into consideration the
relative benefits received by each party from the offering covered by the
Prospectus (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was assessed, the
opportunity to correct and prevent any statement or omission and other equitable
considerations appropriate under the circum stances; provided, however, that
notwithstanding the above in no event shall the Underwriter be required to
contribute any amount in excess of 10% of the initial public offering price of
the Securities; and provided, that, in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party to this Agreement
(or its representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission so to notify
the contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a contributing party or his or its representative of the commencement thereof
within the aforesaid fifteen (15) days, the contributing party will be entitled
to participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of such contributing party. The indemnification provisions contained in
this Section 8 are in addition to any other rights or remedies which either
party hereto may have with respect to the other or hereunder.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
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context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates, and such representations, warranties and
agreements of the Underwriter, the Company and the Selling Stockholders,
including the indemnity agreements contained in Section 8 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any of the Underwriter, the Company or any controlling person,
and shall survive termination of this Agreement or the issuance and delivery of
the Securities to the Underwriter until the earlier of the expiration of any
applicable statute of limitations or the seventh
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anniversary of Closing Date II, at which time the representations, warranties
and agreements shall terminate and be of no further force and effect.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION HEREOF.
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a. This Agreement shall become effective at 9:30 a.m., New York
time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by the
Underwriter of the Securities, whichever is earlier. The time of the initial
public offering, for the purpose of this Section 10, shall mean the time, after
the Registration Statement becomes effective, of the release by the Underwriter
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities or the time, after the Registration
Statement becomes effective, when the Securities are first released by the
Underwriter for offering by the Underwriter or dealers by letter or telegram,
whichever shall first occur. The Underwriter may prevent this Agreement from
becoming effective without liability to any other party, except as noted below,
by giving the notice indicated below in this Section 10 before the time this
Agreement becomes effective. The Underwriter agrees to give the undersigned
notice of the commencement of the offering described herein.
b. The Underwriter shall have the right, in its sole
discretion, to terminate this Agreement, including without limitation, the
obligation to purchase the Firm Securities and the obligation to purchase the
Option Securities after the exercise of the Over-Allotment Option, by notice
given to the Company prior to delivery and payment for all the Firm Securities
or the Option Securities, as the case may be, only if any of the conditions
enumerated in Section 7 are not either fulfilled or waived by the Underwriter on
or before any Closing Date.
c. If the Underwriter elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10, the Company shall be notified on the same day as such election is made by
the Underwriter by telephone or telegram, confirmed by letter.
d. Anything herein to the contrary notwithstanding, if this
Agreement shall not be carried out within the time specified herein, or any
extensions thereof granted by the Underwriter, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied then, in addition to the
obligations assumed by the Company pursuant to Section 6(a) hereof, the
Underwriter shall provide the company with a statement of the Underwriter's
accountable expenses.
e. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or termination of this Agreement, and whether
or not this Agreement is otherwise carried out, the provisions of Section 8
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part
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hereof.
11. NOTICES. All communications hereunder, except as herein
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otherwise specifically provided, shall be in writing and, if sent to the
Underwriter, shall be mailed, delivered or telegraphed and confirmed to First
Hanover Securities, Inc. One Wall Street, New York, New York 10005 Attention:
President, with a copy to Gersten, Savage, Kaplowitz & Curtin, 575 Lexington
Avenue, New York, New York 10022, Attention: Jay Kaplowitz, Esq.; if to the
Company, shall be mailed, delivered or telegraphed and confirmed to Commodore
Holdings Limited, 4000 Hollywood Boulevard, Suite 385, South Tower, Hollywood,
Florida 33021, Attention: Chairman of the Board, with a copy to Broad & Cassell,
(address), Attention: James Cassell, Esq..
12. PARTIES. This Agreement shall inure solely to the benefit of and
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shall be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 8 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained.
13. CONSTRUCTION. This Agreement shall be governed by and
------------
construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws. The parties agree to submit
themselves to the jurisdiction of the courts of the State of New York or of the
United States of America for the Southern District of New York, which shall be
the sole tribunals in which any parties may institute and maintain a legal
proceeding against the other party arising from any dispute in this Agreement.
In the event either party initiates a legal proceeding in a jurisdiction other
than in the courts of the State of New York or of the United States of America
for the Southern District of New York, the other party may assert as a complete
defense and as a basis for dismissal of such legal proceeding that the legal
proceeding was not initiated and maintained in the courts of the State of New
York or of the United States of America for the Southern District of New York,
in accordance with the provisions of this Section 13.
14. ENTIRE AGREEMENT. This Agreement, the Underwriter's Warrant
----------------
Agreement and the Financial Advisory and Investment Banking Agreement contain
the entire agreement between the parties hereto in connection with the subject
matter hereof and thereof.
26
<PAGE>
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
COMMODORE HOLDINGS LIMITED
By:________________________________
Name: Jeffrey Binder
Title: Chairman of the Board
Accepted as of the date
first above written.
New York, New York
FIRST HANOVER SECURITIES, INC.
By: _____________________________
Name:
Title:
27
<PAGE>
PRIVATE OPPORTUNITY PARTNERS II, LTD.
LIMITED PARTNER SIGNATURE PAGE FOR
CORPORATIONS, PARTNERSHIPS AND TRUSTS
EXECUTED this ___ day of _________, 1996.
NUMBER OF UNITS HELD BY LIMITED PARTNER: ______________($100,000 per Unit)
___________________________________________________
(Printed Name of Limited Partner)
By:___________________________________________
(Signature of Authorized Representative)
Print Name:___________________________________
Title:________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
(Address)
STATE OF ___________)
) SS:
COUNTY OF __________)
The foregoing instrument was acknowledged before me this ______ day of
_____________, 1996, by __________________________ as ___________________ of
___________________________, a _____________, on behalf of the _______________.
He/she is personally known to me or has produced ____________ as identification.
___________________________________
(Signature of notary public)
___________________________________
(Typed name of notary public)
Notary Public, State of Florida
Commission No._____________________
My commission expires:
ADMISSION DATE: ________ (please leave blank for completion by General Partner)
Partnership Agreement Signature Page
<PAGE>
EXHIBIT 4D
AGREEMENT, dated this _____ day of ___________, 1996 by and between
COMMODORE HOLDINGS LIMITED, a Bermuda corporation (the "Company"), and STOCK
TRANS, INC., as Warrant Agent (the "Warrant Agent").
W I T N E S S E T H:
-------------------
WHEREAS, in connection with (i) the offering to the public of up to
1,000,000 units ("Units") each Unit comprised of one shares of the Company's
common stock, $.01 par value ("Common Stock"), and one redeemable warrant,
entitling the holder to purchase one half share of Common Stock ("Redeemable
Warrants") (the Units are sometimes alternatively referred to as the
"Securities"), (ii) the over-allotment option to purchase up to an 75,000 Units
(the "Over-allotment Option"), and (iii) the sale to First Hanover Securities,
Inc. its successors and assigns ("First Hanover") of warrants (the
"Underwriter's Warrants") to purchase up 50,000 Units, such Securities being
identical to the Securities being sold to the public (the Redeemable Warrants
issuable upon the exercise of the Underwriter's Warrants are referred to as the
"Common Stock Warrants"), the Company will issue up to 1,075,000 Redeemable
Warrants and 50,000 Common Stock Warrants (subject to increase as provided in
the Underwriter's Warrant Agreement); and
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Redeemable Warrants and the Common Stock Warrants
(collectively, the "Warrants"); and
WHEREAS, the Company desires the Warrant Agent to act on
<PAGE>
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance, registration, transfer and exchange of certificates
representing the Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the
Underwriter, the holders of certificates representing the Warrants and the
Warrant Agent, the parties hereto agree as follows:
Definitions. As used herein, the following terms shall have the
-----------
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
voting and in the distribution of earnings and assets of the Company without
limit as to amount or percentage.
(b) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its principal business
shall be administered, which office is located on the date hereof at __________.
(c) "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
shall have received both (i) the Warrant
2
<PAGE>
Certificate representing such Warrant, with the exercise form thereon duly
executed by the Registered Holder hereof or his attorney duly authorized in
writing, and (ii) payment in cash or by check made payable to the Warrant Agent
for the account of the Company, of the amount in lawful money of the United
States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean ___________, 1997
for the Redeemable Warrants and _____________, 1997 for the Common Stock
Warrants.
(e) "Initial Warrant Redemption Date" shall mean ____________,
1997.
(f) "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8, $6.00 per share of Common Stock and further
subject to the Company's right, in its sole discretion, to decrease the Purchase
Price for a period of not less than 30 days on not less than 30 days' prior
written notice to the Registered Holders.
(g) "Registered Holder" shall mean the person in whose name any
certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(h) "Subsidiary" or "Subsidiaries" shall mean any corporation or
corporations, as the case may be, of which stock having ordinary power to elect
a majority of the Board of Directors of such corporation (regardless of whether
or not at the time stock of any other class or classes of such corporation shall
have or may
3
<PAGE>
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned by the Company or by one or more Subsidiaries, or
by the Company and one or more Subsidiaries.
(i) "Transfer Agent" shall mean Stock Trans, Inc., or its
authorized successor.
(j) "Underwriting Agreement" shall mean the underwriting
agreement dated ____________, 1996 between the Company and First Hanover,
relating to the purchase for resale to the public of the Securities.
(k) "Underwriter's Warrant Agreement" shall mean the agreement
dated as of ____________, 1996 between the Company and First Hanover relating to
and governing the terms and provisions of the Underwriter's Warrants.
(l) "Warrant Certificate" shall mean a certificate representing
each of the Warrants substantially in the form annexed hereto as Exhibit A.
(m) "Warrant Expiration Date" shall mean, unless the Warrants
are redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m.
(Eastern time) on ________________, 2001 for the Redeemable Warrants and on
____________, 2001 for the Common Stock Warrants or, if either such date shall
in the State of Colorado be a holiday or a day on which banks are authorized to
close, than 5:00 p.m. (Eastern time) on the next following day which in the
State of __________ is not a holiday or a day on which banks are authorized to
close, subject to the Company's right,
4
<PAGE>
prior to the Warrant Expiration Date, in its sole discretion, to extend such
Warrant Expiration Date on five business days prior written notice to the
Registered Holders.
SECTION 2. Warrants and Issuance of Warrant Certificates.
---------------------------------------------
(a) One Warrant shall initially entitle the Registered Holder of
the Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one half share of Common Stock upon the exercise thereof,
subject to modification and adjustment as provided in Section 8. The Warrants
must be exercised in pairs so as to purchase one full share of Common Stock at
the Purchase Price therefor.
(b) Upon execution of this Agreement, Warrant Certificates
representing 1,000,000 Redeemable Warrants to purchase up to an aggregate of
500,000 shares of Common Stock (subject to modification and adjustment as
provided in Section 8) shall be executed by the Company and delivered to the
Warrant Agent.
(c) Upon exercise of the Over-allotment Option, in whole or in
part, Warrant Certificates representing up to 75,000 Redeemable Warrants to
purchase up to an aggregate of 75,000 shares of Common Stock (subject to
modification and adjustment as provided in Section 8) shall be executed by the
Company and delivered to the Warrant Agent.
(d) Upon exercise of the Underwriter's Warrants as provided
therein, together with certificates for the appropriate
5
<PAGE>
number of shares of Common Stock, Warrant Certificates representing 50,000
Common Stock Warrants to purchase up to an aggregate of 25,000 shares of Common
Stock (subject to modification and adjustment as provided in Section 8 hereof
and in the Underwriter's Warrant Agreement), shall be countersigned, issued and
delivered by the Warrant Agent upon written order of the Company signed by its
Chairman of the Board, President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary.
(e) From time to time, up to the Warrant Expiration Date, as the
case may be, the Warrant Agent shall countersign and deliver Warrant
Certificates in required denominations of one or whole number multiplies thereof
to the person entitled thereto in connection with any transfer or exchange
permitted under this Agreement. Except as provided in Section 7 hereof, no
Warrant Certificates shall be issued except (i) Warrant Certificates initially
issued hereunder, (ii) Warrant Certificates issued upon any transfer or exchange
of Warrants, (iii) Warrant Certificates issued in replacement of lost, stolen,
destroyed or mutilated Warrant Certificates pursuant to Section 7, (iv) Warrant
Certificates issued pursuant to the Underwriter's Warrant Agreement (including
Common Stock Warrants in excess of 50,000 Underwriter's Warrants issued as a
result of the antidilution provisions contained in the Underwriter's Warrant
Agreement), and (v) at the option of the Company, Warrant Certificates in such
form as may be approved by its Board of Directors, to reflect any adjustment or
6
<PAGE>
change in the Purchase Price, the number of shares of Common Stock purchasable
upon exercise of the Warrants or the Redemption Price therefor made pursuant to
Section 8 hereof.
SECTION 3. Form and Execution of Warrant Certificates.
------------------------------------------
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Warrants may be listed, or to
conform to usage. The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen or destroyed Warrant Certificates).
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
by manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant
7
<PAGE>
Certificates shall cease to be such officer of the Company before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates, nevertheless,
may be countersigned by the Warrant Agent, issued and delivered with the same
force and effect as though the person who signed such Warrant Certificates had
not ceased to be such officer of the Company.
SECTION 4. Exercise.
--------
(a) Warrants in denominations of two or whole number multiples
thereof may be exercised commencing at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date, upon the terms and
subject to the conditions set forth herein (including the provisions set forth
in Sections 5 and 9 hereof) and in the applicable Warrant Certificate. A Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date, provided that the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, together
with payment in cash or by check made payable to the Warrant Agent for the
account of the Company, of an amount in lawful money of the United States of
America equal to the applicable Purchase Price has been received in good funds
by the Warrant Agent. The person entitled to receive the securities deliverable
upon such exercise shall be treated for all purposes as the holder of such
securities as of the close of business on the Exercise Date. If Warrants in
denominations other
8
<PAGE>
than one or whole number multiples thereof shall be exercised at one time by the
same Registered Holder, the number of full shares of Common Stock which shall be
issuable upon exercise thereof shall be computed on the basis of the aggregate
number of full shares of Common Stock issuable upon such exercise. As soon as
practicable on or after the Exercise Date and in any event within five business
days after such date, if one or more Warrants have been exercised, the Warrant
Agent on behalf of the Company shall cause to be issued to the person or persons
entitled to receive the same a Common Stock certificate or certificates for the
shares of Common Stock deliverable upon such exercise, and the Warrant Agent
shall deliver the same to the person or persons entitled thereto. Upon the
exercise of any one or more Warrants, the Warrant Agent shall promptly notify
the Company in writing of such fact and of the number of securities delivered
upon such exercise and, subject to subsection (b) below, shall cause all
payments of an amount in cash or by check made payable to the order of the
Company, equal to the Purchase Price, to be deposited promptly in the Company's
bank account.
(b) At any time upon the exercise of Warrants after one year and
one day from the date hereof, the Warrant Agent shall, on a daily basis, within
two business days after such exercise, notify First Hanover, their successors or
assigns of the exercise of any such Warrants and shall, on a weekly basis
(subject to collection of funds constituting the tendered Purchase Price, but in
no event later than five business days after the last day of the
9
<PAGE>
calendar week in which such funds were tendered), remit to First Hanover an
amount equal to five percent of the Purchase Price of such Warrants being then
exercised unless First Hanover shall have notified the Warrant Agent that the
payment of such amount with respect to such Warrant is violative of the General
Rules and Regulations promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or the rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD") or applicable state securities
or "blue sky" laws, or the Warrants are Common Stock Warrants underlying the
Underwriter's Warrants, in which event the Warrant Agent shall have to pay such
amount to the Company; provided, however, that, the Warrant Agent shall not be
obligated to pay any amounts pursuant to this Section 4(b) during any week that
such amounts payable are less than $1,000 and the Warrant Agent's obligation to
make such payments shall be suspended until the amount payable aggregates
$1,000, and provided further, that, in any event, any such payment (regardless
of amount) shall be made not less frequently than monthly.
(c) The Company shall not be obligated to issue any fractional
share interests or fractional warrant interests upon the exercise of any Warrant
or Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fraction equal to or greater than one-half shall be
rounded up to the next full share or Warrant, as the case may be, any fraction
less than one-half shall be eliminated.
SECTION 5. Reservation of Shares; Listing; Payment of
------------------------------------------
10
<PAGE>
Taxes; etc.
- -----------
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issuance upon exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrants shall, at the time of delivery thereof, be duly and
validly issued and fully paid and nonassessable and free from all preemptive or
similar rights, taxes, liens and charges with respect to the issuance thereof,
and that upon issuance such shares shall be listed on each securities exchange,
if any, on which the other shares of outstanding Common Stock of the Company are
then listed.
(b) The Company covenants that if any securities to be reserved
for the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the federal securities laws or
a post effective amendment, use its best efforts to cause the same to become
effective, keep such registration statement current while any of the Warrants
are outstanding and deliver a prospectus which complies with Section 1O(a)(3) of
the Securities Act of 1933, as amended, to the Registered Holder exercising the
Warrant (except, if in the opinion of counsel to the Company, such registration
is not required under the federal
11
<PAGE>
securities law or if the Company receives a letter from the staff of the
Securities and Exchange Commission stating that it would not take any
enforcement action if such registration is not effected). The Company will use
best efforts to obtain appropriate approvals or registrations under state "blue
sky" securities laws. With respect to any such securities, however, Warrants
may not be exercised by, or shares of Common Stock or issued to, any Registered
Holder in any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares of Common Stock
upon exercise of the Warrants; provided, however, that if shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder of
the Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.
12
<PAGE>
SECTION 6. Exchange and Registration of Transfer.
-------------------------------------
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant's Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
exercise form, as the case may be, on the reverse thereof shall be duly endorsed
or be accompanied by a written instrument or instruments of transfer and
subscription, in form satisfactory to the Company and the Warrant Agent, duly
executed by the Registered Holder thereof or his attorney duly authorized in
writing.
13
<PAGE>
(d) A $10 service charge shall be made for any exchange,
registration or transfer of Warrant Certificates. However, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange shall be promptly canceled by the Warrant Agent.
(f) Prior to due presentment for registration or transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
------------------
Warrant Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the case of
loss, theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall countersign and deliver in lieu thereof a new
Warrant Certificate representing an equal aggregate number of Warrants.
Applicants for a substitute Warrant Certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant
14
<PAGE>
Agent may prescribe.
SECTION 8. Adjustment of Purchase Price and Number of Shares of
----------------------------------------------------
Common Stock Deliverable.
- ------------------------
(a) (i) Except as hereinafter provided, in the event the
Company shall, at any time or from time to time after the date hereof, sell any
shares of Common Stock for a consideration per share less than the greater of
(i) the closing bid price of the Common Stock as reported on NASDAQ on the
trading date next preceding such sale (the "Market Price"), and (ii) the
Purchase Price then in effect, or issue any shares of Common Stock as a stock
dividend to the holders of Common Stock, or subdivide or combine the outstanding
shares of Common Stock into a greater or lesser number of shares (any such sale,
issuance, subdivision or combination being herein called a "Change of Shares"),
then, and thereafter immediately before the date of such sale or the record date
for each Change of Shares, the Purchase Price for the Warrants (whether or not
the same shall be issued and outstanding) in effect immediately prior to such
Change of Shares shall be changed to a price (including any applicable fraction
of a cent to the nearest cent) determined by dividing (1) the product of (a) the
Purchase Price in effect immediately before such Change of Shares and (b) the
sum (i) the total number of shares of Common Stock outstanding immediately prior
to such Change of Shares, and (ii) the number of shares determined by dividing
(A) the aggregate consideration, if any, received by the Company upon such sale,
issuance, subdivision or combination, by (B) the greater of (x) the
15
<PAGE>
Market Price, and (y) the Purchase Price, in effect immediately prior to such
Change of Shares; by (2) the total number of shares of Common Stock outstanding
immediately after such Change of Shares.
For the purposes of any adjustment to be made in accordance with this
Section 8(a) the following provisions shall be applicable:
(A) In case of the issuance or sale of shares of
Common Stock (or of other securities deemed hereunder to involve the
issuance or sale of shares of Common Stock) for a consideration part or all
of which shall be cash, the amount of the cash portion of the consideration
therefor deemed to have been received by the Company shall be (i) the
subscription price (before deducting any commissions or any expenses
incurred in connection therewith), if shares of Common Stock are offered by
the Company for subscription, or (ii) the public offering price (before
deducting therefrom any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection
therewith), if such securities are sold to underwriters or dealers for
public offering without a subscription offering, or (iii) the gross amount
of cash actually received by the Company for such securities, in any other
case.
16
<PAGE>
(B) In case of the issuance or sale (otherwise than as
a dividend or other distribution on any stock of the Company, and otherwise
than on the exercise of options, rights or warrants or the conversion or
exchange of convertible or exchangeable securities) of shares of Common
Stock (or of other securities deemed hereunder to involve the issuance or
sale of shares of Common Stock) for a consideration part or all of which
shall be other than cash, the amount of the consideration therefor other
than cash deemed to have been received by the Company shall be the value of
such consideration as determined in good faith by the Board of Directors of
the Company on the basis of a record of values of similar property or
services.
(C) Shares of Common Stock issuable by way of dividend
or other distribution on any stock of the Company shall be deemed to have
been issued immediately after the opening of business on the day following
the record date for the determination of shareholders entitled to receive
such dividend or other distribution and shall be deemed to have been issued
without consideration.
(D) The reclassification of securities of the Company
other than shares of Common Stock into securities including shares of
Common Stock shall be deemed to involve the issuance of such shares of
Common Stock for a consideration other than cash immediately prior to the
close of business on the date fixed for the determination of
17
<PAGE>
security holders entitled to receive such shares, and the value of the
consideration allocable to such shares of Common Stock shall be determined
as provided in subsection (B) of this Section 8(a).
(E) The number of shares of Common Stock at any one
time outstanding shall be deemed to include the aggregate maximum number of
shares issuable (subject to readjustment upon the actual issuance thereof)
upon the exercise of options, rights or warrants and upon the conversion or
exchange of convertible or exchangeable securities.
(ii) Upon each adjustment of the Purchase Price pursuant to
this Section 8, the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall be the number derived by multiplying the number
of shares of Common Stock purchasable immediately prior to such adjustment by
the Purchase Price in effect prior to such adjustment and dividing the product
so obtained by the applicable adjusted Purchase Price.
(b) In case the Company shall at any time after the date hereof
issue options, rights or warrants to subscribe for shares of Common Stock, or
issue any securities convertible into or exchangeable for shares of Common
Stock, for a consideration per share (determined as provided in Section 8(a) and
as provided below) less than the greater of (i) the Market Price, and (ii) the
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable
18
<PAGE>
securities, or without consideration (including the issuance of any such
securities by way of dividend or other distribution), the Purchase Price for the
Warrants (whether or not the same shall be issued and outstanding) in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making the computation in accordance with the provisions
of Section 8(a) hereof, provided that:
(A) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable or that may become issuable under such
options, rights or warrants (assuming exercise in full even if not then
currently exercisable or currently exercisable in full) shall be deemed to
be issued and outstanding at the time such options, rights or warrants were
issued, for a consideration equal to the minimum purchase price per share
provided for in such options, rights or warrants at the time of issuance,
plus the consideration, if any, received by the Company for such options,
rights or warrants; provided, however, that upon the expiration or other
termination of such options, rights or warrants, if any thereof shall not
have been exercised, the number of shares of Common Stock deemed to be
issued and outstanding pursuant to this subsection (A) (and for the
purposes of subsection (E) of Section 8(a) hereof) shall be reduced by the
number of shares as to which options, warrants and/or rights shall have
expired, and such number of shares
19
<PAGE>
shall no longer be deemed to be issued and outstanding, and the Purchase
Price then in effect shall forthwith be readjusted and thereafter be the
price that it would have been had adjustment been made on the basis of the
issuance only of the shares actually issued plus the shares remaining
issuable upon the exercise of those options, rights or warrants as to which
the exercise rights shall not have expired or terminated unexercised.
(B) The aggregate maximum number of shares of Common
Stock issuable or that may become issuable upon conversion or exchange of
any convertible or exchangeable securities (assuming conversion or exchange
in full even if not then currently convertible or exchangeable in full)
shall be deemed to be issued and outstanding at the time of issuance of
such securities, for a consideration equal to the consideration received by
the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof;
provided, however, that upon the expiration or other termination of the
right to convert or exchange such convertible or exchangeable securities
(whether by reason of redemption or otherwise), the number of shares of
Common Stock deemed to be issued and outstanding pursuant to this
subsection (B) (and for the purposes of subsection (E) of Section 8(a)
hereof) shall be reduced by the number of shares as to which the conversion
or exchange rights shall have expired or terminated unexercised,
20
<PAGE>
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Purchase Price then in effect shall forthwith be
readjusted and thereafter be the price that it would have been had
adjustment been made on the basis of the issuance only of the shares
actually issued plus the shares remaining issuable upon conversion or
exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated
unexercised.
(C) If any change shall occur in the exercise price
per share provided for in any of the options, rights or warrants referred
to in subsection (A) of this Section 8(b), or in the price per share or
ratio at which the securities referred to in subsection (B) of this Section
8(b) are convertible or exchangeable, such options, rights or warrants or
conversion or exchange rights, as the case may be, to the extent not
theretofore exercised, shall be deemed to have expired or terminated on the
date when such price change became effective in respect of shares not
theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities.
(c) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no
21
<PAGE>
par value, or from no par value to par value or as a result of subdivision or
combination), or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification or change of the then outstanding shares of Common Stock or
other capital stock issuable upon exercise of the Warrants) or in case of any
sale or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be, shall
make lawful and adequate provision whereby the Registered Holder of each Warrant
then outstanding shall have the right thereafter to receive on exercise of such
Warrant the kind and amount of securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of securities issuable upon exercise of such Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance and shall forthwith file at the Corporate Office of the Warrant Agent
a statement signed by its President or a Vice President and by its Treasurer or
an Assistant Treasurer or its Secretary or an Assistant Secretary evidencing
such provision. Such provisions shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in
22
<PAGE>
Section 8(a) and (b). The above provisions of this Section 8(c) shall similarly
apply to successive reclassifications and changes of shares of Common Stock and
to successive consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(e) hereof, continue to express the Purchase Price per
share and the number of shares purchasable thereunder as the Purchase Price per
share and the number of shares purchasable thereunder were expressed in the
Warrant Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to this
Section 8, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant, after such adjustment, and (iii) a
brief statement of the facts accounting for such adjustment. The Company will
promptly file such certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to each Registered Holder at his
last address as it shall appear on the registry books of the Warrant
23
<PAGE>
Agent. No failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity thereof except as to the holder to whom the
Company failed to mail such notice, or except as to the holder whose notice was
defective. The affidavit of an officer of the Warrant Agent or the Secretary or
an Assistant Secretary of the Company that such notice has been mailed shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
(f) No adjustment of the Purchase Price shall be made as a
result of or in connection with (A) the issuance or sale of the Underwriter's
Warrants or the Securities underlying the Underwriter's Warrants, (B) the
issuance or sale of the Securities pursuant to the Initial Public Offering, (C)
the issuance or sale of shares of Common Stock pursuant to options, warrants,
stock purchase agreements and convertible or exchangeable securities outstanding
or in effect on the date hereof, (D) the issuance or sale of shares of Common
Stock upon the exercise of any "incentive stock options" (as such term is
defined in the Internal Revenue Code of 1986, as amended), whether or not such
options were outstanding on the date hereof, or (E) the issuance or sale of
shares of Common Stock if the amount of said adjustment shall be less than $.02
for one share of Common Stock, provided, however, that in such case, any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment that shall amount, together with any adjustment so carried forward,
to at
24
<PAGE>
least $.02 for one share of Common Stock. In addition, Registered Holders shall
not be entitled to cash dividends paid by the Company prior to the exercise of
any Warrant or Warrants held by them.
SECTION 9. Redemption.
----------
(a) Commencing on the Initial Warrant Redemption Date, the
Company may, on 25 days prior written notice redeem all the Redeemable Warrants
at $.05 per Redeemable Warrant, provided, however, that before any such call for
redemption of Warrants can take place, the (A) average closing bid price for the
Common Stock in the over-the-counter market as reported by the NASD Automated
Quotation System or (B) the average closing sale price on the primary exchange
on which the Common Stock is traded, if the Common Stock is traded on a national
securities exchange, shall have for twenty (20) consecutive trading days ending
not more than 15 days of the notice of redemption exceeded 150% of the Purchase
Price (initially $6.00 per share of Common Stock) (subject to adjustment in the
event of any stock splits or other similar events as provided in Section 8
hereof). All Redeemable Warrants must be redeemed if any are redeemed.
(b) In the event the Company exercises its right to redeem all
of the Redeemable Warrants, it shall give or cause to be given notice to the
Registered Holders of the Redeemable Warrants, by mailing to such Registered
Holders a notice of redemption, first class, postage prepaid, within ten (10)
calendar days of the aforementioned twenty (20) consecutive trading days and not
later than the thirtieth (30th) day before the date fixed for redemption,
25
<PAGE>
at their last address as shall appear on the records of the Warrant Agent. Any
notice mailed in the manner provided herein shall be conclusively presumed to
have been duly given whether or not the Registered Holder receives such notice.
At the time of the mailing to the Registered Holders of the Warrants of the
notice of redemption, the Company shall deliver or cause to be delivered to
First Hanover a similar notice telephonically and confirmed in writing together
with a list of the Registered Holders (including their respective addresses and
number of Warrants beneficially owned) to whom such notice of redemption has
been or will be given.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, (iii) the place where the Warrant
Certificate shall be delivered and the redemption price shall be paid, (iv) that
First Hanover is the Company's exclusive warrant solicitation agents and shall
receive the commission contemplated by Section 4(b) hereof, and (v) that the
right to exercise the Warrant shall terminate at 5:00 p.m. (New York time) on
the business day immediately preceding the date fixed for redemption. The date
fixed for the redemption of the Warrants shall be the Redemption Date. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
Registered Holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Warrant Agent or the Secretary or Assistant
Secretary of the Company that notice of redemption has been mailed shall, in the
absence of fraud, be prima
26
<PAGE>
facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 p.m.
(New York time) on the business day immediately preceding the Redemption Date.
The redemption price payable to the Registered Holders shall be mailed to such
persons at their addresses of record.
(e) The Company shall indemnify First Hanover and each person,
if any, who controls First Hanover within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from the
registration statement or prospectus referred to in Section 5(b) hereof to the
same extent and with the same effect (including the provisions regarding
contribution) as the provisions pursuant to which the Company has agreed to
indemnify First Hanover contained in Section 8 of the Underwriting Agreement.
(f) Five business days prior to the Redemption Date, the Company
shall furnish to First Hanover (i) an opinion of counsel to the Company, dated
such date and addressed to First Hanover, and (ii) a "cold comfort" letter dated
such date addressed to First Hanover, signed by the independent public
accountants who have issued reports on the Company's financial statements
included in such registration statement, in each case covering substantially the
same matters with respect to such registration statement (and
27
<PAGE>
the prospectus included therein) and, in the case of such accountants' letters,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities, including, without limitation, those matters covered in Sections
7(b) and (i) of the Underwriting Agreement.
(g) The Company shall as soon as practicable after the
Redemption Date, and in any event within 15 months thereafter, make "generally
available to its security holders" (within the meaning of Rule 158 under the
Act) an earnings statement (which need not be audited) complying with Section
11(a) of the Act and covering a period of at least 12 consecutive months
beginning after the Redemption Date.
(h) The Company shall deliver within five business days prior to
the Redemption Date copies of all correspondence between the Securities and
Exchange Commission ("Commission") and the Company, its counsel or auditors and
all memoranda relating to discussions with the Commission or its staff with
respect to such registration statement and permit First Hanover to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
28
<PAGE>
independent auditors, all to such reasonable extent and at such reasonable times
and as often as First Hanover shall reasonably request.
SECTION 10. Concerning the Warrant Agent.
----------------------------
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and First Hanover, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustment, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of fact contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be
29
<PAGE>
responsible for any failure on the part of the Company to comply with any of its
covenants and obligations contained in this Agreement or in any Warrant
Certificate, or (iii) be liable for any act or omission in connection with this
Agreement except for its own gross negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel.
(d) Any notice, statement, instruction, request, direction,
order or demand of the Company shall be sufficiently evidenced by an instrument
signed by the Chairman of the Board of Directors, President or any Vice
President (unless other evidence in respect thereof is herein specifically
prescribed). The Warrant Agent shall not be liable for any action taken,
suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and save it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant
30
<PAGE>
Agent's gross negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own gross negligence or willful misconduct),
after giving 30 days prior written notice to the Company. At least 15 days prior
to the date such resignation is to become effective, the Warrant Agent shall
cause a copy of such notice of resignation to be mailed to the Registered Holder
of each Warrant Certificate at the Company's expense. Upon such resignation the
Company shall appoint in writing a new warrant agent. If the Company shall fail
to make such appointment within a period of 30 days after it has been notified
in writing of such resignation by the resigning Warrant Agent, then the
Registered Holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a bank or trust
company having a capital and surplus, as shown by its last published report to
its stockholders, of not less than $10,000,000 or a stock transfer company doing
business in New York, New York. After acceptance in writing of such appointment
by the new warrant agent is received by the Company, such new warrant agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named herein as the warrant agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any
31
<PAGE>
further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning Warrant Agent. Not later than the effective date of any such
appointment the Company shall file notice thereof with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its Subsidiaries and affiliates, and any
of its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
32
<PAGE>
(i) The Warrant Agent shall retain for a period of two years
from the date of exercise any Warrant Certificate received by it upon such
exercise, marked to indicate its cancellation thereof in accordance with Section
6(e) hereof.
SECTION 11. Modification of Agreement.
-------------------------
The Warrant Agent and the Company may by supplemental agreement make
any changes or corrections in this Agreement without the approval of any holders
of Warrants (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; (ii) that they may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Warrant Certificates; (iii)
that they deem necessary or desirable to decrease the Purchase Price as provided
for in Section 1(f) hereof; or (iv) which may be required by law; provided,
however, that this Agreement shall not otherwise be modified, supplemented or
altered in any respect except with the consent in writing of the Registered
Holders representing not less than 50% of the Warrants then outstanding;
provided, further, that no change in the number or nature of the securities
purchasable upon the exercise of any Warrant, or the Purchase Price (other than
a decrease in the Purchase Price as provided in Section 1(f) hereof) therefor,
shall be made without the consent in writing of the Registered Holder of the
Warrant Certificate, other than such changes as are specifically permitted or
prescribed by this Agreement as originally executed. In addition, this
Agreement may not be
33
<PAGE>
modified, amended or supplemented without the prior written consent of First
Hanover, other than (i) to cure any ambiguity or to correct any provision which
is inconsistent or which is a manifest mistake or error; (ii) to make any such
change that is necessary or desirable and which shall not adversely affect the
interests of First Hanover; (iii) to decrease the Purchase Price as provided for
in Section 1 (f) hereof; or (iv) except as may be required by law.
SECTION 12. Notices.
-------
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid, or delivered to a telegraph office for
transmission if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company at 4000 Hollywood Boulevard, Suite 385, South Tower,
Hollywood, Florida 33021 Attention: Chairman, or at such other address as may
have been furnished to the Warrant Agent in writing by the Company; and if to
the Warrant Agent, at its Corporate Office. Copies of any notice delivered
pursuant to this Agreement shall be delivered to First Hanover at 100 Wall
Street, New York, New York 10005, Attention: President, or at such other
addresses as may have been furnished to the Company and the Warrant Agent in
writing.
SECTION 13. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving
34
<PAGE>
effect to conflicts of laws.
SECTION 14. Binding Effect.
--------------
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Except as
hereinafter stated, nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose upon any
other person any duty, liability or obligation. First Hanover is, and shall at
all times irrevocably be deemed to be, a third-party beneficiary of this
Agreement, with full power, authority and standing to enforce the rights granted
to it hereunder. In the event of any conflict relating to the Underwriter's
Warrant between the terms hereof and the terms of the Underwriter's Warrant
Agreement, the terms of the Underwriter's Warrant Agreement shall prevail.
SECTION 15. Counterparts.
------------
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the first date first above written.
[SEAL]
COMMODORE HOLDINGS LIMITED STOCK TRANS, INC.
By:________________________ By:_______________________
Jeffrey Binder, Name:
Chairman of the Board Title:
36
<PAGE>
Exhibit A
---------
No. W__________ VOID AFTER ________, 2001
WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE ONE HALF SHARE OF COMMON STOCK
COMMODORE HOLDINGS LIMITED
NO. _______ CUSIP
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one half fully paid and non-assessable share of Common Stock, $.01 par
value, of Commodore Holdings Limited, a Delaware corporation (the "Company"), at
any time from _______, 1997 and prior to the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of Stock Trans, Inc., _____________, as Warrant Agent, or its successor
(the "Warrant Agent"), accompanied by payment of $6.00 per full share, subject
to adjustment (the "Purchase Price"), in lawful money of the United States of
America in cash or by check made payable to the Warrant Agent for the account of
the Company.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated __________,
1996, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all the warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor,
<PAGE>
which the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
________, 2001. If each such date shall in the State of New York be a holiday
or a day on which the banks are authorized to close, then the Expiration Date
shall mean 5:00 P.M. (New York time) the next following day which in the State
of New York is not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has
covenanted and agreed that, if required by the Act, it will file a registration
statement under the Act, use its best efforts to cause the same to become
effective, to keep such registration statement current, if required under the
Act, while any of the Warrants are outstanding, and deliver a prospectus which
complies with Section 10(a)(3) of the Act to the Registered Holder exercising
this Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
of Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may
be redeemed at the option of the Company, at a redemption price of $.05 per
Warrant, at any time commencing after ________, 1997, provided that (i) the high
closing bid price for the Common Stock in the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotation
System, or (ii) the closing sale price on the primary exchange on which the
Common Stock is traded, if the Common Stock is traded on a national securities
exchange, or (iii) the closing sale price on
<PAGE>
NASDAQ, if the Common Stock is quoted on NASDAQ, shall have for twenty (20)
consecutive trading days and ending no more than fifteen (15) days prior to the
Notice of Redemption, as defined below, exceeded 150% of the exercise price
(initially $6.00 per share) of the Redeemable Warrants (subject to adjustment in
the event of any stock splits or other similar events). Notice of redemption
(the "Notice of Redemption") shall be given not later than the twentieth day
before the date fixed for redemption, all as provided in the Warrant Agreement.
On and after the date fixed for redemption, the Registered Holder shall have no
rights with respect to this Warrant except to receive the $.05 per Warrant upon
surrender of this Certificate.
Under certain circumstances, First Hanover, their successors and
assigns shall be entitled to receive an aggregate of five percent (5%) of the
Purchase Price of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ____________, 1996
SEAL COMMODORE HOLDINGS LIMITED
By:___________________________
Name: Jeffrey Binder
Title: Chairman
By:___________________________
Name:
Title: Secretary
COUNTERSIGNED:
STOCK TRANS, INC.,
as Warrant Agent
By:______________________________
Authorized Officer
<PAGE>
SUBSCRIPTION FORM
-----------------
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to
exercise ___________________ Warrants represented by this Warrant Certificate,
and to purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
______________________________________________
______________________________________________
______________________________________________
(please print or type name and address)
and be delivered to
______________________________________________
______________________________________________
______________________________________________
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
<PAGE>
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was solicited by First Hanover Securities,
Inc. [_]
2. The exercise of this Warrant was solicited
by __________________________________. [_]
3. If the exercise of this Warrant was not
solicited, please check the following box. [_]
Dated:_________________199____ X_____________________________
______________________________
______________________________
Address
______________________________
Social Security or Taxpayer
Identification Number
______________________________
Signature Guaranteed
______________________________
<PAGE>
ASSIGNMENT
----------
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, _____________________________, hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
______________________________________________
______________________________________________
______________________________________________
(please print or type name and address)
___________________________________________________ of the Warrants represented
by this Warrant Certificate, and hereby irrevocably constitutes and appoints
_____________________________________ Attorney to transfer this Warrant
Certificate on the books of the Company, with full power of substitution in the
premises.
Dated:_________________199____ X_____________________________
Signature Guaranteed
______________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
<PAGE>
COMMODORE HOLDINGS LIMITED
AND
FIRST HANOVER SECURITIES, INC.
UNDERWRITER'S
WARRANT AGREEMENT
<PAGE>
UNDERWRITER'S WARRANT AGREEMENT dated as of ___________, 1996 by and
between COMMODORE HOLDINGS LIMITED (the "Company") and FIRST HANOVER SECURITIES,
INC. ("First Hanover" or the "Underwriter").
W I T N E S S E T H:
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WHEREAS, the Company proposes to issue to the Underwriter warrants
(the "Underwriter's Warrants") to purchase up to 50,000 units (the "Units") each
unit being comprised of one share of the Company's common stock, par value $.01
per share (the "Common Stock") and one warrant (the "Redeemable Warrants") each
exercisable to purchase one half share of Common Stock.
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated _____________, 1996, by and
between the Underwriter and the Company, to act as the underwriter in connection
with the Company's proposed initial public offering (the "Initial Public
Offering") of 1,000,000 Units (the "Offering Securities"), such Offering
Securities being identical to the Units issuable upon exercise of the
Underwriter's Warrants; and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this
Agreement will be issued on Closing Date I (as such term is defined in the
Underwriting Agreement) by the Company to the Underwriter in consideration for,
and as part of, the Underwriter's compensation in connection with the
Underwriter acting as the underwriter pursuant to the Underwriting Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of Ten Dollars ($10.00), the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Holder (as defined in Section 3 below) is hereby
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granted the right to purchase, at any time from _______, 1996 until 5:00 p.m.,
New York time, on ___________, 2001, an aggregate of up 50,000 Units, at an
initial purchase price (subject to adjustment as provided in Section 8 hereof)
of $6.90 per Unit (150% of the Initial Public Offering price per Unit), subject
to the terms and conditions of this Agreement. The securities issuable upon
exercise of the Underwriter's Warrants are sometimes referred to herein as the
"Underwriter's Securities."
2. Warrant Certificates. The warrant certificate (the
--------------------
"Underwriter's Warrant Certificate") to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. Exercise of Underwriter's Warrants. The Underwriter's Warrants
----------------------------------
are exercisable during the term set forth in Section 1 hereof payable (i) by
certified or cashier's check or money order in lawful money of the United
States. Upon surrender of an Underwriter's Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
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Purchase Price (as hereinafter defined) for the Underwriter's Securities (and
such other amounts, if any, arising pursuant to Section 4 hereof) at the
Company's principal office located an Miami, Florida, the registered holder of
an Underwriter's Warrant Certificate ("Holder" or "Holders") shall be entitled
to receive a certificate or certificates for the Underwriter's Securities so
purchased. The purchase rights represented by each Underwriter's Warrant
Certificate are exercisable at the option of the Holder or Holders thereof, in
whole or in part as to Underwriter's Securities. The Underwriter's Warrants may
be exercised to purchase all or any part of the Underwriter's Securities
represented thereby. In the case of the purchase of less than all the
Underwriter's Securities purchasable on the exercise of the Underwriter's
Warrants represented by an Underwriter's Warrant Certificate, the Company shall
cancel the Underwriter's Warrant Certificate represented thereby upon the
surrender thereof and shall execute and deliver a new Underwriter's Warrant
Certificate of like tenor for the balance of the Underwriter's Securities
purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the Underwriter's
------------------------
Warrants and payment of the Purchase Price therefor, the issuance of
certificates representing the Underwriter's Securities or other securities,
properties or rights underlying such Underwriter's Warrants, shall be made
forthwith (and in any event within five (5) business days thereafter) without
further charge to the Holder thereof, and such certificates shall (subject
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<PAGE>
to the provisions of Sections 5 and 7 hereof) be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder, and the Company shall not be required
to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The Underwriter's Warrant Certificates and the certificates
representing the Underwriter's Securities or other securities, property or
rights (if such property or rights are represented by certificates) shall be
executed on behalf of the Company by the manual or facsimile signature of the
then present Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company, attested to by the manual or facsimile signature
of the then present Secretary or Assistant Secretary or Treasurer or Assistant
Treasurer of the Company. Underwriter's Warrant Cer tificates shall be dated
the date of issuance thereof by the Company upon initial issuance, transfer or
exchange.
5. Restriction On Transfer of Underwriter's Warrants. The Holder of
-------------------------------------------------
an Underwriter's Warrant Certificate (and its Permitted Transferee, as defined
below), by its acceptance thereof, covenants and agrees that the Underwriter's
Warrants are being acquired as an investment and not with a view to the
distribution
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<PAGE>
thereof; that the Underwriter's Warrants may be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, to any person (a
"Permitted Transferee"), provided such transfer, assignment, hypothecation or
other disposition is made in accordance with the provisions of the Securities
Act of 1933 (the "Act"); and provided, further, that until __________, 1997 (one
year following the effective date of the Initial Public Offering), only officers
and partners of the Underwriter, or any Initial Public Offering selling group
member and their respective officers and partners, shall be Permitted
Transferees.
6. Purchase Price.
--------------
(a) Initial and Adjusted Purchase Price. Except as otherwise
-----------------------------------
provided in Section 8 hereof, the initial purchase price of the Underwriter's
Securities shall be $6.90 per Unit which for purposes hereof shall be allocated
between the Common Stock at $6.75 and the Redeemable Warrant at $.15. The
adjusted purchase price shall be the price which shall result from time to time
from any and all adjustments of the initial purchase price in accordance with
the provisions of Section 8 hereof.
(b) Purchase Price. The term "Purchase Price" herein shall mean
--------------
the initial purchase price or the adjusted purchase price, depending upon the
context.
7. Registration Rights.
-------------------
(a) Registration Under the Securities Act of 1933. The
---------------------------------------------
Underwriter's Warrants have not been registered under the Act. The Underwriter's
Warrant Certificates shall bear the following
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legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"), and may not be offered
for sale or sold except pursuant to (i) an effective registration statement
under the Act, or (ii) an opinion of counsel, if such opinion and counsel shall
be reasonably satis factory to counsel to the issuer, that an exemption from
registration under the Act is available.
(b) Demand Registration. (1) At any time commencing on the
-------------------
first anniversary of and expiring on the fifth anniversary of the effective date
of the Company's Registration Statement relating to the Initial Public Offering
(the "Effective Date"), the Holders of a Majority (as hereinafter defined) in
interest of the Underwriter's Warrants, or the Majority in interest of the
Underwriter's Securities (assuming the exercise of all of the Underwriter's
Warrants) shall have the right, exercisable by written notice to the Company, to
have the Company prepare and file with the U.S. Securities and Exchange
Commission (the "Commission"), on one (1) occasion, a registration statement on
Form S-1 (or other appropriate form), and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale, for a period of nine (9) months, of
the Underwriter's Securities by such Holders and any other Holders of the
Underwriter's Warrants and/or the Underwriter's Securities who notify the
Company within fifteen (15) business days after receipt of the notice described
in Section 7(b)(2). The Holders of the
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<PAGE>
Underwriter's Warrants may demand registration without exercising the
Underwriter's Warrants, and are never required to exercise same.
(1) The Company covenants and agrees to give written notice
of any registration request under this Section 7(b) by any Holders to all other
registered Holders of the Underwriter's Warrants and the Underwriter's
Securities within ten (10) calendar days from the date of the receipt of any
such registration request.
(2) For purposes of this Agreement, the term "Majority" in
reference to the Holders of the Underwriter's Warrants or Underwriter's
Securities, shall mean in excess of fifty percent (50%) of the then outstanding
Underwriter's Warrants or Underwriter's Securities that (i) are not held by the
Company, an affiliate, officer, creditor, employee or agent thereof or any of
their respective affiliates, members of their family, persons acting as nominees
or in conjunction therewith, or (ii) have not been resold to the public pursuant
to a registration statement filed with the Commission under the Act.
(c) Piggyback Registration. (1) If, at any time within the period
----------------------
commencing on the first anniversary and expiring on the sixth anniversary of the
Effective Date, the Company should file a registration statement with the
Commission under the Act (other than in connection with a merger or other
business
8
<PAGE>
combination transaction or pursuant to Form S-8) it will give written notice at
least thirty (30) calendar days prior to the filing of each such registration
statement to the Underwriter and to all other Holders of the Underwriter's
Warrants and/or the Underwriter's Securities of its intention to do so. If the
Underwriter or other Holders of the Underwriter's Warrants and/or the
Underwriter's Securities notify the Company within twenty (20) calendar days
after receipt of any such notice of its or their desire to include any
Underwriter's Securities in such proposed registration statement, the Company
shall afford the Underwriter and such Holders of the Underwriter's Warrants
and/or Underwriter's Securities the opportunity to have any such Underwriter's
Securities registered under such registration statement. Notwithstanding the
provisions of this Section 7(c)(1) and the provisions of Section 7(d), the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7(c)(1) (irrespective of whether a written
request for inclusion of any such securities shall have been made) to elect not
to file any such proposed registration statement, or to withdraw the same after
the filing but prior to the effective date thereof.
(2) If the underwriter of an offering to which the above
piggyback rights apply objects to such rights, such objection shall preclude
such inclusion. However, in such event, the Company will, within six (6) months
of completion of such subsequent underwriting, file at the expense of the
Company, a
9
<PAGE>
registration statement so as to permit a public offering and sale, for a period
of nine (9) months, of such excluded Underwriter's Securities, which shall be in
addition to any registration statement required to be filed pursuant to Section
7(b).
(d) Covenants of the Company With Respect to Registration. In
-----------------------------------------------------
connection with any registrations under Sections 7(b) and 7(c) hereof, the
Company covenants and agrees as follows:
(1) The Company shall use its best efforts to file a
registration statement within thirty (30) calendar days of receipt of any demand
therefor pursuant to Section 7(b); provided, however, that the Company shall not
be required to produce audited or unaudited financial statements for any period
prior to the date such financial statements are required to be filed in a report
on Form 10-K or Form 10-Q, as the case may be. The Company shall use its best
efforts to have any registration statement declared effective at the earliest
possible time, and shall furnish each Holder desiring to sell Underwriter's
Securities such number of prospectuses as shall reasonably be requested.
(2) The Company shall pay all costs (excluding fees and
expenses of Holders' counsel and any underwriting discounts or selling fees,
expenses or commissions), fees and expenses in connection with any registration
statement filed pursuant to Sections 7(b) and 7(c) hereof including, without
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<PAGE>
limitation, the Company's legal and accounting fees, printing expenses, blue sky
fees and expenses.
(3) The Company will use its best efforts to qualify or
register the Underwriter's Securities included in a registration statement for
offering and sale under the securities or blue sky laws of such states as
reasonably are requested by the Holders, provided that the Company shall not be
obligated to execute or file any general consent to service of process or to
qualify as a foreign corporation to do business under the laws of any such
jurisdiction.
(4) The Company shall indemnify the Holders of the
Underwriter's Securities to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration
statement, but only to the same extent and with the same effect as the
provisions pursuant to which the Company has agreed to indemnify the Underwriter
contained in Section 8 of the Underwriting Agreement.
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<PAGE>
(5) The Holders of the Underwriter's Securities to be sold
pursuant to a registration statement, and their successors and assigns, shall
indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability to which they may become subject under the Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such Holders,
or their successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 8 of the Underwriting Agreement pursuant to which the
Underwriter has agreed to indemnify the Company.
(6) Nothing contained in this Agreement shall be construed
as requiring the Holders to exercise their Underwriter's Warrants prior to the
initial filing of any registration statement or the effectiveness thereof.
(7) The Company shall not be entitled to include any
securities other than the Underwriter's Securities in any registration statement
filed pursuant to Section 7(b) hereof without the prior written consent of the
Holders of the Underwriter's Warrants and Underwriter's Securities representing
a Majority of such securities (assuming exercise of all of the Underwriter's
Warrants).
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<PAGE>
(8) The Company shall furnish to each Holder participating
in the offering and to each underwriter, if any, a signed counterpart, addressed
to such Holder or underwriter of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by each independent
public accountant who has issued a report on the Company's financial statements
included in such registration statement, in each case covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letters, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters, with
respect to events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of securities.
(9) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its
13
<PAGE>
security holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of the Act
and covering a period of at least 12 consecutive months beginning after the
effective date of the registration statement.
(10) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence described below and
any managing underwriter copies of all correspondence between the Commission and
the Company, its counsel or auditors with respect to the registration statement
and permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(11) The Company shall enter into an underwriting agreement
with the managing underwriter selected for such underwriting by Holders holding
a Majority of the Underwriter's Securities requested to be included in such
14
<PAGE>
underwriting, provided, however that such managing underwriter shall be
reasonably acceptable to the Company, except that in connection with an offering
for which the Holders have piggyback rights, the Company shall have the sole
right to select the managing underwriter or underwriters. Such underwriting
agreement shall be satisfactory in form and substance to the Company, a Majority
of such Holders (in respect of a registration under Section 7(b) only) and such
managing underwriter, and shall contain such representations, warranties and
covenants by the Company and such other terms as are customarily contained in
agreements of that type used by the managing underwriter. The Holders shall be
parties to any underwriting agreement relating to an underwritten sale of their
Underwriter's Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such Holders.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
e. Further Registrations. The Company will cooperate with the
---------------------
Holders of the Underwriter's Warrants and Underwriter's Securities in preparing
and signing any registration statement, in addition to the registration
statements discussed above, required in order to sell or transfer the
Underwriter's
15
<PAGE>
Securities and will supply all information required therefor, but such
additional registration statement expenses will be prorated between the Company
and the Holders of the Underwriter's Warrants and Underwriter's Securities
according to the aggregate sales price of the securities being issued. The
provisions of Section 7(d) other than subsection (2) shall apply to any such
registration statement.
8. Adjustments to Purchase Price and Number of Securities.
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(a) Computation of Adjusted Purchase Price. Except as
--------------------------------------
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances
referred to in Section 8(g) hereof), including shares held in the Company's
treasury, for a consideration per share less than the greater of the Purchase
Price in effect immediately prior to the issuance or sale of such shares or the
"Market Price" (as defined in Section 8(a)(6) hereof) per share of Common Stock
on the date immediately prior to the issuance or sale of such shares, or without
consideration, then forthwith upon any such issuance or sale, the Purchase Price
shall (until another such issuance or sale) be reduced to the price (calculated
to the nearest full cent) determined by dividing (1) the product of (a) the
Purchase Price in effect immediately before such issuance or sale and (b) the
sum of (i) the total number of shares of Common
16
<PAGE>
Stock outstanding immediately prior to such issuance or sale, and (ii) the
number of shares determined by dividing (A) the aggregate consideration, if any,
received by the Company upon such sale or issuance, by (B) the greater of (x)
the Market Price, and (y) the Purchase Price, in effect immediately prior to
such issuance or sale; by (2) the total number of shares of Common Stock
outstanding immediately after such issuance or sale provided, however, that in
no event shall the Purchase Price be adjusted pursuant to this computation to an
amount in excess of the Purchase Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock, as provided by Section 8(c) hereof.
For the purposes of this Section 8, the term "Purchase Price" shall
mean the allocated Purchase Price of the Common Stock forming a part of the
Underwriter's Securities set forth in Section 6 hereof, as adjusted from time to
time pursuant to the provisions of this Section 8. For the purposes of any
computation to be made in accordance with this Section 8(a), the following
provisions shall be applicable:
(1) In case of the issuance or sale of shares of Common
Stock for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by the
Company for
17
<PAGE>
subscription, the subscription price, or, if such securities shall be sold to
underwriters or dealers for public offering without a subscription offering, the
initial public offering price) before deducting therefrom any compensation paid
or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services, or any expenses
incurred in connection therewith.
(2) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company) of shares of Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
value of such consideration as determined in good faith by the Board of
Directors of the Company.
(3) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of stockholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
(4) The reclassification of securities of the Company other
than shares of Common Stock into securities including
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<PAGE>
shares of Common Stock shall be deemed to involve the issuance of such shares of
Common Stock for a consideration other than cash immediately prior to the close
of business on the date fixed for the determination of security holders entitled
to receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in Section 8(a)(2).
(5) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares of Common Stock issued
or issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights, warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(6) As used herein in the phrase "Market Price" at any date
shall be deemed to be the last reported sale price, or, in the case no such
reported sale takes place on such day, the average of the last reported sales
prices for the last three (3) trading days, in either case as officially
reported by the principal securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, the average closing bid price as
furnished by the NASD through the NASD Automated Quotation System ("NASDAQ") or
similar organization if NASDAQ is no longer reporting such information, or if
the Common
19
<PAGE>
Stock is not quoted on NASDAQ, as determined in good faith by resolution of the
Board of Directors of the Company, based on the best information available to
it.
(b) Options, Rights, Warrants and Convertible and Exchangeable
----------------------------------------------------------
Securities. Except in the case of the Company issuing rights to subscribe for
- ----------
shares of Common Stock distributed to all the stockholders of the Company and
Holders of Underwriter's Warrants pursuant to Section 8(i) hereof, if the
Company shall at any time after the date hereof issue options, rights or
warrants to purchase shares of Common Stock, or issue any securities convertible
into or exchangeable for shares of Common Stock (other than the issuances
referred to in Section 8(g) hereof), (i) for a consideration per share less than
(a) the Purchase Price in effect immediately prior to the issuance of such
options, rights or warrants, or such convertible or exchangeable securities or
(b) the Market Price, or (ii) without consideration, the Purchase Price in
effect immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making a computation in accordance with the
provisions of Section 8(a) hereof, provided that:
(1) The aggregate maximum number of shares of Common Stock
issuable under such options, rights or warrants shall be deemed to be issued and
outstanding at the time such options,
20
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rights or warrants were issued, and for a consideration equal to the minimum
purchase price per share provided for in such options, rights or warrants at the
time of issuance, plus the consideration (determined in the same manner as
consideration received on the issue or sale of shares in accordance with the
terms of the Underwriter's Warrants), if any, received by the Company for such
options, rights or warrants; provided, however, that upon the expiration or
other termination of such options, rights or warrants, if any thereof shall not
have been exercised, the number of shares of Common Stock deemed to be issued
and outstanding pursuant to this Section 8(b)(1) (and for the purposes of
Section 8(a)(5) hereof) shall be reduced by such number of shares as to which
options, warrants and/or rights shall have expired or terminated unexercised,
and such number of shares shall no longer be deemed to be issued and
outstanding, and the Purchase Price then in effect shall forthwith be readjusted
and thereafter be the price which it would have been had adjustment been made on
the basis of the issuance only of shares actually issued or issuable upon the
exercise of those options, rights or warrants as to which the exercise rights
shall not be expired or terminated unexercised.
(2) The aggregate maximum number of shares of Common Stock
issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities, and for a consideration equal to the consideration
(determined in the same
21
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manner as consideration received on the issue or sale of shares of Common Stock
in accordance with the terms of the Underwriter's Warrants) received by the
Company for such securities, plus the minimum consideration, if any, receivable
by the Company upon the conversion or exchange thereof; provided, however, that
upon the termination of the right to convert or exchange such convertible or
exchangeable securities (whether by reason or redemption or otherwise), the
number of shares deemed to be issued and outstanding pursuant to this Section
8(b)(2) (and for the purpose of Section 8(a)(5) hereof) shall be reduced by such
number of shares as to which the conversion or exchange rights shall have
expired or terminated unexercised, and such number of shares shall no longer be
deemed to be issued and outstanding and the Purchase Price then in effect shall
forthwith be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of the shares actually
issued or issuable upon the conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange rights shall not
have expired or terminated unexercised.
(3) If any change shall occur in the price per share
provided for in any of the options, rights or warrants referred to in Section
8(b)(1), or in the price per share at which the securities referred to in
Section 8(b)(2) are convertible or exchangeable, such options, rights or
warrants or conversion or exchange rights, as the case may be, shall be deemed
to have
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<PAGE>
expired or terminated on the date when such price change became effective in
respect of shares not theretofore issued pursuant to the exercise or conversion
or exchange thereof, and the Company shall be deemed to have issued upon such
date new options, rights or warrants or convertible or exchangeable securities
at the new price in respect of the number of shares issuable upon the exercise
of such options, rights or warrants or the conversion or exchange of such
convertible or exchangeable securities.
(c) Subdivision and Combination. In case the Company shall at
---------------------------
any time issue any shares of Common Stock in connection with a stock dividend in
shares of Common Stock or subdivide or combine the outstanding shares of Common
Stock, the Purchase Price shall forthwith be proportionately decreased in the
case of a stock dividend or a subdivision or increased in the case of
combination.
(d) Adjustment in Number of Securities. Upon each adjustment of
----------------------------------
the Purchase Price pursuant to the provisions of this Section 8, the number of
Underwriter's Securities issuable upon the exercise of the Underwriter's Warrant
shall be adjusted to the nearest whole share by multiplying a number equal to
the Purchase Price in effect immediately prior to such adjustment by the number
of Underwriter's Securities issuable upon exercise of the Underwriter's Warrants
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Purchase Price.
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<PAGE>
(e) Definition of Common Stock. For the purpose of this
--------------------------
Agreement, the term "Common Stock" shall mean the class of stock designated as
Common Stock in the Articles of Incorporation, of the Company as it may be
amended as of the date hereof.
(f) Reclassification, Merger or Consolidation. The Company will
-----------------------------------------
not merge, reorganize or take any other action which would terminate the
Underwriter's Warrants without first making adequate provision for the
Underwriter's Warrants. In case of any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value to no par
value, or from nor par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or change of the outstanding
Common Stock except a change as a result of a subdivision or combination of such
shares or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation or other entity of the property of the Company
as an entirety, the Holders of each Underwriter's Warrant then outstanding or to
be outstanding shall have the right thereafter (until the expiration of such
Underwriter's Warrant) to purchase, upon exercise of such Underwriter's Warrant,
the kind and number of shares of stock and other securities and property
receivable upon such
24
<PAGE>
reclassification, change, consolidation, merger, sale or conveyance as if the
Holders were the owner of the shares of Common Stock underlying the
Underwriter's Warrants immediately prior to any such events at a price equal to
the product of (x) the number of shares issuable upon exercise of the
Underwriter's Warrants and (y) the Purchase Price in effect immediately prior to
the record date for such reclassification, change, consolidation, merger, sale
or conveyance, as if such Holders had exercised the Underwriter's Warrants. In
the event of a consolidation, merger, sale or conveyance of property, the
corporation formed by such consolidation or merger, or acquiring such property,
shall execute and deliver to the Holders a supplemental underwriter's warrant
agreement to such effect. Such supplemental underwriter's warrant agreement
shall provide for adjustments which shall be identical to the adjustment
provided for in this Section 8. The provisions of this Section 8(f) shall
similarly apply to successive consolida tions or mergers.
(g) No Adjustment of Purchase Price in Certain Cases. No
------------------------------------------------
adjustment of the Purchase Price shall be made:
(1) Upon the issuance or sale of (i) the Underwriter's
Warrants or the securities underlying the Underwriter's Warrants, (ii) the
securities sold pursuant to the Initial Public Offering, (iii) the shares
issuable pursuant to the
25
<PAGE>
options, warrants, rights, stock purchase agreements or convertible or
exchangeable securities outstanding or in effect on the date hereof as described
in the prospectus relating to the Initial Public Offering, (iv) up to an
aggregate of 500,000 shares of Common Stock issuable pursuant to the Company's
stock plans, described in such prospectus or subsequently adopted by the
Company.
(2) If the amount of said adjustments shall aggregate less
than two ($.02) cents for one (1) share of Common Stock; provided, however, that
in such case any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so carried
forward, shall aggregate at least two ($.02) cents for one (1) share of Common
Stock.
9. Exchange and Replacement of Warrant Certificates. Each
------------------------------------------------
Underwriter's Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holders at the principal executive office of
the Company, for a new Underwriter's Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of
Underwriter's Securities in such denominations as shall be designated by the
Holders thereof at the time of such surrender.
26
<PAGE>
10. Loss, Theft etc. of Certificates Upon receipt by the Company of
---------------------------------
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Underwriter's Warrant Certificate, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Underwriter's Warrant Certificates, if
mutilated, the Company will make and deliver a new Underwriter's Warrant
Certificate of like tenor, in lieu thereof
11. Elimination of Fractional Interests. The Company shall not be
-----------------------------------
required to issue certificates representing fractions of shares of Common Stock
and/or Redeemable Warrants upon the exercise of the Underwriter's Warrants, nor
shall it be required to issue scrip or pay cash in lieu of fractional interests;
provided, however, that if a Holder exercises all Underwriter's Warrants held of
record by such Holder the fractional interests shall be eliminated by rounding
any fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
12. Reservation and Listing of Securities. The Company shall at all
-------------------------------------
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Underwriter's
Warrants, such number of shares of
27
<PAGE>
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof and the exercise of the Redeemable Warrants. The Company
covenants and agrees that, upon exercise of Underwriter's Warrants and payment
of the Purchase Price therefor, all the shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Underwriter's Warrants shall be outstanding, the
Company shall use its best efforts to cause the Common Stock to be listed
(subject to official notice of issuance) on all securities exchanges on which
the Common Stock issued to the public in connection herewith may then be listed
or quoted.
13. Notices to Underwriter's Warrant Holders. Nothing contained in
----------------------------------------
this Agreement shall be construed as conferring upon the Holders the right to
vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however, at
any time prior to the expiration of the Underwriter's Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of
28
<PAGE>
current or retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) calendar days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or
29
<PAGE>
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
14. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
If to the registered Holders of the Underwriter's Warrants, to the
address of such Holders as shown on the books of the Company; or
(b) If to the Company to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Holders.
15. Supplements and Amendments. The Company and the Underwriter may
--------------------------
from time to time supplement or amend this Agree ment without the approval of
any Holders of Underwriter's Warrant Certificates (other than the Underwriter)
in order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Underwriter may deem necessary or desirable and which
the Company and the Underwriter deem shall not adversely affect the interests of
the Holders of
30
<PAGE>
Underwriter's Warrant Certificates.
16. Successors. All the covenants and provisions of this Agreement
----------
shall be binding upon and inure to the benefit of the Company, the Underwriter,
the Holders and their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of
-----------
business on _____________, 2001. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination until the
close of business on the expiration of any applicable statue of limitations.
18. Governing Law; Submission to Jurisdiction. This Agreement and
-----------------------------------------
each Underwriter's Warrant Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of said state without giving effect to
the rules of said state governing the conflicts of laws. The Company, the
Underwriter and the Holders hereby agree that any action, proceeding or claim
against it arising out of, or relating in any way to, this Agreement shall be
brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and irrevocably submits
to such jurisdiction, which jurisdiction shall be exclusive. The Company, the
Underwriter and the Holders hereby irrevocably waive any
31
<PAGE>
objection to such exclusive jurisdiction or inconvenient forum. Any such process
or summons to be served upon any of the Company, the Underwriter and the Holders
(at the option of the party bringing such action, proceeding or claim) may be
served by transmitting a copy thereof, by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 13 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or claim.
19. Entire Agreement; Modification. This Agreement (including the
------------------------------
Underwriting Agreement, to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and thereof. Subject to Section 14, this Agreement may
not be modified or amended except by a writing duly signed by the Company and
the Holders of a Majority in Interest of the Underwriter's Securities (for this
purpose, treating all then outstanding Underwriter's Warrants as if they had
been exercised).
20. Severability. If any provision of this Agreement shall be held to
------------
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
32
<PAGE>
21. Captions. The caption headings of the Sections of this Agreement
--------
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holders of the Underwriter's Warrant
Certificates or Underwriter's Securities any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Underwriter and any other Holders of
the Underwriter's Warrant Certificates or Underwriter's Securities.
23. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
24. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the Company, the Underwriter and their respective successors
and assigns and the Holders from time to time of the Underwriter's Warrant
Certificates or any of them.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
COMMODORE HOLDINGS LIMITED
By:__________________________________________
Jeffrey Binder, Chairman of the Board
FIRST HANOVER SECURITIES, INC.
By:__________________________________________
Name:
Title:
34
<PAGE>
EXHIBIT A
---------
COMMODORE HOLDINGS LIMITED
--------------------------
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AND MAY NOT BE OFFERED FOR SALE OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR
(ii) AN OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING _______________, 1997 THROUGH
5:00 P.M., NEW YORK TIME ON ______________, 2001
No. UW-1 50,000 Warrants
This Warrant Certificate certifies that First Hanover Securities,
Inc., or registered assigns, is the registered holder of 50,000 Warrants to
purchase initially, at any time from ______________, 1996, until 5:00 p.m., New
York time on ___________, 2001 (the "Expiration Date"), up to 50,000 units
("Units") each Unit comprised of one share of Commodore Holdings Limited's (the
"Company") Common Stock, $.01 par value (the "Common Stock") and one Redeemable
Warrant exercisable to purchase one half share of Common Stock at $6.00 per
share(the "Common Stock Warrants"), at a purchase price of $6.90 per Unit (the
"Purchase Price"), upon the surrender of this Warrant Certificate and payment of
the applicable Purchase Price at an office or agency of the Company, but subject
<PAGE>
to the conditions set forth herein and in the underwriter's warrant agreement,
dated as of ______________, 1996, by and between the Company and First Hanover
Securities, Inc. (the "Underwriter") (the "Warrant Agreement"). Payment of the
Purchase Price shall be made by certified or cashier's check or money order
payable to the order of the Company or the surrender of that portion of the
Underwriter's Warrants having equivalent value (as determined in accordance with
the provisions of paragraph 3(ii) of the Underwriter's Warrant Agreement).
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement between
the Company and the Underwriter, which Warrant Agreement is hereby incorporated
by reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Purchase Price and the type and/or number of the Company's securities
issuable upon the exercise of this Warrant, may, subject to certain conditions,
be adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the Purchase Price
and the number and/or type of securities issuable upon the exercise of the
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
36
<PAGE>
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this
_____ day of _____________, 1996.
COMMODORE HOLDINGS LIMITED
By:________________________________
Jeffrey Binder,
Chairman of the Board
ATTEST:
<PAGE>
By:_________________________
Name:
Title:
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED___________________________
hereby sells, assigns and transfers unto __________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Warrant Certificate on the books of Commodore
Holdings Limited, with full power of substitution.
Dated:____________________
Signature_____________________
(Signature must conform in all respects to
the name of holder as specified on the face of the Warrant Certificate.)
________________________________
(Insert Social Security or Other
Identifying Number of Holders)
<PAGE>
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase Units and herewith tenders in payment for
such securities a certified or cashier's check or money order payable to the
order of Commodore Holdings Limited in the amount of $______, all in accordance
with the terms hereof. The undersigned requests that certificates for such
securities be registered in the name of ___________________________ whose
address is _________________________ and that such certificates be delivered to
_____________________________________ whose address is
_________________________________________________________________________.
Dated:___________________
Signature_______________________
(Signature must conform in all respects
to the name of holder as specified on the face of the Warrant Certificate.)
__________________________________
(Insert Social Security or Other
Identifying Number of Holders)
<PAGE>
Exhibit 10j
CRUISE SHIP
MANAGEMENT SERVICES AGREEMENT
-----------------------------
PART I
THIS AGREEMENT made as of the ____ day of July, 1995, and effective as of
the "Effective Date", by and between New Commodore Cruise Line Limited, Owner by
Demise, ("Owner") and INTERNATIONAL MARINE CARRIERS, INC. ("Manager");
W I T N E S S E T H :
WHEREAS, Owner has bareboat chartered the oceangoing vessel described in
Attachment (I), (the "Vessel"); and
WHEREAS, Owner proposes to operate the Vessel in international commerce;
and
WHEREAS, Manager is engaged in the business of providing vessel management
services; and
WHEREAS, Owner is desirous of utilizing the services of Manager in
connection with the operation of the Vessel, and Manager desires to render such
services, all upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, Owner and Manager agree as follows:
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 1
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
1.01 Definitions. As used herein, the following terms shall have the
------------
respective meanings indicated below:
Agreement. The term "Agreement" shall mean this Agreement and all
----------
amendments and modifications thereof made from time to time in writing and
subscribed to by Owner and Manager.
Budget. The term "Budget" shall mean, collectively or separately,
-------
the Pre-Operating Budget, the Initial Operating Budget and the Operating
Budgets.
Class. The term "Class" or "In Class" shall mean all standards,
------
requirements and recommendations established or which may be promulgated from
time to time by the Vessel's Classification Society to maintain the vessel in
the highest Classification for vessels of the Vessel's age or service.
Core Maritime Staff. The term "Core Maritime Staff" shall have the
--------------------
meaning set forth in Section 3.04.2.
Gross Maritime Payroll. The term "Gross Maritime Payroll" shall
-----------------------
mean the direct salaries and wages paid to, or accrued for the benefit of, any
Management Staff, Crew or Service Employees together with all fringe benefits
payable to, or accrued for the benefit of such Management Staff, Crew or Service
Employee, including employer's contributions required pursuant to any Legal
Requirements, or other employment taxes, pension fund contributions, group life
and accident and health insurance premiums, and profit sharing, retirement,
disability and other similar benefits.
Effective Date. The term "Effective Date" shall mean the dates that
---------------
the Owner notifies the Manager that the Vessel shall be delivered by the Seller
to Owner or redelivered to Owner by any bareboat charterer or that Owner shall
have requested Manager to render pre-delivery assistance and as set forth in
Attachment "I".
Executive Staff. The term "Management Staff" shall mean the Vessel
----------------
Master, Mate, Chief Engineer, First Assistant, Hotel Manager and Cruise Director
and any other executives of the Vessel as designated by the Owner/Manager.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 2
<PAGE>
Impositions. The term "Impositions" shall mean all taxes,
------------
assessments, water, sewer or other similar rents, rates and charges, levies,
fines, license fees, permit fees, inspection fees and other authorization fees
and charges, which at any time may be assessed, levied, confirmed or imposed on
the Vessel or the operation thereof by any flag or port state, or any other
competent authority.
Initial Operating Budget. The term "Initial Operating Budget" shall
-------------------------
mean the Operating Budget established for the initial Operating Year, which
begins with the Operating Date and ends on December 31 of the same year.
Initial Operating Year. The term "Initial Operating Year" shall be
-----------------------
the period beginning on the Operating Date and ending on December 31 of the same
year.
Initial Term. The term "Initial Term" shall have the meaning set
-------------
forth in Section 2.0.1.
Legal Requirements. The term "Legal Requirements" shall mean all
-------------------
applicable flag state, port state and international public laws, statues,
ordinances, orders, rules, regulations, permits, licenses, authorizations,
directions and requirements of all governments and government authorities,
including any Classification Society acting pursuant to the authority of such
government, which now or hereafter may be applicable to the Cruise and the
operation thereof, including without limitation, those relating to safety,
environmental and health.
Management Fee. The term "Management Fee" shall have the meaning set
---------------
forth in Section 6.01.
Manager. The term "Manager" shall mean INTERNATIONAL MARINE
--------
CARRIERS, INC.
Manager Denial. The term "Manager Denial" shall have the meaning
---------------
set forth in Section 11.01.
Major Capital Improvements. The term "Major Capital Improvements"
---------------------------
shall mean any program of capital improvements, renovation or refurbishing
involving an addition to the Vessel, or renovation or refurbishing designed to
substantially upgrade or change the nature or image of the Vessel or to comply
with Legal Requirements (as opposed to a renovation or refurbishing which takes
place as part of the normal or cyclical upkeep of the Vessel). Major Capital
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 3
<PAGE>
Improvements will be undertaken only at the request of Owner, or as required by
law.
Maritime Staff. The term "Maritime Staff" shall include the
---------------
Management Staff, Crew and the Service Employees employed by INTERNATIONAL
MARINE CARRIERS, INC. on behalf of the Owner.
Operating Date. The term "Operating Date" shall mean the date upon
---------------
which the Vessel is put into service or upon Closing of Sale, whichever occurs
first.
Operating Budget. The term "Operating Budget" shall mean the budget
-----------------
established by the parties for the services to be managed by the Manager. Such
budget shall be established annually as set forth herein and become effective on
January 1 of each Operating Year during the term of this Agreement, except if
the Effective Date shall not fall on January 1, it shall become effective as of
the Effective Date.
Operating Equipment. The term "Operating Equipment" shall mean all
--------------------
related equipment used in, or held in storage for use in (or if the context so
dictates, required in connection with), the maritime operation of the Vessel.
Operating Period. The term "Operating Period" shall mean the period
-----------------
beginning with the Operating Date and ending upon the expiration or termination
of this Agreement.
Operating Supplies. The term "Operating Supplies" shall mean spare
-------------------
parts, stores, supplies and other such consumable items used in, or held in
storage for use in (or if the context so dictates, required in connection with),
the maritime operation of the Vessel, including fuel and lube oils, tools,
cleaning material and other items with respect to the Vessel.
Operating Year. The term "Operating Year" shall mean the calendar
---------------
year.
Owner. The term "Owner" shall mean the New Commodore Cruise Line
------
Limited (NCCL), or the successor to Owner's interest pursuant to this Agreement.
Pre-Operating Budget. The term "Pre-Operating Budget" shall mean the
---------------------
budget established for the Manager's services and operations occurring during
the Pre-Operating Period.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 4
<PAGE>
Pre-Operating Period. The term "Pre-Operating Period" shall mean the
---------------------
period beginning with the Effective Date and ending with the Operating Date.
Registry. The term "Registry" shall mean the flag state under the
--------
laws of which the Vessel shall be registered by Owner.
Renewal Term. The term "Renewal Term" shall have the meaning set
-------------
forth in Section 2.02.
Service Employees. The term "Service Employees" shall mean maritime
------------------
and hotel service employees including deckhands, engine room attendants, and
assistants to the Executive staff, hotel, casino, food and beverage, cruise
staff and gift shop personnel.
Vessel. The term "Vessel" shall mean the Vessel described in
-------
Attachment I which as of the Operating Date shall be owned or under bareboat
charter to Owner.
1.02 References. Except as otherwise specifically indicated, all
-----------
references to Article, Section and Subsection numbers refer to Articles,
Sections and Subsections of this Agreement, and all references to Exhibits refer
to the Exhibits attached hereto. The words "herein", "hereof", "hereunder",
"hereinafter" and words of similar import refer to this Agreement as a whole
and not to any particular Section or Subsection hereof. The terms "include" and
"including" shall each be construed as if followed by the phrase "without being
limited to". Unless expressly stated to the contrary, reference to any Section
includes the following Subsections thereof.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 5
<PAGE>
ARTICLE II
----------
TERM - RENEWAL TERMS
--------------------
2.0 The Term. The Initial Term of this Agreement shall begin
---------
upon the Operating Date and shall remain in force for two (2) years from the
Operating Date, subject to Owner's renewal options under Section 2.01, or
earlier termination as provided hereafter.
2.01 Renewal Terms. Owner shall have the right to extend the term
--------------
of this Agreement for successive periods of one (1) year each commencing on each
anniversary of the Initial Term (the "Renewal Term"), upon the same terms and
conditions as are herein contained. Owner may exercise its rights of renewal by
written notice to Manager, not later than ninety (90) days prior to the end of
the Initial Term or each Renewal Term. The phrase "term of this Agreement", as
used herein, shall mean the Initial Term and any Renewal Term then in effect
under this Section 2.01.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 6
<PAGE>
ARTICLE III
-----------
VESSEL OPERATIONS
-----------------
3.01 Manager's Authority and Responsibility. Manager shall
---------------------------------------
manage and operate the Vessel, including the hotel department and the functions
set out in Clause 3.03 hereof, pursuant to the terms of this Agreement, as a
cruise vessel offering the highest standards for comparable vessels in the
standard rate market, in full compliance with all Class and Legal Requirements.
In connection therewith, Manager shall (i) implement operating policy, standards
of operation, quality of service and maintenance requirements of the Vessel; and
(ii) hire, train and supervise all marine and hotel-related employees. Owner
agrees that it will cooperate reasonably with Manager to permit and assist
Manager in carrying out its duties hereunder.
3.02 General Operations. Manager will establish internal
-------------------
controls and administrative procedures, with approval of Owner, sufficient to
manage and operate the Vessel within budget and in accordance with this
Agreement and standards appropriate to the size and service of the Vessel.
Provided, however, that the Manager in the performance of its management
responsibilities under this Agreement shall be entitled to have regard to their
overall responsibility in relation to the Vessel and all vessels as may from
time to time be entrusted to their management and in particular, but without
prejudice to the generality of the foregoing, the Manager shall be entitled in
the event of emergent circumstances to allocate available supplies, manpower
and services in such manner as in the prevailing circumstances the Manager in
its absolute discretion considers to be fair and reasonable.
3.03 Functions. Subject to the terms and conditions herein
---------
provided, during the period of this Agreement, the Manager shall carry out, as
"Agents" for and on behalf of the Owner and the Vessel, such of the following
-----------
functions in respect of the Vessel:
p Crewing (see clause 3.04)
p Technical Management (see clause 3.05.1)
p Operation (see clause 3.05.2)
p Insurance (see Article V)
p Hotel Management (see clause 3.05.3)
p Food and Beverage (see clause 3.05.4)
p Purchasing Provisions, Stores, Supplies and Spares (see
clause 3.05.5)
p Bunkering (see clause 3.05.6)
p Accounting (see clause 3.05.7)
p Entertainment (see clause 3.05.8)
p Onboard Concessions (see clause 3.05.9)
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 7
<PAGE>
p Casino (see clause 3.05.10)
p Shore Excursions (see clause 3.05.11)
p Chartering (see clause 3.05.12)
p Sale or Purchase of Vessel (see clause 3.05.13)
3.03.1 Compliance. Throughout the Operating Period, Manager
-----------
shall maintain the Vessel in class and operate the Vessel in accordance with
---------------------------------------------------
applicable Legal Requirements.
3.03.2. Operating Procedures and Manuals. In order to
---------------------------------
implement this Article III of the Agreement, Manager and Owner shall endeavor
from time to time to formulate written operating procedures which shall be
incorporated in an operating manual or manuals for the Vessel, but nothing
contained in the Clause 3.03.2 shall be deemed to affect the respective rights
and obligations of the Manager and Owner under this Agreement.
3.03.3. Reporting Procedures. Unless otherwise agreed by the
--------------------
Owner and Manager, the Manager shall maintain three (3) shoreside functions for
reporting responsibility:
Marine Department Management:
-----------------------------
Crewing (Marine)
Technical Management
Operations
Purchasing (Marine Stores and Supplies)
Bunkering
Maintenance & Repairs
Hotel Department Management:
----------------------------
Hotel Management
Food and Beverage
Purchasing (Provisions and Hotel Dept. Supplies)
On Board Concessions
On Board Coordination of Shore Excursions & Entertainment
Business Department Accounting & Controls:
------------------------------------------
Accounting for On Board Activities
Payroll
Insurance
Labor relations
Casino
Claims
Chartering
Sales & Purchase
The Marine Department function and Hotel Department function, who shall not be
employed by the Owner, shall report to Owner's Vice President of Operations, who
if presently an employee of the Manager shall be seconded to and be an employee
of the Owner. The Business Department function shall report to Owner's Chief
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Cruise Ship Management Services Agreement July, 1995 - Page 8
<PAGE>
Financial Officer, who shall not be an employee of the Manager. The Vice
President of Operations and the Chief Financial Officer shall report to Owner's
Chief Executive Officer.
3.04 Crewing.
--------
3.04.1 General. Manager shall on behalf of the Owner, hire,
--------
discharge, promote and supervise the Management Staff of the Vessel, and shall
supervise, through said Management Staff, the hiring, discharging, promotion and
work of all Officers, Managers, Crew and Service Employees. All members of the
Maritime and Hotel Staff shall be properly qualified for their positions, and
the compensation payable to the Maritime and Hotel Staff shall be comparable to
the compensation paid to the Maritime and Hotel employees of other comparable
vessels, taking into account the location, cruise itinerary, size of the Vessel,
and character of services offered, it being understood that the Vessel will at
no time be placed at a competitive disadvantage with respect to the hiring and
maintaining of its Maritime and Hotel Staff. In this regard, Manager will:
(i) establish screening, hiring, training and supervisory
procedures with respect to the Maritime and Hotel Staff so that the
Vessel is operated in accordance with the highest standards;
(ii) arrange that the Vessel is adequately staffed and that all
Maritime and Hotel staff are properly trained and licensed or
certified, prior to their employment as Maritime and Hotel Staff and
at all times during their employment as such.
(iii) arrangement of transportation of the Crew, including
reparation;
3.04.2 Core Staffing of Vessel. The entire Management Staff
------------------------
and a contingent of the Service Employees will be assigned to the Vessel and
shall be known as the "Core Maritime Staff".
3.04.3 Maritime and Hotel Staff Uniforms and Apparel. Owner
----------------------------------------------
will design and Manager will procure, on behalf of Owner, all Maritime and Hotel
Staff uniforms and other apparel, the cost of which shall be included in the
Pre-Operating, Initial Operating and Operating Budgets.
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Cruise Ship Management Services Agreement July, 1995 - Page 9
<PAGE>
3.04.4 Owner as Employer. All Maritime and Hotel Staff of the
------------------
Vessel shall be employees of the Owner. Manager shall be responsible, however,
for payment of wages on board the Vessel. Owner shall be responsible for payment
of the remainder of the Gross Maritime Payroll and accounting for all Gross
Maritime Payroll to such employees.
3.04.5 Labor Relations. Manager shall negotiate with any
----------------
Agencies or labor unions representing Maritime and Hotel Staff, and any
collective bargaining agreement or labor contract resulting therefrom will be
executed by Manager on behalf of the employer. To the extent that any Maritime
and Hotel Staff are included in, or covered by, any pension and/or retirement,
disability, health, welfare or other benefit plans pursuant to a collective
bargaining agreement or labor contract, Owner, as the employer of such
employees, shall be solely responsible for the administration of any plan
contributions and/or other obligations or liabilities arising thereunder.
3.04.6 Safety Program. Manager will institute, subject to
---------------
Owner's approval, a comprehensive safety program covering all aspects of Vessel
operations. The safety program will require that the Manager:
(a) implement a comprehensive safety manual containing policies
and procedures addressing all aspects of Vessel operations. The safety manual
and any material changes thereto will be reviewed and approved by Owner prior to
implementation;
(b) provide Owner with a Ship's Station Bill;
(c) conduct at a minimum monthly safety meetings and drills
involving all Maritime Staff and provide monthly reports to Owner concerning
same;
(d) properly train all Maritime and Hotel Staff in fire-fighting
and rescue techniques, and conduct fire and rescue drills as required by the
United States Coast Guard;
(e) arrange for all Maritime and Hotel Staff to be adequately
trained in first aid treatment, including CPR;
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Cruise Ship Management Services Agreement July, 1995 - Page 10
<PAGE>
(f) implement a comprehensive Drug and Alcohol Policy, including
random and post-accident testing to conform with Department of Transportation
guidelines; and
(g) maintain complete written records of all employee safety
training; and
(h) in addition to normal procedures, conduct at least
quarterly, safety, health and sanitary audit of the Vessel and provide the
results in writing to Owner within five (5) business days of same audit.
3.04.7 Owner's Right to Hire or Discharge Employees. Owner
--------------------------------------------
reserves the right, in its sole discretion, to hire or discharge any employees
as set forth in Section 3.04.
3.05 Additional Responsibilities of Manager. Manager shall,
---------------------------------------
as agent of Owner, perform the following additional services, for the marine
aspects of the Vessel during the Operating Period:
(a) Advise Owner relative to, administer and supervise contracts
for the furnishing of porter, service and maintenance and other service to the
Vessel as shall be reasonably necessary for the proper marine and hotel
operation and maintenance thereof;
(b) Advise Owner relative to, administer and supervise maritime
and hotel repairs, decorations, revisions, alterations and improvements to the
Vessel as shall be reasonably necessary for the proper maintenance thereof in
good order, condition and repair;
(c) Advise Owner as to and implement the purchase of such
Operating Equipment and Operating Supplies as shall be reasonably necessary for
the proper operation of the Vessel and Hotel Services and coordinate and
supervise all necessary installations;
(d) Apply for, and use its best efforts to obtain and maintain,
all licenses and permits required of the Owner or Manager in connection with the
operation and management of the Vessel; Owner agrees to provide all requisite
information not within the knowledge of the Manager and execute and deliver any
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Cruise Ship Management Services Agreement July, 1995 - Page 11
<PAGE>
and all applications and other documents as shall be reasonably required and to
otherwise cooperate, in all reasonable respects, with Manager in applying for,
obtaining and maintaining such licenses and permits;
(e) Use its best efforts to do all such acts and things in and
about the Vessel as shall be reasonably necessary to comply with all Legal
Requirements, class requirements, and the terms of all insurance policies, and
to take legal and/or other action to discharge any lien, encumbrance or charge
on or with respect to the Vessel and the operation thereof; and Owner to
reimburse Manager for such expenses incurred and to provide Manager with any
collateral necessary to bond any claim except to the extent such is promptly
obtainable from Owner's Protection & Indemnity or other interested insurer.
3.05.1 Technical Management
--------------------
The Manager shall provide technical management which includes, but
is not limited to, the following functions:
(i) Provision of competent personnel to supervise the maintenance
and general efficiency of the Vessel;
(ii) Arrangement and supervision of drydockings, repairs,
alterations and the upkeep of the Vessel to the standards required by the Owner
provided that the Manager shall be entitled to incur the necessary expenditure
to provide for the Vessel to comply with all requirements and recommendations of
the Classification Society, and with the laws and regulations of the flag state
and of the places where she trades;
(iii) Arrangement of the supply of necessary stores, spares and
lubricating oil;
(iv) Appointment of surveyors and technical consultants as the
Manager may consider from time to time to be necessary.
3.05.2 Operations
----------
The Manager shall provide Operational Services including handling of
Vessel while in ports by agents, port entrance and clearance, pilots,
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Cruise Ship Management Services Agreement July, 1995 - Page 12
<PAGE>
planning, arranging for and implementation of launch services, consular
approvals and other such services.
3.05.3 Hotel Manager
-------------
The Manager shall provide services normally associated with Hotel
Management, including, purser, stewarding and housekeeping services and
supplies.
3.05.4 Food and Beverage
-----------------
The Manager shall provide Food and Beverage Services and Supplies
including all dining rooms, restaurants, galleys, bars, guest and crew food.
3.05.5 Purchasing
----------
The Manager shall procure as necessary, all materials, stores,
supplies, consumables, provisions, spare parts, fuel, lubes, water, etc., as
might be required to provide and support Vessel and hotel operation (including
associated delivery and handling of same).
3.05.6 Bunkering
---------
The Manager shall arrange all fuels required for vessel propulsion,
auxiliaries and hotel services.
3.05.7 Environmental
-------------
The Manager shall establish procedures for and to implement policies
for the disposal of garbage, sanitary waste and any hazardous material in
accordance with applicable law and regulations; to maintain an oil record book,
and to comply with all prevention and reporting requirements relating to oil and
air pollution.
3.05.8 Entertainment
-------------
At the request and under direction of Owner, the Manager shall carry
out onboard management, coordination and support of entertainment services and
personnel and staff.
3.05.9 On Board Concessions and Subcontractors
---------------------------------------
a) At the request and under the direction of the Owner, the
Manager shall invite proposals for employment of onboard concessionaires and
subcontractors, e.g. caterers, photo, spa, beautician, retail shops, duty free,
amusements, etc. All concessionaires and subcontractors offerings shall be
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 13
<PAGE>
jointly negotiated and approved by Owner and Manager. Owner reserves the right
to select concessionaires and subcontractors.
b) At the request and under the direction of the Owner to
conduct on board management coordination and support of concessionaires and
subcontractors, their operators and staff.
3.05.10 Casino
------
a) At the request and under the direction of the Owner, the
Manager shall invite proposals for casino operations and carry out arrangements
for casino personnel, equipment, machines, supplies, etc.
b) At the request and under the direction of the Owner, to
carry out onboard management, coordination and support of casino operations,
personnel and staff, including on board supervision of any casino
concessionaires or subcontractors.
3.05.11 Shore Excursion
---------------
At the request and under the direction of the Owner, the Manager
shall carry out onboard management, coordination and support of shore
excursions.
3.05.12 Chartering and Sales and Purchase Brokerage
-------------------------------------------
The Manager shall, if requested by Owner, provide chartering, sales
and purchasing services which include, but are not limited to, seeking and
negotiating employment and/or sale or purchase of a Vessel and the conclusion
(including the execution thereof) of charter parties or other sale or purchase
contracts relating to the employment or sale or purchase of the Vessel. The
Manager will be entitled to an additional "fee" or "commission" for this
service, but only to the extent that the total fees and commissions payable by
Owner to Manager and any brokers in respect of such transactions do not exceed
customary brokerage fees for similar transactions. To the extent, the Manager
engages any brokers in connection with any charter and/or sale or purchase of a
Vessel, such engagement shall require the prior approval of Owner.
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Cruise Ship Management Services Agreement July, 1995 - Page 14
<PAGE>
3.05.13 Sale or Purchase of Vessel
--------------------------
The Manager shall, in accordance with the Owner's instructions,
supervise the sale or purchase of the Vessel, including the performance of any
sale or purchase agreement, but not negotiation of the same. The Manager will be
entitled to a reasonable hourly rate for this service, according to industry
standards.
3.06 Reimbursements to Manager.
--------------------------
In addition to the Management Fee provided for in Article VI,
Manager shall be entitled to be reimbursed for the following costs and expenses
incurred in rendering services to the Vessel:
(a) All Maritime and Hotel Payroll and related expenses paid by
Manager and in furtherance of Manager's responsibilities and duties hereunder;
(b) Pre-approved expenses paid by Manager to all independent
marine and hotel service entities rendering marine and hotel services and
furnishing supplies to the Vessel.
(c) Reasonable pre-approved expenses of all officers and
employees of the Manager incurred in performing its duties hereunder in
connection with any phase of the operation of the Vessel to the extent such are
not budgeted.
3.06.1 Manager as Agent Only.
----------------------
The Manager shall make all purchases, and enter into all Agreements
and Service Contracts with regard to the Vessel "as Agent only" for the Owner.
---------------
3.07 Compliance with the Flag/Port State.
------------------------------------
Manager and Owner agree that they will cooperate with each other in
order to comply with Flag/port State and with any and all directives of the Flag
State and International Regulatory Agencies. In the event that Manager or Owner
become aware of any grounds for non-compliance or receive notice regarding same,
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 15
<PAGE>
such party agrees to promptly notify the other party hereto, and Manager and
Owner agree to cooperate fully in order to rectify such non-compliance.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 16
<PAGE>
ARTICLE IV
----------
BUDGET
------
4.01 Pre-Operating and Initial Operating Budgets.
--------------------------------------------
The Pre- Operating Budget and the Initial Operating Budget (covering
the initial Operating Year) are attached hereto as Attachments "_____" and
"_____", respectively. By execution of this Agreement, the Pre-Operating Budget
and Initial Operating Budget are hereby approved by Owner and accepted by
Manager.
4.02 Operating Budget.
-----------------
Beginning with the first full Operating Year and continuing
throughout the term of this Agreement, Manager shall submit a proposed Operating
Budget to Owner for Owner's approval. The Operating Budget for a given Operating
Year shall be submitted to Owner no later than September 1st of the preceding
Operating Year. At least thirty (30) days prior to each calendar quarter, the
Manager shall submit to the Owner any proposed revisions or adjustments for such
quarter.
4.03 Approval of Budgets.
--------------------
Owner shall not unreasonably withhold approval of any proposed
Budget submitted to it by Manager. Subject to the foregoing, Owner's decision
regarding the approval or disapproval of all Budgets, in total or by line item,
is final and binding upon Manager.
4.04 Budget Deviations.
------------------
Manager shall at all times comply with the Budget. Expenditures made
by Manager shall not exceed approved Budget amounts on a total basis without the
prior express, written consent of Owner, except in the event of a casualty,
machinery breakdown or other emergent situation requiring Manager's immediate
decision. Manager may, at any time, recommend a revision of any
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Cruise Ship Management Services Agreement July, 1995 - Page 17
<PAGE>
Budget item to Owner and Owner will not unreasonably withhold approval for such
revision. However, if possible, any Budget revision sought by Manager must be
recommended to Owner at least thirty (30) days prior to the date Manager desires
the revision to be effective, with the exception of repairs necessary for the
safe and efficient operation of the Vessel. Owner may revise any Budget as and
when it deems such revision necessary.
4.05 Components of Operating Budgets.
--------------------------------
The Operating Budget shall include Manager's estimate of all
expenses necessary to maintain and operate the Vessel, including Gross Maritime
Payroll, Operating Equipment, Regulatory Survey Requirements, Operating
Supplies, Marine Insurance and Deductible Amounts, Fuel and Lube Oil and Major
Capital Replacements.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 18
<PAGE>
ARTICLE V
---------
INSURANCE
---------
5.01.1 Manager shall procure for the account of Owner, Hull &
Machinery and Protection & Indemnity insurance against injuries to persons or
loss or damage to the Vessel or other property caused in whole or in part by the
Maritime and Hotel Staff and/or Manager, its agents or employees and/or by the
acts or omissions of third parties, and other causes. In addition, Manager shall
procure workers compensation coverage to the extent required by law and any
additional coverages as requested by Owner. In addition, Manager will maintain
any and all other insurances as required and directed by the Owner and listed in
Attachment "II". Manager represents that it has special expertise in ship
management and matters of marine insurance. In connection with the Pre-Operating
Budget, Manager shall propose to Owner any additional forms of insurance cover
that Manager recommends that it procure. In connection with review of the
Operating Budget pursuant to Clause 4.02, Manager shall review the insurances
and applicable deductibles and franchises and recommend any changes the Manager
deems advisable for such insurances.
5.01.2 Changes in Coverage.
--------------------
Owner, by notice to Manager, shall have the right to raise the
minimum amount of insurance to be procured by Manager with respect to the
coverages expressed in the hereinabove Subsection 5.01.1 at the sole discretion
of the Owner.
5.01.3 Requirements.
-------------
All policies of insurance shall be written on an "occurrence" basis,
if possible.
5.02 Policies and Endorsements.
--------------------------
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Cruise Ship Management Services Agreement July, 1995 - Page 19
<PAGE>
5.02.1 Policies.
---------
All insurance provided for under the above Section 5.01 shall be
effected by policies issued by insurers of good reputation and of sound and
adequate financial responsibility. The Manager shall deliver to the Owner
certificates of insurance with respect to all of the polices of insurance so
procured, including existing, additional and renewal policies, and in the case
of insurance about to expire, shall deliver certificates of insurance with
respect to the renewal policies to the other party not less than 30 days after
the respective dates of expiration.
5.02.2 Endorsements.
-------------
All polices of insurance provided for under this Article V shall, in
addition to the requirements of Clause 5.03 hereof, have attached thereto
endorsements to the effect that such policy shall not be canceled or materially
changed without at least 30 days prior written notice to Owner, and shall
contain an "Associated Companies" or similar clause extending the benefit of any
liability policy to Owner's related companies and to the Manager.
5.02.3 Named Insured.
--------------
All policies of insurance required under Subsection 5.01.1 shall be
carried in the name of the Vessel and Owner, and the Manager shall be named as
an additional insured thereunder.
5.03 Waiver of Liability.
--------------------
Neither Manager nor Owner shall assert against the other, and do
hereby waive with respect to each other, or against any other entity or person
named as an additional insured on any policies carried under this Article V, any
claims for any losses, damages, liability or expenses (including attorneys'
fees) incurred or sustained by either of them on account of injury to persons or
damage to property arising out of the ownership, development, construction,
completion, operation or maintenance of the Vessel, to the extent that the same
are covered by the insurance required under this Article V. Each policy of
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Cruise Ship Management Services Agreement July, 1995 - Page 20
<PAGE>
insurance shall contain a specific waiver of subrogation reflecting the
provisions of this Section 5.03, or a provision to the effect that the existence
of the preceding waiver shall not affect the validity of any such policy or the
obligation of the insurer to pay the full amount of any loss sustained.
5.04 Claims.
-------
The Manager, at Owner's direction, shall process and handle all
claims, by maritime staff and as all other non-passenger third party liability
claims arising from the operation of the Vessel and shall appoint attorneys with
the approval of Owner. All passenger claims relative to passage and passage
money to be handled by the Owner. All other passenger claims, including all
liability claims covered by insurance, shall be processed and handled by the
Manager.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 21
<PAGE>
ARTICLE VI
----------
MANAGEMENT FEE
--------------
6.01 Management Fee.
---------------
In consideration of Manager's services during the Operating Period,
Owner shall pay to Manager an approved management fee (the "Management Fee") as
set out in Attachment III hereof. Owner agrees to pay monthly fifty percent
(50%) of the Management Fee, in advance, by the 5th day of each month and the
balance by the 20th day of each month.
6.02 The Manager shall, at no extra cost to the Owner, provide its
own office accommodations, office staff and stationery at the locations set out
in Attachment IV. Without limiting the generality of Clause 3.06, in addition to
the Operating Budget, the Owner shall reimburse the Manager for vessel-direct
postage and communication expenses incurred by the Manager in pursuance of the
Management Services. The Manager shall be responsible for all domestic travel
expenses, which shall include places and ports along the intended itinerary of
the Vessel listed in Attachment Ia. Whenever necessary, practical and in the
Owner's best interests, the Owner may provide some office space and general
office expenses.
6.03 In the event of the appointment of the Manager being terminated
by the Owner or the Manager in accordance with the provisions of Clause 6.01
other than by reason of default by the Manager, or for other cause for which the
Manager is responsible, or if the Vessel is lost, sold, or otherwise disposed
of, the Management Fee payable to the Manager according to the provisions of
sub-clause 6.01 shall continue to be payable for a further period of three
calendar months. In addition, provided that the Manager provide Crew for the
Vessel in accordance with Clause 3.04.
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Cruise Ship Management Services Agreement July, 1995 - Page 22
<PAGE>
a) the Owner shall continue to pay Crew Related Support Costs
up to a further period of three months and additionally any other crew-related
obligations and liabilities.
b) the Owner shall pay an equitable proportion of any crew
redundancy costs which may materialize not exceeding the three months wages.
c) the Owner shall pay all remaining liabilities incurred but
not yet paid relating to agreed-to services.
d) the Owner shall pay any retroactive insurance premiums due,
Supplemental Calls, and cancellation penalties that may be required for
insurance and/or other contracts entered into, on behalf of Owner, by the
Manager.
6.04 While the Vessel remains under management by the Manager,
pursuant to this Agreement, if the Owner decides to lay-up the Vessel and such
lay-up lasts for more than one month, an appropriate reduction of the Management
Fee for any period exceeding one month until one month before the Vessel is
again put into service, shall be mutually agreed between the parties. Such lay
up reduction shall not be less than fifty percent (50%) of the Management Fee
for such period.
6.05 Except as provided in Clauses 3.05.12 and 3.05.13, all discounts,
commissions and address payments and benefits obtained by the Manager in the
course of the management of the Vessel shall be disclosed to and credited to the
Owner.
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Cruise Ship Management Services Agreement July, 1995 - Page 23
<PAGE>
ARTICLE VII
-----------
ACCOUNTS; WORKING FUNDS; RECORDS AND REPORTS
--------------------------------------------
7.01 Expenditures. Owner shall pay such amounts and at such times
-------------
as are required in connection with the operation of the Vessel, including,
without limitation, the following:
(a) the Gross Maritime Payroll of the Maritime Staff;
(b) all costs and expenditures incurred or made in connection
with the authorized items under Section 3.06 and all expenditures required to be
made under any other provision of this Agreement;
(c) reimbursements and other amounts due to Manager under
Section 3.06, or under any other provisions of this Agreement; and
7.02 Owner Advance. The Owner shall advance all funds as
-------------
specified in the Operating Budget. At no time shall the Manager be required to
utilize its own funds.
7.02.1 Income Collected and Expenses Paid on Behalf of Owner.
------------------------------------------------------
Owner shall collect all normal passenger, concession and casino revenues. Any
other monies received in respect of the operation of the Vessel by the Owner or
the Manager shall be held to the credit of the Owner in a separate bank account
maintained by Owner.
7.03 Owner's Rights to Inspection and Review. Manager shall keep
----------------------------------------
full and adequate books of account and such other records as are necessary to
evidence Manager's performance of services hereunder. Manager shall accord to
Owner, its accountants, attorneys and agents, the right to enter its offices at
all reasonable times during the term of this Agreement for the purpose of
examining or inspecting Manager's offices or examining and making extracts of
the financial books and records relating to the Vessel or for any other purpose
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Cruise Ship Management Services Agreement July, 1995 - Page 24
<PAGE>
which the Owner, in its reasonable discretion, shall deem necessary or
advisable, but same shall be done without disruption to the operation and
business of Manager's offices.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 25
<PAGE>
ARTICLE VIII
------------
TERMINATION RIGHTS
------------------
8.01 Termination by Owner. If any one of the following events
---------------------
shall occur:
(a) if Manager shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Manager, and such default shall continue for a period
of forty five (45) days after notice thereof by Owner to Manager;
(b) if Manager declares bankruptcy or is deemed insolvent;
(c) if Owner fails to obtain, for any reason, within thirty (30)
days all approvals and certificates necessary for trading;
(d) if a right of termination on the part of Owner shall have
arisen under Section 10.01;
then Owner shall have the right to terminate this Agreement upon written notice
to Manager given at any time following the occurrence of such event, or if a
period of grace is provided in such notice, then following the expiration of the
applicable period, and while such event shall be continuing, and this Agreement
shall terminate upon the date specified therein, which date shall be not less
than sixty (60) days nor more than one hundred and twenty (120) days after the
date of giving of such notice.
8.02 Termination by Manager. If any of the following events
-----------------------
shall occur:
(a) For Cause. The Owner shall fail to keep, observe or
----------
perform any other material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Owner, and such default shall
continue for a period of thirty (30) days after notice thereof by Manager to the
Owner, then Manager shall have the right to terminate this Agreement upon
written notice to
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Cruise Ship Management Services Agreement July, 1995 - Page 26
<PAGE>
Owner given at any time following the occurrence of any such event, or if a
period of grace is provided in such notice, then following the expiration of the
applicable period, and while such event shall be continuing, and this Agreement
shall terminate upon the date specified therein, which date shall be not less
than 60 (sixty) days nor more than ninety (90) days after the date of the giving
of such notice.
8.03 Curing Defaults. Any default by Manager under clause (a) of
----------------
Section 8.01, or by Owner under clause (a) of Section 8.02, as the case may be,
which is susceptible of being cured shall not constitute a basis of termination
if the nature of such default shall not permit it to be cured within the grace
period allotted, provided that within such grace period either Manager or Owner
shall have commenced to cure such default and shall proceed to complete the same
with reasonable diligence. Wilful acts or gross negligence shall not be deemed
susceptible of being cured for purposes of this Section.
8.04 Effect of Termination. The termination of this Agreement
----------------------
under the provisions of this Article VIII shall not affect the rights of the
terminating party with respect to any damages it has suffered as a result of any
breach of this Agreement, nor shall it affect the rights of either party with
respect to liability or claims accrued, or arising out of events occurring,
prior to the date of termination.
8.05 Remedies Cumulative. Neither the right of termination,
--------------------
nor the right to sue for damages, nor any other remedy available to either party
hereunder shall be exclusive of any other remedy given hereunder or now or
hereafter existing at law or in equity.
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Cruise Ship Management Services Agreement July, 1995 - Page 27
<PAGE>
ARTICLE IX
----------
ASSIGNMENTS
-----------
9.01 Assignments. Neither Manager nor Owner shall assign this
------------
Agreement without the prior written consent of the other. It is understood and
agreed that any consent granted by the Owner to any assignment under this
Subsection 9.01 shall not be deemed a waiver of the covenant herein contained
against assignment in any subsequent case. Such consent by the Owner shall not
be unreasonably withheld.
9.02 Change of Management. Owner shall have the right, without
---------------------
other cause, to terminate this Agreement, if neither Robert G. Wellner nor
Thomas F. Keenan shall remain in the management of the Manager.
9.03 Successors and Assigns. Subject to the foregoing, this
-----------------------
Agreement shall inure to the benefit of and be binding upon the parties hereto,
their respective heirs, legal representatives, successors and assigns.
9.04 Remedies. Any assignment by either party of this Agreement
---------
in violation of the provisions of this Article IX shall be null and void. In
addition to any other remedies available to the parties, the provisions of this
Article IX shall be enforceable by injunctive proceeding or by suit for specific
performance.
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Cruise Ship Management Services Agreement July, 1995 - Page 28
<PAGE>
ARTICLE X
---------
DAMAGE OR DESTRUCTION
---------------------
10.01 Damage or Destruction. If the Vessel shall be damaged by
----------------------
fire or other casualty, then Owner, by written notice to Manager given within
ninety (90) days after the occurrence of such event, shall have the right to
terminate this Agreement on the basis that Owner does not elect to rebuild or
restore the Vessel, and neither party shall have any further obligation to the
other party hereunder, except with respect to liability accruing, or based upon
events occurring, prior to the effective date of such termination.
10.02 Reinstatement. If following a termination under Section
--------------
10.01 above, Owner shall decide, notwithstanding its previous determination, to
restore the Vessel, then upon completion of such restoration, this Agreement, at
the option of Manager, shall be reinstated for the remainder of the term hereof,
which term shall automatically be extended by the number of full years, plus on
full year for any partial year, elapsing between the date of termination and the
date of such reinstatement.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 29
<PAGE>
ARTICLE XI
----------
GENERAL PROVISIONS
------------------
11.01 Purchases by Manager. All purchases made by Manager for
---------------------
Owner or special prices as a result of Manager's involvement in the management
of other vessels, Manager shall cooperate with Owner, to allow Owner to make
purchases through Manager, availing Owner of Manager's access to advantageous
pricing. In addition, all trade discounts, rebates and refunds, other than cash
and volume discounts, and all returns from the sale of supplies, materials and
equipment shall accrue to the benefit of Owner.
11.02 Responsibilities.
-----------------
11.02.1 Liability to Owner - Without prejudice to sub-clause
11.12, the Manager shall be under no liability whatsoever to the Owner for any
loss, damage, delay or expense of whatsoever nature, whether direct or indirect,
(including, but not limited to, loss of profit arising out of or in connection
with detention of or delay to the Vessel) and howsoever arising in the course of
performance of the Management Services, except arising from Manager's wilful act
or gross negligence.
11.02.2 Indemnity - Except to the extent and solely for the
---------
amount therein set out that the Manager would be liable under sub-clause 11.02.1
the Owner hereby undertakes to keep the Manager and its employees, agents and
sub-contractors indemnified and to defend and hold them harmless against all
actions, proceedings, claims, demands or liabilities whatsoever or howsoever
arising which may be brought against them or incurred or suffered by them
arising out of or in connection with the performance of the Agreement, and
against and in respect of all costs, loss, damages, and expenses (including
legal costs and expenses on a full indemnity basis) which the Manager may suffer
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 30
<PAGE>
or incur (either directly or indirectly) in the course of the performance of
this Agreement.
11.02.3 Himalaya - It is hereby expressly agreed that, except
--------
in the event of wilful default, or gross negligence or deliberate act or
omission by such party, no employee or agent of the Manager (including every
sub-contractor from time to time utilized by the Manager) shall in any
circumstances whatsoever be under any liability whatsoever to the Owner for any
loss, damage or delay of whatsoever kind arising or resulting directly or
indirectly from any act, neglect or default on his part while acting in the
course of or in connection with his employment and, without prejudice to the
generality of the foregoing provisions in this Clause, every exemption,
limitation, condition and liberty herein contained and every right, exemption
from liability, defenses and immunity of whatsoever nature applicable to the
Manager or to which the Manager is entitled hereunder shall also be available
and shall extend to protect every such employee or agent of the Manager acting
as aforesaid and for the purpose of all the foregoing provisions of this Clause
11 the Manager is or shall be deemed to be acting as agent or trustee on behalf
of and for the benefit of all persons who are or might be his servants or agents
from time to time (including sub-contractors as aforesaid) and all such persons
shall to this extent be or be deemed to be parties to this Agreement.
11.03 Notices. Except as otherwise provided in this Agreement, all
--------
notices, demands, consents, reports and other communications (herein
collectively, the "Notices") required or permitted to be given hereunder, or
which are to be given with respect to this Agreement, shall be in writing,
addressed to the party to be so notified as follows:
If to Owner : NEW COMMODORE CRUISE LINE LIMITED
4000 Hollywood Boulevard
South Tower, Suite 385
Hollywood, FL 33021
Phone No:
Fax No:
Attention:
With Copies to:
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 31
<PAGE>
If to Manager : INTERNATIONAL MARINE CARRIERS, INC.
22 Jericho Turnpike, Suite 200
Mineola, NY 11501
Fax: (516) 741-2847
Phone: (516) 741-2700
Attn: Thomas F. Keenan, Vice President
Notices may be mailed by United States registered or certified mail,
return receipt request, postage prepaid, deposited in a United State post office
or a depository for the receipt of mail regularly maintained by the post office.
If so mailed, then such Notice shall be deemed to have been received by the
addressee on the third day following the date of such mailing. Such Notices may
also be delivered by hand, or by special courier, if receipted for.
11.04 No Partnership or Joint Venture. Nothing contained in this
--------------------------------
Agreement shall be construed to be or create a partnership or joint venture
between the Owner, its successors or assigns, on the other part and the Manager.
11.05 Modification and Changes. This Agreement cannot be changed
-------------------------
or modified except by another agreement in writing signed by the parties to this
Agreement, or their duly authorized agents.
11.05 Understandings and Agreements. This Agreement constitutes
------------------------------
all of the understandings and agreements of whatsoever nature or kind existing
between the parties with respect to Manager's management of the Vessel.
11.07 Headings. The Article and Section headings contained herein
---------
are for convenience and reference only and are not intended to define, limit or
describe the scope or intent of any provision of this Agreement.
11.08 Survival of Covenants. Any covenant, term or provision of
----------------------
this Agreement which, in order to be effective, must survive the termination of
this Agreement, shall survive any such termination.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 32
<PAGE>
11.09 Third Parties. None of the obligations hereunder of either
--------------
party shall run to the benefit of or be enforceable by any party other than the
parties to this Agreement or by a party deriving rights hereunder as a result of
an assignment permitted pursuant to the terms hereof.
11.10 Waivers. No failure by Manager or Owner to insist upon the
--------
strict performances of any covenant, agreement, term or condition of this
Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent breach
of such covenant, agreement, or condition. No covenant, agreement, term or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
11.12 Force Majeure. If by reason of war, riots, civil commotion,
--------------
labor disputes, strikes, lockouts, inability to obtain labor or materials, fire
or other acts or elements, accidents, government restrictions or appropriation
or other causes, whether like or unlike the foregoing, beyond the control of a
party hereto, such party is unable to perform in whole or in part is obligations
under this Agreement, then in such event such party shall be relieved of those
obligations to the extent it is so unable to perform, and such inability to
perform, so caused, shall not make such party liable to the other. The
provisions of this Section 11.12 shall not be applicable to Section 7 or to
Article X.
11.13 Applicable Law. This Agreement shall be construed and
---------------
interpreted, and be governed by, the laws of the State of New York.
11.14 Arbitration. Any and all differences and disputes of
------------
whatsoever nature arising out of this Agreement shall be put to arbitration in
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 33
<PAGE>
the City of New York before a board of three (3) persons, consisting of one
arbitrator to be appointed by the Owner, one by the Manager, and one by the two
so chosen. The decision of any two of the three on any such point or points
shall be final. Any party hereto may call for such arbitration by service upon
any officer of the other, wherever he may be found, of a written notice, as
provided herein, specifying the name and address of the arbitrator chosen by the
first moving party and a brief description of the disputes or differences which
such party desires to put to arbitration. If the other party shall not, by
notice served upon an officer of the first moving party within thirty (30) days
of the service of such first notice, appoint its arbitrator to arbitrate the
dispute or differences further notice to appoint a second arbitrator, who shall
be a disinterested person, with precisely the same force and effect as if said
second arbitrator had been appointed by the other party. In the event that the
two arbitrators fail to appoint a third arbitrator within twenty (20) days of
the appointment of the second arbitrator, either arbitrator may apply to a Judge
of any Federal court in the City of New York for the appointment of a third
arbitrator, and the appointment of such arbitrator by such Judge on such
application shall have precisely the same force and effect as if such arbitrator
had been appointed by the two arbitrators. Until such time as the arbitrators
finally close the hearings, either party shall have the right by written notice
to serve on the arbitrators and on an officers of the other party to specify
further disputes or differences under this Agreement for hearing and
determination. Awards made in pursuance of this clause may include costs,
including a reasonable allowance for attorneys' fees, and judgment may be
entered upon any award hereunder in any Court having jurisdiction in the
premises.
11.15. Confidentiality. Information of any nature, including any
----------------
technical data or knowledge exchanged by the parties in connection with any
matter arising under this Agreement shall remain confidential and among the
parties to this Agreement.
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the day and year first above written.
NEW COMMODORE CRUISE LINE LIMITED
[SIGNATURE ILLEGIBLE]
------------------------------------------------
________________________________________________
INTERNATIONAL MARINE CARRIERS, INC.
[SIGNATURE ILLEGIBLE]
------------------------------------------------
[SIGNATURE ILLEGIBLE]
------------------------------------------------
PRESIDENT
________________________________________________________________________________
Cruise Ship Management Services Agreement July, 1995 - Page 35
<PAGE>
ATTACHMENT 1
DATE OF AGREEMENT: June 23, 1995
NAME OF VESSEL: Enchanted Isle
LLOYDS ID #: 5023162
PARTICULARS OF VESSEL:
LENGTH 617 Feet
WIDTH 84 Feet
DRAFT 28 Feet
TONNAGE 23,395
REGISTRY/FLAG Panama
CAPACITY 729 Passengers
350 Crew
STATEROOMS 367 Total (290 Outside/77 Inside)
CREW NATIONALITY Officers: European & Scandinavian
Crew: International
YEAR BUILT 1959
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
<PAGE>
ATTACHMENT 1a
<TABLE>
<CAPTION>
================================================================================
ITINERARIES
================================================================================
SHIP 1 SHIP II
- --------------------------------------------------------------------------------
DAY PORT DAY PORT
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 New Orleans 1 New Orleans
- --------------------------------------------------------------------------------
2 At Sea 2 At Sea
- --------------------------------------------------------------------------------
3 Playa del Carman/ 3 Playa del Carman/
Cozumel Cozumel
- --------------------------------------------------------------------------------
4 Puerto Cortez 4 Grand Cayman
- --------------------------------------------------------------------------------
5 Roatan 5 Montego Bay
- --------------------------------------------------------------------------------
6 At Sea 6 At Sea
- --------------------------------------------------------------------------------
7 At Sea 7 At Sea
- --------------------------------------------------------------------------------
8 New Orleans 8 New Orleans
================================================================================
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
ATTACHMENT II
LIST OF INSURANCE
<TABLE>
<S> <C>
Hull and Machinery $16,000,000
(includes War Risk)
Increased Value $ 4,000,000
Protection & Indemnity $500,000,000
War Risk Included in H & M
Loss of Hire $ 63,000 per diem
(Subject to Modification)
Passenger Evacuation $ 500,000/1,000,000
Mortgage Interest $ 16,000,000
Passenger Liability $ 2,500,000
</TABLE>
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
<PAGE>
ATTACHMENT III
Enchanted Isle
Management Fee: Five Hundred Eighty Five Thousand US
Dollars per annum (US $585,000)
Payable in 24 installments in
advance no later than the fifth
(5th) and twentieth (20th) day of
each month.
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
<PAGE>
CRUISE SHIP MANAGEMENT
SERVICES AGREEMENT
Dated July 6, 1995
(the "Management Agreement")
ADDENDUM NO. 1
AGREEMENT made as of the __ day of July 1995, by and between NEW
COMMODORE CRUISE LINE LIMITED (the "Owner") and INTERNATIONAL MARINE CARRIERS,
INC. (the "Manager")
WHEREAS the Owner has contracted for the purchase of or has bareboat
chartered the oceangoing cruise vessel described in Attachment 1 to this
Addendum No. 1 to the Management Agreement (the "Second Vessel"); and
WHEREAS the Owner wishes to utilize the vessel management services of
the Manager in connection with the operation of the Second Vessel and the
Manager desires to render such services, all upon the terms and conditions set
forth in the Management Agreement,
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, Owner and Manager agree as follows:
1. The Second Vessel will be managed by the Manager according to the
terms and conditions stipulated in the Management Agreement except as
hereinafter set forth.
2. The amount of the Management Fee for the Second Vessel as provided in
Clause 6.01 of the Management Agreement shall be negotiated and agreed upon.
3. Owner agrees to pay the Management Fee for the Second Vessel
commencing thirty (30) days prior to the starting date of the first cruise of
the Second Vessel under the Owner's operation which starting date is currently
anticipated to be December 16, 1995.
4. Routine Lay-Up. Upon closing of the Second Vessel (on or about 6 July
--------------
1995), the Second Vessel will be inactive and in a lay-up status in New Orleans,
L.A. The parties agree that during this lay-up period, the Manager will provide
management and oversight services relative to the following:
<PAGE>
Routine Lay-Up
1. Operations (Port; Regulatory, Class and Requirements)
2. Crewing
3. Purchasing
4. Maintenance & Repair
5. Insurance
6. Labor Relations
During any routine lay-up, the Owner will pay to the Manager a fee of
$250.00 per day which fee shall be paid in advance twice monthly but no later
than the fifth (5th) and twentieth (20th) day of each month and which shall be
effective, due and payable commencing upon closing.
5. Expanded Lay-Up In addition, the Owner may wish to perform extensive
---------------
repairs, drydocking, upgrades, modifications or improvements to the Second
Vessel during this lay-up period and in such case, will utilize the management
services and oversight of the Manger in connection therewith. In addition to the
services provided during routine lay-up as set forth in paragraph 4 above,
during any expanded lay-up for extensive repairs, drydocking, upgrades,
modifications, or improvements, the Manager will provide specific "on-sight"
supervision and management and during this expanded lay-up the Owner will pay
the manager a total fee of $500 per day for all its services, including routine
lay-up, which fee will be paid in advance twice monthly but no later than the
fifth (5th) and twentieth (20th) day of each month.
6. The fees payable under paragraphs 4 and 5 above will cease when
payment of the Management Fee commences under clause 3 above. However, the
Manager will continue to provide all management services required for the Second
Vessel including routine lay-up and expanded lay-up services.
7. In event that the Second Vessel is chartered, selection of vessel
management will be at Charterers' Option and according to "agreed to" terms and
conditions.
NEW COMMODORE CRUISE LINE INTERNATIONAL MARINE CARRIERS, INC.
LIMITED
/s/ Fred Mayer /s/ Robert G. Wellner
- ------------------------- ---------------------------
By: Fred Mayer, Chairman By: Robert G. Wellner,
President
Dated: July 5 , 1995
--
2
<PAGE>
ATTACHMENT 1
DATE OF AGREEMENT: June 23, 1995
NAME OF VESSEL: Enchanted Seas
ABS ID #: 5800588
PARTICULARS OF VESSEL:
LENGTH 617 Feet
WIDTH 84 Feet
DRAFT 28 Feet
TONNAGE 23,395
REGISTRY/FLAG Panama
CAPACITY 726 Passengers
330 Crew
STATEROOMS 369 Total (293 Outside/76 Inside)
CREW NATIONALITY Officers: European & Scandinavian
Crew: International
YEAR BUILT 1958
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT
---------
INCENTIVE PAYMENTS
------------------
This Agreement is made and entered into by and between NEW COMMODORE CRUISE
LINE, its successors and assigns (hereinafter referred to as "NCCL") and
INTERNATIONAL MARINE CARRIERS, INC., (hereinafter referred to as "IMC").
In conjunction with and in addition to; the CRUISE SHIP MANAGEMENT
SERVICES AGREEMENTS(S), dated 5 July, 1995, with Amendments; the parties hereby
agree as follows:
THAT in addition to the Management Fee agreed to, NCCL will provide
Incentive Compensation to IMC.
THAT the incentive amounts will be mutually agreed between the parties.
THAT payment of incentive amounts will be payable to IMC, at any time, when
the vessels and NCCL become profitable and may be retroactive to the initial
contract period.
THAT the incentive payments will be made to IMC, as managers, for
satisfactorily accomplishing performance parameters jointly established by NCCL
and IMC--which could include: A. Budgeted Operating Coats
B. Budgeted On Board Revenues
C. Vessel Operating Performances
This Agreement shall become effective as of July 1, 1995, or at closing,
whichever occurs first:
FOR NCCL FOR IMC
/s/ Fred Mayer /s/ Robert G. Wellner
- ------------------------------------ -----------------------------------
By: Fred Mayer, Chairman by: Robert G. Wellner, President
Dated: 5 July, 1995
<PAGE>
AGREEMENT
---------
INTERIM VP OPERATIONS
---------------------
This Agreement is made and entered into by and between NEW COMMODORE CRUISE
LINE, its successors and assigns (hereinafter referred to as "NCCL") and
INTERNATIONAL MARINE CARRIERS, INC., (hereinafter referred to as "IMC").
In conjunction with and in addition to; the CRUISE SHIP MANAGEMENT SERVICES
AGREEMENT, dated 5 July, 1995, with Amendments; the parties hereby agree as
follows:
THAT Mr. Robert Young, Vice President of Operations and Engineering for
IMC, will serve as interim Vice President of Operations for NCCL until such time
-------
as a permanent VP of Operations is employed by NCCL. This period shall commence
on June 19, 1995, and shall terminate on Thirty (30) days notice, such notice
will not be given in July, 1995.
---
THAT, as part of its monthly fee, NCCL will compensate IMC for Mr. Young's
services at the rate of Six Thousand Seven Hundred US Dollars (US$6,700.00) per
month.
This Agreement shall become effective as of July 6, 1995, or at closing.
FOR NCCL FOR IMC
/s/ Fred Mayer /s/ Robert G. Wellner
- ------------------------------------ ---------------------------------
By: Fred Mayer, Chairman by: Robert G. Wellner, President
Dated: 5 July, 1995
<PAGE>
ATTACHMENT I
DATE OF AGREEMENT: June 23, 1995
NAME OF VESSEL: Enchanted Isle
LLOYDS ID #: 5023162
PARTICULARS OF VESSEL:
LENGTH 617 Feet
WIDTH 84 Feet
DRAFT 28 Feet
TONNAGE 23,395
REGISTRY/FLAG Panama
CAPACITY 729 Passengers
350 Crew
STATEROOMS 367 Total (290 Outside/77 Inside)
CREW NATIONALITY Officers: European & Scandinavian
Crew: International
YEAR BUILT 1959
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
<PAGE>
ATTACHMENT I
DATE OF AGREEMENT: June 23, 1995
NAME OF VESSEL: Enchanted Seas
ABS ID #: 5800588
PARTICULARS OF VESSEL:
LENGTH 617 Feet
WIDTH 84 Feet
DRAFT 28 Feet
TONNAGE 23,395
REGISTRY/FLAG Panama
CAPACITY 726 Passengers
330 Crew
STATEROOMS 369 Total (293 Outside/76 Inside)
CREW NATIONALITY Officers: European & Scandinavian
Crew: International
YEAR BUILT 1958
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
<PAGE>
ATTACHMENT IA
<TABLE>
<CAPTION>
================================================================================
ITINERARIES
- --------------------------------------------------------------------------------
SHIP I SHIP II
- --------------------------------------------------------------------------------
DAY PORT DAY PORT
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 New Orleans 1 New Orleans
- --------------------------------------------------------------------------------
2 At Sea 2 At Sea
- --------------------------------------------------------------------------------
3 Playa del Carman/Cozumel 3 Playa del Carman/Cozumel
- --------------------------------------------------------------------------------
4 Puerto Cortez 4 Grand Cayman
- --------------------------------------------------------------------------------
5 Roatan 5 Montego Bay
- --------------------------------------------------------------------------------
6 At Sea 6 At Sea
- --------------------------------------------------------------------------------
7 At Sea 7 At Sea
- --------------------------------------------------------------------------------
8 New Orleans 8 New Orleans
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
<PAGE>
ATTACHMENT II
LIST OF INSURANCE
<TABLE>
<S> <C>
Hull and Machinery $16,000,000
(includes War Risk)
Increased Value $ 4,000,000
Protection & Indemnity $500,000,000
War Risk Included in H & M
Loss of Hire $ 63,000 per diem
(Subject to Modification)
Passenger Evacuation $500,000/1,000,000
Mortgagee Interest $ 16,000,000
Passenger Liability $ 2,500,000
</TABLE>
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
<PAGE>
CRUISE SHIP MANAGEMENT
SERVICES AGREEMENT
Dated July 6, 1995
(the "Management Agreement")
ADDENDUM NO. 1
AGREEMENT made as of the 6th day of July, 1995, by and between NEW
COMMODORE CRUISE LINE LIMITED (the "Owner") and INTERNATIONAL MARINE CARRIERS,
INC. (the "Manager")
WHEREAS the Owner has contracted for the purchase of or has bareboat
chartered the oceangoing cruise vessel described in Attachment I to this
Addendum No. 1 to the Management Agreement (the "Second Vessel"); and
WHEREAS the Owner wishes to utilize the vessel management services of
the Manager in connection with the operation of the Second Vessel and the
Manager desires to render such services, all upon the terms and conditions set
forth in the Management Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, Owner and Manager agree as follows:
1. The Second Vessel will be managed by the Manager according to the
terms and conditions stipulated in the Management Agreement except as
hereinafter set forth.
2. The amount of the Management Fee for the Second vessel as provided in
Clause 6.01 of the Management Agreement shall be negotiated and agreed upon.
3. Owner agrees to pay the Management Fee for the Second Vessel
commencing thirty (30) days prior to the starting date of the first cruise of
the Second Vessel under the Owner's operation which starting date is currently
anticipated to be December 16, 1995.
4. Routine Lay-Up. Upon closing of the Second Vessel (on or about 6 July
--------------
1995), the Second Vessel will be inactive and in a lay-up status in New Orleans,
LA. The parties agree that during this lay-up period, the Manager will provide
management and overnight services relative to the following:
Routine Lay-Up
A. Operations (Port; Regulatory, Class and Requirements)
B. Crewing
C. Purchasing
D. Maintenance & Repair
E. Insurance
F. Labor Relations
<PAGE>
During any routine lay-up, the Owner will pay to the Manager a fee of
$250.00 per day which fee shall be paid in advance twice monthly but no later
than the fifth (5th) and twentieth (20th) day of each month and which shall be
effective, due and payable commencing upon closing.
5. Expanded Lay-Up. In addition, the Owner may wish to perform extensive
---------------
repairs, drydocking, upgrades, modifications or improvements to the Second
Vessel during this lay-up period and in such case, will utilize the management
services and oversight of the Manager in connection therewith. In addition to
the services provided during routine lay-up as set forth in paragraph 4 above,
during any expanded lay-up for extensive repairs, drydocking, upgrades,
modifications, or improvements, the Manager will provide specific "on-sight"
supervision and management and during this expanded lay-up the Owner will pay
the manager a total fee of $500 per day for all its services, including routine
lay-up, which fee will be paid in advance twice monthly but no later than the
fifth (5th) and twentieth (20th) day of each month.
6. The fees payable under paragraph 4 and 5 above will cease when payment
of the Management Fee commence under clause 3 above. However, the Manager will
continue to provide all management services required for the Second Vessel
including routine lay-up and expanded lay-up services.
7. In the event that the Second Vessel is chartered, selection of vessel
management will be at Charterers' Option and according to "agreed to" terms and
conditions.
NEW COMMODORE CRUISE INTERNATIONAL MARINE
LINE LIMITED CARRIERS, INC.
/s/ Fred Mayer /s/ Robert Wellner
- ------------------------------ --------------------------------------
By: Fred Mayer, Chairman By: Robert G. Wellner, President
Dated July __, 1995
- --------------------------------------------------------------------------------
New Commodore Cruise Lines
Management Services Agreement July, 1995
- --------------------------------------------------------------------------------
-2-
<PAGE>
SUBLEASE FOR OFFICE SPACE
-------------------------
THIS SUBLEASE is entered into this ____ day of ____________, 1995, by and
between Effjohn International B.V., a Dutch corporation with an office at 4000
Hollywood Boulevard, Hollywood, Florida 33021 ("Sublessor") and New Commodore
Cruise Lines Limited, a Bermuda corporation, ("Sublessee") with reference to the
following facts:
A. Pursuant to an December 23, 1994 Lease Agreement (the "Main Lease")
between Hollywood Corporate Circle Associates ("Landlord") and Sublessor,
Sublessor has leased office space on second (2nd) and third (3rd) floors of the
building located at 4000 Hollywood Boulevard, Hollywood, Florida 33021 (the
"Building") and desires to sublease that space to Sublessee, and
B. Sublessee desires to sublease the office space.
NOW, THEREFORE, the parties agree as follows:
1. DEMISE AND DESCRIPTION OF PROPERTY
Sublessor hereby leases to Sublessee, and Sublessee hereby leases from
Sublessor, for the term, and subject to the conditions and covenants hereinafter
set forth, the property, hereinafter referred to as the "subleased premises,"
located in Broward County, Florida, described as follows: a portion of the
second (2nd) floor, shown on Exhibit "A" attached hereto and made a part hereof
and a portion of the third (3rd) floor, shown on Exhibit "B" attached hereto and
made a part hereof containing a total of approximately 16,214 rentable square
feet.
2. TERM
The term of this Sublease shall commence on June 30, 1995 for the Exhibit
A space and Exhibit B space, provided Landlord's consent to this fully-executed
Sublease has been obtained, and shall end on June 30, 2000.
3. RENT
Base Rent and Additional Rent shall be paid as defined in the Main Lease
and shall commence on June 30, 1995.
Sublessee will pay the rent to Sublessor, at the address set forth above,
or at such address as Sublessor may from time to time designate. Sublessee
agrees to pay all such sums monthly, in advance, and without demand. If the
term of this Sublease commences on a day other than the first day of the month
or terminates on a day other than the last day of a month, then the installments
of rent and any adjustments thereto for such month or months shall be prorated,
based on the number of days in such month.
<PAGE>
4. USE OF PREMISES
The subleased premises shall be used by Sublessee for office purposes as
defined in the Main Lease.
5. ASSUMPTION AGREEMENT AND COVENANTS
Except as modified herein, the Sublessee shall comply with all provisions
of the Main Lease during the term hereof by the Sublessor as Tenant thereunder
and Sublessor shall have all rights and remedies of the Landlord thereunder.
Notwithstanding the foregoing, the payment of rent shall be governed by the
provisions of Paragraph 3, above.
6. ASSIGNMENT AND SUBLETTING
Sublessee may sublease or assign the subleased premises or any part
thereof subject to the terms of the Main Lease. Sublessee shall not be released
from its obligation under the terms of this Sublease.
7. QUIET POSSESSION
Sublessee, upon full performance of all provisions herein, shall peaceably
and quietly have, hold and enjoy the subleased premises throughout the term
hereof without any disturbance from Sublessor or any person claiming through
Sublessor.
8. INSURANCE
Sublessee agrees that, at all times during the Sublease Term, it will keep
in force and effect all insurance as is required under the Main Lease and shall
name Landlord and Sublessor as additional insured.
9. GENERAL
a) This Sublease embodies the entire agreement between the parties hereto
relative to the subject matter hereof and shall not be modified, changed,
or altered in any respect except in writing.
b) The covenants, agreements, and obligations herein contained shall extend
to, bind, and insure to the benefit not only of the parties hereto but
their successors and assigns; and where more than one party shall be
Sublessor under this lease, the word "Sublessor" whenever used in this
lease shall be deemed to include all such parties jointly and severally.
c) Whenever under this Sublease, a provision is made for notice of any kind,
such notice shall be in writing and signed by or on behalf of the party
giving or making the same, and it shall be deemed sufficient notice and
service thereof if such notice is sent by
-2-
<PAGE>
registered or certified mail, postage prepaid, to the address furnished
for such purpose. Copies of any notices to Sublessee shall also be sent
to 4000 Hollywood Boulevard Suite 385S Hollywood Florida 33021. All
notices to be given to the parties shall be given at the addresses stated
above unless and until some other place is designated in writing by the
respective party and in accordance with the Main Lease.
d) Nothing in this Sublease Agreement is intended to conflict with the terms
of the Main Lease or with any of the rights accorded the Landlord in the
Main Lease which shall remain in full force and effect throughout the term
of the Sublease.
e) The subleased premises shall be designated as a non-smoking area and no
smoking shall be permitted upon the subleased premises.
f) The sublessee confirms that they have not utilized a broker in connection
with this transaction.
g) Any improvements constructed by sublessee shall be in accordance with the
main lease and subject to Landlord's and Sublessor's approval.
Executed on the day and year first above written.
SUBLESSOR SUBLESSEE
EFFJOHN INTERNATIONAL B.V. NEW COMMODORE CRUISE LINES LIMITED
By:/s/Thomas Forss By:/s/Alan Pritzker
---------------------------- -------------------------------
Name: Thomas Forss Name: Alan Pritzker
-------------------------- -----------------------------
Title: procura holder Title: V.P. Finance
------------------------- ----------------------------
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<PAGE>
CONSENT
-------
Hollywood Corporate Circle Associates ("Hollywood") hereby consents to the
terms and conditions of the above June 30, 1995 Sublease for Office Space by and
between EffJohn International B.V. ("Sublessee") and New Commodore Cruise Lines
Limited ("Sublessee"). Hollywood has executed this consent to indicate approval
of Sublessee, but in no way shall this consent be construed as a modification,
amendment or supplement to the December 23, 1994 lease agreement between
Sublessor and Hollywood, nor shall the execution of this consent by Hollywood be
deemed to make Hollywood a party to the Sublease.
HOLLYWOOD CORPORATE CIRCLE ASSOCIATES
/s/ Gerald E. Lou, Senior Vice President
-----------------
By: Gerald E. Lou
-------------------------------------------
<PAGE>
Exhibit A
Exhibit A consists of a diagram of a portion of the second floor located at
4000 Hollywood Boulevard.
<PAGE>
Exhibit B
Exhibit B consists of a diagram of a portion of the third floor located at
4000 Hollywood Boulevard.
<PAGE>
LEASE
-----
THIS AGREEMENT, made this 23rd day of December 1994, by and between
HOLLYWOOD CORPORATE CIRCLE ASSOCIATES, (hereinafter called "Landlord"), and
EFFJOHN INTERNATIONAL B.V. (hereinafter called "Tenant").
WITNESSETH:
That the Landlord for and in consideration of the covenants and agreements
hereinafter set forth and the rent hereinafter specifically reserved, does
hereby lease, unto said Tenant the space described as follows:
PREMISES
1.01. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those certain offices in the building located at 4000 Hollywood Blvd.,
Hollywood, FL. 33021 (the "Building") which consist of about 16,214 rentable
------
square feet (per the modified BOMA Standard of Measurement of usable space plus
15%) of office space (the "Premises" or "Demised Premises"), Suites 285S & 385S,
-----------
situated on the 2nd & 3rd floor of the building, as shown in Exhibit A
---------
incorporated herein by reference. Rentable square feet includes Tenant's pro-
rata share of common areas.
1.02. Provided Tenant Is not in default under this Lease, if there shall
be any vacant contiguous space, or an immediate prospect of any vacant
contiguous space, Landlord shall give Tenant written notice thereof. If within
five (5) days thereafter, Tenant shall give Landlord written notice that Tenant
elects to lease such space, Landlord and Tenant shall immediately execute a
Lease for the space under the same terms and conditions as are then current,
except that any improvement allowance shall be pro-rated in accordance with the
time remaining on the lease Term. If Tenant does not give Landlord notice that
is elects to lease such space within the time specified, Landlord may lease such
space to any third party.
TERM
2.01. The term shall be for sixty months (or until such term shall sooner
------------
cease, expire, or terminate as hereinafter provided) commencing on July 1, 1995
------------
and terminating on June 30, 2000, both dates inclusive.
-------------
2.02. Provided Tenant is not and has not been in default under this Lease,
Tenant shall have one (1) option to renew this Lease for an additional five (5)
years with an adjustment of the base rent at the commencement of the option
period to ninety percent (90%) of the then current market rent.
<PAGE>
BASE RENTAL
3.01. As Base rental for the use and occupancy of the Premises, Tenant
shall pay to the Landlord during the initial year of the term set forth
herein the sum of One hundred eighty six thousand four hundred sixty dollars
----------------------------------------------------------
plus the amount of the Improvement Allowance used divided by five, without
- -----------------------------------------------------------------
deduction, demand, or notice payable in advance, in equal monthly installments
of Fifteen thousand five hundred thirty-eight and 42/100 dollars plus the amount
-----------------------------------------------------------------------------
of the Improvement Allowance used divided by sixty. The first installment shall
- --------------------------------------------------
be payable on commencement, per 29.01, of this agreement and the remaining
installments shall be payable, in advance, on the first day of each and every
month, without demand, at the office of the building manager, or such other
place as the Landlord may hereafter designate in writing. Rent checks are to be
made payable to HOLLYWOOD CORPORATE CIRCLE ASSOCIATES or such other person, firm
or corporation as the Landlord may designate in writing. If the Term commences
on a day other than the first day of the month, the first payment shall be
prorated on a thirty-day per calendar month basis for the period from the Lease
Commencement Date to the first day of the first full month during the Term.
In addition to the Base Rent, Tenant shall and hereby agrees to pay to
Landlord each month a sum equal to any sales tax, tax on rentals, and any other
charges, taxes and/or impositions now in existence or hereafter imposed based
upon the privilege of renting the space leased hereunder or upon the amount of
rentals collected therefor. Nothing herein shall, however, be construed to
require Tenant to pay any part of any Federal and State Taxes on Income imposed
upon Landlord.
ADDITIONAL RENT
4.01. Tenant shall, for each calendar year, pay to Landlord as Additional
Rent 5.69% of the Real Estate Tax and Electricity Costs of the Building. Real
-----
estate taxes for the Base Year and subsequent calendar years shall include
general real estate taxes, special assessments and any other taxes that may be
imposed upon the premises. Electricity Costs for the Base Year and subsequent
calendar years shall include all charges incurred by Landlord to provide power
to the building and shall exclude any charges billed directly to Tenant by a
public utility company.
4.02. Sixty (60) days before the start of each calendar year, Landlord
Shall make a determination of the anticipated Real Estate Tax and Electricity
Costs of the Building for such calendar year. Landlord shall submit to Tenant a
statement of the determination, including Tenant's aforesaid proportionate
share. Tenant shall pay his proportionate share to Landlord, as additional rent,
in equal monthly payments commencing January 1st of such calendar year. Not
later than ninety (90) days following the conclusion of each calendar year,
Landlord shall give to Tenant an accounting of the actual Real Estate Tax and
Electricity Costs for the previous calendar year and should said expenses vary
from expenses actually assessed, the appropriate party shall pay to the other
party the over payment he (Landlord) collected or the under payment he (Tenant)
failed to pay within fifteen (15) days after receipt of written request
therefor. All amounts shall be equitably adjusted so that Tenant's share of the
Real Estate Tax and Electricity Costs shall not be payable with respect to that
portion of a calendar year, if any, during which
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<PAGE>
the Lease is not in effect. Landlord agrees to maintain copies of Real Estate
Tax and Electricity bills reflecting those expenses of the Building. The
Landlord's estimate of Real Estate Tax and Electricity Costs for 1995 is
$1,077,000.
4.03. The amount provided, as related to the Demised Premises, for Other
Operating Costs is Sixty Thousand Eight Hundred Two and 50/100 ($60,802.50)
--------------------------------------------------------
Dollars per year. In addition to the Real Estate Tax and Electricity Costs
discussed above, Tenant shall pay this amount to the Landlord as further
Additional Rent, in equal monthly payments. This amount shall be increased by
five per cent (5%) on January 1st of each calendar year to allow for anticipated
increases in Other Operating Costs.
4.04. Commencing on the first anniversary of this Lease and on each
anniversary thereafter, during the term of this Lease, the annual Base Rent
reserved herein shall be increased four (4%) per cent over the preceding year.
In no event shall the Base and Additional Rent payable by Tenant during any
calendar year be less than the Base and Additional Rent payable during the
previous calendar year.
SECURITY DEPOSIT
5.01. Tenant shall pay the Landlord upon execution of this Lease, the
sum of ______________________________ ($-0-) Dollars to be held as collateral
security for the payment of any rentals and any other sums of money for which
Tenant shall become liable to Landlord under this Lease and for the faithful
performance by Tenant of all other covenants and agreements made herein. In the
event Tenant fails to perform or observe any of the provisions of this Lease to
be performed or observed by it, then, at the option of Landlord, Landlord may
(but shall not be obligated to do so) apply the deposit, or so much thereof as
may be necessary to remedy such default or to repair damages to the Premises
caused by the Tenant, Tenant shall pay to Landlord, within fifteen (15) days
after written demand for such payment by Landlord, all monies necessary to
restore the deposit up to the original amount. In the event the deposit shall
not be utilized for any such purposes, then such deposit shall be returned by
Landlord to Tenant within forty-five (45) days after the expiration or
termination of this Lease. The deposit may be commingled with other funds of
Landlord and Landlord shall not be required to pay Tenant any interest on such
security deposit.
EXAMINATION OF PREMISES
6.01. Tenant, having examined the Demised Premises, is familiar with the
condition thereof and, relying solely upon such examination, will take then in
their present condition. The above notwithstanding, Landlord has allocated One
hundred sixty two thousand one hundred forty dollars ($162,140.00), (the
"Improvement Allowance"), for changes or improvements in the Demised Premises
and for Tenant's relocation, phone system costs, and modular workstations to be
used subsequent to delivering possession in making the Premises suitable for
Tenant's occupancy.
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<PAGE>
USE OF PREMISES
7.01. The Tenant shall use and occupy the Demised Premises for office
------
space and other purposes associated with cruise line operations and for other
- ---------------------------------------------------------------
reasonable purposes not in conflict with any exclusive use of other tenants in
the Building.
UPKEEP OF PREMISES
8.01. The Tenant agrees that it will keep the Demised Premises and
the fixtures thereon in good order and condition and will, at the expiration or
other termination of the term hereof, surrender and deliver up the same in like
good order and condition as the same now is or shall be at the commencement of
the term hereof, ordinary wear and tear, and damage by the elements, fire, and
other unavoidable casualty excepted, unless caused by negligence of Tenant or
their agents or employees.
ASSIGNMENT AND SUBLETTING
9.01. The Tenant covenants and agrees not to encumber or assign this
Lease or sublet all or any part of the Demised Premises without the prior
written consent of Landlord. Any sale or transfer, whether to one or more
persons or entities and whether at one or different times, of a total of more
than fifty percent (50%) of the share of voting or capital stock of any
corporation which is then the legal Tenant under this Lease, shall be deemed an
assignment or subletting within the meaning of this paragraph. If Landlord
consents to an assignment or subletting, the Assignee or Sub-Lessee shall first
be obligated to assume, in writing, all of the obligations of Tenant under this
Lease and Tenant shall, for the full term of this Lease, continue to be jointly
and severally liable with such Assignee or Sub-Lessee for the payment of the
rent and the performance of all obligations required by Tenant under this Lease.
In no event shall Tenant assign or sublet the Demised Premises for any terms,
conditions and covenants other than those contained herein. In no event shall
this Lease be assigned or be assignable by operation of law or by voluntary or
involuntary bankruptcy proceedings or otherwise, and in no event shall this
Lease or any rights or privileges hereunder be an asset of Tenant under any
bankruptcy, insolvency or reorganization proceedings. Should Landlord consent
to any assignment or sublease, any economic benefit, less Tenant's costs
associated with subleasing the Premises, thus derived shall be for the account
of Landlord. Landlord's consent, as required herein, shall not unreasonably be
withheld.
FIRE INSURANCE
10.01. Landlord shall, at its expense, keep the building of which the
Demised Premises form a part, insured against loss by fire or casualty with
extended coverage in an amount determined by the Landlord, and said policy shall
include a standard waiver of subrogation clause against Tenant. Landlord agrees
to provide Tenant with a copy of the policy declarations page.
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<PAGE>
The Tenant will not do or permit anything to be done in the Demised Premises or
the Building of which they form a part or bring or keep anything therein which
shall in any way increase the rate of fire or other insurance in said Building,
or on the property kept therein, or obstruct, or interfere with the rights of
other tenants, or in any way injure or annoy them, or those having business with
them, or conflict with them, or conflict with the fire laws or regulations, or
with any insurance policy upon said Building or any part thereof, or with any
statutes, rules or regulations enacted or established by the appropriate
governmental authority.
In the event the cost of premiums on said fire and extended insurance increases
due to the hazardous nature of the use and occupancy by Tenant of the Premises,
then the entire increase in insurance cost shall be paid by Tenant as additional
rent in a lump sum upon receipt of invoice from the Landlord.
ALTERATIONS
11.01. Tenant will not make any alterations, installations, changes,
replacements, additions, or improvements (structural or otherwise) in or to the
Demised Premises or any part thereof, without the prior written consent of the
Landlord. All alterations or improvements shall be and remain a part of the
Demised Premises at the expiration of this Lease; or at the option of the
Landlord, he may require Tenant to remove all or any portion of said
improvements and restore that portion to its original condition. The cost of
said removal and restoration shall be paid by Tenant. Landlord's consent, as
required herein, shall not be unreasonably be withheld.
TENANT'S AGREEMENT
12.01. Tenant further agrees that no sign, advertisement or notice shall
be inscribed, painted or affixed on any part of the outside or inside of the
Demised Premises or Building, except on the directories and doors of offices,
and then only in such size, color and style as the Landlord shall approve.
Landlord shall have the right to prescribe the weight, and method of
installation and position of safes or other heavy fixtures or equipment and
Tenant will not install in the premises any fixtures, equipment or machinery
that will place a load upon any floor exceeding the floor load per square foot
area which such floor was designed to carry. All damage done to the Building by
taking in or removing a safe or any other article of Tenant's office equipment,
or due to its being in the premises, shall be repaired at the expense of the
Tenant. No freight, furniture or other bulky matter of any description will be
received into the Building or carried in the elevators, except as approved by
the Landlord. All moving of furniture, material and equipment shall be under
the direct control and supervision of the Landlord, who shall, however, not be
responsible for any damage to or charges for moving same. Tenant agrees
promptly to remove from the public area adjacent to said Building any of
Tenant's merchandise there delivered or deposited. Landlord's consent, as
required herein, shall not unreasonably be withheld.
-5-
<PAGE>
ELECTRICAL EQUIPMENT
13.01. Tenant will not install or operate in the premises any electrically
operated equipment or other machinery, other than personal computers,
typewriters, adding machines and such other electrically operated office
machinery and equipment normally used in modern offices, without first obtaining
the prior written consent of the Landlord. Landlord may condition such consent
upon the payment by the Tenant of additional rent as compensation for such
excess consumption of water and/or electricity as may be occasioned by the
operation of said equipment or machinery. Tenant shall not install any other
equipment of any kind or nature whatsoever which will or may necessitate any
changes, replacements or additions to or require the use of the water system,
plumbing system, heating system, air conditioning system or the electrical
system of the Demised Premises without the prior written consent of the
Landlord. Landlord's consent, as required herein, shall not unreasonably be
withheld.
TENANT EQUIPMENT
14.01. Maintenance and repair of equipment such as kitchen fixtures,
separate air-conditioning equipment, or any other type of special equipment,
whether installed by Tenant or by Landlord on behalf of Tenant, shall be the
sole responsibility of Tenant and Landlord shall have no obligation in
connection therewith.
ACCESS
15.01. Tenant further agrees that it will allow the Landlord, its agents
or employees, to enter the Demised Premises during normal business hours to
examine, inspect or to protect the same or prevent damage or injury to the same,
or to make such alterations and repairs to the Demised Premises as the Landlord
may deem necessary; or to exhibit the same to prospective tenants during the
last six (6) months of the term of this Lease.
ILLEGAL USE
16.01. The Tenant will not use or permit the Demised Premises or any part
thereof to be used for any disorderly, unlawful or extra hazardous purpose nor
for any other purpose than hereinbefore specified; and will not manufacture any
commodity therein, without the prior written consent of the Landlord.
RULES AND REGULATIONS
17.01. The Tenant covenants that the Rules and Regulations attached hereto
as Exhibit B, and such other and further rules and regulations as the landlord
may make and which in the Landlord's judgment are needful for the general well
being, safety, care and cleanliness of the Demised Premises and the Building of
which they are a part together with their appurtenances, shall be faithfully
kept, observed and performed by the Tenant, and by its agents, servants,
employees and guests.
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<PAGE>
DAMAGE
18.01 All injury to the Demised Premises or the Building of which they are
a part, caused by moving the property of Tenant into or out of, the said
Building and all breakage done by Tenant, or the agents, servants, employees and
visitors of Tenant, shall be repaired by the Tenant, at the expense of the
Tenant. In the event that the Tenant shall fail to do so, then the Landlord
shall have the right to make such necessary repairs, alterations and
replacements (structural, non-structural or otherwise) and any charge or cost so
incurred by the landlord shall be paid by the Tenant with the right on the part
of the Landlord to elect in its discretion, to regard the same as additional
Rent, in which event such cost or charge shall become additional Rent payable
with the installment of Rent next becoming due or thereafter falling due under
the terms of this Lease. This provision shall be construed as an additional
remedy granted to the Landlord and not a limitation of any other rights and
remedies which the Landlord has or may have in said circumstances.
PERSONAL PROPERTY
19.01. All personal property of the Tenant in the Demised Premises or in
the Building of which the Demised Premises is a part shall be at the sole risk
of the Tenant. The Landlord shall not be liable for any accident to or damage
to property of Tenant resulting from the use or operation of elevators or of the
heating, cooling, electrical or plumbing apparatus. Landlord shall not, in any
event, be liable for damages to property resulting from water, steam or other
causes. Tenant hereby expressly releases and agrees to hold Landlord harmless
from any liability incurred or claimed by reason of damage to Tenant's property.
Landlord shall not be liable in damages, nor shall this Lease be affected, for
conditions arising or resulting, and which may affect the Building of which the
Demised Premises is a part, due to construction on contiguous premises.
Notwithstanding the foregoing, Landlord shall not be relieved of liability as a
result of willfully negligent acts caused by Landlord, its agents or employees.
LIABILITY
20.01 The Landlord assumes no liability or responsibility whatsoever with
respect to the conduct and operation of the business to be conducted in the
Demised Premises. The Landlord shall not be liable for any accident to or
injury to any person or persons or property in or about the Demised Premises
which are caused by the conduct and operation of said business or by virtue of
equipment or property of the Tenant in said premises. The Tenant agrees to hold
the Landlord harmless against all such claims.
20.02 Tenant shall carry comprehensive general liability insurance,
including coverage for bodily injury and death, property damage and personal
injury, and contractual liability with the Landlord named as an additional
insured on the policy. Such insurance to include a minimum limit of Five
Million Dollars ($5,000,000) and to be with companies satisfactory to Landlord
and shall include a standard waiver of subrogation clause against Landlord.
During the term of the Lease Tenant agrees to furnish to Landlord policies or
certificates of insurance evidencing uninterrupted coverage.
-7-
<PAGE>
20.03 The Demised Premises shall be constructed in Accordance with the
requirements of the Americans with Disabilities Act ("ADA") and, thereafter,
Tenant shall be responsible for compliance within the Demised Premises and with
all requirements of the ADA.
SERVICES
21.01 The Landlord shall furnish reasonably adequate electric current
(excluding any electrical service metered directly to Tenant), water, lavatory
supplies, fluorescent tube replacements, and automatically operated elevator
service during normal business hours, and normal and usual cleaning and
janitorial service after business hours, without additional cost to the Tenant.
Landlord further agrees to furnish heat and air conditioning by means of a
central air conditioning system during the appropriate seasons of the year,
between the hours of 8 AM and 7 PM on Monday through Friday and from 9 AM to 1
PM on Saturday (exclusive of holidays), provided, however, that the Landlord
shall not be liable for failure to furnish, or for suspension or delays in
furnishing, any of such services caused by breakdown, maintenance or repair work
or strike, riot, civil commotion, or any cause or reason whatever beyond the
control of the Landlord. Landlord shall also supply all such services
referenced above upon reasonable request of Tenant during those times which are
not covered hereunder and Tenant agrees to pay all reasonable costs associated
with the same.
21.02 The overall parking ratio for the Building is 4 spaces per 1,000
rentable square feet. Included in the overall ratio is one (1) garage space per
1,200 rentable square feet. Parking is on a non-exclusive, unreserved basis.
There will be no charge during the term of this Lease for the referenced
parking.
21.03 Landlord, at its cost, will provide one directory strip in each of
the north and south tower elevator lobby directories, one building standard
entrance door sign for the second and third floor suites, and one building
standard strip on one of the four driveway entrance monument strips surrounding
the Building.
BANKRUPTCY
22.01 If the Tenant shall make an assignment of its assets for the benefit
of creditors, or if the Tenant shall become insolvent (either because total
liabilities exceed assets or because insufficient cash is available to meet
current liabilities) during the term of this Lease, then and in any of said
events this Lease shall immediately cease and terminate at the option of the
Landlord with the same force and effect as though the date of said event was the
day herein fixed for expiration of the term of this Lease.
DEFAULT
23.01 If Tenant defaults in the prompt payment of Rent or Additional Rent
or in the performance or observance of any other provision of this Lease and
such other default shall continue for ten (10) days after notice thereof shall
have been given to Tenant; or if the leasehold interest of Tenant be levied upon
under execution or attached by process of law; or
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<PAGE>
if Tenant abandons the Demised Premises; then and in any such event Landlord, if
it so elects forthwith, or at any time thereafter while such default continues,
either may terminate Tenant's right to possession without terminating this
Lease, or may terminate this Lease.
23.02 Upon termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of the Tenant's right to possession without
termination of the Lease, the Tenant shall surrender possession and vacate the
Demised Premises immediately and deliver possession thereof to the Landlord.
23.03 Tenant shall be deemed to have abandoned the Demised Premises if
rent is not currently paid and Tenant is absent from the Premises for a period
of fifteen (15) days. If the Tenant abandons the Demised Premises and if the
Landlord elects to terminate the Tenant's right to possession only, without
terminating the Lease, the Landlord may, at the Landlord's option, enter into
the Demised Premises, remove the Tenant's signs and other evidences of tenancy,
and take and hold possession thereof without such entry and possession
terminating the Lease or releasing the Tenant, in whole or in part, from the
Tenant's obligation to pay the Rent hereunder for the full term. Upon and after
entry into possession without termination of the Lease, the Landlord may relet
the Demised Premises or any part thereof for the account of the Tenant to any
person, firm or corporation other than the Tenant for such rent, for such time,
and upon such terms as the Landlord in the Landlord's sole discretion shall
determine. In any such case, the Landlord may make repairs in or to the Demised
Premises, and redecorate the same to the extent deemed by the Landlord necessary
or desirable, and the Tenant shall, upon demand, pay the cost hereof together
with the Landlord's expenses of the reletting. If the consideration collected
by the Landlord upon any such reletting for the Tenant's account is not
sufficient to pay the full amount of unpaid rent reserved in this Lease,
together with the costs of repairs, alterations, additions, redecorating, and
the Landlord's expenses, the Tenant shall pay to the Landlord the amount of each
deficiency upon demand.
23.04 If any voluntary or involuntary petition or similar pleading under
any section or sections of any bankruptcy act shall be filed by or against
Tenant, or any voluntary or involuntary proceedings in any court shall be
instituted to declare Tenant insolvent or unable to pay Tenant's debts, or if
Tenant makes an assignment for the benefit of its creditors, or a trustee or
receiver is appointed for Tenant or for the major part of Tenant's property,
then and in such event Landlord may, if Landlord so elects, with or without
notice of such election and with or without entry or other action by Landlord,
forthwith terminate this Lease, and notwithstanding any other provisions of this
Lease, Landlord shall forthwith upon such termination be entitled to recover
damages in an amount equal to the then present value of the Rent specified in
this Lease for the residue of the stated term hereof, less the fair rental
income of the Premises received by Landlord for the residue of the stated term.
23.05 Tenant shall pay all reasonable Landlord's costs, charges and
expenses, including the reasonable fees of counsel, agents and others retained
by Landlord, incurred in enforcing Tenant's obligations hereunder or incurred by
Landlord in any litigation, negotiation, bankruptcy or insolvency proceeding,
transaction or appeal, including those in which Tenant causes Landlord, without
Landlord's fault, to become involved or concerned.
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<PAGE>
23.06 If Tenant violates any of the terms and provisions of this Lease, or
defaults in any of its obligations hereunder, other than the payment of rent or
other sums payable hereunder, such violation may be restrained or such
obligation enforced by injunction.
23.07 Tenant agrees that it will promptly pay said Rent at the times above
stated without notice or demand; that, if any part of the Rent remains due and
unpaid for ten (10) days next after the same shall become due and payable,
Landlord shall have the option of declaring the balance of the entire rental
term of this Lease to be immediately due and payable, and Landlord may then
proceed to collect all of the unpaid Rent called for by this Lease by distress
or otherwise.
23.08 Time is of the essence with respect to Rent, Additional Rent and/or
any other payment due under this Lease. All payments required to be paid by
Tenant shall be paid on the first day of the month (but not later than five days
after stated due date) and shall be subject to a 5% late charge if not received
within said maximum five day period. In addition, any payment not paid when due
will bear interest from the due date until paid at the highest rate allowed by
law. If Tenant is late with three (3) consecutive payments, then all payments
automatically become payable quarterly in advance instead of monthly.
23.09 All rights and remedies of Landlord herein enumerated shall be
cumulative and none shall exclude any other right or remedy allowed by law.
23.10 In case of default hereunder by any Landlord or by any of its agents
or representatives, Tenant shall look solely to the interest of such Landlord in
the Building and the land on which it is located for the collection of any
judgment or other relief and no other property or estate of Landlord shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of Tenant's rights and remedies under this Lease.
DAMAGE BY FIRE OR CASUALTY
24.01 In the event of damage or destruction of the Demised Premises by
fire or any other casualty, this Lease shall not be terminated, but the premises
may be promptly and fully repaired and restored as the case may be by the
Landlord at its own cost and expense. Due allowance, however, shall be given
for reasonable time required for adjustment and settlement of insurance claims,
and for such other delays as may result from government restrictions, and
availability of materials or controls on construction, if any, and for strikes,
national emergencies and other conditions beyond the control of the Landlord.
It is agreed that in any of the aforesaid events, this Lease shall continue in
full force and effect, but if the condition is such so as to make the entire
premises untenantable, then the rental which the Tenant is obligated to pay
hereunder shall abate as of the date of the occurrence until the premises have
been fully and completely restored by the Landlord. Any unpaid or prepaid rent
for the month in which said condition occurs shall be pro-rated. If the
premises are partially damaged or destroyed, then during the period that Tenant
is deprived of the use of the damaged portion of said premises, Tenant shall be
required to pay rental covering only that part of the premises that it is able
to occupy, based on that portion of the total rent which the amount of square
foot area remaining
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<PAGE>
that can be occupied bears to the total square foot area of all the premises
covered by this Lease. In the event the Building is substantially or totally
destroyed by fire or other casualty so as to be entirely untenantable and it
shall require more than one hundred twenty (120) days for the Landlord to
commence restoration of same, then either party hereto, upon written notice to
the other party, may terminate this Lease, in which case the rent shall be
appointed and paid to the date of said fire or other casualty.
SUBORDINATION
25.01 This Lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or the
real property of which the Demised Premises form a part, and to all renewals,
modifications, consolidations, replacements and extensions thereof. This clause
shall be self-operative and no further instrument of subordination shall be
required by any mortgagee. In confirmation of such subordination, Tenant shall
execute promptly any certificate that the Landlord may request. Tenant hereby
constitutes and appoints Landlord the Tenant's attorney-in-fact to execute any
such certificate or certificates for and on behalf of the Tenant.
CONDEMNATION
26.01 Tenant agrees that if the said premises, or any part thereof, shall
be taken or condemned for public or quasi-public use or purpose by any competent
authority, Tenant shall have no claim against the Landlord and shall not have
any claim or right to any portion of the amount that may be awarded as damages
or paid as a result of any such condemnation; and all right of the Tenant to
damages therefor, if any, are hereby assigned by the Tenant to the Landlord. If
all or a substantial part of the premises shall be so condemned or taken, the
term of this Lease shall cease and terminate from the date of such governmental
taking or condemnation, and the Tenant shall have no claim against the Landlord
for the value of any unexpired term of this Lease. If any part of the Building
other than the Demised Premises shall be so condemned or taken, Landlord may, at
its sole option, terminate this Lease upon sixty (60) days written notice to
Tenant of such termination. In no event shall the Landlord be liable to the
Tenant for any business interruption, diminution in use or for the value of any
unexpired term of this Lease.
TENANT HOLDOVER
27.01 Tenant agrees that if Tenant does not surrender to Landlord said
Demised Premises at the end of the term of this Lease, or upon any cancellation
of the term of this Lease, without prior written consent of Landlord, which
consent shall not be unreasonably withheld, such holdover tenancy shall be a
tenancy at sufferance, and Tenant shall pay to Landlord all damages that
Landlord may suffer on account of Tenant's failure to surrender possession of
said Demised Premises, and will indemnify Landlord on account of delay of
Landlord in delivering possession of said Premises to another Tenant. Unless
Tenant's failure to surrender the Premises is consented to in writing by
landlord, the rent during any holdover period shall be double the adjusted
rental specified in this Lease, without necessity of additional demand
-11-
<PAGE>
therefor. The acceptance of such rent shall not be deemed to be consent to such
continued occupancy nor shall it be deemed a waiver of any rights of the
Landlord as set forth herein, at law or in equity.
POSSESSION
28.01 Landlord shall construct a demising wall and finish the inside of
the corridor wall and ceiling before delivering possession of the Demised
Premises, in otherwise the existing condition, on or before February 1, 1995,
clean and ready for occupancy. If permission is given to Tenant to enter into
the possession of the Demised Premises or to occupy premises other than the
Demised Premises prior to the date specified as the commencement of the term of
this Lease, then Tenant covenants and agrees that such occupancy shall be deemed
to be under all the terms, covenants, conditions and provisions of this Lease.
TENANT PLANS
29.01 It is agreed that the Tenant will furnish to the Landlord plans for
its partition, electric, telephone and all other requirements not later than
fifteen (15) days after executing the Lease. Landlord and Tenant agree that
Tenant shall be allowed to occupy the Premises for five (5) months at no cost
after renovations or improvements are substantially complete, but no later than
April 1, 1995; therefore, excluding any delays caused by Tenant or Tenant's
contractors, the commencement and expiration dates of the Lease shall be
adjusted accordingly on Exhibit "D".
OFFSET STATEMENT "ESTOPPEL CERTIFICATE"
30.01 Within ten (10) days after Landlord's request, Tenant shall execute
in recordable form and deliver a declaration to any person designated by
Landlord (a) ratifying this Lease; (b) stating the commencement and termination
dates of this Lease; and (c) certifying (i) that this Lease is in full force and
effect and has not been assigned, modified, supplemented or amended except by
such writing as shall be stated), (ii) that all conditions under this Lease to
be performed by Landlord have been satisfied (stating exceptions, if any), (iii)
no defenses or offsets against the enforcement of this Lease by Landlord exist
(or, if any stating those claimed), (iv) advance rent, if any, paid by Tenant,
(v) the date to which rent has been paid, (vi) the amount of security deposited
with Landlord, and such other information as Landlord reasonably requires.
Persons receiving such statements shall be entitled to rely upon them.
ATTORNMENT
31.01 Tenant shall, in the event of a sale or assignment of Landlord's
interest in the Demised Premises or the Building, or if the Demised Premises or
the Building comes into the hands of a mortgagee, ground lessor or any other
person, attorn to the purchaser or such mortgagee or other person and recognize
the same as Landlord hereunder. At Landlord's request, Tenant shall execute,
within fifteen (15) days, any attornment agreement required to be executed,
containing such provision as are required.
-12-
<PAGE>
FAILURE TO EXECUTE INSTRUMENTS
32.02 Tenant's failure to execute instruments or certificates provided for
in this Lease within fifteen (15) days after the mailing by Landlord of a
written request for their execution shall be a default under this Lease.
COUNTERCLAIM
33.01 If Landlord commences any proceedings for nonpayment of rent,
minimum rent, percentage rent or additional rent, Tenant will not interpose any
counterclaim of any nature or description in such proceedings, except for
compulsory counterclaims. This shall not, however, be construed as a waiver of
Tenant's right to assert such claims in a separate action brought by Tenant.
The covenants to pay rent and other amounts hereunder are independent covenants,
and Tenant shall have no right to hold back, offset, or fail to pay any such
amounts for default by landlord or any other reason whatsoever.
WAIVER OF JURY TRIAL
34.01 The parties hereto shall and they hereby do waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Leased Premises, and/or any claim of injury or damage.
WAIVER OF RIGHTS OF REDEMPTION
35.01 To the extent permitted by law, Tenant waives any and all rights of
redemption granted by or under any present or future laws if Tenant is evicted
or dispossessed for any cause, or if Landlord obtains possession of the premises
due to Tenant's default hereunder or otherwise.
TAXES OF LEASEHOLD
36.01 Tenant shall be responsible for and shall pay before delinquent all
municipal, county, federal, or state taxes coming due during or after the term
of this Lease against any leasehold interest or personal property of any kind
owned or placed in, upon, or about the premises by Tenant.
NO LIENS ON LANDLORD'S INTEREST
37.01 Tenant will not knowingly permit or suffer any lien attributable to
Tenant or its agents or employees to attach to the Demised Premises or the
Building and nothing contained herein shall be deemed to imply any agreement of
Landlord to subject Landlord's interest or estate to any mechanics' lien or any
other lien. If any mechanics' lien is filed against the Demised Premises or the
Building as a result of additions, alterations, repairs, installations or
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<PAGE>
improvements made or claimed to have been made by Tenant or anyone holding any
part of the Demised Premises through or under Tenant, or any other work or act
of any of the foregoing, Tenant shall discharge the same within twenty (20) days
from the filing thereof. If Tenant fails to so discharge for payment, bond or
court order any such mechanics' lien, Landlord, at its option, in addition to
all other rights or remedies herein provided, may bond said lien or claim (or
pay off said lien or claim if it cannot be bonded) for the account of Tenant
without inquiring into the validity thereof, and all sums so advanced by
Landlord shall be paid by Tenant to Landlord as additional rent on demand.
Pursuant to Florida Statutes, Section 713.10, all potential lien claimants are
hereby placed upon notice that the interest of the Landlord may not be subject
to any lien whatsoever.
PRONOUNS
38.01 Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places herein in which the context may require such substitution or
substitutions. The Landlord herein for convenience has been referred to in
neuter form.
NOTICES
39.01 All notices required or desired to be given hereunder by either
party to the other shall be given by certified or registered mail postage
prepaid, return receipt requested. Notice to the respective parties shall be
mailed as follows, if to the Landlord, 4000 Hollywood Blvd., Hollywood, FL,
33021, and if to the Tenant, the address for the Demised Premises. Either party
may, by written notice, designate a new address to which such notices shall be
directed.
RELOCATION
40.01 Landlord expressly reserves the right at Landlord's sole cost and
expense to remove Tenant from the Leased Premises and to relocate Tenant in some
other space which must be acceptable to Tenant, in its sole discretion, of
approximately the same dimensions and size within the Building, which other
space shall be decorated by Landlord at Landlord's expense. Landlord shall have
the right to use such decorations and materials from the existing Premises, or
other materials so that the space in which Tenant is relocated shall be
furnished using materials comparable to the building standard finishes. Nothing
herein contained shall be construed to relieve Tenant or imply that Tenant is
relieved of the liability for or obligation to pay the Base Rent and any
Additional Rent due under this Lease, the provisions of which paragraphs shall
be applied to the space in which Tenant is relocated on the same basis as said
provisions were applied to the Premises from which Tenant is removed. Tenant
agrees that Landlord's exercise of its election to remove and relocate Tenant
shall not terminate this Lease or release Tenant in whole or in part, from
Tenant's obligation to pay the rents and perform the covenants and agreements
hereunder for the full Term of this Lease.
40.02 In the event Tenant deems it desirable to relocate the third floor,
south tower operations to the second floor, south tower in order to have
contiguous offices, Tenant shall have
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<PAGE>
the right to do so, at its sole cost, as space becomes available on the second
floor, south tower. If there shall be any vacant space, or the immediate
prospect for any vacant space, on the second floor, south tower, Landlord shall
give Tenant written notice thereof. If within five (5) days thereafter, Tenant
shall give Landlord written notice that Tenant desires to relocate, Landlord and
Tenant shall immediately execute an Amendment to Lease Agreement providing for
such relocation within a reasonable period of time. If Tenant does not give
Landlord notice that it elects to lease such space within the time specified,
Landlord may lease such space to any third party.
BROKER'S COMMISSION
41.01 Landlord and Tenant acknowledge by their execution hereof that CB
--
Commercial Real Estate Group, Inc. is the only procuring broker of this Lease
- ----------------------------------
and Landlord agrees to pay a leasing commission in accordance with a Commission
Agreement between the Landlord and the broker.
ACCORD AND SATISFACTION
42.01 Landlord is entitled to accept, receive and cash or deposit any
payment made by Tenant for any reason or purpose or in any amount whatsoever,
and apply the same at Landlord's option to any obligation of Tenant and the same
shall not constitute payment of any amount owed except that to which Landlord
has applied the same. No endorsement or statement on any check or letter of
Tenant shall be deemed an accord and satisfaction or otherwise recognized for
any purpose whatsoever. The acceptance of any such check or payment shall be
without prejudice to Landlord's right to recover any and all amounts owed by
Tenant hereunder and Landlord's right to pursue any other available remedy.
QUIET ENJOYMENT
43.01 As long as Tenant fully complies with the terms, conditions, and
covenants of this lease, Landlord agrees that Tenant shall and may peaceably
have, hold and enjoy the Demised Premises without hinderance or molestation by
Landlord.
GOVERNING LAW
44.01 This Lease shall be construed under the laws of the State of Florida
and the venue of any action to enforce rights hereunder shall be the county in
which the building is located.
BENEFIT AND BURDEN
45.01 Except as otherwise expressly set forth in this Lease, the
covenants, conditions, agreements, terms and provisions herein contained shall
be binding upon, and shall inure to the benefit of, the parties hereto and their
respective personal representatives, successors and assigns. No rights,
however, shall inure to the benefit of any assignee or sublessee of Tenant
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<PAGE>
unless the assignment or sublease to such assignee or sublessee has been
approved by Landlord in writing as provided in Paragraph 9.01 hereof.
CAPTIONS AND SECTION NUMBERS
46.01 This Lease shall be construed without reference to titles of
paragraphs which are inserted only for convenience of reference.
PARTIAL INVALIDITY
47.01 If any provision of this Lease or the application thereof to any
person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby and each provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
ENTIRE AGREEMENT
48.01 There are no representations, covenants, warranties, promises,
agreements, conditions or undertakings, oral or written, between Landlord and
Tenant other than herein set forth. Except as herein otherwise provided, no
subsequent alteration, amendment, change or addition to this Lease shall be
binding upon Landlord or Tenant unless in writing and signed by them. Landlord
and Tenant acknowledge that they were each represented by counsel in reviewing
this Lease and that any rule of construction, to the effect that ambiguities are
to be resolved against the drafting party or Landlord, shall not be employed in
the interpretation of this Lease.
EXHIBITS
49.01 Exhibits made a part of this Lease are incorporated herein by
reference include the following marked X.
X A - Floor Plan
---
X B - Rules and Regulations
---
___ C - Work Letter
X D - Declaration by Tenant
---
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<PAGE>
TIME OF ESSENCE
50.01 It is understood and agreed between the parties hereto that time is
of the essence of all the terms, provisions, covenants and conditions of this
Lease.
EFFECTIVE DATE
51.01 Submission of this instrument for examination does not constitute an
offer, right of first refusal, reservation of or option for the Leased Premises
or any other space or premises in, on or about the Building. This instrument
becomes effective as a Lease upon execution and delivery by both Landlord and
Tenant.
STATUTORY DISCLOSURES
52.01 Radon Gas is a naturally occurring radioactive gas that, when
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
IN WITNESS WHEREOF, this Lease is executed as of the date first written
above.
WITNESS: LANDLORD:
HOLLYWOOD CORPORATE CIRCLE
/s/illegible ASSOCIATES
- --------------------------
/s/Judy Bill By:/s/Gerald E. Lou
- -------------------------- ---------------------------------------
Gerald E. Lou (print name)
--------------------------
Senior Vice President
WITNESS: TENANT:
/s/illegible
- --------------------------
/s/illegible By:/s/Patrick Doyle
- -------------------------- ----------------------------------------
Patrick Doyle (print name)
--------------------------
Chief Financial Officer
--------------------------------------
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<PAGE>
EXHIBIT A
Exhibit A consists of two pages. The first page contains a diagram of a portion
of the second floor located at 4000 Hollywood Boulevard. The second page
contains a diagram of a portion of the third floor located at 4000 Hollywood
Boulevard.
<PAGE>
EXHIBIT "B"
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
Tenant or used for any purpose other than ingress and egress to and from the
Demised Premises.
2. No awnings or other projections shall be attached to the outside walls of
the Building without the prior written consent of the Landlord. No curtains,
blinds, shades, or screens shall be attached to or hung in, or used in
connection with, any window or door of the Demised Premises, without the prior
written consent of the Landlord. Such awnings, projections, curtains, blinds,
shades, screens or other fixtures must be of a quality, type, design and color,
and attached in the manner approved by the Landlord.
3. No sign, advertisement, notice of other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
Demised Premises or Building or on the inside of the Demised Premises if the
same can be seen from the outside of the Demised Premises without the prior
written consent of Landlord except that the name of Tenant may appear on the
entrance door of the Demised Premises in conformance with Landlord's standard
Tenant signage. In the event of a violation of the foregoing by Tenant,
Landlord may remove same without any liability and may charge the expense
incurred by such removal to the Tenant violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Landlord at the expense of such Tenant and shall be of a sight and
style acceptable to Landlord.
4. A directory will be placed by Landlord, at his own expense, in a
conspicuous place in the building. No other directories shall be permitted,
unless previously consented to by Landlord in writing.
5. The sashes, sash doors, skylights, windows and doors that reflect or admit
light and air into the halls, passageways or other public places in the Building
shall not be covered or obstructed by any Tenant nor shall any bottles, parcels
or other articles be placed on the window sills.
6. The water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the Tenant,
when its servants, employees, agents, visitors or licenses shall have caused
same, and Landlord shall not in any case be responsible therefor.
7. No Tenant shall mark, paint, drill into, or in any way deface any part of
the Demised Premises or the Building of which they for a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Landlord, and as it may direct. Should a Tenant require telegraphic,
telephonic, annunciator or other communication service, Landlord will direct the
electricians where and how wires are to be introduced and placed, and none shall
<PAGE>
be introduced or placed except as Landlord shall direct. Electric current shall
not be used for power or heating without Landlord's prior written permission.
No antenna shall be permitted.
8. No bicycles, vehicles or animals of any kind shall be brought into or kept
in or about the Demised Premises, and, except as expressly provided in the
Lease, no cooking shall be done or permitted by any Tenant on said Demised
Premises. No Tenant shall cause or permit any unusual or objectionable odors to
be produced upon or permeate from the Demised Premises.
9. Landlord shall have the right to enter the Demised Premises leased to
Tenant to examine the same in accordance with the Lease Agreement and make such
alterations as may be deemed reasonably necessary by the Landlord and so long as
the same does not materially interfere with Tenant's intended use of the Demised
Premises.
10. No Tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring Buildings
or Demised Premises or those having business with them, whether by use of any
musical instrument, radio, talking machine unmusical noise, whistling, singing
or in any other way. No Tenant shall throw anything out the doors, windows or
skylights or down the passageways.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or the mechanism thereof. Each Tenant must, upon the termination of his tenancy
restore to the Landlord all keys of offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant. Tenant shall pay to the Landlord the
cost of any lost keys.
12. Tenant will refer all contractors, contractors' representatives and
installation technicians, rendering any service to Tenant, to Landlord for
Landlord's supervision, approval, and control before performance of any
contractual service. This provision shall apply to all work performed in the
Building including installations of telephones, telegraph equipment, electrical
devices and attachments, and installations of any nature affecting floors,
walls, woodwork, trim, windows, ceilings, equipment or any other physical
portion of the Building.
13. All removals, or the carrying in or out of any safes, freight, furniture or
bulky matter of any description must take place during the hours which the
Landlord or its agent may determine from time to time. All such movement shall
be under supervision of Landlord and in the manner agreed between Tenant and
Landlord by pre-arrangement before performance. Such pre-arrangements initiated
by Tenant will include determination by Landlord, subject to his decision and
control, of the time, method and routing of movement and limitations imposed by
safety or other concerns which may prohibit any article, equipment or other item
from being brought into the Building. The Landlord reserves the right to
prescribe the weight and positions of all safes and mass filing systems, which
must be placed upon 2-inch thick plank strips to distribute the weight. Any
damage done to the Building or to the Tenants or to other persons in bringing in
or removing safes, furniture or other bulky or heavy articles shall be paid for
by the Tenant.
-2-
<PAGE>
14. Tenant agrees that all machines or machinery placed in the Demised Premises
by Tenant will be erected and placed so as to prevent any vibration or annoyance
to any other of the Tenants in the Building of which the Demised Premises are a
part, and it is agreed that upon written request of Landlord, Tenant will,
within ten (10) days after the mailing of such notice, provide approved settings
for the absorbing, preventing, or decreasing of noise from any or all machines
or machinery placed in the Demised Premises.
15. The requirements of Tenant will be attended to only upon written
application at the office of the Building. Employees of Landlord shall not
receive or carry messages for or to any Tenant or other person nor contract with
or render free or paid services to any Tenant or Tenant's agent, employees or
invitees.
16. Canvassing, soliciting, and peddling in the Building is prohibited and each
Tenant shall cooperate to prevent the same.
17. Tenant shall have the free use of the mail chutes, if any, installed in the
Building, but the Landlord in no way guarantees efficiency of the said mail
chutes and shall be in no way responsible for any damage or delay which may
arise from use thereof.
18. Landlord will not be responsible for lost, stolen or damaged property,
equipment, money or jewelry from Tenant's area regardless of whether such loss
occurs when areas is locked against entry or not.
19. The Landlord specifically reserves the right to refuse admittance to the
Building from 7 p.m. to 7 a.m. daily or on Saturdays, Sundays or legal holidays,
to any person or persons who cannot furnish satisfactory identification, or to
any person or persons who, for any other reason in the Landlord's judgment,
should be denied access to the Demised Premises. The Landlord, for the
protection of the Tenant and Tenant's effects, may prescribe hours and intervals
during the night and on Saturdays, Sundays and holidays, when all persons
entering and departing the Building shall be required to enter their names, the
offices to which they are going or from which they are leaving, and the time of
entrance and departure in a register provided for that purpose by the Landlord.
20. The Landlord may retain a passkey to the leased Demised Premises, and be
allowed admittance thereto at all times to enable a representative to examine
the said Demised Premises.
21. The Landlord reserves the right to make such other and further reasonable
rules and regulations as in its judgment may from time to time be needful for
the safety, care and cleanliness of the Demised Premises, and for the
preservation of good order therein and any such other or further rules and
regulations shall be binding upon the parties hereto with the same force and
effect as if they had been inserted herein at the time of the execution hereof.
Furthermore, Landlord reserves the right to amend these Rules and Regulations
for the benefit of any particular tenant without the need for approval by any
Tenant.
-3-
<PAGE>
22. No Tenant, nor any of the Tenant's servants, employees, agents, visitors,
or licensees, shall at any time bring or keep upon the Demised Premises any
inflammable, combustible, or explosive fluid, chemical, or substance.
-4-
<PAGE>
EXHIBIT "D"
DECLARATION BY LANDLORD AND TENANT
AS TO DATE OF DELIVERY AND ACCEPTANCE OF
POSSESSION OF LEASED PREMISES
This Declaration is hereby attached to and made a part of the Lease
dated 12/23, 1994, entered into by and between HOLLYWOOD CORPORATE CIRCLE
ASSOCIATES, as Landlord, and Effjohn International B.V., as Tenant.
--------------------------
Landlord and Tenant do hereby declare that possession of the Demised
Premises was accepted by Tenant on the 2nd day of February, 1995. The Demised
Premises required to be constructed and finished by Landlord have been
satisfactorily completed (subject to agreed punch-list) and accepted by Tenant.
The Lease is now in full force and effect and Landlord has fulfilled its
obligations under the Lease. The Lease Commencement Date is hereby established
as 7/1/95 and the term of this Lease shall expire on 6/30/2000.
LANDLORD:
HOLLYWOOD CORPORATE CIRCLE ASSOCIATES
ATTEST:
/s/Judy Bill By:/s/Gerald E. Lou
- ----------------------------- -------------------------------------
Gerald E. Lou (print name)
--------------------------
Senior Vice President
ATTEST: TENANT:
EFFJOHN INTERNATIONAL B.V.
----------------------------------------
/s/illegible
- -----------------------------
By:/s/Patrick Doyle
-------------------------------------
Patrick Doyle (print name)
--------------------------
<PAGE>
Software Agreement
------------------
THIS AGREEMENT, made as of this ____________________ by and between
Reservations Technology, Inc., a corporation incorporated under the laws of the
State of Florida with its principal offices at 2139 NW 191 Avenue, Pembroke
Pines, Florida 33029 ("Licensor") and New Commodore Cruise Lines, Limited, a
corporation incorporated under the laws of Bermuda and authorized to do business
in the State of Florida, with its principal offices at 4000 Hollywood Blvd.,
#385-S, Hollywood, Florida 33021 ("Licensee").
BACKGROUND
- ----------
New Commodore Cruise Lines, Limited, is the marketing subsidiary of an
international cruise line company. It desires to license, customize, operate
and, from time to time, enhance an electronic information data processing
reservation system for use in cruise operations.
Licensor is a software company that has experience and expertise in the
computer systems required by the travel and reservation operations of cruise
companies.
NOW, THEREFORE, in consideration of the promises and mutual covenants
below, Licensee and Licensor agree as follows:
1. Definitions
-----------
1.1 "Licensed Software" shall mean (i) those computer programs and
routines consisting of a series of instructions or statements in source and
object code form and identified in Schedule "A"; (ii) all Modifications as
defined herein; and (iii) all documentation, installation guides, user manuals,
educational, and all other materials in machine readable, printed, or other form
to facilitate the use of the computer programs and routines identified in
Schedule "A".
1.2 "Use" shall mean copying the Licensed Software from storage units or
media into a stand-alone mini-computer utilizing the Licensed Software, stand-
alone or in a computer network linking the mini-computer to work stations for
the purposes of processing data for
<PAGE>
internal use or for the purpose of creating and developing Modifications and
Enhancements as defined herein.
1.3 "Enhancement(s)" shall mean any software which is developed by
Licensor for Licensee, as defined herein, or by Licensee independently or with
Licensor's assistance that constitutes a separate and independent module not
part of mainstream Licensed Software code.
1.4 "Modification(s)" shall mean any upgrade, modification or revision of
the Licensed Software which is developed for Licensee by Licensor or by Licensee
independently or with Licensor's assistance.
1.5 "Licensee" shall mean New Commodore Cruise Lines, Limited, and its
current and future subsidiaries and affiliates.
1.6 "Designated Site" shall mean the processing facility first above
written at which the Licensed Software will be used and/or a disaster recovery
site used in lieu of such facility. The processing facility may be changed by
Licensee provided the Licensor is so notified.
1.7 "Designated Hardware" shall mean the mini-computer specified in
Schedule "A" of this Agreement or a substitute minicomputer. Such substitution
may be made by the Licensee provided the Licensor is so notified.
1.8 "Confidential Information" shall mean all matters regarding the
Licensed Software, and such business or other matters as are disclosed by either
party to the other and identified in writing as confidential.
1.9 "Agreement" shall mean this document and the annexed schedules and
exhibits which are incorporated herein, together with any subsequent written and
executed amendments.
-2-
<PAGE>
2. Grant of License
----------------
2.1 Subject to the terms and conditions set forth in this Agreement,
Licensor grants to Licensee, and the Licensee hereby accepts a non-exclusive,
non-transferable perpetual license to use the Licensed Software on the
Designated Hardware at the Designated Site, for the marketing of Commodore
Cruise Line and s.s. United States products and services, and as specified in
Section 2.2 herein, provided that the use and disclosure of the Licensed
Software is restricted solely to the employees of the Licensee and to
consultants selected by the Licensee who have executed non-disclosure
agreements. The Licensee shall have the right to make an unlimited number of
copies of the Licensed Software as in its sole judgment shall be reasonably
required for internal use under this Agreement.
2.2 The Licensed Software may also be used by Licensee for cruise line
products and services marketed by Licensee for its current and future
subsidiaries and affiliates, provided that Licensee pays to Licensor a fee for
each license to a subsidiary or affiliate in an amount which is fifty percent
(50%) less than the amount of the last license fee paid.
2.3 Except as expressly provided under this Agreement, the Licensee shall
not have the right: (i) to assign, sell, relicense, or otherwise transfer the
Licensed Software; or (ii) to use the Licensed Software in whole or in part for
any use or purpose, other than as provided herein.
2.4 Subject to the rights granted to the Licensee in this Agreement, all
rights, title, and interest to the Licensed Software shall be the property of
Licensor, who may use, sell, assign, or transfer rights to the Licensed Software
during the term of this Agreement subject to Licensee's rights hereunder.
3. Confidentiality
---------------
3.1 The parties shall hold all Confidential Information in secrecy to the
same extent as each holds its own comparable information and shall not disclose
or make any use thereof except as related to the performance of this Agreement.
Notwithstanding, Confidential
-3-
<PAGE>
Information shall not include any information which (i) is or becomes part of
the public domain through no act or omission on the part of the receiving party,
(ii) is disclosed to third parties by the disclosing party without restriction
on such third parties, (iii) is in the receiving party's possession, without
actual or constructive knowledge of an obligation of confidentiality with
respect thereof, at or prior to the time of disclosure under this Agreement,
(iv) is disclosed to the receiving party by a third party having no obligation
of confidentiality with respect thereto, (v) is required to be disclosed
pursuant to a legal proceeding.
3.2 The Licensee shall exercise its best efforts with regard to its
employees', and consultants' confidentiality obligations but shall not be liable
for its employees or its consultants except in instances of gross negligence.
3.3 The Licensee shall not alter or remove any copyright, trade secret,
patent, proprietary and/or other legal notices contained on or in copies of the
Licensed Software. The existence of any such copyright notice on the Licensed
Software shall not be construed as an admission, or be deemed to create a
presumption, that publication of such materials has occurred.
4. Ownership, and Intellectual Property Rights
-------------------------------------------
4.1 For purposes of Section 117 of the Copyright Act of 1976, as amended,
and for all other purposes, Licensor shall be considered the owner of the
Licensed Software and all copies thereof, and of all copyright, trade secret,
patent and other intellectual or industrial property rights therein. Physical
copies of the Licensed Software (in diskette, tape, or other form provided by
Licensor) shall remain its property.
4.2 For purposes of Section 117 of the Copyright Act of 1976, as amended,
and for all other purposes, the Licensee shall be considered the sole and
exclusive owner of all Enhancements, and all right, title and interest therein,
free and clear of any liens and encumbrances, including (a) the United States
copyright to the Enhancements; (b) all literary and other rights of every kind
in the Enhancements; (c) the right to license, sell, assign, or otherwise
-4-
<PAGE>
transfer the Enhancements in whatsoever form desired by Licensee or its assigns
or corporate successors; and (d) all rights to secure copyrights on the
Enhancements anywhere in the world.
4.3 If Licensor desires to sublicense an Enhancement in order to market
the same, it shall so notify Licensee who may withhold its consent if it views
use of the Enhancement by its competitors as detrimental. If Licensee consents,
the parties shall negotiate such licensing terms and conditions as are
satisfactory to both parties.
5. Delivery of Licensed Software
-----------------------------
Licensee has inspected and reviewed the Licensed Software and accepts it as
is.
6. Revisions and Updates
---------------------
Revisions and updates to the Licensed Software, if any, made available by
Licensor to it other licensees shall be promptly provided to the Licensee
without further charges for eighteen (18) months from date of this Agreement.
Thereafter, such revisions and updates shall be so provided at not more than the
price paid by Licensor's other licensees, but in no event shall Licensee be
under any obligation to license such revisions or updates.
7. Fees
----
7.1 Licensee shall pay to Licensor upon execution of the Agreement for the
licensing rights to the Licensed Software, and for the ownership of the
Enhancements created hereunder a license fee of fifty thousand ($50,000.00)
dollars.
7.2 All fees and charges hereunder are exclusive of all state or federal
sales, use, excise and other similar taxes and charges, all of which shall be
paid by Licensee.
8. Term/Termination
----------------
8.1 This Agreement shall take effect as of the day, month and year first
above written ("Commencement Date") and shall continue in perpetuity unless
sooner terminated as provided hereunder.
-5-
<PAGE>
8.2 Upon any material breach of or default under this Agreement by
Licensor, the Licensee may give notice of such breach or default and, unless the
same shall be cured within thirty (30) days after delivery of such notice, then,
without limitation of any other remedy available hereunder, Licensee may
terminate this Agreement.
8.3 If Licensor files a petition for bankruptcy or if an involuntary
petition in bankruptcy is filed against Licensor and is not discharged within
thirty (30) days, or if Licensor becomes insolvent or makes a general assignment
for the benefit of its creditors, then in any case, Licensee may in its sole
discretion and at its sole option terminate this Agreement.
8.4 Termination under this provision shall not relieve Licensor or
Licensee of the continuing obligations that it has under this Agreement,
including without limitation, its obligations regarding the confidentiality of
each other's Confidential Information.
8.5 The rights and remedies of Licensor provided hereunder shall be
exclusive and are not in addition to any other rights and remedies provided by
law or equity or in this Agreement.
9. Responsibilities of Licensee
----------------------------
9.1 Licensee shall keep the Licensed Software free and clear of all liens,
claims, and encumbrances.
9.2 Licensee shall be responsible for the management and control of its
use of the Licensed Software, including without limitation: (i) establishing
adequate back-up plans, based on alternative procedures and access to qualified
programming personnel; and (ii) implementing sufficient recovery procedures and
checkpoints to satisfy its requirements for security and accuracy of input and
output.
-6-
<PAGE>
10. Warranties by Licensor
----------------------
10.1 Licensor hereby warrants and represents that the Licensed Software
was conceived and independently developed solely by Licensor.
10.2 Licensor hereby warrants and represents that the employees and
consultants, if any, who contributed to the development of the Licensed
Software, all executed non-disclosure agreements containing an assignment of
copyright and other intellectual property rights relating to the Licensed
Software to Licensor and further reciting that such development work constituted
a work-for-hire under the Copyright Act. Licensor further warrants and
represents that it has a copy of all such agreements which it can furnish upon
request.
10.3 Licensor hereby warrants and represents that as of the date of
contract execution the Licensed Software is free and clear of all liens, claims,
liabilities, and encumbrance, except for the licensing rights of other cruise
companies who may use the Licensed Software solely for processing data relating
to the internal operations of each of the other companies.
10.4 Licensor hereby represents and warrants that it has sufficient right,
title and interest in the Licensed Software to make this Agreement, and to grant
the rights herein specified.
11. Indemnification
---------------
11.1 Licensor agrees to defend at its expense any claim or suit against
Licensee based upon an assertion that Licensor does not have the rights, title
and interest in the Licensed Software as represented and warranted by Licensor
under Section 9 of this Agreement or that the Licensed Software as furnished by
or modified by Licensor under this Agreement infringe on a patent, trade secret
or copyright, and to pay the amount of Licensee's reasonable costs and
settlement or damages awarded provided that Licensor has been notified promptly
of any notice of claim or of threatened or actual suit.
-7-
<PAGE>
11.2 Following notice of this claim or of a threatened or actual suit and
solely at the written request of Licensee, Licensor shall procure for Licensee
the right to continue to use the Licensed Software as furnished or, may replace
or modify the Licensed Software to make it non-infringing.
12. Warranty of Performance
-----------------------
Licensor represents and warrants that the Licensed Software with the
Modifications and Enhancements (together "Software Plus") will operate
substantially error free in Licensee's hardware/software configuration and
operating environment for a period of ninety (90) business days following
execution of this Agreement ("Warranty Period"). During the Warranty Period,
and thereafter as required, Licensor will expeditiously correct without charge
all errors of which it is notified by Licensee during the Warranty Period.
13. Limitations of Liability
------------------------
LICENSOR SHALL NOT BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, FOR THE LOSS OF USE, LOSS OF
PROFITS OR FOR THE LOSS OF DATA INFORMATION OF ANY KIND, ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.
14. Relationship of the Parties
---------------------------
The relationship between Licensor and Licensee is that of
licensor/licensee. Neither party shall represent that it has any authority to
assume or create any obligation, express or implied, on behalf of the other
party, nor to represent the other party as agent, employee or in any other
capacity.
15. Notices
-------
All notices or other communications given by either party to the other
under this Agreement shall be in writing and shall be personally delivered or
sent by registered or certified mail, return-receipt requested, to the other
party at its address set forth above or such other
-8-
<PAGE>
addresses as a party may subsequently designate in writing. The date of
personal delivery or the date of mailing, as the case may be, shall be deemed to
be the date on which such notice is given.
16. General Provisions
------------------
16.1 Assignment
----------
Neither this Agreement nor any rights or licenses granted hereunder
may be assigned or delegated without the written consent of Licensee. This
Agreement shall inure to the benefit of and be binding upon any permitted
successor or assign of the parties.
16.2 Governing Law
-------------
This Agreement shall be governed by and construed as a sealed
instrument in accordance with the laws of the State of Florida.
16.3 Delay
-----
The parties shall not be liable for delays in the performance of
their obligation hereunder due to causes beyond their reasonable control
including, but not limited to, Acts of God.
16.4 Successors
----------
Except as otherwise provided herein, this Agreement together with all
schedules or modifications now and hereafter made a part hereof shall be binding
on the respective parties and respective heirs, executors, administrators, legal
representatives and assigns.
16.5 Waiver and Invalidity
---------------------
No waiver of any breach of this Agreement shall constitute a waiver
of any other breach of the same or other provisions of this Agreement and no
waiver shall be effective unless made in writing. In the event that any
provisions herein shall be illegal or unenforceable, such provision shall be
severed and the entire Agreement shall not fail, but the balance of the
Agreement shall continue in full force and effect.
-9-
<PAGE>
16.6 Headings
--------
The titles of the Sections and subsections of this Agreement are for
the convenience of references only and are not to be considered in construing
this Agreement.
16.7 Agreement
---------
This Agreement, including the attached Schedules, constitutes the
exclusive statement of the agreement between the parties concerning the subject
matter thereof. All other prior agreements, arrangements or undertakings, oral
or written, are merged into and are superseded by the terms of this Agreement.
No addition to or modification of any provisions of this Agreement shall be
binding unless made in writing and signed by duly authorized representatives of
the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
deal as of the day and year indicated above.
RESERVATIONS TECHNOLOGY, INC. NEW COMMODORE CRUISE
LINES, LIMITED
/s/Ben Tipps /s/Alan Pritzker
- ----------------------------- ------------------------------------
By By
Ben Tipps Alan Pritzker
- ----------------------------- ------------------------------------
Print Name Print Name
Pres. V.P. Finance
- ----------------------------- ------------------------------------
Title Title
-10-
<PAGE>
SCHEDULE A
----------
Schedule A consists of approximately 72 pages entitled "Programming
Development Manager - Member List", which lists computer files, libraries,
member numbers, creation dates, last changed dates, time, records, records
deleted and text.
<PAGE>
Software Agreement
------------------
THIS AGREEMENT, made as of this ____________________ by and between
Reservations Technology, Inc., a corporation incorporated under the laws of the
State of Florida with its principal offices at 2139 NW 191 Avenue, Pembroke
Pines, Florida 33029 ("Licensor") and New Commodore Cruise Lines, Limited, a
corporation incorporated under the laws of Bermuda and authorized to do business
in the State of Florida, with its principal offices at 4000 Hollywood Blvd.,
#385-S, Hollywood, Florida 33021 ("Licensee").
BACKGROUND
- ----------
New Commodore Cruise Lines, Limited, is the marketing subsidiary of an
international cruise line company. It desires to license, customize, operate
and, from time to time, enhance an electronic information data processing
reservation system for use in cruise operations.
Licensor is a software company that has experience and expertise in the
computer systems required by the travel and reservation operations of cruise
companies.
NOW, THEREFORE, in consideration of the promises and mutual covenants
below, Licensee and Licensor agree as follows:
1. Definitions
-----------
1.1 "Licensed Software" shall mean (i) those computer programs and
routines consisting of a series of instructions or statements in source and
object code form and identified in Schedule "A"; (ii) all Modifications as
defined herein; and (iii) all documentation, installation guides, user manuals,
educational, and all other materials in machine readable, printed, or other form
to facilitate the use of the computer programs and routines identified in
Schedule "A".
1.2 "Use" shall mean copying the Licensed Software from storage units or
media into a stand-alone mini-computer utilizing the Licensed Software, stand-
alone or in a computer network linking the mini-computer to work stations for
the purposes of processing data for
<PAGE>
internal use or for the purpose of creating and developing Modifications and
Enhancements as defined herein.
1.3 "Enhancement(s)" shall mean any software which is developed by
Licensor for Licensee, as defined herein, or by Licensee independently or with
Licensor's assistance that constitutes a separate and independent module not
part of mainstream Licensed Software code.
1.4 "Modification(s)" shall mean any upgrade, modification or revision of
the Licensed Software which is developed for Licensee by Licensor or by Licensee
independently or with Licensor's assistance.
1.5 "Licensee" shall mean New Commodore Cruise Lines, Limited, and its
current and future subsidiaries and affiliates.
1.6 "Designated Site" shall mean the processing facility first above
written at which the Licensed Software will be used and/or a disaster recovery
site used in lieu of such facility. The processing facility may be changed by
Licensee provided the Licensor is so notified.
1.7 "Designated Hardware" shall mean the mini-computer specified in
Schedule "A" of this Agreement or a substitute minicomputer. Such substitution
may be made by the Licensee provided the Licensor is so notified.
1.8 "Confidential Information" shall mean all matters regarding the
Licensed Software, and such business or other matters as are disclosed by either
party to the other and identified in writing as confidential.
1.9 "Agreement" shall mean this document and the annexed schedules and
exhibits which are incorporated herein, together with any subsequent written and
executed amendments.
-2-
<PAGE>
2. Grant of License
----------------
2.1 Subject to the terms and conditions set forth in this Agreement,
Licensor grants to Licensee, and the Licensee hereby accepts a non-exclusive,
non-transferable perpetual license to use the Licensed Software on the
Designated Hardware at the Designated Site, for the marketing of Commodore
Cruise Line and s.s. United States products and services, and as specified in
Section 2.2 herein, provided that the use and disclosure of the Licensed
Software is restricted solely to the employees of the Licensee and to
consultants selected by the Licensee who have executed non-disclosure
agreements. The Licensee shall have the right to make an unlimited number of
copies of the Licensed Software as in its sole judgment shall be reasonably
required for internal use under this Agreement.
2.2 The Licensed Software may also be used by Licensee for cruise line
products and services marketed by Licensee for its current and future
subsidiaries and affiliates, provided that Licensee pays to Licensor a fee for
each license to a subsidiary or affiliate in an amount which is fifty percent
(50%) less than the amount of the last license fee paid.
2.3 Except as expressly provided under this Agreement, the Licensee shall
not have the right: (i) to assign, sell, relicense, or otherwise transfer the
Licensed Software; or (ii) to use the Licensed Software in whole or in part for
any use or purpose, other than as provided herein.
2.4 Subject to the rights granted to the Licensee in this Agreement, all
rights, title, and interest to the Licensed Software shall be the property of
Licensor, who may use, sell, assign, or transfer rights to the Licensed Software
during the term of this Agreement subject to Licensee's rights hereunder.
3. Confidentiality
---------------
3.1 The parties shall hold all Confidential Information in secrecy to the
same extent as each holds its own comparable information and shall not disclose
or make any use thereof except as related to the performance of this Agreement.
Notwithstanding, Confidential
-3-
<PAGE>
Information shall not include any information which (i) is or becomes part of
the public domain through no act or omission on the part of the receiving party,
(ii) is disclosed to third parties by the disclosing party without restriction
on such third parties, (iii) is in the receiving party's possession, without
actual or constructive knowledge of an obligation of confidentiality with
respect thereof, at or prior to the time of disclosure under this Agreement,
(iv) is disclosed to the receiving party by a third party having no obligation
of confidentiality with respect thereto, (v) is required to be disclosed
pursuant to a legal proceeding.
3.2 The Licensee shall exercise its best efforts with regard to its
employees', and consultants' confidentiality obligations but shall not be liable
for its employees or its consultants except in instances of gross negligence.
3.3 The Licensee shall not alter or remove any copyright, trade secret,
patent, proprietary and/or other legal notices contained on or in copies of the
Licensed Software. The existence of any such copyright notice on the Licensed
Software shall not be construed as an admission, or be deemed to create a
presumption, that publication of such materials has occurred.
4. Ownership, and Intellectual Property Rights
-------------------------------------------
4.1 For purposes of Section 117 of the Copyright Act of 1976, as amended,
and for all other purposes, Licensor shall be considered the owner of the
Licensed Software and all copies thereof, and of all copyright, trade secret,
patent and other intellectual or industrial property rights therein. Physical
copies of the Licensed Software (in diskette, tape, or other form provided by
Licensor) shall remain its property.
4.2 For purposes of Section 117 of the Copyright Act of 1976, as amended,
and for all other purposes, the Licensee shall be considered the sole and
exclusive owner of all Enhancements, and all right, title and interest therein,
free and clear of any liens and encumbrances, including (a) the United States
copyright to the Enhancements; (b) all literary and other rights of every kind
in the Enhancements; (c) the right to license, sell, assign, or otherwise
-4-
<PAGE>
transfer the Enhancements in whatsoever form desired by Licensee or its assigns
or corporate successors; and (d) all rights to secure copyrights on the
Enhancements anywhere in the world.
4.3 If Licensor desires to sublicense an Enhancement in order to market
the same, it shall so notify Licensee who may withhold its consent if it views
use of the Enhancement by its competitors as detrimental. If Licensee consents,
the parties shall negotiate such licensing terms and conditions as are
satisfactory to both parties.
5. Delivery of Licensed Software
-----------------------------
Licensee has inspected and reviewed the Licensed Software and accepts it as
is.
6. Revisions and Updates
---------------------
Revisions and updates to the Licensed Software, if any, made available by
Licensor to it other licensees shall be promptly provided to the Licensee
without further charges for eighteen (18) months from date of this Agreement.
Thereafter, such revisions and updates shall be so provided at not more than the
price paid by Licensor's other licensees, but in no event shall Licensee be
under any obligation to license such revisions or updates.
7. Fees
----
7.1 Licensee shall pay to Licensor upon execution of the Agreement for the
licensing rights to the Licensed Software, and for the ownership of the
Enhancements created hereunder a license fee of fifty thousand ($50,000.00)
dollars.
7.2 All fees and charges hereunder are exclusive of all state or federal
sales, use, excise and other similar taxes and charges, all of which shall be
paid by Licensee.
8. Term/Termination
----------------
8.1 This Agreement shall take effect as of the day, month and year first
above written ("Commencement Date") and shall continue in perpetuity unless
sooner terminated as provided hereunder.
-5-
<PAGE>
8.2 Upon any material breach of or default under this Agreement by
Licensor, the Licensee may give notice of such breach or default and, unless the
same shall be cured within thirty (30) days after delivery of such notice, then,
without limitation of any other remedy available hereunder, Licensee may
terminate this Agreement.
8.3 If Licensor files a petition for bankruptcy or if an involuntary
petition in bankruptcy is filed against Licensor and is not discharged within
thirty (30) days, or if Licensor becomes insolvent or makes a general assignment
for the benefit of its creditors, then in any case, Licensee may in its sole
discretion and at its sole option terminate this Agreement.
8.4 Termination under this provision shall not relieve Licensor or
Licensee of the continuing obligations that it has under this Agreement,
including without limitation, its obligations regarding the confidentiality of
each other's Confidential Information.
8.5 The rights and remedies of Licensor provided hereunder shall be
exclusive and are not in addition to any other rights and remedies provided by
law or equity or in this Agreement.
9. Responsibilities of Licensee
----------------------------
9.1 Licensee shall keep the Licensed Software free and clear of all liens,
claims, and encumbrances.
9.2 Licensee shall be responsible for the management and control of its
use of the Licensed Software, including without limitation: (i) establishing
adequate back-up plans, based on alternative procedures and access to qualified
programming personnel; and (ii) implementing sufficient recovery procedures and
checkpoints to satisfy its requirements for security and accuracy of input and
output.
-6-
<PAGE>
10. Warranties by Licensor
----------------------
10.1 Licensor hereby warrants and represents that the Licensed Software
was conceived and independently developed solely by Licensor.
10.2 Licensor hereby warrants and represents that the employees and
consultants, if any, who contributed to the development of the Licensed
Software, all executed non-disclosure agreements containing an assignment of
copyright and other intellectual property rights relating to the Licensed
Software to Licensor and further reciting that such development work constituted
a work-for-hire under the Copyright Act. Licensor further warrants and
represents that it has a copy of all such agreements which it can furnish upon
request.
10.3 Licensor hereby warrants and represents that as of the date of
contract execution the Licensed Software is free and clear of all liens, claims,
liabilities, and encumbrance, except for the licensing rights of other cruise
companies who may use the Licensed Software solely for processing data relating
to the internal operations of each of the other companies.
10.4 Licensor hereby represents and warrants that it has sufficient right,
title and interest in the Licensed Software to make this Agreement, and to grant
the rights herein specified.
11. Indemnification
---------------
11.1 Licensor agrees to defend at its expense any claim or suit against
Licensee based upon an assertion that Licensor does not have the rights, title
and interest in the Licensed Software as represented and warranted by Licensor
under Section 9 of this Agreement or that the Licensed Software as furnished by
or modified by Licensor under this Agreement infringe on a patent, trade secret
or copyright, and to pay the amount of Licensee's reasonable costs and
settlement or damages awarded provided that Licensor has been notified promptly
of any notice of claim or of threatened or actual suit.
-7-
<PAGE>
11.2 Following notice of this claim or of a threatened or actual suit and
solely at the written request of Licensee, Licensor shall procure for Licensee
the right to continue to use the Licensed Software as furnished or, may replace
or modify the Licensed Software to make it non-infringing.
12. Warranty of Performance
-----------------------
Licensor represents and warrants that the Licensed Software with the
Modifications and Enhancements (together "Software Plus") will operate
substantially error free in Licensee's hardware/software configuration and
operating environment for a period of ninety (90) business days following
execution of this Agreement ("Warranty Period"). During the Warranty Period,
and thereafter as required, Licensor will expeditiously correct without charge
all errors of which it is notified by Licensee during the Warranty Period.
13. Limitations of Liability
------------------------
LICENSOR SHALL NOT BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, FOR THE LOSS OF USE, LOSS OF
PROFITS OR FOR THE LOSS OF DATA INFORMATION OF ANY KIND, ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.
14. Relationship of the Parties
---------------------------
The relationship between Licensor and Licensee is that of
licensor/licensee. Neither party shall represent that it has any authority to
assume or create any obligation, express or implied, on behalf of the other
party, nor to represent the other party as agent, employee or in any other
capacity.
15. Notices
-------
All notices or other communications given by either party to the other
under this Agreement shall be in writing and shall be personally delivered or
sent by registered or certified mail, return-receipt requested, to the other
party at its address set forth above or such other
-8-
<PAGE>
addresses as a party may subsequently designate in writing. The date of
personal delivery or the date of mailing, as the case may be, shall be deemed to
be the date on which such notice is given.
16. General Provisions
------------------
16.1 Assignment
----------
Neither this Agreement nor any rights or licenses granted hereunder
may be assigned or delegated without the written consent of Licensee. This
Agreement shall inure to the benefit of and be binding upon any permitted
successor or assign of the parties.
16.2 Governing Law
-------------
This Agreement shall be governed by and construed as a sealed
instrument in accordance with the laws of the State of Florida.
16.3 Delay
-----
The parties shall not be liable for delays in the performance of
their obligation hereunder due to causes beyond their reasonable control
including, but not limited to, Acts of God.
16.4 Successors
----------
Except as otherwise provided herein, this Agreement together with all
schedules or modifications now and hereafter made a part hereof shall be binding
on the respective parties and respective heirs, executors, administrators, legal
representatives and assigns.
16.5 Waiver and Invalidity
---------------------
No waiver of any breach of this Agreement shall constitute a waiver
of any other breach of the same or other provisions of this Agreement and no
waiver shall be effective unless made in writing. In the event that any
provisions herein shall be illegal or unenforceable, such provision shall be
severed and the entire Agreement shall not fail, but the balance of the
Agreement shall continue in full force and effect.
-9-
<PAGE>
16.6 Headings
--------
The titles of the Sections and subsections of this Agreement are for
the convenience of references only and are not to be considered in construing
this Agreement.
16.7 Agreement
---------
This Agreement, including the attached Schedules, constitutes the
exclusive statement of the agreement between the parties concerning the subject
matter thereof. All other prior agreements, arrangements or undertakings, oral
or written, are merged into and are superseded by the terms of this Agreement.
No addition to or modification of any provisions of this Agreement shall be
binding unless made in writing and signed by duly authorized representatives of
the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
deal as of the day and year indicated above.
RESERVATIONS TECHNOLOGY, INC. NEW COMMODORE CRUISE
LINES, LIMITED
/s/Ben Tipps /s/Alan Pritzker
- ----------------------------- ------------------------------------
By By
Ben Tipps Alan Pritzker
- ----------------------------- ------------------------------------
Print Name Print Name
Pres. V.P. Finance
- ----------------------------- ------------------------------------
Title Title
-10-
<PAGE>
SCHEDULE A
----------
Schedule A consists of approximately 72 pages entitled "Programming
Development Manager - Member List", which lists computer files, libraries,
member numbers, creation dates, last changed dates, time, records, records
deleted and text.
<PAGE>
EXHIBIT 10 M
SUBLEASE
This Sublease is entered into this ________ day of _______, 1995, by and between
Commodore Cruise Line, Limited, a Cayman Island corporation with an office at
4000 Hollywood Boulevard, Hollywood, Florida 33021 ("Sublessor") and New
Commodore Cruise Lines Limited, a Bermuda corporation, ("Sublessee") with
reference to the following facts:
A. Pursuant to an July 22, 1991 Lease Agreement number 0T00021 and amendments
000191 and 000192 (the "Main Lease") between IBM Credit Corporation
("Lessor") and Sublessor, Sublessor has leased computer equipment and
software (the "Equipment") and desires to sublease the Equipment to
Sublessee, and
B. Sublessee desires to sublease the Equipment.
NOW, THEREFORE, the parties agree as follows:
1. DESCRIPTION OF EQUIPMENT
Sublessor hereby leases to Sublessee, and sublessee hereby leases from
Sublessor, for the term, and subject to the conditions and covenants
hereinafter set forth, the Equipment as listed on Attachment A.
2. TERM
The term of this Sublease shall commence on June 30, 1995 and shall end in
accordance with the terms specified in the Main Lease. Sublessee shall have
the purchase rights for the Equipment as set forth in the Main Lease
provided they are not in default of this Sublease.
3. RENT
Rent shall be paid as defined in the Main Lease and shall commence on June
30, 1995. Rent shall include all applicable sales taxes and property taxes.
Sublessee will pay the rent to Sublessor, at the address set forth above,
or at such address as Sublessor may from time to time designate. Sublessee
agrees to pay all such sums monthly, in arrears, and without demand. If the
term of this Sublease commences on a day other than the first day of the
month or terminates on a day other than the last day of a month, then the
installments and any adjustments thereto for such month or months shall be
prorated, based on the number of days in such month.
4. LIMITATIONS OF LIABILITY
Sublessee has inspected the Equipment and accepts it "as is, where is".
Sublessor shall not be liable for any special, incidental, consequential or
exemplary damages, including without limitation, for the loss of use, loss
of profits or for the loss of data information of any kind, arising out of
or in connection with this Agreement.
5. ASSIGNMENT AND SUBLETTING
Sublessee may sublease or assign the subleased Equipment or any part
thereof subject to the terms of the Main Lease. Sublessee shall not be
released from its obligations under the terms of this Sublease.
6. INSURANCE
<PAGE>
Sublessee agrees that, at all times during the Sublease term, it will keep
in force and effect all insurance as is required under the Main Lease and
shall name Lessor and Sublessor as additional insured.
7. GENERAL
a) This Sublease embodies the entire agreement between the parties hereto
relative to the subject matter hereof and shall not be modified, changed,
or altered in any respect except in writing.
b) The covenants, agreements, and obligation herein contained shall extend to,
bind, and insure the benefit not only of the parties hereto but their
successors and assigns; and where more than one party shall be Sublessor
under this lease, the word "Sublessor" whenever used in this lease shall be
deemed to include all such parties jointly and severally.
c) Whenever under this Sublease, a provision is made for notice of any kind,
such notice shall be in writing and signed by or on behalf of the party
giving or making the same, and it shall be deemed sufficient notice and
service thereof if such notice is sent by registered or certified mail,
postage prepaid, to the address furnished for such purpose. Copies of any
notices to Sublessee shall also be sent to 4000 Hollywood Boulevard, Suite
3858, Hollywood, Florida 33021. All notices to be given to the parties
shall be given at the addresses stated above unless and until some other
place is designed in writing by the respective party and in accordance with
the Main Lease.
d) Nothing in this Sublease Agreement is intended to conflict with the terms
of the Main Lease or with any of the rights accorded the Lessor in the Main
Lease.
Executed on the day and year first above written.
SUBLESSOR SUBLESSEE
COMMODORE CRUISE LINE, LIMITED NEW COMMODORE CRUISE LINES LIMITED
By:/s/ Thomas Forss By:/s/Alan Pritzker
------------------------ --------------------------
Name: Thomas Forss Name: Alan Pritzker
---------------------- ------------------------
Title: procure holder Title: V.P. Finance
--------------------- -----------------------
<PAGE>
Attachment A
Attachment A consists of 6 pages describing each piece of equipment being leased
including: quantities and types, descriptions, plant order numbers, serial
numbers, price, lease rate, payment terms, lease option code, purchase option
code, estimated shipment date, total rent and payment period.
<PAGE>
ASSIGNMENT OF FINANCING AND ) UNITED STATES OF AMERICA
)
BERTHING AGREEMENT )
)
BY )
)
COMMODORE CRUISE LINE LIMITED ) STATE OF LOUISIANA
)
TO ) PARISH OF ORLEANS
)
NEW COMMODORE CRUISE LINE LIMITED ) CITY OF NEW ORLEANS
___________________________________/
This Assignment of Financing and Berthing Agreement (the "Assignment"),
entered into and effective June 29, 1995, between:
COMMODORE CRUISE LINE LIMITED, ("CCL" or the "Assignor") a company
incorporated under the laws of the Cayman Islands whose principal place of
business is c/o Caledonian Bank & Trust Limited, Caledonian House, George Town,
Grand Cayman, Cayman Islands; and
NEW COMMODORE CRUISE LINE LIMITED, (the "Assignee"), a company incorporated
under the laws of Bermuda whose principal place of business is at 4000 Hollywood
Boulevard, Suite 385, South Tower, Hollywood, Florida 33021, USA.
WITNESSES
WHEREAS, on April 29, 1992, CCL and the Board of Commissioners of the Port
of New Orleans (the "Board") entered into a Financing and Berthing Agreement
(the "Agreement") providing for the construction of a modern cruise ship
terminal at the Board's Julia Street Wharf; and
WHEREAS, on September 25, 1992, the Agreement was amended to provide for
the cost of construction; and
WHEREAS, Section 22 of the Agreement as amended provides CCL may assign the
Agreement, provided it secures the prior written consent of the Board acting
through its President and Chief Executive Officer in his discretion; and
WHEREAS, Assignor desires to assign its rights in the Agreement to Assignee
and the Board agrees to consent to the Assignment under the terms and conditions
contained herein;
-1-
<PAGE>
NOW THEREFORE, in return for the consideration and conditions contained
herein, the parties agree as follows:
Assignee hereby assumes all of Assignor's rights, title and interest under
the Agreement and hereby binds itself to perform all conditions of the Agreement
and obligations owed by Assignor under the Agreement arising after the effective
date of the assignment. Assignee agrees that all insurance requirements of the
Agreement shall be satisfied by Assignee, and all required policies shall be
issued in the name of Assignee prior to the effective date of this Assignment.
Assignor also declares that all obligations of Assignor under Agreement
have been satisfied to the date of the execution of this Agreement.
THUS DONE AND SIGNED in three originals on the dates written below in the
presence of the undersigned competent witnesses who have hereunto signed their
names with the appearers and effective on June 29, 1995.
WITNESSES: COMMODORE CRUISE LINE, LTD.
(Assignor)
/s/illegible
- ----------------------------
/s/Alina Mole By:/s/Patrick Doyle
- ---------------------------- -----------------------------------
WITNESSES: NEW COMMODORE CRUISE LINE, LTD.
(Assignee)
/s/Gail Santee
- ----------------------------
By:/s/Frederick A. Mayer
____________________________ -----------------------------------
WITNESSES: ASSIGNMENT CONSENTED TO UNDER THE TERMS
AND CONDITIONS SET OUT HEREIN BY THE
____________________________ BOARD OF COMMISSIONERS OF THE PORT OF
NEW ORLEANS
____________________________
APPROVED:
/s/illegible By:/s/J. Ron Brinson
- ---------------------------- -----------------------------------
Attorney for Board M. Ron Brinson
President & Chief
Executive Officer
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<PAGE>
FINANCING AND BERTHING AGREEMENT ) UNITED STATES OF AMERICA
)
BETWEEN ) STATE OF LOUISIANA
)
THE BOARD OF COMMISSIONERS ) PARISH OF ORLEANS
OF THE PORT OF NEW ORLEANS )
) CITY OF NEW ORLEANS
AND )
)
COMMODORE CRUISE LINE, LTD. )
__________________________________/
THIS FINANCING AND BERTHING AGREEMENT (hereafter Agreement), made and
entered into on the dates written below and effective as provided hereafter,
between the Board of Commissioners of the Port of New Orleans (hereafter Board),
a political subdivision of the State of Louisiana, represented herein by J. Ron
Brinson, its President and Chief Executive Officer, by virtue of a resolution of
said Board, a certified copy of which is annexed hereto as Exhibit A, and
Commodore Cruise Line, Ltd. (hereafter CCL), a Cayman corporation organized and
existing under the laws of The Cayman Islands, represented herein by Ove
Nordqvist, its President and Chief Executive Officer, by virtue of a resolution
of the Board of Directors of said corporation, a certified copy of which is
annexed hereto as Exhibit B,
WITNESSES
WHEREAS, the Board owns the Julia Street wharf on the east bank of the
Mississippi River at mile 92.2 AHP; and
WHEREAS, the Board is vitally interested in promoting the cruise ship
industry by attracting expanded cruise ship service to the Port of New
Orleans; and
WHEREAS, CCL operates the cruise ship S.S. Enchanted Seas (hereafter
--------------
Vessel) from the Port of New Orleans to the Caribbean Sea and Gulf of
Mexico; and
WHEREAS, to enhance community relations and to insure ongoing and expanded
operations by CCL in the Port of New Orleans, the Board proposes to
construct a modern cruise ship terminal at the upper Julia Street wharf,
WHEREAS, discussions have been conducted between this Board's staff and
officers of CCL concerning mutually satisfactory terms and conditions for
construction of a terminal, and the proposed agreement has been determined
by this Board to be in the best interests of all concerned and to have
significant benefits to the Port of New Orleans and business activities in
the New Orleans area, and the Board has agreed thereto.
-1-
<PAGE>
NOW, THEREFORE, these premises considered, the Board and CCL hereto agree
that for the consideration and on the terms and conditions hereafter set forth:
1. IMPROVEMENTS TO BE MADE BY BOARD
--------------------------------
(A) Board agrees that, within thirty (30) days after execution of this
Agreement, Board shall commence performance of the work necessary to effect
construction of a modern cruise passenger terminal and approaches at the upper
end of the Julia Street Wharf. Adjacent to this terminal, the Board shall also
design and construct parking facilities sufficient to accommodate a maximum of
123 vehicles for the passengers embarking on the Vessel. Storage space of
approximately 2,000 square feet shall be made available within the shed directly
adjacent to and downstream of the terminal and will be accessible via a double
door. The assignment of this storage space to CCL will be in accordance with
Item 308 of the Board's Dock Department Tariff. CCL may, at its option, erect
the necessary fencing for security, subject to Board approval. Board shall be
under no obligation to provide any security fencing. However, the cost of
fencing may be included in total cost of the Terminal, if mutually agreed upon
by the Board and CCL. Generic terminal signage will be included in the
construction. CCL shall have the right to include specific CCL signage in the
construction, but all cost for such shall be for the account of CCL. All
construction and improvements shall be as generally set forth or described on
Drawing No. PR-30698, dated December 6, 1991, annexed hereto and made part
hereof as Exhibit "C", all of which is sometimes herein referred to as the
Terminal, provided that the total cost of the work, as indicated by the total of
the acceptable bid or bids received by Board pursuant to Louisiana law for
performance of such work and other costs incurred or which would be incurred,
including refurbishment of the "water" stairs, shall not exceed the sum of Six
Hundred Seventy-One Thousand (671,000.00) Dollars. The Terminal, including all
constructions or improvements made thereto pursuant to this Agreement, shall at
all times be and remain the property of Board without any right or claim thereto
or against same by CCL. For purposes of this section, commencement of the work
by Board shall be the initiation of engineering studies of the work.
(B) Board shall have sole and exclusive responsibility for the design of
the work and for preparation of the plans and specifications for the work and
determination of the contents thereof, without any right or claim on the part of
CCL, provided that the design of the work, the plans and specifications
therefor, and the work to be set forth or depicted therein and to be performed
pursuant thereto shall be generally as set forth on Exhibit "C". However, Board
agrees to submit to CCL for design review the plans and specifications for the
construction of the Terminal no later than 90 days after the execution of this
Agreement. CCL shall have 14 days within which to review the plans and
specifications and respond with comments, suggestions, and requested corrections
before the project is advertised for bids. If CCL does not respond within that
time, CCL's concurrence with the plans shall be presumed.
(C) Should the total amount of the acceptable bid or bids received by
Board for performance of the work and other allocable costs, including, without
limitation, contingencies, in-house engineering and inspections, indicate that
the total cost of the work will exceed the
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<PAGE>
aforesaid sum of Six Hundred Seventy-One Thousand (671,000.00) Dollars, then
this Agreement shall be null, void and of no effect unless Board and CCL shall,
within sixty (60) days of the receipt of such bids, agree to amendment of the
Agreement and the plans and specifications so as to reduce the total cost of the
work to within said sum, as shall be indicated by the acceptable bid or bids
received on the revised plans or specifications, or Board and CCL shall agree to
the expenditure of additional funds required to perform the work according to
the original plans and specifications.
2. RELOCATION
----------
Board shall have the right to relocate the Terminal at any time upon giving
to CCL at least ninety (90) days written notice in advance. In the event that
Board exercises its right to relocate the Terminal, CCL shall have (1) the right
to terminate this Agreement; or (2) the right to renegotiate the terms of this
Agreement with Board, provided CCL exercises either right in writing within
thirty (30) days of its receipt of written notice from Board that Board has
elected to exercise its option to relocate the Terminal. Board agrees that it
shall elect to relocate the Terminal only if relocation is necessary and
appropriate in the development of the riverfront area of which the Terminal will
form a part. If CCL elects to renegotiate, Board agrees to use its best efforts
to relocate the Terminal to an area suitable to CCL's operation and provide
accommodations reasonably similar to those CCL will enjoy at the Terminal. If
CCL elects to terminate the agreement, all of CCL's obligations to Board shall
become extinguished on the Board's receipt of CCL's notice in writing of CCL's
intentions.
3. COMMITMENT BY CCL
-----------------
(A) CCL commits to homeport and operate the Vessel (or equal
replacement, in CCL's sole judgment) for five years from the Port of New Orleans
year round (minimum 50 weeks per year) commencing with the first voyage from
this Terminal, to occur within seven (7) days of the date on which the Board
notifies CCL it has accepted completion of the Terminal.
(B) If CCL cannot complete 50 sailings in any one year for reasons
beyond the control of CCL (including, but not limited to, strikes, labor
stoppages, weather, or extended maintenance and repair), then this Agreement
will be modified as provided in Section 7 (A) below. CCL shall notify Board
immediately in writing of any situation which will limit CCL's sailings. For
purposes of this Section, year as defined in this Section shall mean the one-
year period commencing on the date of the first cruise by the Vessel (or equal
replacement) from the Terminal and, subsequently, the one-year period following
the anniversary of the date in each year of the agreement of the first cruise by
the Vessel (or equal replacement).
4. OPERATION OF TERMINAL
---------------------
(A) CCL agrees to be and shall remain throughout the term of this
Agreement responsible for the daily operation and maintenance of the Terminal
when vessels owned or
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<PAGE>
operated by CCL are at the Terminal in the Port of New Orleans. As used in this
Agreement, the term "operation" includes, but is not necessarily limited to,
janitorial services (before, during, and after usage), furnishing all personnel
and equipment required, baggage handling, security, gangway, and any other
requirements necessary to load passengers and their personal effects, equipment,
stores and supplies.
(B) The Board shall arrange at its expense for necessary installation of
all utility connections (water, sewage, and electricity necessary to operate
air-conditioning, heating, lighting, and restroom facilities), and will provide
at its expense maintenance support in case of mechanical failure of Board-
supplied equipment.
(C) CCL may subcontract its obligations under this section with prior
approval of the Board, which approval will not be unreasonably withheld,
provided CCL shall at all times remain liable for its obligations under this
Agreement.
5. TERM
----
The term of this Agreement shall begin on the date of its execution. CCL
shall have five years from the date of the first cruise by the Vessel (or equal
replacement) from the Terminal to complete CCL's financial obligation to the
Board for the improvements to be constructed hereunder.
6. FEES AND CHARGES
----------------
(A) CCL agrees to pay to Board dockage and other charges as published in
the Board's Dock Department Tariff, FMC T-No. 2 (hereafter the Tariff) and as
these rates shall be subsequently amended or otherwise revised. CCL hereby
acknowledges receipt of a copy of the Tariff.
In addition to these charges, CCL shall pay a passenger charge equal
initially to the rate for such charges posted in the Tariff, which rate shall
soon increase to $5.50 per passenger. Board shall have the option to increase
this rate at such time in the future that the Tariff is amended for passenger
wharfage charges, provided, however, that any Tariff rate increase
notwithstanding, the rate of the passenger charge in effect for this Agreement
shall not increase by more than ten (10) percent per year over the rate that was
previously in effect before any Tariff amendment for passenger wharfage is
passed, or no more than the Tariff rate increases for passenger wharfage charge
if said increase should be less than ten (10) percent. For purposes of this
section of this Agreement, year shall mean the year following the anniversary of
the date in each year of the agreement of the first cruise by the Vessel (or
equal replacement).
(B) The initial parking fee per vehicle shall be $6.00 per 24-hour day
or any fraction thereof for cruise vessel passengers. Each year of this
Agreement on the anniversary of the date of the first cruise by the Vessel (or
equal replacement), Board shall have the option to increase
-4-
<PAGE>
the parking fee, provided this increase shall be no greater than fifteen (15)
percent of the parking fee previously in effect.
(C) CCL shall be invoiced and shall pay for its pro rata share of
utility consumption during its usage of the Terminal, which will be measured on
a separate meter to be installed at Board's expense.
7. CCL'S FINANCIAL OBLIGATION
--------------------------
(A) The Board shall divide the full amount of the capital expenditure
for constructing the Terminal into 250 equal installments to be credited over a
five-year period. For each sailing of the Vessel (or equal replacement) from the
port, the Board shall reduce CCL's financial obligation by one installment. The
installment reduction shall commence on the date of the first cruise by the
Vessel (or equal replacement) from the new Terminal.
(B) If CCL cannot complete 50 sailings per year as provided in Section 3
(B), CCL may at its option:
(i) extend the term of this Agreement in order to complete 250
sailings before the expiration of this Agreement; or
(ii) pay an amount each year equal to the number of installments not
deducted because of insufficient sailings.
In no event shall this Agreement be extended more than one (1) year.
(C) If CCL places another vessel in service with New Orleans as
homeport, in addition to the Vessel (or equal replacement), each vessel call
shall also result in a one installment reduction of CCL's financial commitment
to the Board.
(D) In the event passenger vessels with overnight accommodations not
owned or operated by CCL or by any affiliate of CCL utilize the Terminal for
passenger embarkation/debarkation during the term of this Agreement, an
additional installment reduction will be subtracted from CCL's financial
commitment for each such use.
(E) If CCL or any affiliate of CCL does not remain in New Orleans as a
homeport year-round with at least one vessel for the full five-year term of
CCL's obligation, CCL shall pay to the Board in one lump sum an amount equal to
the remaining principal due at the date of CCL's departure from the Port.
However, CCL shall at all times endeavor to remain homeported with at least one
vessel year-round in New Orleans for a minimum of five years.
(F) If multiple vessels utilize the Terminal over the five-year period
and the full capital expenditure obligation of CCL is completed prior to the
five-year period, CCL's
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<PAGE>
commitment to sail year-round from the Port of New Orleans for the term of this
Agreement shall not be diminished.
8. OPTION TO EXTEND
----------------
At the end of the five-year term (or any extension as contemplated in
Section 7 (B) above), CCL shall have the option to utilize the Terminal for an
additional three-year period under the same terms and conditions as set forth
herein, except for the provisions of Section 7 above.
9. PRIORITY USE OF TERMINAL
------------------------
(A) The Vessel shall have priority use of the Terminal on Saturdays and
Sundays, provided a schedule of sailings (berth applications) at least six
months in advance is filed with the Board's terminal assignment department.
(B) If CCL places another vessel in service in New Orleans in addition
to the Vessel, that vessel shall also have priority use of the Terminal on
Saturdays and Sundays.
(C) If CCL is not utilizing the Terminal on either one of its priority
days, and another cruise line requests the use of the Terminal as a homeport
during one of those priority days, the Board shall notify CCL of the request,
and CCL shall have sixty (60) days in which to advise the Board that CCL will
commit another vessel to homeport in New Orleans on that day. If CCL declines to
commit a vessel, the Board shall be free to assign the Terminal to the other
cruise line.
(D) If another cruise line requests simultaneous use of the Terminal,
and that use does not adversely affect CCL's use of the Terminal, then CCL shall
not unreasonably withhold its permission to allow the Board to assign the
Terminal simultaneously to another cruise line.
(E) If another cruise line requests the use of the Terminal as a port
call on days the Terminal is not utilized by CCL, the Board shall have the right
to assign the Terminal without prior approval from or notice to CCL. Each such
use shall result in a reduction of one-half (1/2) of CCL's weekly installment
rate.
10. INSURANCE
---------
(A) CCL shall procure and maintain at CCL's sole cost and expense
comprehensive general liability insurance with limit of liability of not less
than 10 million dollars ($10,000,000) for all injuries or deaths resulting to
any one person or from any one occurrence arising out of use or occupancy of the
Terminal. The limit of liability for property damage shall be not less than five
million dollars ($5,000,000) for each occurrence and aggregate.
-6-
<PAGE>
(B) CCL shall procure and maintain at CCL's sole cost and expense
comprehensive motor vehicle liability insurance which shall include hired car
and non-ownership coverage with limit of liability of not less than one million
dollars ($1,000,000) for all injuries or deaths resulting to any one person or
from any one occurrence. The limit of liability for property damage shall be not
less than one million dollars ($1,000,000) for each occurrence and aggregate.
(C) CCL shall procure and maintain at CCL's sole cost and expense
workers' compensation insurance as will protect it from claims under the
Louisiana Workers' Compensation Act as well as under the federal Longshoremen's
and Harbor Workers' Compensation Act, if applicable. The limit of liability
under the employer's liability section of the workers' compensation insurance
policy shall be not less than five hundred thousand dollars ($500,000). Whenever
applicable, protection shall also be provided for liability under the Jones Act
and under general maritime law in an amount of not less than five hundred
thousand dollars ($500,000).
(D) CCL shall procure and maintain at its sole cost and expense, for
vessels used in its operation, hull and machinery insurance including collision
liability and salvage removal, for the full value of the vessels. CCL shall also
provide protection and indemnity insurance with limits of liability of no less
than $25 million subject to a deductible of no more than $25,000. CCL shall be
responsible for all deductibles.
(E) Except for the workers' compensation policy, Board shall be named as
an insured on all insurance policies carried by CCL and its subcontractors in
compliance with this Agreement. All insurance policies required under
subsections (a), (b) and (d) above as well as any insurance carried by CCL or
those holding under or through CCL for the protection of its or their property
at the Terminal shall provide that the insurers waive their rights of
subrogation against Board and CCL and their respective officers, servants,
agents, representatives, employees or invitees. CCL further agrees to waive and
agrees to have its insurance waive any rights of subrogation (whether by loan
receipts, equitable assignment or otherwise) with respect to deductibles under
such policies and with respect to damage to equipment, including the loss of it,
whether insured or not. All such policies shall also provide for thirty (30)
days' written notice of cancellation of material change to be sent to Board's
risk manager at P.O. Box 60046, New Orleans, Louisiana 70160. All such policies
shall be underwritten by companies authorized to do and doing business in the
State of Louisiana and acceptable to Board (Best's rating IV or better), acting
through its risk manager. CCL shall furnish to Board's risk manager, on forms
acceptable to him, certificates evidencing that it has procured the insurance
required herein prior to CCL's occupancy of the Terminal. Nothing contained here
shall prevent CCL or Board from placing and maintaining, at its respective cost
and expense, additional or other insurance as may be desired.
(F) All insurances required for landside operation of terminal may be
provided by CCL's subcontractors, provided CCL remains liable for performance of
all of its obligations under this Agreement.
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<PAGE>
11. DREDGING
--------
Board agrees to be responsible at Board's expense for any required dredging
of the approach to and at the face of the Julia Street wharf, so as to always
guarantee water depth of thirty-two (32) feet for the Vessel and other CCL
vessels. CCL guarantees that none of CCL's or its affiliates' vessels shall
require more than thirty-two (32) feet of water depth. Board agrees to furnish
CCL, on request, copies of its sounding charts of the water berth which may be
taken by Board from time to time, provided, however, that Board shall not be
responsible for the accuracy or correctness of such sounding charts.
12. MAINTENANCE AND REPAIR OF DAMAGE
--------------------------------
(A) CCL shall be responsible at its sole cost, risk and expense for
repairing any damage to the Terminal which is caused by CCL, its employees,
contractors, agents, representatives, invitees or permittees. CCL agrees that it
shall take all necessary action to protect the interests of Board as well as of
CCL. CCL shall not be responsible for damage to the Terminal not caused by CCL,
its employees, contractors, agents, representatives, invitees, or permittees.
(B) Should CCL fail to (i) commence repair, replacement, maintenance or
restoration of all such property which may become the subject of loss, damage or
destruction within fifteen (15) days after having been notified in writing by
Board to perform such obligations as stated above, and (ii) continuously without
interruption pursue the completion of such repair, replacement, maintenance or
restoration, in addition to such remedies as may be afforded to Board by law,
Board is hereby authorized by CCL to perform the work at CCL's cost, risk, and
expense, and CCL shall on demand pay to Board the actual expenses incurred by
Board plus liquidated damages. Liquidated damages are hereby agreed to be the
Board's actual expense plus 25 percent.
13. LAWS, RULES AND REGULATIONS
---------------------------
(A) CCL shall not at any time during the term of this Agreement use or
allow the use of the Terminal for any purpose in violation of the laws,
regulations or ordinances of the United States of America, the State of
Louisiana, the City of New Orleans, or of Board, whether such laws, regulations
or ordinances now exist or shall be enacted or issued during the term of this
Agreement.
(B) CCL shall observe all laws and ordinances applicable to the
installation, maintenance and removal of any improvements, machinery or other
equipment on, in, or near the Terminal (including access or utility connections)
and to take appropriate safeguards to prevent loss, damage or injury to the
Terminal or to any adjacent property as a result of such installation,
maintenance or removal of such improvements, machinery or equipment.
-8-
<PAGE>
(C) CCL, when using the terminal, shall keep the Terminal, including the
utility reservation and access area fronting or serving it and other areas as
may be indicated in a safe, clean and wholesome condition and in full compliance
with local ordinances and all other laws and governmental regulations affecting
the Terminal and shall remove promptly at CCL's cost any rubbish or waste
material of any character whatsoever which may accumulate thereon from CCL's
operation. Any oil, sludge, residue or other materials to be disposed of in
connection with CCL's operation of the Terminal shall not be discharged into the
Mississippi River, connecting waterways or drains, nor shall any material,
debris, or objects of any kind be thrown or otherwise allowed to be discharged
into those waterways. CCL shall not use the Terminal for any purposes which
might cause a nuisance to adjacent property owners, lessees or occupants.
(D) CCL shall report to Board in writing every occasion when hazardous
materials are to be stored or used on or passed through the Terminal. Whenever
possible, CCL shall make this report before such occasion and in any event as
soon as CCL becomes aware of any such occasion. CCL shall report to Board all
environmental compliance orders issued to CCL as a result of CCL's operations at
the Terminal by the U.S. Environmental Protection Agency or the Louisiana State
Department of Environmental Quality immediately after receiving notice of any
such orders.
(E) Board shall at all times be free to make and enforce any reasonable
and uniform rules, regulations or ordinances which it deems necessary or
appropriate with regard to the property under its administration of which the
Terminal forms a part, provided that such rules, regulations or ordinances shall
not be arbitrary or discriminatory against CCL.
(F) CCL shall demand adherence to all of the above-mentioned laws,
ordinances, rules and regulations both from its employees and all other persons
entering the Terminal who derive their right to be there from CCL.
14. WATCHMAN SERVICE
----------------
CCL shall furnish all watchman service which it may desire at CCL's own
cost, risk and expense. Board shall have no obligation to provide watchman
service.
15. COST, RISK AND EXPENSE
----------------------
(A) CCL shall pay all costs and assume all risks in doing work or
carrying on operations, now or hereafter permitted or required under the terms
and conditions of this Agreement, except as may be otherwise specifically
designated in this Agreement or in written instructions given r other agreements
made by proper authority under the terms and conditions of this Agreement.
(B) The application for and installation of any water, gas, sewerage and
drainage lines and electric power cables to the Terminal shall be made by Board
at Board's expense.
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<PAGE>
(C) Payment of the cost of all ship's service water, electricity, and
other services or utilities shall be in accordance with the Tariff and the sole
responsibility of CCL.
16. DEFAULT
-------
(A) The following shall constitute events of default (hereafter Events
of Default) under this lease:
(i) If CCL shall fail duly and punctually to make any payment required
when due to Board, and if such failure shall continue for a period
of thirty (30) days after written notice of it has been given to CCL
by Board; or
(ii) If CCL shall be adjudged bankrupt or insolvent by any court of
competent jurisdiction, or if a voluntary petition in bankruptcy or
a petition for reorganization or arrangement shall be filed by CCL,
or if a receiver of the property of CCL shall be appointed; or
(iii) If the interest of CCL under this Agreement shall transfer or pass
to or devolve on any other person, firm or corporation by operation
of law or otherwise without the prior written consent and approval
of Board except to an affiliate, a wholly owned subsidiary, or
successor company; or
(iv) If CCL becomes a corporation or other entity in dissolution or
liquidation, whether voluntary or as the result of any act or
omission, or by operation of law or the order or decree of any court
having jurisdiction or for any other reason whatsoever and the
exceptions of (iii) above have not become operative; or
(v) If, by or pursuant to or under authority of any legislative act,
resolution or rule or any order or decree of any court or
governmental board, agency or office, a receiver, trustee or
liquidator shall take possession or control of all or substantially
all of CCL's property; or
(vi) If CCL shall voluntarily abandon, desert or vacate New Orleans or
discontinue its operations at the Terminal for a period greater than
thirty (30) days, excluding drydocking or maintenance repair time,
provided such time does not exceed 90 days and CCL gives written
notification to Board in advance of the 30-day period provided
herein if the maintenance period is forecast to be greater than 30
days; or
-10-
<PAGE>
(vii) If CCL breaches or defaults in respect to any other covenants,
conditions or agreements contained herein and fails for a period of
thirty (30) days after receipt of written notice to remedy such
default, or, if remedying such default would reasonably require
longer than thirty (30) days, fails to commence to remedy and to
proceed thereafter with all reasonable diligence to the remedying of
such default.
(B) At the occurrence of any such Event of Default, the unamortized
portion of the principle capital expense shall at once become due and exigible
without putting CCL in default. At that time, Board in its sole discretion may
exercise either of the following options without further notice to CCL and
without putting CCL into default:
(i) to demand the unamortized portion of the principal capital expense,
(ii) to cancel this Agreement immediately.
(C) CCL expressly waives any statutory right it may have under La.
C.C.P. Art. 4701 et seq. of notice to vacate the Terminal.
-------
(D) In all cases, CCL shall remain responsible for all damages or losses
suffered by Board as a consequence of CCL's breach in the performance of its
obligations under this Agreement. In addition to exercising the rights or
remedies hereinabove provided in this Section, at the occurrence of Event of
Default designated in (vi) above (i.e. abandonment or discontinuance of
operations), whether alone or in conjunction with other Events of Default, Board
may take possession of the Terminal without terminating this Agreement and at
the Board's option either operate the facility or relet it at the best price
obtainable by reasonable effort, consistent with the public purposes of Board,
and for any term Board deems proper, and CCL shall remain liable to Board for
the deficiency, if any, between CCL's charges and other obligations hereunder
and the price contained by Board on operation or re-letting. Failure strictly
and promptly to enforce these conditions shall not operate as a waiver of
Board's rights.
17. TERMINATION OF AGREEMENT
------------------------
(A) At termination of this Agreement by cancellation or expiration or
for any other reason whatsoever, CCL shall immediately yield up possession of
the Terminal to Board. In case of failure or refusal of CCL to yield up the
Terminal, CCL shall pay as liquidated damages for the whole time such possession
is withheld double the proportionate amount of charges herein specified to be
due. This provision shall not constitute a waiver by Board of any remedies now
or hereafter given to Board by the laws of Louisiana.
(B) At such termination, CCL shall have the right, and CCL may be
required by Board, to remove any and all facilities, buildings or structures
placed by CCL or CCL's agents
-11-
<PAGE>
on the Terminal, and CCL shall restore the Terminal to as good condition as at
the commence ment of this Agreement, ordinary wear and tear expected. In any
event, CCL shall immediately remove all trash, stocks or materials, supplies,
tools, etc. from the Terminal and from the adjacent areas of responsibility of
CCL.
(C) If the facilities, buildings or structures which are required by
Board to be removed from the Terminal and all trash, stocks of materials,
supplies, tools, etc. shall not have been removed by CCL prior to the date of
termination of this Agreement, and the Terminal not restored as aforesaid, Board
shall have the option either to collect double the proportionate amount of
charges due as liquidated damages until the facilities, buildings, structures,
trash, stocks of materials, supplies, tools etc. have been removed and the
Terminal restored by CCL; or to remove the same and restore the Terminal at
CCL's cost, risk and expense, the double charge to continue until ultimate
removal thereof and completion of restoration; or to retain such property of CCL
or any part thereof which remains on the Terminal without payment or
reimbursement to CCL unless other arrangements have been made in writing between
Board and CCL with regard to the removal thereof.
18. RIGHTS OF WAY
-------------
Board may at its option grant to CCL, or to appropriate public utility
companies if requested by CCL, rights of way to be so located as to give the
utility companies as convenient access to the Terminal as practicable without
unreasonable interference with the use by Board or Board's other tenants of the
property, provided that the location of such utilities, insofar as they cross or
otherwise affect any of Board's property within or outside of the Terminal,
shall be approved in writing in advance by Board. Such rights of way for
utilities, granted by Board, shall be only for the duration of the term of this
Agreement or any extensions thereof. CCL shall assume all risks, costs or other
obligations imposed by the utility companies as a condition of such
installations made at CCL's request.
19. LOSS, DAMAGE AND DESTRUCTION
----------------------------
(A) Except as provided herein, the occurrence of any loss, damage or
destruction of the Terminal, however caused and whether covered by insurance or
not, shall not be grounds for cancellation or termination of this Agreement or
for reduction or abatement of charges or amortization. Board shall be under no
responsibility to repair, replace or restore any of the Terminal which may be
the subject of such loss, damage or destruction, and its failure to do so shall
not be grounds for cancellation of this Agreement.
(B) Except as provided herein, CCL agrees that it shall at its own cost,
risk and expense promptly and with due diligence repair, replace or restore (or
cause repair, replacement or restoration) any and all of the Terminal which may
become the subject of such loss, damage or destruction, if caused by CCL. CCL
shall obtain the written consent of Board to the plans for any repairs,
replacements or restoration. The proceeds derived from insurance policies and
amounts recovered from third parties shall be applied toward such repairs,
replacement or
-12-
<PAGE>
restoration. Board agrees to make such insurance proceeds and amounts recovered
from third parties available to CCL for the payment of progress payments to
CCL's suppliers and contractors working on such repair, replacement or
restoration.
(C) CCL shall have the option to terminate this Agreement and its
obligations under this Agreement in the event of any loss, damage or destruction
of the Terminal which renders it unusable for the handling of passengers to and
from vessels as contemplated by this Agreement, if such loss, damage or
destruction of the Terminal is not caused by CCL, its employees, contractors,
agents, representatives, invitees, or permittees. CCL shall give Board prompt
notice of such election no later than thirty (30) days from the date of
occurrence of such loss, damage or destruction, and failure to give such notice
shall be deemed an election to continue this Agreement. Such termination shall
be effective (for the purposes of the payment of charges) as of the date of such
loss, damage or destruction, and Board shall have no obligation to CCL for any
payment as a consequence of such termination. In the event said loss, damage or
destruction shall have been covered by insurance, before CCL may exercise its
option to cancel this Agreement as set out in this Subsection, CCL shall pay
over to Board all such insurance proceeds which CCL has been paid or for which
CCL has or may have a claim.
(D) The right is reserved to CCL and to Board (at Board's option) to
claim reimbursement from the party or parties responsible for any such loss,
damage or destruction, provided, however, that the pendency of any claim for
payment of insurance or the pendency of any claim against persons believed to be
responsible for such loss, damage or destruction shall in no manner be cause for
delay by CCL in effecting the repair, replacement or restoration of such
property.
20. TAXES
-----
If by reason of this Agreement or of the use of the Terminal by CCL as
provided under this Agreement, ad valorem or other taxes should accrue against
----------
any improvements on the Terminal constructed and owned by CCL, then CCL shall
pay any and all such taxes prior to their becoming delinquent. Failure to do so
shall constitute a breach of this Agreement.
21. LIENS
-----
CCL shall not permit any lien or privilege to remain of record when filed
by any person or company for claims arising in connection with any work or
undertaking by CCL or CCL's agents on the Terminal, and CCL shall promptly
discharge or cause to be discharged any such lien. If in default therein for
thirty (30) days after written notice thereof from Board, CCL shall pay to Board
as additional rent any amount or amounts paid by Board in causing the removal of
such lien, including reasonable attorney's fees and expenses. Nothing contained
herein, however, shall require Board to discharge such lien except in its own
discretion.
-13-
<PAGE>
22. ASSIGNMENT AND SUBLETTING
-------------------------
(A) CCL shall not assign this Agreement in whole or in part, nor sublet
the Terminal or any portion of it, to anyone without in each case the prior
written consent of Board acting through its president and chief executive
officer in his discretion. CCL shall not permit any transfer by operation of law
of any of CCL's interest in the Terminal. Nothing contained herein shall be
construed as requiring the consent of Board to any assignment of this Agreement
to a wholly owned subsidiary or affiliate of CCL or to any corporate successor
of CCL, provided, however, that in the event of such assignment, CCL shall
continue to remain primarily liable for all its obligations under this Agreement
unless Board shall give its written consent to the release of CCL after the
receipt of due consideration. CCL, in case of assignment or sublease with
permission of Board, shall remain at all times primarily liable for the prompt
payment of all amounts due from CCL under the terms hereof and for the prompt
performance of all covenants on CCL's part herein agreed to be performed.
(B) In the event of any proposed assignment of the Agreement to an
affiliate or a wholly owned subsidiary, CCL shall give prior notice to Board of
the assignment and proof of CCL's ownership or affiliation of the subsidiary. In
the event of any proposed assignment or transfer of this Agreement to a
corporate successor, CCL shall give prior notice to Board of the assignment and
proof that the proposed assignee is a corporate successor of CCL.
(C) For purposes of this section, a change in ownership of CCL in which
over 50 percent of the ownership is transferred to another person or entity
shall constitute as assignment which must be approved in advance by the Board.
23. INDEMNITY
---------
(A) CCL shall protect, defend, indemnify, and forever hold harmless
Board against all loss, cost, claims, charges, expenses, penalties, damages,
fines, suits, demands, attorney's fees, interest, and actions of any kind and
nature whatsoever growing out of, in connection with, or by reason of any of
CCL's operations and the operations of those holding under or through CCL at the
Terminal, including such as may be imposed for the violation of any law of the
United States, the State of Louisiana, any ordinance of the City of New Orleans,
Board or of any regulation of any governmental agency (federal, state or local),
and including all liability under employers' liability or workers' compensation
acts (federal or state).
(B) CCL shall further protect, defend, indemnify, and forever hold
harmless Board against all loss, cost, claims, charges, expenses, penalties,
damages, fines, suits, demands, attorney's fees, interest, and actions of any
kind and nature whatsoever growing out of or in connection with any accident or
other occurrence, including strict liability, whether directly or indirectly
caused, occasioned or contributed to in whole or in part through any act,
omission, fault or negligence of CCL, its officers, directors, employees,
representatives, agents or invitees, or those occupying the Terminal through CCL
causing injury to any person (fatal or otherwise) or damage to property caused
by the use or occupancy of the Terminal by CCL, its officers,
-14-
<PAGE>
directors, employees, representatives, agents or invitees, or those occupying
the Terminal through CCL during the term of this Agreement or in CCL's
performance of its obligations hereunder.
(C) When in the course of fulfilling its obligations under this Section,
CCL must engage attorneys to defend Board, CCL shall obtain the prior written
consent of Board to the attorneys to be engaged, and such consent shall not be
unreasonably withheld.
(D) If Board must retain an attorney to enforce this indemnity
provision, CCL shall be liable to Board for all attorney's fees and costs
reasonably associated with enforcing this indemnity.
24. HEADINGS
--------
The headings in this Agreement are for quick reference and convenience only
and do not alter, amend, explain or otherwise affect the terms and conditions
appearing in this agreement.
25. NOTICE
------
Wherever, in the provisions of this Agreement, notice is required to be
given by either party, it shall not be construed to mean personal service, but
it shall mean notice in writing, addressed to the party to receive such notice
at the addresses designated below or as may be designated by the parties from
time to time by notice given pursuant to this Section and sent by registered or
certified U.S. mail:
To Board: The Board of Commissioners
of the Port of New Orleans
P.O. Box 60046
New Orleans, Louisiana 70160
Attention: President and
Chief Executive Officer
To CCL: Commodore Cruise Line, Ltd.
800 Douglas Road
Suite 700
Coral Gables, Florida 33134
Attention: President and
Chief Executive Officer
-15-
<PAGE>
26. FEDERAL MARITIME COMMISSION APPROVAL
------------------------------------
Board and CCL agree that this Agreement is subject to the approval of the
Federal Maritime Commission (hereafter FMC). Upon execution of this Agreement,
Board shall submit it to the FMC for consideration and review pursuant to
Section 15 of the Shipping Act of 1916, 46 U.S.C. app. 814, and Section 5 of the
Shipping Act of 1984, 46 U.S.C. app. 1704(a). The parties further agree that the
terms and conditions of this Agreement shall not be effective until this
Agreement receives the approval of the FMC or the FMC indicates that this
Agreement has become effective, either expressly or through the passage without
objection of time afforded by the Shipping Act and/or the regulations adopted in
furtherance thereof, for review thereof or of such shortened period of time as
may be authorized by the FMC for effecting review.
27. LOUISIANA CONTRACT
------------------
This Agreement is a Louisiana contract and shall be governed, interpreted
and enforced in the courts of Louisiana in accordance with the laws of the State
of Louisiana and where applicable of the United States of America.
THUS DONE AND SIGNED in multiple originals in this City of New Orleans,
State of Louisiana, this 29th day of April, 1996, in the presence of the
subscribing witnesses.
WITNESSES: COMMODORE CRUISE LINE, LTD.
/s/illegible
- -----------------------------
/s/illegible By:/s/Ove Nordqvist
- ----------------------------- ------------------------------------
OVE NORDQVIST, President and
Chief Executive Officer
signed in the city of Coral
Gables, State of Florida
WITNESSES: THE BOARD OF COMMISSIONERS
OF THE PORT OF NEW ORLEANS
/s/illegible
- -----------------------------
/s/illegible By:/s/J. Ron Robinson
- ----------------------------- ------------------------------------
J. RON BRINSON, President and
Chief Executive Officer
-16-
<PAGE>
APPROVED:
/s/illegible
- -----------------------------
Attorney of Board
I hereby certify that this copy
presented to me on the 29th day of
April, 1996 is a copy of a true original
/s/Alexandra H. Anagnostis
----------------------------------------
Notary Public
ACKNOWLEDGMENT
--------------
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned authority, personally appeared OVE NORDQVIST,
who after being duly sworn deposed that he is the President and Chief Executive
Officer of Commodore Cruise Line, Ltd. and that he signed the foregoing
Agreement for and on behalf of that corporation as he was duly authorized to do
this 29th day of April, 1996.
WITNESSES:
/s/illegible
- -----------------------------
/s/Alexandra H. Anagnostis /s/illegible
- ----------------------------- -----------------------------
/s/Alexandra H. Anagnostis
-----------------------------
Notary Public
-17-
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned authority, personally appeared J. RON BRINSON,
who after being duly sworn deposed that he is the President and Chief Executive
Officer of the Board of Commissioners of the Port of New Orleans, and that he
signed the foregoing Agreement for and on behalf of said Board as he was duly
authorized to do this 4th day of May, 1996.
WITNESSES:
/s/illegible
- ----------------------------
/s/Kayle L. Hentze /s/J. Ron Brinson
- ---------------------------- ---------------------------------
J. RON BRINSON
/s/illegible
---------------------------------
Notary Public
-18-
<PAGE>
RESOLUTION
April 29, 1992
The Board of Directors of Commodore Cruise Line, Ltd. at their meeting
today in Coral Gables, Florida, hereby with full quorum resolves that the
Financing and Berthing Agreement between the Board of Commissioners of the Port
of New Orleans and Commodore Cruise Line, Ltd. is approved and that Mr. Ove
Nordqvist, President and Chief Executive Officer, is authorized to sign the
contract on behalf of Commodore Cruse Line, Ltd.
/s/Hans Christner /s/Henrik Osterberg
- ----------------------------- ----------------------------------
Hans Christner Henrik Osterberg
Chairman Vice Chairman
/s/Soren Pettersson /s/Olov Johannesson
- ----------------------------- ----------------------------------
Soren Pettersson Olov Johannesson
Director Director
/s/Ove Nordqvist
- -----------------------------
Ove Nordqvist
Director I hereby certify that this copy
presented to me on the 29th day of
April, 1992 is a copy of the true
original.
/s/Alexandra H. Anagnostis
----------------------------------
Notary Public
<PAGE>
FIRST AMENDMENT TO )
FINANCING AND BERTHING AGREEMENT ) UNITED STATES OF AMERICA
)
BETWEEN ) STATE OF LOUISIANA
)
THE BOARD OF COMMISSIONERS ) PARISH OF ORLEANS
OF THE PORT OF NEW ORLEANS )
) CITY OF NEW ORLEANS
AND )
)
COMMODORE CRUISE LINE, LTD. )
___________________________________/
THIS FIRST AMENDMENT TO THE FINANCING AND BERTHING AGREEMENT (hereafter
Agreement), made and entered into on the dates written below and effective as
provided hereafter between the Board of Commissioners of the Port of New Orleans
(hereafter Board), a political subdivision of the State of Louisiana,
represented herein by J. Ron Brinson, its President and Chief Executive Officer,
by virtue of a resolution of said Board, a certified copy of which is annexed to
and made a part of this Agreement, and Commodore Cruise Line, Ltd. (hereafter
CCL), a Cayman Islands corporation, organized and existing under the laws of the
Cayman Islands, represented herein by Ove Nordqvist, its President and Chief
Executive Officer, by virtue of a resolution of the Board of Directors of said
corporation, a certified copy of which is annexed hereto and made a part of this
Agreement,
W I T N E S S E S:
WHEREAS, on April 29, 1992, Commodore and the Board entered into an
Agreement providing for the Board's construction of a modern cruise ship
terminal at the upper Julia Street wharf at a cost not to exceed $671,000;
and
WHEREAS, preliminary estimates from the design consultants indicate that
the cost of construction will exceed the authorized expenditure; and
WHEREAS, the Agreement provides that if the cost exceeds the authorized
amount, both parties may agree to the increased cost and amend the
Agreement; and
WHEREAS, both Commodore and the Board deem that it is in their best
interests to increase the authorized expenditure and to increase the term
of the contract from five to six years,
NOW, THEREFORE, in consideration of the above, Commodore and the Board
hereby amend the original Agreement in the following respects:
I.
<PAGE>
To revise Section 1 of the Agreement in the following manner:
1. IMPROVEMENTS TO BE MADE BY THE BOARD
Under Section 1 (C) ("Improvements to be made by Board") of the Agreement,
in the fifth and sixth lines of the section, delete "Six Hundred Seventy
One Thousand ($671,000.00) Dollars and replace it by "Eight Hundred Ninety
Five Thousand ($895,000.00) Dollars."
II.
To replace Section 3 (A) of the Agreement with the following revised
section:
3. COMMITMENT BY CCL
(A) CCL commits to homeport and operate the Vessel (or equal replacement
in CCL's sole judgment) for six years from the Port of New Orleans year
round (minimum 50 weeks per year) commencing with the first voyage from
this Terminal, to occur within seven (7) days of the date on which the
Board notifies CCL it has accepted completion of the Terminal.
III.
To replace Section 5 of the Agreement with the following revised section:
5. TERM
The term of this Agreement shall begin on the date of its execution. CCL
shall have six years from the date of the first cruise by the Vessel (or
equal replacement) from the Terminal to complete CCL's financial obligation
to the Board for the improvements to be constructed hereunder.
IV.
To replace Section 7 (A), (B), and (F) of the Agreement with the following
revised sub-sections:
7. CCL'S FINANCIAL OBLIGATION
(A) The Board shall divide the full amount of the capital expenditure for
constructing the terminal into 300 equal installments to be credited over a
six-year period. For each sailing of the Vessel (or equal replacement) from
the port, the Board shall reuse CCL's financial obligation by one
installment. The installment reduction shall commence on the date of the
first cruise by the Vessel (or equal replacement) from the Terminal.
-2-
<PAGE>
(B) If CCL cannot complete 50 sailings per year as provided in Section 3
(B), CCL may at its option:
(i) extend the term of this Agreement in order to complete 300 sailings
before the expiration of the term of this Agreement; or
(ii) pay an amount to the Board each year equal to the number of
installments not deducted because of insufficient sailings.
In no event shall this Agreement be extended more than one (1) year.
(F) If multiple vessels utilize the Terminal over its six-year term and
the full capital expenditure obligation of CCL is completed prior to the
end of the six-year term, CCL's commitment to sail year-round for six years
from the Port of New Orleans shall not be diminished.
V.
To replace current Section 8 of the Agreement with the following revised
section:
8. OPTION TO EXTEND
At the end of the six-year term (or any extension as contemplated in
Section 7 (B) above), CCL shall have the option to utilize the Terminal for an
additional three-year period under the same terms and conditions as set forth
herein, except for the provisions of Section 7 above.
VI.
6. FEDERAL MARITIME COMMISSION APPROVAL
Board and CCL agree that this First Amendment Agreement is subject to the
approval of the Federal Maritime Commission (hereafter FMC). Upon execution of
this First Amendment Agreement, Board shall submit it to the FMC for
consideration and review pursuant to Section 15 of the Shipping Act of 1916, 46
U.S.C. app. 814, and Section 5 of the Shipping Act of 1984, 46 U.S.C. app.
1704(a). The First Amendment Agreement parties further agree that the terms and
conditions of this First Amendment Agreement shall not be effective until they
are approved by the FMC or the FMC indicates that this First Amendment Agreement
has become effective, either expressly or through the passage without objection
of time afforded by the Shipping Act and/or the regulations adopted in
furtherance thereof, for review thereof or of such shortened period of time as
may be authorized by the FMC for effecting review.
-3-
<PAGE>
VII.
All other terms and conditions of the Financing and Berthing Agreement
shall remain in full force and effect.
THUS DONE AND SIGNED in multiple originals in the presence of the
subscribing witnesses in the places set out below on the dates indicated and
effective as provided above.
WITNESSES: COMMODORE CRUISE LINE, LTD.
/s/Alexandra Anagnostis
- -----------------------------
/s/Michele Mole By:/s/OVE NORDQVIST
- ----------------------------- ------------------------------------
OVE NORDQVIST, President and
Chief Executive Officer
at Coral Gables, Florida
date: 9/25/92
-------------------------------
WITNESSES: THE BOARD OF COMMISSIONERS
OF THE PORT OF NEW ORLEANS
/s/Kyle L. Goode
- -----------------------------
/s/illegible By:/s/J. RON BRINSON
- ----------------------------- ------------------------------------
J. RON BRINSON, President and
Chief Executive Officer
at New Orleans, Louisiana
date: 5 Oct 92
-------------------------------
APPROVED:
/s/illegible
- -----------------------------
Attorney of Board
-4-
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF FLORIDA
COUNTY OF DADE
----
BEFORE ME, the undersigned authority, personally appeared OVE NORDQVIST,
who after being duly sworn deposed that he is the President and Chief Executive
Officer of Commodore Cruise Line, Ltd. and that he signed the foregoing First
Amendment for and on behalf of that corporation as he was duly authorized to do
this 25th day of September, 1996.
WITNESSES:
/s/Alexandra H. Anagnostis
- -----------------------------
/s/OVE NORDQVIST
_____________________________ -----------------------------------
OVE NORDQVIST
/s/Alexandra H. Anagnostis
-----------------------------------
Notary Public
ACKNOWLEDGMENT
--------------
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned authority, personally appeared J. RON BRINSON,
who after being duly sworn deposed that he is the President and Chief Executive
Officer of the Board of Commissioners of the Port of New Orleans, and that he
signed the foregoing First Amendment for and on behalf of said Board as he was
duly authorized to do this 5th day of October, 1996.
WITNESSES:
/s/Kyle L. Goode
- -----------------------------
/s/Elida Ibarra /s/J. RON BRINSON
- ----------------------------- ---------------------------------------
J. RON BRINSON
/s/illegible
---------------------------------------
Notary Public
-5-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH EXHIBIT I REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., MIAMI TIME, July 14, 2002
No. W-2 250,000 Warrants
WARRANT TO PURCHASE
250,000 SHARES OF
COMMODORE HOLDINGS
LIMITED COMMON STOCK
WARRANT CERTIFICATE
-------------------
THIS WARRANT CERTIFICATE certifies that JeMJ Financial Services, Inc., or
its registered assigns, is the registered holder of 250,000 Warrants (the
"Warrants") to purchase initially, at any time from the date hereof until 5:30
p.m., Miami time, on July 14, 2002 ("Expiration Date"), up to 250,000 fully paid
and nonassessable shares of common stock, $.01 par value ("Common Stock") of
COMMODORE HOLDINGS LIMITED, a Bermuda corporation (the "Company"), at the
initial exercise price, subject to adjustment in certain events (the "Exercise
Price"), of $6.00 per share of Common Stock upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office of the Company
located at 4000 Hollywood Boulevard, Suite 385, South Tower, Hollywood, Florida
33021, or any successor office, but subject to the conditions set forth herein
and in Exhibit I hereto. Payment of the Exercise Price shall be made by
certified or official bank check payable to the order of the Company or may be
made by tendering an amount of Warrants for cancellation with a value as
determined by the difference between the then current market price of the
underlying shares of Common Stock as of the date of exercise less the Exercise
Price of each Warrant.
<PAGE>
No Warrant may be exercised after 5:30 p.m., Miami time, on the Expiration
Date, at which time all Warrants evidenced hereby, unless exercised prior
thereto, shall thereafter be void. If the Expiration Date shall in the State of
Florida be a holiday or a day on which banks are authorized to close, then the
Expiration Date shall mean 5:30 P.M., Miami Time, the next following day which,
in the State of Florida, is not a holiday or a day on which banks are authorized
to close.
The Warrants evidenced by this Warrant Certificate are subject to the
provisions of Exhibit I hereto, which Exhibit I is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
Exhibit I hereto provides that upon the occurrence of certain events the
Exercise Price and the type and/or number of the Company's securities issuable
thereupon may, subject to certain conditions, be adjusted. In such event, the
Company will, at the request of the holder, issue a new Warrant Certificate
evidencing the adjustment in the Exercise Price and the number and/or type of
securities issuable upon the exercise of the Warrants; provided, however, that
-------- -------
the failure of the Company to issue such new Warrant Certificates shall not in
any way change, alter, or otherwise impair the rights of the holder as set forth
in Exhibit I.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company located at 4000 Hollywood Boulevard,
Suite 385, South Tower, Hollywood, Florida 33021, or any successor office, a new
Warrant Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in Exhibit I, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in Exhibit I
hereto shall have the meanings assigned to them in Exhibit I hereto.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of April 26, 1995
COMMODORE HOLDINGS LIMITED
By:/s/Frederick Mayer
---------------------------
Frederick Mayer,
Vice-Chairman of the Board
Attest:
/s/Blanca Santos
- --------------------------------------
Blanca Santos, Secretary
-3-
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
THE UNDERSIGNED hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ shares of Common
Stock and herewith tenders in payment for such securities a certified or
official bank check payable to the order of Commodore Holdings Limited in the
amount of $________, all in accordance with the terms hereof. The undersigned
requests that a certificate for such securities be registered in the name of
___________________________________________________________ whose address is
_______________________________________________ and that such Certificate be
delivered to ____________________________ whose address is
___________________________________.
Dated:
Signature_________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
____________________________________________
Signature Guarantee
-4-
<PAGE>
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________________
Attorney, to transfer the within Warrant Certificate on the books of the within
named Company, with full power of substitution.
Dated: ___________________
Signature___________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Assignee)
____________________________________________
Signature Guarantee
-5-
<PAGE>
EXHIBIT I
Section 1. Exercise of Warrant. The Warrants initially are exercisable at
-------------------
an aggregate initial exercise price per share of common stock, $.01 par value
per share (the "Common Stock") of Commodore Holdings Limited (the "Company") set
forth in Section 3 hereof (subject to adjustment as provided in Section 5
hereof) payable by certified or official bank check. Upon surrender of a Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
shares of Common Stock purchased at the Company's principal offices in Florida
(presently located at 4000 Hollywood Boulevard, Suite 385, South Tower,
Hollywood, Florida 33021), the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). In the case of the purchase of less than
all the shares (the "Warrant Shares") of Common Stock purchasable under any
Warrant Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock purchasable thereunder.
Section 2. Issuance of Certificates. Upon the exercise of the Warrants,
------------------------
the issuance of certificates for shares of Common Stock shall be made forthwith
(and in any event within ten (10) business days thereafter) without charge to
the Holder thereof including, without limitation, any tax which may be payable
in respect of the issuance thereof, and such certificates shall be issued in the
name of, or in such names as may be directed by, the Holder thereof; provided,
--------
however, that the Company shall not be required to pay any tax which may be
- -------
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder and the Company shall
not be required to issue or deliver such certificates unless or until the
persons or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Warrant
Shares shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors and also by the Secretary or by any two Directors or by any one
Director and the Secretary of the Company under its corporate seal reproduced
thereon.
Section 3. Exercise Price.
--------------
3.1 Initial and Adjusted Exercise Price. Except as otherwise provided
-----------------------------------
in Section 5 hereof, the exercise price of each Warrant shall be $6.00 per share
of Common Stock. The adjusted exercise price shall be the price which shall
result from time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Section 5 hereof.
3.2 Exercise Price. The term "Exercise Price" as used herein shall mean
--------------
the initial exercise price or the adjusted exercise price, depending upon the
context.
<PAGE>
Section 4. Restrictions on Transfer; Registration Rights.
---------------------------------------------
4.1 Representations. The Holders of the Warrants agree to the following:
---------------
(a) Each Holder understands that the Warrants, or the Warrant
Shares, have not been registered under applicable state and federal securities
laws, and that such Warrants or Warrant Shares cannot be resold or transferred
unless they are so registered, or unless such transfer qualifies for an
exemption from such registration;
(b) Each Holder is acquiring the Warrants for investment purposes
only, and not with a view towards resale or distribution;
(c) Each Holder understands that all certificates which represent
the Warrants issued to him or her will bear a legend which incorporates these
restrictions; and
(d) Each Holder is familiar with the business and financial
condition of the Company, has been provided access and an opportunity to review
all material agreements, books and records of the Company and has been afforded
an opportunity to question the executive officers of the Company with respect to
the foregoing.
4.2 Restrictions on Transfer. Notwithstanding any provisions contained
------------------------
in the Warrant Certificate to the contrary, these Warrants shall not be
transferable and the related Warrant Shares shall not be transferable except
upon the conditions specified in this Section 4, which conditions are intended,
---------
among other things, to ensure compliance with the provisions of the 1933 Act in
respect of the transfer of the Warrants or the Warrant Shares. The Holders of
the Warrants further agree that they will not (a) transfer the Warrants prior to
delivery to the Company of an opinion of the Holder's counsel (as provided for
in Section 4.3), which opinion shall be acceptable to counsel for the Company,
-----------
or (b) transfer the Warrant Shares prior to delivery to the Company of the
opinion of the Holder's counsel (as provided for in Section 4.3), which opinion
-----------
shall be acceptable to counsel for the Company, or until registration of the
Warrant Shares under the Securities Act has become effective.
4.3 Opinion of Counsel. In connection with any transfer of the Warrants
------------------
or of the related Warrant Shares, the following provisions shall apply:
(a) If in the opinion of counsel, which counsel and opinion shall
be acceptable to the Company, the proposed transfer of the Warrants or the
Warrant Shares may be effected without registration of the Warrants of the
Warrant Shares under the 1933 Act, the Holders shall be entitled to transfer the
Warrants or the Warrant Shares in accordance with the proposed method of
disposition.
(b) If in the opinion of counsel, which counsel and opinion shall
be acceptable to the Company, the proposed transfer of the Warrants or the
Warrant Shares may not be effected without registration of the Warrants or such
Warrant Shares under the Securities Act,
-2-
<PAGE>
the holder of the Warrants shall not be entitled to transfer the Warrants or the
Warrant Shares until registration is effective.
4.4 Subsequent Holders. Anything contained herein to the contrary
------------------
notwithstanding, the provisions of this Section 4 shall be binding upon all
---------
subsequent holders of the Warrants and the Warrant Shares, and the Company shall
not be required to issue all of any portion of the Warrants or the Warrant
Shares to such Holder unless such Holder agrees in writing in advance of such
issuance to be so bound. The provisions of this Section 4 shall survive the
---------
Expiration Date.
4.5 Securities Act of 1933 Legend. The Warrant and the Warrant Shares
-----------------------------
have not been registered under the Securities Act. Upon exercise of the
Warrants, in part or in whole, the certificates representing the Warrant Shares
shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
4.6 Required Registration.
---------------------
(a) Demand Registration. If the Company shall receive from the Holders
-------------------
of a majority of the Warrant Shares at any time not than the Expiration Date, a
written request that the Company effect any registration with respect to all or
a part of the Warrant Shares, the Company will, as soon as practicable, use its
best efforts to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws, and appropriate compliance with the Securities
Act); and as would permit or facilitate the sale and distribution of all or such
portion of such Warrant Shares as are specified in such request and cause such
registration to remain effective until the earlier of six months have elapsed or
all of the Warrant Shares included therein have been sold.
The Company shall not be obligated to effect, or to take any action
to effect, any such registration pursuant to this Section:
(i) In any particular jurisdiction in which the
Company would be required to execute a general consent to
service of process in effecting such registration,
qualification, or compliance, unless the Company is already
subject to service in such jurisdiction and except as may
be required by the Securities Act;
-3-
<PAGE>
(ii) After the Company has initiated one such
registration pursuant to this Section (counting for these
purposes only registrations which have been declared or
ordered effective and pursuant to which all securities have
been sold); or
(iii) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the
date of filing of, and ending on a date one hundred eighty
(180) days after the effective date of, a Company-initiated
registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause
such registration statement to become effective.
Subject to the foregoing clauses (i) through (iii), the Company
shall file a registration statement covering the Warrant Shares so requested to
be registered as soon as practicable after receipt of the request or requests of
the Holders; provided, however, that if in the good faith judgment of the Board
of Directors of the Company, such registration would be seriously detrimental to
the Company and the Board of Directors of the Company concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, and the Company shall furnish to such Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company for
such registration statement to be filed in the near future and that it is,
therefore, essential to defer the filing of such registration statement, then
the Company shall have the right to defer such filing for the period during
which such disclosure would be seriously detrimental, provided that (except as
provided in clause (iii) above) the Company may not defer the filing for a
period of more than one hundred eighty (180) days after receipt of the request
of the Holders, and, provided further, that the Company shall not defer its
obligation in this manner more than once in any twelve (12) month period.
If the Company or other persons shall request inclusion in any registration
pursuant to this Section of securities being sold for its or their own accounts,
the Holders shall offer to include such securities in the underwriting and may
condition such offer on their acceptance of the further applicable provisions of
this Section. The Company shall (together with all Holders and other persons
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Holders, which underwriters are reasonably acceptable to the
Company.
(b) Piggyback Registration. If the Company shall determine to register
----------------------
any of its securities either for its own account or the account of a security
holder or holders exercising their respective demand registration rights (other
than pursuant to this Section), other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Rule 145
transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:
-4-
<PAGE>
(i) promptly give to each Holder written notice
thereof; and
(ii) use its best efforts to include in such
registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved
therein, all the Warrant Shares specified in a written
request or requests, made by any Holder and received by the
Company within twenty (20) days after the written notice
from the Company described in clause (i) above is mailed or
delivered by the Company. Such written request may specify
all or a part of a Holder's Warrant Shares.
The Holders agree to sell their Warrant Shares on the same terms as the
sale of other shares of Common Stock in the offering and agree to execute such
documents as shall be reasonably requested by the Company or its counsel in
connection with such offering.
If the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise the
Holders as a part of the written notice given pursuant to this Section. In such
event, the right of any Holder to registration pursuant to this Section shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Warrant Shares in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company and the other holders of
securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) Expenses of Registration. All registration expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Section (including filing fees, printing expenses, blue sky fees, and fees and
expenses of the Company's counsel and accountants) shall be borne by the
Company. All expenses incurred by the Holders for their own counsel or
accountants and all selling expenses relating to securities so registered
(including underwriter discounts and commissions) shall be borne by the holders
of securities so registered on the basis of the number of shares of securities
so registered on their behalf.
(d) Indemnification
---------------
(i) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section, and each underwriter, if any,and each person
who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document
-5-
<PAGE>
(including any related registration statement, notification, or the like),
incident to any such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its officers,
directors, partners, legal counsel, and accountants and each person controlling
such Holder, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or underwriter and
stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Section shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent has not
been unreasonably withheld).
(ii) Each Holder will, if Warrant Shares held by him are included
in the securities as to which such registration, qualification, or compliance is
being effected, indemnify the Company, each of its directors, officers,
partners, legal counsel, and accountants and each of its directors, officers,
partners, legal counsel, and accountants and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, each other such Holder and other Shareholder, and each of their
officers, directors, and partners, and each person controlling such Holder or
other Shareholder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and such Holders, other Shareholders, directors, officers, partners,
legal counsel, and accountants, persons, underwriters, or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability, or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein provided,
however, that the obligations of such Holder hereunder shall not apply to
amounts paid in settlement of any such claims, losses, damages, or liabilities
(or actions in respect thereof) if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably withheld), and
provided that in no event shall any indemnity under this Section exceed the
gross proceeds from the offering received by such Holder.
-6-
<PAGE>
Section 5. Adjustments to Exercise Price and Number of Shares.
--------------------------------------------------
5.1 Subdivision and Combination. In case the Company shall at any time:
---------------------------
(i) subdivide the outstanding shares of Common Stock into a larger number of
shares, (ii) declare a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, or (iii) issue by reclassification of its
Common Stock any shares of its capital stock, the Exercise Price in effect
immediately after the record date for such dividend or distribution on the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such dividend, distribution, subdivision, combination or reclassification, and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such dividend, distribution, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event specified above shall occur. Notwithstanding the foregoing,
in the event the Company shall combine its outstanding shares of Common Stock
into a smaller number of shares, there shall be no adjustment in the Exercise
Price.
5.2 Adjustment in Number of Warrant Shares. Upon each adjustment of the
--------------------------------------
Exercise Price pursuant to the provisions of this Section 5, the number of
Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to
the nearest full share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
5.3 Definition of Common Stock. For the purpose of this Agreement, the
--------------------------
term "Common Stock" shall mean: (i) the class of stock designated as Common
Stock in the Memorandum of Association of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
5.4 Merger or Consolidation. (a) In case the Company after the date
-----------------------
hereof: (i) shall consolidate with or merge into any other person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(ii) shall permit any other person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving person but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, or (iii) shall transfer all or substantially all of its properties or
assets to any other person, or (iv) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of additional shares of Common Stock for
which adjustment in the Exercise Price is provided in this Section 5), then, and
in the case of each such transaction, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Agreement and
the Warrants, the Holders of the Warrants, upon the exercise thereof at any time
after the consummation of such trans-
-7-
<PAGE>
action, shall be entitled to receive (at the aggregate Exercise Price in effect
at the time of such consummation for all Common Stock issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock,
the highest amount of securities, cash or other property to which such Holders
would actually have been entitled as shareholders upon such consummation if such
Holders had exercised the rights represented by the Warrants immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in this Section 5.
5.5 Assumption of Obligations. Notwithstanding anything contained in the
-------------------------
Warrants to the contrary, the Company will not effect any of the transactions
described in clauses (i) through (iv) of Section 5.4 unless, prior to the
consummation thereof, each person (other than the Company) which may be required
to deliver any stock, securities, cash or property upon the exercise of the
Warrants as provided herein shall assume, by written instrument delivered to the
Holders of the Warrants, (a) the obligations of the Company under the Warrants
(including this Exhibit I) (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this Exhibit I
and the Warrants) and (b) the obligation to deliver to such Holders such shares
of stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 5, such Holders may be entitled to receive, and such
person shall have similarly delivered to such Holders an opinion of counsel for
such person stating that the Warrants (including this Exhibit I) shall
thereafter continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this Section 5) shall be applicable
to the stock, securities, cash or property which such person may be required to
deliver upon any exercise of the Warrants or the exercise of any rights pursuant
hereto.
5.6 Dividends and Other Distributions. If, at any time or from time to
---------------------------------
time after the date of this Warrant, the Company shall issue or distribute to
the holders of shares of Common Stock, evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Section 5.1, and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such non-excluded event being herein
called a "Special Dividend"), the Exercise Price shall be adjusted by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the then current market price of the Common Stock (defined as the
average for the thirty consecutive business days immediately prior to the record
date of the daily closing price of the Common Stock as reported by the national
securities exchange upon which the Common Stock is then listed or if not listed
on any such exchange, the average of the closing prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") Stock Market's National Market, or if not then listed on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked prices as reported by the NASDAQ, or if not then publicly traded, as the
fair market price as determined by the Company's Board of Directors) less the
fair market value (as determined by the Company's Board of Directors) of the
evidences
-8-
<PAGE>
of indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be such then current market price per share of
Common Stock. An adjustment made pursuant to this Section 5.6 shall become
effective immediately after the record date of any such Special Dividend.
5.7 Other Dilutive Events. In case any event shall occur as to which the
---------------------
other provisions of this Section 5 are similar to, but not strictly applicable
but as to which the failure to make any adjustment would not fairly protect the
purchase rights represented by the Warrants (including this Exhibit I) in
accordance with the essential intent and principles hereof then, in each such
case, the Holders collectively may appoint a firm of independent public
accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a basis
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants (including
this Exhibit I). Upon receipt of such opinion the Company will promptly mail a
copy thereof to the Holders and shall make the adjustments described therein.
The fees and expenses of such independent public accountants shall be borne by
the Company. The issuance by the Company of shares of capital stock, including,
without limitation, shares of Common Stock, for consideration less than the
Exercise Price, or the issuance of convertible securities or derivative
securities, convertible into shares of capital stock at a conversion price or
exercise price less than the Exercise Price shall not be deemed an event that
requires an adjustment under this Section 5.7.
5.8 Notice of Adjustment Events. Whenever the Company contemplates the
---------------------------
occurrence of an event which would give rise to adjustments under this Section
5, the Company shall mail to each Holder, at least thirty (30) days prior to the
record date with resect to such event or, if no record date shall be
established, at least thirty (30) days prior to such event, a notice specifying:
(i) the nature of the contemplated event, (ii) the date of which any such record
is to be taken for the purpose of such event, (iii) the date on which such event
is expected to become effective and (iv) the time, if any is to be fixed, when
the holders of record of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable in connection with
such event.
5.9 Notice of Adjustments. Whenever the Exercise Price or the kind of
---------------------
securities or property issuable upon exercise of the Warrants, or both, shall be
adjusted pursuant to this Section 5, the Company shall make a certificate signed
by its President or a Vice President and by its Chief Financial Officer,
Secretary or Assistant Secretary, setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method of which such
adjustment was calculated (including a description of the basis on which the
Company made any determination hereunder), and the Exercise Price and the kind
of securities or property issuable upon exercise of the Warrants after giving
effect to such adjustment, and shall cause copies of such certificate to be
mailed (by first class mail postage prepaid) to each Holder promptly after each
adjustment.
-9-
<PAGE>
5.10 Preservation of Rights. The Company will not, by amendment of its
----------------------
Memorandum of Association or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants (including this Exhibit I) or the rights represented
thereby, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
5.11 When No Adjustment Required. No adjustment in the Exercise Price
---------------------------
shall be required unless such adjustment would require an increase or decrease
of at least $0.05 per share of Common Stock; provided, however, that any
-------- -------
adjustments which by reason of this Section 5.11 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment;
provided further, however, that adjustments shall be required and made in
- -------- -------
accordance with the provisions of this Section 5 (other than this Section 5.11)
not later than such time as may be required in order to preserve the tax-free
nature of a distribution to the Holders of the Warrants. All calculations under
this Section 5 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 5 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Exercise Price, in addition to those required by this Section 5, as it in its
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
Section 6. Exchange and Replacement of Warrant Certificates. Each Warrant
------------------------------------------------
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
Section 7. Elimination of Fractional Interests. The Company shall not be
-----------------------------------
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock.
Section 8. Reservation of Securities. The Company shall at all times
-------------------------
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock as shall be issuable upon
-10-
<PAGE>
the exercise thereof. The Company covenants and agrees that, upon exercise of
the Warrants and payment of the Exercise Price therefor, all shares of Common
Stock shall be duly and validly issued, fully paid, nonassessable and not
subject to the preemptive rights of any shareholder.
Section 9. Notices to Warrant Holders. Nothing contained in this Exhibit
--------------------------
I shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders
of its shares of Common Stock for the purpose of determining
the holders thereof who are entitled to receive any dividend
or other distribution payable; or
(b) the Company shall offer to all the holders of
its Common Stock any additional shares of capital stock of
the Company or securities convertible into or exchangeable
for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a voluntary or involuntary dissolution,
liquidation or winding-up of the Company (other than in
connection with a consolidation or merger) or any capital
reorganization, recapitalization or reclassification or a
sale of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder of
a Warrant a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for the securities or other property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding-up. Such notice shall be mailed at
least thirty (30) days prior to the date therein specified.
Section 10. Notices.
-------
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly given or made at the time
delivered by hand if personally
-11-
<PAGE>
delivered; five calendar days after mailing if sent by registered or certified
mail; when receipt is confirmed, if telecopied; and the next business day after
timely delivery to the courier, if sent by overnight air courier guaranteeing
next day delivery (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee):
(a) If to the registered Holder of the Warrants, to
the address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set forth in
Section 1 hereof or to such other address as the Company may
designate by notice to the Holders.
Section 11. Successors. All the covenants and provisions of this Exhibit
----------
I shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
Section 12. Governing Law. This Exhibit I and each Warrant shall be
-------------
governed and construed in accordance with the laws of the State of Florida
applicable to contracts made and performed in the State of Florida without
giving effect to the principles of conflicts of law thereof.
Section 13. Entire Agreement; Modification. This Exhibit I (including the
------------------------------
Warrant Certificate and the Subscription Agreements with respect to registration
rights) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought.
Section 14. Severability. If any provision of this Exhibit I shall be
------------
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Exhibit I.
Section 15. Captions. The caption headings of the Sections of this
--------
Exhibit I are for convenience of reference only and are not intended to be, nor
should they be construed as, part of this Exhibit I and shall be given no
substantive effect.
Section 16. Benefits of This Exhibit I. Nothing in this Exhibit I shall
--------------------------
be construed to give any person or corporation other than the Company and the
registered Holder(s) of the Warrant Certificates or Warrant Shares any legal or
equitable right, remedy or claim under this Exhibit I; and this Exhibit I shall
be for the sole and exclusive benefit of the Company and any registered
Holder(s) of the Warrant Certificates or Warrant Shares.
-12-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH EXHIBIT I REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., MIAMI TIME, July 14, 2002
No. W-1 250,000 Warrants
WARRANT TO PURCHASE
250,000 SHARES OF
COMMODORE HOLDINGS
LIMITED COMMON STOCK
WARRANT CERTIFICATE
-------------------
THIS WARRANT CERTIFICATE certifies that Jeffrey I. Binder and Rosalie
Binder, as tenants by the entireties, or their registered assigns, are the
registered holders of 250,000 Warrants (the "Warrants") to purchase initially,
at any time from the date hereof until 5:30 p.m., Miami time, on July 14, 2002
("Expiration Date"), up to 250,000 fully paid and nonassessable shares of common
stock, $.01 par value ("Common Stock") of COMMODORE HOLDINGS LIMITED, a Bermuda
corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $6.00 per share of
Common Stock upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office of the Company located at 4000 Hollywood Boulevard,
Suite 385, South Tower, Hollywood, Florida 33021, or any successor office, but
subject to the conditions set forth herein and in Exhibit I hereto. Payment of
the Exercise Price shall be made by certified or official bank check payable to
the order of the Company or may be made by tendering an amount of Warrants for
cancellation with a value as determined by the difference between the then
current market price of the underlying shares of Common Stock as of the date of
exercise less the Exercise Price of each Warrant.
<PAGE>
No Warrant may be exercised after 5:30 p.m., Miami time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void. If the Expiration Date shall in the
State of Florida be a holiday or a day on which banks are authorized to close,
then the Expiration Date shall mean 5:30 P.M., Miami Time, the next following
day which, in the State of Florida, is not a holiday or a day on which banks are
authorized to close.
The Warrants evidenced by this Warrant Certificate are subject to the
provisions of Exhibit I hereto, which Exhibit I is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
Exhibit I hereto provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
--------
however, that the failure of the Company to issue such new Warrant Certificates
- -------
shall not in any way change, alter, or otherwise impair the rights of the holder
as set forth in Exhibit I.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company located at 4000 Hollywood Boulevard,
Suite 385, South Tower, Hollywood, Florida 33021, or any successor office, a new
Warrant Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in Exhibit I, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
Exhibit I hereto shall have the meanings assigned to them in Exhibit I hereto.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of April 26, 1995
COMMODORE HOLDINGS LIMITED
By:/s/Frederick Mayer
-----------------------------------
Frederick Mayer, Vice-Chairman the
of Board
Attest:
/s/Blanca Santos
- -----------------------------------
Blanca Santos, Secretary
-3-
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
THE UNDERSIGNED hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ shares of Common
Stock and herewith tenders in payment for such securities a certified or
official bank check payable to the order of Commodore Holdings Limited in the
amount of $________, all in accordance with the terms hereof. The undersigned
requests that a certificate for such securities be registered in the name of
___________________________________________________________ whose address is
_______________________________________________ and that such Certificate be
delivered to ____________________________ whose address is ____________________
________________________________.
Dated :
Signature____________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
_____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
_____________________________________________
Signature Guarantee
-4-
<PAGE>
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED ______________________ hereby sells, assigns and transfers
unto
______________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Warrant Certificate on the books of the within
named Company, with full power of substitution.
Dated: __________________
Signature __________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Assignee)
____________________________________________
Signature Guarantee
-5-
<PAGE>
EXHIBIT I
Section 1. Exercise of Warrant. The Warrants initially are exercisable at
-------------------
an aggregate initial exercise price per share of common stock, $.01 par value
per share (the "Common Stock") of Commodore Holdings Limited (the "Company") set
forth in Section 3 hereof (subject to adjustment as provided in Section 5
hereof) payable by certified or official bank check. Upon surrender of a Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
shares of Common Stock purchased at the Company's principal offices in Florida
(presently located at 4000 Hollywood Boulevard, Suite 385, South Tower,
Hollywood, Florida 33021), the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). In the case of the purchase of less than
all the shares (the "Warrant Shares") of Common Stock purchasable under any
Warrant Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock purchasable thereunder.
Section 2. Issuance of Certificates. Upon the exercise of the Warrants, the
------------------------
issuance of certificates for shares of Common Stock shall be made forthwith (and
in any event within ten (10) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall be issued in the
name of, or in such names as may be directed by, the Holder thereof; provided,
--------
however that the Company shall not be required to pay any tax which may be
- -------
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder and the Company shall
not be required to issue or deliver such certifi cates unless or until the
persons or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Warrant
Shares shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors and also by the Secretary or by any two Directors or by any one
Director and the Secretary of the Company under its corporate seal reproduced
thereon.
Section 3. Exercise Price.
--------------
3.1 Initial and Adjusted Exercise Price. Except as otherwise provided in
-----------------------------------
Section 5 hereof, the exercise price of each Warrant shall be $6.00 per share
of Common Stock. The adjusted exercise price shall be the price which shall
result from time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Section 5 hereof.
3.2 Exercise Price. The term "Exercise Price" as used herein shall mean
--------------
the initial exercise price or the adjusted exercise price, depending upon the
context.
<PAGE>
Section 4. Restrictions on Transfer; Registration Rights.
---------------------------------------------
4.1 Representations. The Holders of the Warrants agree to the following:
---------------
(a) Each Holder understands that the Warrants, or the Warrant Shares,
have not been registered under applicable state and federal securities laws, and
that such Warrants or Warrant Shares cannot be resold or transferred unless they
are so registered, or unless such transfer qualifies for an exemption from such
registration;
(b) Each Holder is acquiring the Warrants for investment purposes
only, and not with a view towards resale or distribution;
(c) Each Holder understands that all certificates which represent the
Warrants issued to him or her will bear a legend which incorporates these
restrictions; and
(d) Each Holder is familiar with the business and financial condition
of the Company, has been provided access and an opportunity to review all
material agreements, books and records of the Company and has been afforded an
opportunity to question the executive officers of the Company with respect to
the foregoing.
4.2 Restrictions on Transfer. Notwithstanding any provisions contained in
------------------------
the Warrant Certificate to the contrary, these Warrants shall not be
transferable and the related Warrant Shares shall not be transferable except
upon the conditions specified in this Section 4, which conditions are intended,
---------
among other things, to ensure compliance with the provisions of the 1933 Act in
respect of the transfer of the Warrants or the Warrant Shares. The Holders of
the Warrants further agree that they will not (a) transfer the Warrants prior to
delivery to the Company of an opinion of the Holder's counsel (as provided for
in Section 4.3), which opinion shall be acceptable to counsel for the Company,
-----------
or (b) transfer the Warrant Shares prior to delivery to the Company of the
opinion of the Holder's counsel (as provided for in Section 4.3), which opinion
-----------
shall be acceptable to counsel for the Company, or until registration of the
Warrant Shares under the Securities Act has become effective.
4.3 Opinion of Counsel. In connection with any transfer of the Warrants or
------------------
of the related Warrant Shares, the following provisions shall apply:
(a) If in the opinion of counsel, which counsel and opinion shall be
acceptable to the Company, the proposed transfer of the Warrants or the Warrant
Shares may be effected without registration of the Warrants of the Warrant
Shares under the 1933 Act, the Holders shall be entitled to transfer the
Warrants or the Warrant Shares in accordance with the proposed method of
disposition.
(b) If in the opinion of counsel, which counsel and opinion shall be
acceptable to the Company, the proposed transfer of the Warrants or the Warrant
Shares may not be effected without registration of the Warrants or such Warrant
Shares under the Securities Act,
-2-
<PAGE>
the holder of the Warrants shall not be entitled to transfer the Warrants or the
Warrant Shares until registration is effective.
4.4 Subsequent Holders. Anything contained herein to the contrary
------------------
notwithstanding, the provisions of this Section 4 shall be binding upon all
---------
subsequent holders of the Warrants and the Warrant Shares, and the Company shall
not be required to issue all of any portion of the Warrants or the Warrant
Shares to such Holder unless such Holder agrees in writing in advance of such
issuance to be so bound. The provisions of this Section 4 shall survive the
---------
Expiration Date.
4.5 Securities Act of 1933 Legend. The Warrant and the Warrant Shares have
-----------------------------
not been registered under the Securities Act. Upon exercise of the Warrants, in
part or in whole, the certificates representing the Warrant Shares shall bear
the following legend :
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
4.6 Required Registration.
---------------------
(a) Demand Registration. If the Company shall receive from the Holders of
-------------------
a majority of the Warrant Shares at any time not than the Expiration Date, a
written request that the Company effect any registration with respect to all or
a part of the Warrant Shares, the Company will, as soon as practicable, use its
best efforts to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws, and appropriate compliance with the Securities
Act); and as would permit or facilitate the sale and distribution of all or such
portion of such Warrant Shares as are specified in such request and cause such
registration to remain effective until the earlier of six months have elapsed or
all of the Warrant Shares included therein have been sold.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section:
(i) In any particular jurisdiction in which the
Company would be required to execute a general consent to
service of process in effecting such registration,
qualification, or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be
required by the Securities Act;
-3-
<PAGE>
(ii) After the Company has initiated one such
registration pursuant to this Section (counting for these
purposes only registrations which have been declared or
ordered effective and pursuant to which all securities have
been sold); or
(iii) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the
date of filing of, and ending on a date one hundred eighty
(180) days after the effective date of, a Company-initiated
registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such
registration statement to become effective.
Subject to the foregoing clauses (i) through (iii), the Company shall
file a registration statement covering the Warrant Shares so requested to be
registered as soon as practicable after receipt of the request or requests of
the Holders; provided, however, that if in the good faith judgment of the Board
of Directors of the Company, such registration would be seriously detrimental to
the Company and the Board of Directors of the Company concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, and the Company shall furnish to such Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company for
such registration statement to be filed in the near future and that it is,
therefore, essential to defer the filing of such registration statement, then
the Company shall have the right to defer such filing for the period during
which such disclosure would be seriously detrimental, provided that (except as
provided in clause (iii) above) the Company may not defer the filing for a
period of more than one hundred eighty (180) days after receipt of the request
of the Holders, and, provided further, that the Company shall not defer its
obligation in this manner more than once in any twelve (12) month period.
If the Company or other persons shall request inclusion in any
registration pursuant to this Section of securities being sold for its or their
own accounts, the Holders shall offer to include such securities in the
underwriting and may condition such offer on their acceptance of the further
applicable provisions of this Section. The Company shall (together with all
Holders and other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by a majority in interest of the Holders, which underwriters are reasonably
acceptable to the Company.
(b) Piggyback Registration. If the Company shall determine to
----------------------
register any of its securities either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights (other than pursuant to this Section), other than a registration relating
solely to employee benefit plans, or a registration relating solely to a Rule
145 transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:
-4-
<PAGE>
(i) promptly give to each Holder written notice thereof;
and
(ii) use its best efforts to include in such
registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved
therein, all the Warrant Shares specified in a written
request or requests, made by any Holder and received by the
Company within twenty (20) days after the written notice
from the Company described in clause (i) above is mailed or
delivered by the Company. Such written request may specify
all or a part of a Holder's Warrant Shares.
The Holders agree to sell their Warrant Shares on the same terms as the
sale of other shares of Common Stock in the offering and agree to execute such
documents as shall be reasonably requested by the Company or its counsel in
connection with such offering.
If the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company shall so advise the
Holders as a part of the written notice given pursuant to this Section. In such
event, the right of any Holder to registration pursuant to this Section shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Warrant Shares in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company and the other holders of
securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) Expenses of Registration. All registration expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Section (including filing fees, printing expenses, blue sky fees, and fees and
expenses of the Company's counsel and accountants) shall be borne by the
Company. All expenses incurred by the Holders for their own counsel or
accountants and all selling expenses relating to securities so registered
(including underwriter discounts and commissions) shall be borne by the holders
of securities so registered on the basis of the number of shares of securities
so registered on their behalf.
(d) Indemnification
---------------
(i) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section, and each underwriter, if any,and each person
who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document
-5-
<PAGE>
(including any related registration statement, notification, or the like),
incident to any such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its officers,
directors, partners, legal counsel, and accountants and each person controlling
such Holder, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or underwriter and
stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Section shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent has not
been unreasonably withheld).
(ii) Each Holder will, if Warrant Shares held by him are included in
the securities as to which such registration, qualification, or compliance is
being effected, indemnify the Company, each of its directors, officers,
partners, legal counsel, and accountants and each of its directors, officers,
partners, legal counsel, and accountants and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, each other such Holder and other Shareholder, and each of their
officers, directors, and partners, and each person controlling such Holder or
other Shareholder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and such Holders, other Shareholders, directors, officers, partners,
legal counsel, and accountants, persons, underwriters, or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability, or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein provided,
however, that the obligations of such Holder hereunder shall not apply to
amounts paid in settlement of any such claims, losses, damages, or liabilities
(or actions in respect thereof) if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably withheld), and
provided that in no event shall any indemnity under this Section exceed the
gross proceeds from the offering received by such Holder.
-6-
<PAGE>
Section 5. Adjustments to Exercise Price and Number of Shares.
--------------------------------------------------
5.1 Subdivision and Combination. In case the Company shall at any time:
---------------------------
(i) subdivide the outstanding shares of Common Stock into a larger number of
shares, (ii) declare a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, or (iii) issue by reclassification of its
Common Stock any shares of its capital stock, the Exercise Price in effect
immediately after the record date for such dividend or distribution on the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such dividend, distribution, subdivision, combination or reclassification, and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such dividend, distribution, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event specified above shall occur. Notwithstanding the foregoing,
in the event the Company shall combine its outstanding shares of Common Stock
into a smaller number of shares, there shall be no adjustment in the Exercise
Price.
5.2 Adjustment in Number of Warrant Shares. Upon each adjustment of the
--------------------------------------
Exercise Price pursuant to the provisions of this Section 5, the number of
Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to
the nearest full share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
5.3 Definition of Common Stock. For the purpose of this Agreement, the
--------------------------
term "Common Stock" shall mean: (i) the class of stock designated as Common
Stock in the Memorandum of Association of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
5.4 Merger or Consolidation. (a) In case the Company after the date
-----------------------
hereof: (i) shall consolidate with or merge into any other person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(ii) shall permit any other person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving person but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, or (iii) shall transfer all or substantially all of its properties or
assets to any other person, or (iv) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of additional shares of Common Stock for
which adjustment in the Exercise Price is provided in this Section 5), then, and
in the case of each such transaction, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Agreement and
the Warrants, the Holders of the Warrants, upon the exercise thereof at any time
after the consummation of such trans-
-7-
<PAGE>
action, shall be entitled to receive (at the aggregate Exercise Price in effect
at the time of such consummation for all Common Stock issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock,
the highest amount of securities, cash or other property to which such Holders
would actually have been entitled as shareholders upon such consummation if such
Holders had exercised the rights represented by the Warrants immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in this Section 5.
5.5 Assumption of Obligations. Notwithstanding anything contained in the
-------------------------
Warrants to the contrary, the Company will not effect any of the transactions
described in clauses (i) through (iv) of Section 5.4 unless, prior to the
consummation thereof, each person (other than the Company) which may be required
to deliver any stock, securities, cash or property upon the exercise of the
Warrants as provided herein shall assume, by written instrument delivered to the
Holders of the Warrants, (a) the obligations of the Company under the Warrants
(including this Exhibit I) (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this Exhibit I
and the Warrants) and (b) the obligation to deliver to such Holders such shares
of stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 5, such Holders may be entitled to receive, and such
person shall have similarly delivered to such Holders an opinion of counsel for
such person stating that the Warrants (including this Exhibit I) shall
thereafter continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this Section 5) shall be applicable
to the stock, securities, cash or property which such person may be required to
deliver upon any exercise of the Warrants or the exercise of any rights pursuant
hereto.
5.6 Dividends and Other Distributions. If, at any time or from time to
---------------------------------
time after the date of this Warrant, the Company shall issue or distribute to
the holders of shares of Common Stock, evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Section 5.1, and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such non-excluded event being herein
called a "Special Dividend"), the Exercise Price shall be adjusted by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the then current market price of the Common Stock (defined as the
average for the thirty consecutive business days immediately prior to the record
date of the daily closing price of the Common Stock as reported by the national
securities exchange upon which the Common Stock is then listed or if not listed
on any such exchange, the average of the closing prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") Stock Market's National Market, or if not then listed on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked prices as reported by the NASDAQ, or if not then publicly traded, as the
fair market price as determined by the Company's Board of Directors) less the
fair market value (as determined by the Company's Board of Directors) of the
evidences
-8-
<PAGE>
of indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be such then current market price per share of
Common Stock. An adjustment made pursuant to this Section 5.6 shall become
effective immediately after the record date of any such Special Dividend.
5.7 Other Dilutive Events. In case any event shall occur as to which the
---------------------
other provisions of this Section 5 are similar to, but not strictly applicable
but as to which the failure to make any adjustment would not fairly protect the
purchase rights represented by the Warrants (including this Exhibit I) in
accordance with the essential intent and principles hereof then, in each such
case, the Holders collectively may appoint a firm of independent public
accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a basis
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants (including
this Exhibit I). Upon receipt of such opinion the Company will promptly mail a
copy thereof to the Holders and shall make the adjustments described therein.
The fees and expenses of such independent public accountants shall be borne by
the Company. The issuance by the Company of shares of capital stock, including,
without limitation, shares of Common Stock, for consideration less than the
Exercise Price, or the issuance of convertible securities or derivative
securities, convertible into shares of capital stock at a conversion price or
exercise price less than the Exercise Price shall be deemed an event that
requires an adjustment under this Section 5.7.
5.8 Notice of Adjustment Events. Whenever the Company contemplates the
---------------------------
occurrence of an event which would give rise to adjustments under this Section
5, the Company shall mail to each Holder, at least thirty (30) days prior to the
record date with resect to such event or, if no record date shall be
established, at least thirty (30) days prior to such event, a notice specifying:
(i) the nature of the contemplated event, (ii) the date of which any such record
is to be taken for the purpose of such event, (iii) the date on which such event
is expected to become effective and (iv) the time, if any is to be fixed, when
the holders of record of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable in connection with
such event.
5.9 Notice of Adjustments. Whenever the Exercise Price or the kind of
---------------------
securities or property issuable upon exercise of the Warrants, or both, shall be
adjusted pursuant to this Section 5, the Company shall make a certificate signed
by its President or a Vice President and by its Chief Financial Officer,
Secretary or Assistant Secretary, setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method of which such
adjustment was calculated (including a description of the basis on which the
Company made any determination hereunder), and the Exercise Price and the kind
of securities or property issuable upon exercise of the Warrants after giving
effect to such adjustment, and shall cause copies of such certificate to be
mailed (by first class mail postage prepaid) to each Holder promptly after each
adjustment.
-9-
<PAGE>
5.10 Preservation of Rights. The Company will not, by amendment of its
----------------------
Memorandum of Association or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants (including this Exhibit I) or the rights represented
thereby, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
5.11 When No Adjustment Required. No adjustment in the Exercise Price shall
---------------------------
be required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock; provided, however, that any adjustments
-------- -------
which by reason of this Section 5.11 are not required to be made shall be
carried forward and taken into account in any subsequent adjustment; provided
--------
further, however, that adjustments shall be required and made in accordance with
- -------
the provisions of this Section 5 (other than this Section 5.11) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holders of the Warrants. All calculations under this Section
5 shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be. Anything in this Section 5 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Exercise Price, in
addition to those required by this Section 5, as it in its discretion shall deem
to be advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its shareholders shall
not be taxable.
Section 6. Exchange and Replacement of Warrant Certificates. Each Warrant
------------------------------------------------
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
Section 7. Elimination of Fractional Interests. The Company shall not be
-----------------------------------
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock.
Section 8. Reservation of Securities. The Company shall at all times
-------------------------
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock as shall be issuable upon
-10-
<PAGE>
the exercise thereof. The Company covenants and agrees that, upon exercise of
the Warrants and payment of the Exercise Price therefor, all shares of Common
Stock shall be duly and validly issued, fully paid, nonassessable and not
subject to the preemptive rights of any shareholder.
Section 9. Notices to Warrant Holders. Nothing contained in this Exhibit
--------------------------
I shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders
of its shares of Common Stock for the purpose of determining
the holders thereof who are entitled to receive any dividend
or other distribution payable; or
(b) the Company shall offer to all the holders of
its Common Stock any additional shares of capital stock of
the Company or securities convertible into or exchangeable
for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a voluntary or involuntary dissolution,
liquidation or winding-up of the Company (other than in
connection with a consolidation or merger) or any capital
reorganization, recapitalization or reclassification or a
sale of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company will mail to each Holder of
a Warrant a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for the securities or other property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding-up. Such notice shall be mailed at
least thirty (30) days prior to the date therein specified.
Section 10. Notices.
-------
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly given or made at the time
delivered by hand if personally
-11-
<PAGE>
delivered; five calendar days after mailing if sent by registered or certified
mail; when receipt is confirmed, if telecopied; and the next business day after
timely delivery to the courier, if sent by overnight air courier guaranteeing
next day delivery (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee):
(a) If to the registered Holder of the Warrants, to
the address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set forth in
Section 1 hereof or to such other address as the Company may
designate by notice to the Holders.
Section 11. Successors. All the covenants and provisions of this Exhibit
----------
I shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
Section 12. Governing Law. This Exhibit I and each Warrant shall be
-------------
governed and construed in accordance with the laws of the State of Florida
applicable to contracts made and performed in the State of Florida without
giving effect to the principles of conflicts of law thereof.
Section 13. Entire Agreement; Modification. This Exhibit I (including the
------------------------------
Warrant Certificate and the Subscription Agreements with respect to registration
rights) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought.
Section 14. Severability. If any provision of this Exhibit I shall be
------------
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Exhibit I.
Section 15. Captions. The caption headings of the Sections of this
--------
Exhibit I are for convenience of reference only and are not intended to be, nor
should they be construed as, part of this Exhibit I and shall be given no
substantive effect.
Section 16. Benefits of This Exhibit I. Nothing in this Exhibit I shall
--------------------------
be construed to give any person or corporation other than the Company and the
registered Holder(s) of the Warrant Certificates or Warrant Shares any legal or
equitable right, remedy or claim under this Exhibit I; and this Exhibit I shall
be for the sole and exclusive benefit of the Company and any registered
Holder(s) of the Warrant Certificates or Warrant Shares.
-12-
<PAGE>
WARRANT OF
COMMODORE HOLDINGS, LIMITED
INCORPORATED UNDER THE LAWS OF BERMUDA
1. BASIC TERMS. This certifies that, for value received, SEAWISE
-----------
FOUNDATION, INC. ("Seawise"), a Liberian corporation, is entitled to purchase
and receive from COMMODORE HOLDINGS, LIMITED (the "Corporation"), a Bermuda
corporation, during the period hereinafter provided, 250,000 fully paid and non-
assessable shares of common voting stock of the Corporation with a par value of
US$.01 per share ("Capital Stock"), upon delivery of this Warrant to the
Corporation with an exercise form, a copy of which is attached hereto as Annex
-----
A, duly executed, and payment of the purchase price of six US dollars (US$6.00)
- -
for each share of the Capital Stock so purchased (by certified or bank cashier's
check payable to the order of the Corporation or by wire transfer to the bank
account of the Corporation), and such purchase price per share being subject,
however, to adjustment as hereinafter provided. The purchase price per share,
as adjusted from time to time, is hereinafter referred to as the "Purchase
Price".
This Warrant shall be exercisable for a period of five (5) years
commencing on the Commencement Date, as defined in that certain agreement, dated
October 30, 1995, among Sea-Comm, Ltd., a Liberian corporation (the "Sea-Comm,
Ltd."), the Corporation and Seawise (the "Agreement"), pursuant to which they
will effect certain business transactions; provided, however, that this Warrant
shall terminate upon the effective date of the exercise by Seawise of its option
to terminate the Agreement early pursuant to Clause 16.2 of the Agreement.
2. CORPORATION'S COVENANTS AS TO COMMON STOCK. Shares deliverable
------------------------------------------
on the exercise of this Warrant shall, at delivery, be fully paid and non-
assessable, free from taxes, liens, and charges with respect to their purchase.
The Corporation shall take any necessary steps to assure that the par value per
share of the Capital Stock is at all times equal to or less than the then
current Purchase Price per share of the Capital Stock issuable pursuant to this
Warrant. The Corporation shall at all time reserve and hold available sufficient
shares of the Capital Stock to satisfy all conversion and purchase rights of
outstanding convertible securities, options and warrant including the shares
covered by this Warrant.
Upon surrender of this Warrant at the office of the Corporation
accompanied by payment of the appropriate Purchase Price in cash, the
Corporation shall forthwith cause to be executed, issued and delivered to the
holder of the Warrant (the "Registered Owner") a certificate or certificates for
the proper number of shares of capital stock or other securities of the
Corporation; and the Corporation covenants that the issuance of this Warrant
shall constitute full authority to those of its officers who are charged with
the duty of issuing stock certificates to promptly execute, issue and deliver to
the holder of the Warrant the necessary certificate for shares of Capital Stock
or other securities of the Corporation required by such exercise. Certificates
for shares of Capital
<PAGE>
Stock or other securities of the Corporation issuable by reason of the exercise
of this Warrant shall be dated and shall be effective as of the date of the
surrender of this Warrant for exercise or acceptance of the offering of shares
or other securities, as the case may be, and the payment of the appropriate
Purchase Price, notwithstanding any delay in the actual execution, issuance or
delivery of the certificates or securities to be purchased.
3. METHOD OF EXERCISE; FRACTIONAL SHARES. The purchase rights
-------------------------------------
represented by this Warrant are exercisable at the option of the Registered
Owner in whole at any time, or in part, from time to time, within the period
above specified, provided, however, that purchase rights are not exercisable
with respect to a fraction of a share of the Capital Stock. In lieu of issuing
a fraction of a share remaining after exercise of this Warrant as to all full
shares covered hereby, the Corporation shall make a cash payment therefor on the
basis of the Purchase Price then in effect. In case of the exercise of this
Warrant for less than all the shares available for purchase, the Corporation
shall cancel the Warrant and execute and deliver a new Warrant of like tenor and
date for the balance of the shares purchasable.
4. ADJUSTMENT OF SHARES AVAILABLE FOR PURCHASE. The number of
-------------------------------------------
shares available for purchase hereunder and the Purchase Price per share are
subject to adjustment from time to time as specified in this Warrant.
5. LIMITED RIGHTS OF OWNER. This Warrant does not entitle the
-----------------------
Registered Owner or the holder of this Warrant to any voting rights or other
rights as a stockholder of the Corporation, or to any other rights whatsoever
except the rights herein expressed. No dividends are payable or will accrue on
this Warrant or the shares available for purchase hereunder until, and except to
the extent that, this Warrant is exercised.
6. EXCHANGE FOR OTHER DENOMINATIONS. This Warrant is exchangeable,
--------------------------------
on its surrender by the Registered Owner to the Corporation, for new Warrant of
like tenor and date representing in the aggregate the right to purchase the
number of shares available for purchase hereunder in denominations designated by
the Registered Owner at the time of surrender.
7. TRANSFER AND ASSIGNMENT. Except as otherwise above provided,
-----------------------
this Warrant is transferable only on the books of the Corporation by the
Registered Owner in person or by attorney, on surrender of this Warrant,
properly endorsed and a duly completed Assignment Form, a copy of which is
attached hereto as Annex B. Seawise shall not sell, assign or transfer this
-------
Warrant or any shares of the Capital Stock purchased pursuant hereto for a
period of two (2) years commencing on the Commencement Date. After such initial
two (2) year period, Seawise may sell, assign or transfer the Warrant or Shares;
provided, however, that Seawise shall not sell, assign or transfer in excess of
twenty-five percent (25%) of the Warrant or Shares in any one (1) calendar
quarter.
8. RECOGNITION OF REGISTERED OWNER. Prior to due presentment for
-------------------------------
registration of transfer of this Warrant, the Corporation may treat the
Registered Owner as
2
<PAGE>
the person exclusively entitled to receive notices and otherwise to exercise
rights hereunder.
9. EFFECT OF STOCK SPLIT, ETC. If the Corporation, by stock
---------------------------
dividend, split, reverse split, re-classification of shares, or otherwise,
changes as a whole the outstanding common stock of the Corporation into a
different number or class of shares, then:
A. The number and class of shares so changed shall, for the
purposes of this Warrant, replace the shares outstanding immediately prior
to the change; and
B. The Purchase Price in effect, and the number of shares
available for purchase under this Warrant, immediately prior to the date
upon which the change becomes effective, shall be proportionately adjusted
(the price to the nearest cent).
10. REGISTRATION. The Corporation shall have no obligation to
------------
register the Warrant or the shares of Capital Stock issuable upon exercise of
the Warrant under the Securities Act of 1933 in connection with any initial
public offering of the Corporation's shares or any other offering following a
transaction by which the shares shall become publicly traded ("Initial
Offering") contemplated to occur sometime in 1996. In the event that any time
after the Initial Offering, the Corporation or its controlling shareholder(s)
contemplate a further public offering or a secondary pubic offering of the
Capital Stock (collectively, the "Secondary Offering"), the Corporation shall
cause any then remaining unexercised Warrant, any of the shares which have
already been issued on previous exercise of the Warrant, and the shares issuable
upon exercise of the remaining unexercised Warrant, to be included in the
securities then being registered in connection with the Secondary Offering so
that, after the effective date of any such Secondary Offering, the Registered
Owner will have freely transferable Warrant or shares, as the case may be,
subject, however, to the restrictions set forth in Clause 7 hereof.
11. ADDITIONAL SALES OR ISSUANCE OF CAPITAL STOCK.
---------------------------------------------
A. Other than in connection with the contemplated Initial
Offering or any other public offering of shares of the Corporation's
Capital Stock, if the Corporation shall at any time or from time to time
hereafter:
(a) Sell or issue any additional shares of its Capital
Stock (other than upon exercise of this Warrant) and any other
warrant issued upon exchange of this Warrant, for a consideration
per share less than the Purchase Price in effect immediately prior
to such sale or issuance, or without consideration; or
(b) Sell or issue any rights or options to purchase Capital
Stock of the Corporation or sell or issue any securities of any
kind convertible into shares of Capital Stock of the Corporation
in which the
3
<PAGE>
option, purchase, exercise or conversion price (or consideration)
per share, as the case may be, is less than the Purchase Price in
effect immediately prior to such sale or issuance; then and in each
such case the Purchase Price in effect immediately prior to such
sale or issuance shall immediately and automatically be reduced to
the consideration per share received by the Corporation upon such
sale or issuance as specified in subparagraph (a), above, or to the
option, purchase, exercise or conversion price (or consideration)
per share upon such sale or issuance as specified in this
subparagraph (b), as the case may be.
Upon each such adjustment of the Purchase Price, the
Registered Owner shall thereafter (until a subsequent adjustment of
the Purchase Price) be entitled to purchase at the adjusted Purchase
Price the number of shares of Capital Stock of the Corporation
obtained by multiplying the number of shares specified in this
Warrant by the initial Purchase Price (i.e. US $6.00) and dividing
the product so obtained by the adjusted Purchase Price.
B. For purposes of the foregoing adjustments, the following
provisions shall also apply:
(a) In case the consideration for such issuance or sale of
additional shares of Capital Stock, or the option, purchase,
exercise or conversion price (or consideration) per share provided
for in any such right, option or convertible security, shall be
wholly or partially other than cash, such other consideration shall
be deemed to be the value, expressed in monetary terms, of such
consideration as fairly determined by the Board of Directors of the
Corporation whose determination shall be final and binding on the
parties hereto.
(b) In case the Corporation shall sell or issue any rights
or options to purchase Capital Stock of the Corporation, or any
securities of any kind convertible into shares of Capital Stock of
the Corporation, such sale or issue shall be deemed to be an issue
or sale (as of the date of the issue or sale of such rights, options
or convertible securities) of the maximum number of shares of
Capital Stock necessary to effect the exercise, conversion or
exchange of all such rights, options or convertible securities, and
the amount received by the Corporation for the issue or sale of such
rights options or convertible securities plus the total amount of
additional consideration, if any, payable to the Corporation on such
exercise, conversion or exchange shall be deemed to be consideration
actually received for the issue or sale of such shares of Capital
Stock, and such shares of Capital Stock shall be deemed to
constitute issued shares of Capital Stock as of said date; provided,
however, that no further adjustment of the Purchase Price shall be
4
<PAGE>
made upon the actual issuance of any shares of Capital Stock to
effect such exercise, conversion or exchange.
(c) No adjustment in the Purchase Price shall be made as a
result of the sale or issuance by the Corporation of any additional
shares of Capital Stock issued as a stock dividend upon outstanding
Capital Stock, and no further adjustment in the number of shares of
Capital Stock issuable upon exercise of this Warrant shall be made
except to the extent:
(i) in case the Corporation shall declare any dividend
upon outstanding Capital Stock payable in cash or in shares of
Capital Stock (or fractions thereof), or in case the
Corporation shall make any other distribution upon outstanding
Capital Stock, then and in each such case the Registered Owner,
upon any exercise of all or any part hereof thereafter, will be
entitled to receive the number of shares of Capital Stock as to
which the right of purchase is being exercised and, in addition
but without any further payment, the securities, cash or other
property which the holder of this Warrant would have received
by way of such dividends or distributions if such holder (i)
had continuously since the date hereof been the record holder
of the Capital Stock as to which the right of purchase is then
being exercised, and (ii) had retained all securities which he
or she would have received as dividends and/or other
distributions upon such Capital Stock;
(ii) if the Corporation shall, by subdivision,
combination or reclassification of shares or otherwise, change
the outstanding shares of its Capital Stock into a different
number or class of shares, the number and class of shares
issuable upon exercise of this Warrant and the Purchase Price
payable upon such exercise shall be adjusted as provided in
paragraph (i) above.
(d) No adjustment in the Purchase Price shall be made as
the result of any shares of Capital Stock being issued for purposes
of any stock option plan for the employees of the Corporation or for
purpose of any other stock options or risks granted to purchase
capital stock of the Corporation to any existing or new employees
provided always that the aggregate of such options or warrants
issued or granted in any one (a) calendar year shall not exclude ten
percent (10%) of the average number of shares of outstanding Capital
Stock during the preceding calendar year or if such calendar year
was not a full year, the average number of shares outstanding during
such short year.
5
<PAGE>
12. EFFECT OF MERGER, ETC. If the Corporation consolidates with or
----------------------
merges into another corporation, the Registered Owner shall thereafter be
entitled on exercise to purchase, with respect to each share of Capital Stock
purchasable hereunder immediately before the consolidation or merger becomes
effective, the securities or other consideration to which a holder of one share
of common stock is entitled in the consolidation or merger without any change in
or payment in addition to the Purchase Price in effect immediately prior to the
merger or consolidation. The Corporation shall take any necessary steps in
connection with a consolidation or merger to assure that all the provisions of
this Warrant shall thereafter be applicable, as nearly as reasonably may be, to
any securities or other consideration so deliverable on exercise of this
Warrant. The Corporation shall not consolidate or merge unless, prior to
consummation, the successor Corporation (if other than the Corporation) assumes
the obligations of this paragraph by written instrument executed and mailed to
the Registered Owner at the address of the Registered Owner on the books of the
Corporation. A sale or lease of all or substantially all the assets of the
Corporation for a consideration (apart from the assumption of obligations)
consisting primarily of securities is a consolidation or merger for the
foregoing purposes.
13. NOTICE OF ADJUSTMENT. On the happening of an event requiring an
---------------------
adjustment of the Purchase Price or the shares available for purchase hereunder,
the Corporation shall forthwith give written notice to the Registered Owner
stating the adjusted Purchase Price and the adjusted number and kind of
securities or other property available for purchase hereunder resulting from the
event and setting forth in reasonable detail the method of calculation and the
facts upon which the calculation is based. The Board of Directors of the
Corporation, acting in good faith, shall determine the calculation.
14. NOTICE AND EFFECT OF DISSOLUTION, ETC. In case a voluntary or
--------------------------------------
involuntary dissolution, liquidation, or winding up of the Corporation (other
than in connection with a consolidation or merger covered by paragraph 11 above)
is at any time proposed, the Corporation shall give at least thirty (30) days
written notice to the Registered Owner. Such notice shall contain: (i) the date
on which the transaction is to take place; (ii) the record date (which shall be
at least thirty (30) days after the giving of the notice) as of which holders of
Common Shares will be entitled to receive distributions as a result of the
transaction; (iii) a brief description of the transaction; (iv) a brief
description of the distributions to be made to holders of stock of the
Corporation as a result of the transaction; and (v) an estimate of the fair
value of the distributions. On the date of the transaction, if it actually
occurs, this Warrant and all rights hereunder shall terminate.
<PAGE>
15. METHOD OF GIVING NOTICE; EXTENT REQUIRED. Notices hereunder
-----------------------------------------
shall be given in the manner as provided for in the Joint Venture Agreement
addressed to the Registered Owner at the address of the Registered Owner
appearing in the records of the Corporation and to the Corporation at the
address set forth in the Joint Venture Agreement.
WITNESS the seal of the Corporation and the signatures of its
authorized Officers.
Dated: October 30, 1995
COMMODORE HOLDINGS, LIMITED
BY: /s/ FREDERICK A. MAYER
----------------------------------
NAME: FREDERICK A. MAYER
TITLE: VICE-CHAIRMAN
<PAGE>
Execution Copy
--------------
Dated 14th, July 1995
---------------------
Azure Investments, Inc.
as owner
to
Effjohn International Cruise Holdings Inc.
as lender
---------------------------------------
First Priority Panamanian Mortgage
- on -
"ENCHANTED SEAS"
--------------------------------------
Sinclair Roche & Temperley
Broadwalk House
5 Appold Street
London EC2A 2NN
Tel: 0171-638 9044
Ref: JPM/180210
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Clause Subject Page
- ------ ------- ----
<S> <C> <C>
1. Definitions and Construction........................... 1
2. Performance of Obligations under Security Documents.... 4
3. Security............................................... 4
4. Insurance.............................................. 5
5. Operation and Maintenance.............................. 11
6. Protection and Maintenance of Security................. 16
7. Enforcement of Rights.................................. 17
8. Application of Moneys.................................. 19
9. Waiver of Preferred Status............................. 19
10. Miscellaneous.......................................... 20
11. Notices................................................ 21
12. Jurisdiction........................................... 22
13. Governing Law.......................................... 23
14. Assignment............................................. 23
15. Counterparts........................................... 23
16. Appointment of Agent in Panama......................... 23
Schedule "A"............................................... 26
</TABLE>
<PAGE>
THIS FIRST PREFERRED NAVAL MORTGAGE is made the 14th day of July 1995 by:-
(1) Azure Investments, Inc., a company incorporated under the laws of the
Republic of Panama whose registered office is at c/o Galindo Arias & Lopez,
200 Via Espana, Panama 5, Panama City, Republic of Panama (the "Owner") in
favour of:-
(2) Effjohn International Cruise Holdings Inc., a company incorporated under
the laws of the Cayman Islands whose registered office is at c/o Caledonian
Bank & Trust Limited, P O Box 1043, Grand Cayman, Cayman Islands (the
"Mortgagee");
WHEREAS:-
(A) The Owner is the sole registered and beneficial owner of the whole of the
M.V. "Enchanted Seas" duly documented in the name of the Owner under the
laws and flag of Panama under Provisional Patente Number 18355-Rext-8
having radio call letters in the International Code of Signals 3FMF2 with a
registered gross capacity in tons of 22,162.00 registered net capacity in
tons of 6,648.00 length of 173.74 metres breadth of 25.60 metres and depth
of 13.94 metres.
(B) By a loan agreement dated 14 July 1995 (the "Loan Agreement") (a copy of
which is annexed hereto as "Schedule A" and hereby made part hereof) and
made between (i) the Owner and Almira Enterprises, Inc as borrowers
(together the "Borrowers") (ii) the Mortgagee and (iii) New Commodore
Cruise Lines Limited and Commodore Holdings Limited (together the
"Guarantors") the Mortgagee agreed to advance to the Borrowers a loan (the
"Loan") of USD24,500,000 on the terms and conditions set out therein.
(C) To secure the repayment of the Loan interest thereon and the due
performance and observance of all the agreements, covenants and provisions
contained in this Mortgage and in the other Security Documents the Owner
has duly authorised the execution and delivery of this First Preferred
Naval Mortgage.
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions
-----------
In this Mortgage (unless the context otherwise requires):-
(A) "Default Rate" means the rate of interest determined in accordance
with Clause 6.5 of the Loan Agreement;
(B) "Environmental Approvals" means all approvals, licences, permits,
exemptions or authorisations required under applicable Environmental
Laws;
(C) "Environmental Claim" means:-
(a) any claim by, or directive from, any applicable governmental,
judicial or other regulatory authority alleging breach of, or
non-compliance with, any Environmental Laws or Environmental
Approvals or
<PAGE>
- 2 -
otherwise howsoever relating to or arising out of an
Environmental Incident; or
(b) any claim by any other third party howsoever relating to or
arising out of an Environmental Incident,
and in each case "claim" shall mean a claim for damages, clean-up
costs, compliance, remedial action or otherwise;
(D) "Environmental Incident" means:-
(a) any release of Environmentally Sensitive Material from the
Vessel; or
(b) any incident in which Environmentally Sensitive Material is
released from a ship other than the Vessel and which involves
collision between the Vessel and such other ship or some other
incident of navigation or operation, in either case, where the
Vessel, the Owner, the Bareboat Charterer or the Lay-Up Charterer
is actually or allegedly at fault or otherwise liable (in whole
or in part); or
(c) any incident in which Environmentally Sensitive Material is
released from a ship other than the Vessel and where the Vessel
is actually or potentially liable to be arrested as a result
and/or where the Owner, the Bareboat Charterer or the Lay-Up
Charterer is actually or allegedly at fault or otherwise liable;
(E) "Environmental Laws" means all laws, regulations, conventions and
agreements whatsoever relating to pollution or protection of the
environment (including, but not limited to, the United States Oil
Pollution Act of 1990 and any comparable laws of the individual States
of the United States of America);
(F) "Environmentally Sensitive Material" means oil, oil products, any
other substance which is polluting, toxic or hazardous or any
substance the release of which into the environment is regulated,
prohibited or penalised by or pursuant to any Environmental Law;
(G) "Outstanding Indebtedness" means all sums of any kind arising at any
time for any reason payable actually or contingently by the Borrowers
under or pursuant to this Mortgage and each of the other Security
Documents (whether by way of payment of principal, payment of interest
or default interest, payment upon any indemnity or counter-indemnity,
reimbursements for costs or otherwise howsoever);
(H) "Vessel" means the ship described in Recital (A) and includes her
machinery, outfit, spare gear, fuel and consumable or other stores,
belongings and appurtenances, whether on board or ashore and whether
now owned or hereafter acquired;
<PAGE>
- 3 -
(I) words and expressions defined in the Loan Agreement shall have the
same meanings when used in this Mortgage except where the same words
and expressions are defined differently herein.
1.2 Construction
------------
In this Mortgage unless the context otherwise requires:-
(A) Clause headings are inserted for convenience of reference only and
shall be ignored in the interpretation of this Mortgage;
(B) references to Clauses and Schedules are to be construed as references
to clauses of and schedules to this Mortgage unless otherwise stated
and references to this Mortgage are to be construed as references to
this Mortgage including its Schedules;
(C) references to (or to any specified provision thereof) of this Mortgage
or any other Subject Document shall be construed as reference to this
Mortgage, that provision or that Subject Document as from time to time
amended, supplemented and/or novated;
(D) without prejudice to the provisions of Clause 14 references to any
party to this Mortgage or any such other Subject Document shall
include reference to such party's successors and permitted assigns;
(E) words importing the plural shall include the singular and vice versa;
(F) references to a person shall be construed as references to an
individual, firm, company, corporation, unincorporated body of persons
or any state or any agency thereof;
(G) where any matter under any Security Document requires the approval or
consent of the Mortgagee such approval or consent shall not be deemed
to have been given unless the approval or consent is given in writing;
where any matter under any Security Document is required to be
acceptable to the Mortgagee, the Mortgagee shall not be deemed to have
accepted such matter unless its acceptance is communicated in writing;
the Mortgagee may give or withhold its consent, approval or acceptance
under any Security Document subject to it not being unreasonably
withheld or delayed and such consent, approval or acceptance may be
given by the Mortgagee subject to such conditions as it may reasonably
impose;
(H) a certificate by the Mortgagee as to any amount due or calculation
made hereunder shall be conclusive except for manifest error; and
(I) references to any statutory or other legislative provision are to be
construed as references to any such statute or other legislative
provision as the same may
<PAGE>
- 4 -
be re-enacted or modified or substituted by any subsequent statute or
legislative provision.
2. PERFORMANCE OF OBLIGATIONS UNDER SECURITY DOCUMENTS
---------------------------------------------------
The Owner hereby undertakes to the Mortgagee that:-
2.1 it will repay the Loan and pay interest in accordance with the Loan
Agreement and will pay all other amounts due or to become due to the
Mortgagee in accordance with the Security Documents to which it is a party
and that it will duly perform its other obligations under the Security
Documents; and
2.2 it will pay interest at the Default Rate on any moneys which are due in
accordance with the Security Documents but unpaid from the date on which
such moneys were due until the date of receipt by the Mortgagee (whether
before or after judgment).
3. SECURITY
--------
3.1 Mortgage
--------
In consideration of the agreement of the Mortgagee to make the Loan
available to the Borrowers and in order to secure the payment of the
Outstanding Indebtedness in accordance with the provisions of the Security
Documents and to secure the due performance and observance of all of the
agreements, covenants, undertakings and provisions contained in this
Mortgage and in the other Security Documents to which the Owner is a party,
the Owner hereby executes and constitutes a first preferred naval mortgage
on the whole of the Vessel to the Mortgagee.
3.2 Panamanian Legislation
----------------------
This Mortgage is granted in accordance with the provisions of Chapter V
Title IV of Book Second of the Code of Commerce of the Republic of Panama
and of the pertinent provisions of the Civil Code and other legislation of
the Republic of Panama.
3.3 Extent of security
------------------
By virtue of this Mortgage, the Owner shall have and hold the Vessel unto
the Mortgagee for its own use and benefit for use upon the terms set out
herein for the enforcement of payment of the Loan and interest thereon in
accordance with the provisions of the Security Documents and to secure the
performance and observance of and the compliance with the covenants terms
and conditions contained expressed or implied in this Mortgage and the
other Security Documents
3.4 Discharge
---------
If the Owner repays the Loan and pays interest thereon in accordance with
the terms of this Mortgage and any other sums owing under this Mortgage and
performs and
<PAGE>
- 5 -
complies with all the covenants terms and conditions herein contained the
rights hereunder shall cease, terminate and be void but shall otherwise
remain in full force and effect.
4. INSURANCE
---------
4.1 Duration
--------
The Owner undertakes to the Mortgagee that throughout the Security Period
it will at its own expense effect and maintain insurance in accordance with
the following provisions of this Clause.
4.2 Risks insured
-------------
The Owner will insure the Vessel and keep her insured in the name of the
Owner and, if required, the Mortgagee against loss or damage from any cause
whatsoever including fire and usual marine risks, excess risks, war risks
and additional perils (and such other perils as the Mortgagee may
reasonably require).
4.3 Amount insured
--------------
For the purposes of all hull and machinery and war and political risks
insurance the Vessel and the Isle shall be insured on an agreed value basis
for the greater of:-
(A) an amount which is equal to 120% of the Loan; and
(B) the aggregate market value of the Vessel and the Isle for the time
being as agreed between the Owner and the Mortgagee or, failing
agreement, as determined by the Mortgagee in its sole discretion.
4.4 Hull and Machinery Insurances
-----------------------------
The Owner will effect and maintain hull and machinery insurance on the
usual Institute hull clauses (or as otherwise agreed by the Mortgagee) with
policy limits agreed by the Mortgagee from time to time and including an
endorsement that a breach of warranty by one assured shall not invalidate
the insurance as to all other named insureds.
4.5 War risks
---------
The Owner will effect and maintain war risks insurance with policy limits
agreed by the Mortgagee from time to time and including an endorsement that
a breach of warranty by one assured shall not invalidate the insurance as
to all other named insureds.
<PAGE>
- 6 -
4.6 Port risk cover
---------------
While the Vessel is laid up and if the Mortgagee approves, port risk
insurance may be taken out on the Vessel by the Owner instead of hull
insurance, on terms and for amounts approved by the Mortgagee.
4.7 Protection and Indemnity coverage
---------------------------------
The Owner will effect and maintain insurance or an entry or entries in a
protection and indemnity association in the name of the Owner on such terms
and in such amounts as the Mortgagee may require in respect of protection
and indemnity risks (other than in respect of crew) for which cover is
available from a first class protection and indemnity association.
Without limitation, the risks to be insured shall include:-
(A) claims of employees, agents or sub-contractors of the Owner, the
Bareboat Charterer, the Lay-Up Charterer, any other charterer of the
Vessel, passengers, third parties (including governments or other
authorities) and their dependants who may suffer damage to property,
financial loss or personal injury or arising from the death of any
such persons;
(B) such other risks as may be required by statute, order or regulations
of the Republic of Panama and of all other countries to whose
jurisdiction the Vessel may from time to time become subject and/or
which the Mortgagee may direct; and
(C) Protection and indemnity insurance (as well as required insurance
against liability for pollution or the spillage or leakage of cargo)
which shall:
(i) be in the highest amount from time to time available for ships
of the same type, size, age and flag as the Vessel. Without
limitation of the foregoing, coverage against liability for
pollution or the spillage or leakage of cargo shall in no event
be less than USD500,000,000 for any one incident or such other
amount which may be the highest available cover from time to
time from a first class protection and indemnity association;
(ii) if applicable include as areas of its cover the United States
of America and the Exclusive Economic Zone of the United States
of America ("EEZ") as such term is defined in the US Oil
Pollution Act of 1990. The Owner shall procure that the
protection and indemnity cover in respect of the Vessel shall
at no time contain a clause excluding the Vessel from trading
in United States' or EEZ waters (a "US Trading Exclusion
Clause") and for this purpose the Owner shall deliver to the
relevant protection and indemnity association such quarterly or
other declarations of the Vessel's voyages as may from time to
time be required in accordance with the association's rules to
obtain deletion
<PAGE>
- 7 -
of the US Trading Exclusion Clause. The Owner agrees to deliver
to the Mortgagee a copy of each such voyage declaration
simultaneously with its being delivered to the protection and
indemnity association. The Owner further agrees to provide the
Mortgagee with such evidence as it shall reasonably request
that the US Trading Exclusion Clause has been and remains
deleted and undertakes to use its best endeavours, if requested
by the Mortgagee, to procure that the protection and indemnity
association confirms such deletion in writing direct to the
Mortgagee; and
(iii) include as areas of cover all other jurisdictions which may
require specific inclusion following the promulgation of
legislation imposing liability for oil pollution which requires
specific cover under current protection and indemnity
association rules.
4.8 Terms of cover
--------------
The Owner shall ensure that the Insurances shall:-
(A) be effected through brokers and with insurance companies,
underwriters, war risks and protection and indemnity associations each
internationally recognised and approved by the Mortgagee;
(B) be in a form and on terms and in amounts approved by the Mortgagee;
(C) provide that all amounts payable thereunder shall be payable in
Dollars or another currency approved by the Mortgagee;
(D) if the Mortgagee shall not have effected and maintained a mortgagee's
interest policy pursuant to Clause 4.21, include a provision on terms
approved by the Mortgagee whereby no breach of warranty or condition
or lack of due diligence on the part of the Owner shall prevent or
prejudice the Mortgagee collecting the full amount which it would have
been entitled to receive as assignee of the Insurances but for such
breach or lack of due diligence;
(E) provide that they may not lapse, be terminated, cancelled or
materially modified without thirty days' prior notice to the Mortgagee
and to such other persons as the Mortgagee may nominate;
(F) be endorsed with a note of the Mortgagee's interest, and shall further
ensure that such interest is endorsed upon all slips, cover notes and
other instruments of insurance, in a form satisfactory to the
Mortgagee and a notice of assignment and a loss payable and notice of
cancellation clause in such terms as the Mortgagee may require.
<PAGE>
- 8 -
4.9 Production of insurance documents
---------------------------------
When requested the Owner shall produce certified copies of the policies,
certificates of insurance or entry and cover notes in respect of the
Insurances (or evidence of their existence) to the Mortgagee. In the case
of the Insurances the Owner shall produce to the Mortgagee evidence of each
such renewal at least fourteen (14) days before expiry.
4.10 Payment of premiums and calls
-----------------------------
The Owner shall promptly pay all premiums and calls and shall produce to
the Mortgagee the receipts (or other evidence of payment) for such premiums
and calls within fourteen (14) days of such payment together with a letter
from the broker, insurance company, war risks or protection and indemnity
association to which the premium or call is paid, confirming that no credit
has been extended or is outstanding in respect of premiums or calls or, if
credit has been extended, the terms of such credit and amount of premiums
and calls then outstanding. The Owner shall not take credit in respect of
the payment of premiums or calls without the approval of the Mortgagee. The
Owner shall procure that its brokers and the insurance companies with which
the Vessel is insured and the protection and indemnity association and/or
war risk association in which the Vessel is entered shall waive any lien
for premiums or calls except in relation to premiums or calls attributable
to the Vessel.
4.11 Information from brokers
------------------------
The Owner shall procure that its insurance brokers give to the Mortgagee
and its insurance advisers such information as to the Insurances as the
Mortgagee or its insurance advisers may request.
4.12 Notice of amendments to cover
-----------------------------
If any variation is made to the Insurances or if any other insurance in
relation to the Vessel or to third party risks in relation thereto is taken
out, the Owner shall forthwith give written notice to the Mortgagee. The
Owner shall not be entitled to make any alteration to any of the Insurances
without the consent of the Mortgagee and shall not take any action or omit
to take any action which would render any instrument of insurance invalid,
void, voidable or unenforceable or render any sum payable thereunder
repayable in whole or in part.
4.13 Letters of undertaking
----------------------
The Owner shall cause its insurers, brokers and/or the managers of any
protection and indemnity or war risks association in which the Vessel may
be entered to deliver to the Mortgagee letters of undertaking in such terms
as the Mortgagee may reasonably require.
<PAGE>
- 9 -
4.14 Cover in case of default by Owner
---------------------------------
If the Owner shall fail to comply with any of the provisions of this
Clause, the Mortgagee shall be entitled to procure that insurance is
effected in accordance with the provisions of this Clause (at the Owner's
expense). Alternatively or in addition (without prejudice to the rights of
the Mortgagee under Clause 7) whilst such failure is continuing the
Mortgagee may require the Vessel to remain in port (or proceed to and
remain in a reasonably convenient port designated by the Mortgagee) until
such provisions are fully complied with.
4.15 Total loss
----------
In the event of a Total Loss the proceeds of all insurance claims shall be
payable to the Mortgagee without deduction or withholding except for
customary brokers' collection commissions and save as provided in Clause
7.3 of the Loan Agreement the Mortgagee shall apply the proceeds in
accordance with the provisions of Clause 8.
4.16 Average damage
--------------
In the event of the occurrence of any loss or damage other than a Total
Loss, insurance moneys in respect of such loss or damage shall be paid to
the Mortgagee (subject to the provisions of any loss payable and notice of
cancellation clause approved by the Mortgagee) and:-
(A) if no Event of Default has occurred, the Mortgagee shall, either
------
consent that such moneys on receipt by the Mortgagee shall be applied
for repairs, salvage or other charges or, if the Owner has first fully
--
repaired the damage or secured complete discharge of the liability
insured against the Mortgagee shall reimburse the Owner therefor up to
the amount received by the Mortgagee PROVIDED THAT the insurers
through whom the fire and usual marine risks insurances are effected
may in the case of a major casualty (being a claim in excess of
USD1,500,000 or its equivalent in another currency) and with the
previous consent in writing of the Mortgagee make payment on account
of repairs in the course of being effected; or
(B) if an Event of Default has occurred, the Mortgagee shall be entitled
to receive such insurance moneys from the underwriters or insurers and
may apply them in prepayment of the Loan and/or other amounts due or
to become due under the Loan Agreement or under this Mortgage or under
any other Security Document.
4.17 Receipt of proceeds by Owner
----------------------------
If, despite the provisions of Clauses 4.15 and 4.16 the Owner receives any
insurance moneys before having made good the loss or restoring the damage
or discharging the liability in respect of which the moneys are paid, the
Owner shall (unless the Mortgagee agrees otherwise) immediately pay the
moneys to the Mortgagee (and until
<PAGE>
- 10 -
payment the Owner shall hold the moneys on trust for the Mortgagee). The
provisions of Clause 4.15 shall apply if the moneys are received in respect
of a Total Loss and the provisions of Clause 4.16 if the moneys are
received in respect of any other insurance claim.
4.18 Independent report
------------------
At the request of the Mortgagee, the Owner will at its expense promptly
either once a year if there is no change to the then current Insurances or
from time to time if there are changes to the then current Insurances
provide the Mortgagee with a detailed report signed by an independent firm
of marine insurance brokers appointed by the Mortgagee to examine the
adequacy of the Insurances and shall procure that there is delivered to
such brokers any and all information in relation to the Insurances as the
brokers may require for the purposes of such report. Each such report shall
affirm compliance of the Insurances with the requirements of this Clause
4.18 and state such brokers' opinion as to the adequacy thereof for the
protection of the interests of the Mortgagee.
4.19 Assistance by Owner
-------------------
The Owner undertakes to do all things necessary and to provide all
documents, evidence and information to enable the Mortgagee to collect or
recover any moneys which at any time become due in respect of the
Insurances and for such purpose the Owner shall permit the Mortgagee if
necessary to sue in the name of the Owner. The Owner will not settle,
compromise or abandon claims under the Insurances for a Total Loss or major
casualty (being a claim in excess of USD1,500,000 or its equivalent in
another currency) without the consent of the Mortgagee.
4.20 Employment in conformity with insurance cover
---------------------------------------------
The Owner will not at any time employ the Vessel or permit her to be
employed except in accordance with the terms of the Insurances (including
any express or implied warranties) without first obtaining the consent of
the underwriters or insurers or protection and indemnity or war risk
association to such employment and complying with requirements as to extra
premium and other requirements prescribed by them.
4.21 Mortgagee's interest insurance
------------------------------
The Mortgagee shall effect a mortgagee's interest policy (to include, if
required, cover in respect of Additional Perils) in respect of its interest
in the Vessel as mortgagee on such terms as the Mortgagee considers
appropriate. It is agreed that the mortgagee's interest insurance in
respect of the Vessel shall not exceed 120% of the Loan. The Owner will pay
to the Mortgagee on demand the cost of effecting and maintaining this
insurance.
<PAGE>
- 11 -
4.22 Certificates of Financial Responsibility
----------------------------------------
The Owner will ensure that the Vessel holds certificates of Financial
Responsibility as required by the Oil Pollution Act.
5. OPERATION AND MAINTENANCE
-------------------------
5.1 Duration
--------
The Owner undertakes to the Mortgagee that it will comply with the
obligations set out in this Clause at its own expense throughout the
Security Period.
5.2 Standard of maintenance
-----------------------
The Owner will keep the Vessel in a good and efficient state of repair so
as to entitle the Vessel to maintain its current classification free of all
recommendations and qualifications with American Bureau of Shipping or such
other classification society approved by the Mortgagee. On the date hereof
and annually thereafter, the Owner will furnish to the Mortgagee a
statement by such classification society that such classification is
maintained. The Owner will comply with all recommendations, regulations and
requirements (statutory or otherwise) from time to time applicable to the
Vessel and shall have on board as and when required thereby valid
certificates showing compliance therewith and shall procure that all
repairs to or replacements of any damaged, worn or lost parts or equipment
are carried out (both as regards workmanship and quality of materials) so
as not to diminish the value or class of the Vessel. No part or item of
equipment shall be removed unless it is replaced forthwith by a suitable
part or item and the replacement part is (i) in the same or better
condition than that removed; (ii) free from any Encumbrance in favour of
any person other than the Mortgagee and (iii) is subject to the security
constituted by this Mortgage. The Owner will not make any substantial
modifications or alterations to the Vessel or any part thereof without the
prior consent of the Mortgagee, save that the Owner is entitled to modify
or alter the Vessel if such modification or alteration can reasonably be
said to have enhanced the value of the Vessel.
5.3 Survey
------
The Owner will submit the Vessel to continuous survey and such other
surveys as may be required for classification purposes and, if so required
by the Mortgagee, the Owner will supply to the Mortgagee copies in English
of the survey reports.
5.4 Inspection
----------
The Owner will permit surveyors or agents appointed by the Mortgagee to
board the Vessel at all reasonable times to inspect her condition or
satisfy themselves as to repairs proposed or already carried out. The Owner
will afford all proper facilities for such inspections.
<PAGE>
- 12 -
5.5 Employment to comply with law
-----------------------------
The Owner will not employ the Vessel or permit her employment in any trade
or business which is forbidden by any applicable law or is otherwise
illicit or in carrying illicit or prohibited goods or in any manner
whatsoever which may render her liable to condemnation in a prize court or
to destruction, seizure or confiscation or that may expose the Vessel to
penalties. In the event of hostilities in any part of the world (whether
war be declared or not) the Owner will not employ the Vessel or permit her
employment in carrying any contraband goods.
5.6 Information
-----------
The Owner will promptly provide the Mortgagee with all information which
the Mortgagee may periodically require regarding the Vessel, her
employment, position and engagements, particulars of all towages and
salvages and copies of all charters and other contracts for her employment
and otherwise concerning the Vessel.
5.7 Notification of accidents, etc.
-------------------------------
The Owner will give notice to the Mortgagee forthwith and in reasonable
detail of:-
(A) accidents to the Vessel involving repairs the cost of which will or is
likely to exceed USD1,500,000 (or its equivalent in another currency);
(B) the Vessel becoming or being likely to become a Total Loss;
(C) any recommendation or requirement made by any insurer or
classification society or by any competent authority which is not
complied with within any time limit relating thereto;
(D) any writ served against or any arrest of the Vessel or the exercise of
any lien or purported lien on the Vessel her Earnings or Insurances;
(E) the occurrence of any Event of Default or Possible Event of Default;
(F) the Vessel ceasing to be registered as a Panamanian ship or anything
which is done or not done whereby such registration may be imperilled;
(G) it becoming impossible or unlawful for the Owner to fulfil any of its
obligations under the Security Documents;
(H) anything done or permitted or not done in respect of the Vessel by any
person which is likely to imperil the security created by this
Mortgage;
(I) the intended drydocking of the Vessel; and
(J) any Environmental Claim being made against the Owner, the Bareboat
Charterer, the Lay-Up Charterer or otherwise in connection with the
Vessel
<PAGE>
- 13 -
or any Environmental Incident occurring, and to keep the Mortgagee
advised in writing on such regular basis and in such detail as the
Mortgagee shall require of the Owner's response to each Environmental
Claim or Environmental Incident.
5.8 Payment of trading expenses and wages
-------------------------------------
The Owner will promptly pay and discharge all debts, damages and
liabilities, taxes, assessments, governmental charges, fines, penalties,
tolls, dues and other outgoings in respect of the Vessel and keep proper
books of account in respect thereof. As and when the Mortgagee may so
require and upon giving reasonable notice the Owner will make such books
available for inspection on behalf of the Mortgagee and provide evidence
satisfactory to the Mortgagee that the wages and allotments and the
insurance and pension contributions of the master and crew are being
regularly paid, that all deductions from crew's wages in respect of any tax
liability are being properly accounted for and that the master has no claim
for disbursements other than those incurred in the ordinary course of
trading on the voyage then in progress or completed prior to such
inspection.
5.9 Negative pledge
---------------
Save as contemplated by the other Security Documents, the Owner will not
without the prior consent of the Mortgagee agree to or actually mortgage,
charge, assign or in any other way encumber the Vessel or any share or
interest therein. Neither the Owner, nor the master, nor any charterer of
the Vessel, nor any other person has the right or authority to create,
incur or permit the creation or continuance of any such mortgage, charge or
assignment or encumbrance to or in favour of any person other than the
Mortgagee or liens in respect of crew's wages or salvage.
5.10 Avoidance of repairer's liens
-----------------------------
The Owner will not put the Vessel into the possession of any person without
the prior consent of the Mortgagee (such consent not to be unreasonably
withheld by reason only that such person shall not provide a written
undertaking to the Mortgagee whereby it agrees not to exercise its lien on
the Vessel or her Earnings for the cost of such work or any other reason)
for the purpose of work being done on her in an amount exceeding or likely
to exceed USD1,500,000 or its equivalent in another currency.
5.11 Management
----------
The Owner will not without the prior written consent of the Mortgagee
appoint a commercial manager of the Vessel other than the Bareboat
Charterer or a technical manager of the Vessel other than the Technical
Manager nor cause or allow the Seas Charter, the Lay-Up Charter or the
Technical Management Agreement to be amended.
<PAGE>
- 14 -
5.12 Avoidance and discharge of other liens
--------------------------------------
The Owner will promptly pay and discharge all liabilities which have given
rise, or may give rise, to liens or claims enforceable against the Vessel
under the laws of all countries to whose jurisdiction the Vessel may from
time to time be subject. If the Vessel is arrested or detained for any
reason the Owner will, upon receiving notice thereof, procure the prompt
release of the Vessel by providing bail or taking such other steps as the
circumstances may require.
5.13 Notice as to outstanding debts
------------------------------
The Owner will give to the Mortgagee at such times as it may from time to
time require (which will normally be no more than twice per annum) a
certificate, duly signed on behalf of the Owner as to the amount of any
debts, damages and liabilities relating to the Vessel only and, if so
required by the Mortgagee, forthwith discharge such debts, damages and
liabilities to the Mortgagee's satisfaction.
5.14 Restriction on sale or transfer
-------------------------------
Except as specifically permitted by the provisions of Clause 15.2(j) of the
Loan Agreement, the Owner will not without the Mortgagee's prior consent
agree to or actually sell, assign or otherwise transfer or dispose of the
Vessel or any share or interest therein.
5.15 Restrictions on employment
--------------------------
The Owner will not without the Mortgagee's prior consent let or employ the
Vessel below the market rate prevailing at the time the Vessel is fixed:-
(A) (other than the Lay-Up Charter or the Seas Charter) on demise charter
for any period; or
(B) by any time or consecutive voyage charter for a period which exceeds
or by virtue of any optional extensions might exceed thirteen (13)
months duration; or
(C) on terms whereby more than two (2) months hire (or the equivalent) is
payable in advance;
Provided always that in respect of the matters referred to above in this
clause 5.15 the Mortgagee's consent shall be deemed to have been given
thereto if the Owner shall not have been informed by the Mortgagee either
in writing or by word of mouth that such consent is refused within five (5)
Banking Days of the time at which the application for such consent was
acknowledged as received by the Mortgagee (who shall promptly give such
acknowledgement).
<PAGE>
- 15 -
5.16 Registration of Vessel
----------------------
The Owner will maintain the registration of the Vessel (in its present
name) as a Panamanian vessel at such port as the Mortgagee may approve. The
Owner will not do or permit anything to be done whereby such registration
may be forfeited or imperilled.
5.17 US Anti Drug Abuse Act
----------------------
The Owner will take all reasonable precautions to prevent any infringements
of the Anti-Drug Abuse Act of 1986 of the United States of America (as the
same may be amended and/or re-enacted from time to time hereafter) or any
similar legislation applicable to the Vessel in any other jurisdiction in
which the Vessel shall trade.
5.18 Notice of mortgage
------------------
The Owner will do everything necessary under the laws of Panama for the
purpose of perfecting and maintaining this Mortgage as a valid and
enforceable first preferred mortgage and, in particular (but without
limitation), it will:-
(A) keep on board the Vessel each such document or record as may be
required by law and cause such particulars relating to the Mortgage to
be recorded as may be required by law:-
(B) carry on board the Vessel with the ship's papers a properly
certified copy of this Mortgage; and
(C) keep prominently displayed in the chart room and in the master's
cabin of the Vessel a framed printed notice (the print on which
shall measure at least six inches by nine inches) reading as
follows:-
"NOTICE OF MORTGAGE
This Vessel is owned by Azure Investments, Inc., and is subject
to a first preferred mortgage in favour of Effjohn International
Cruise Holdings Inc. Under the terms of the said Mortgage neither
the Owner, nor the master, nor any charterer of the Vessel nor
any other person has the right or authority to create, incur or
permit any lien, charge or encumbrance to be placed on the Vessel
other than sums for crews' wages and salvage".
5.19 Requisition of title, etc.
--------------------------
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, or any authority acting or
purporting to act under colour of government, 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
<PAGE>
- 16 -
compensation of the Owner for its interest in the Vessel from such
Government or department, agency or representative thereof, or from any
other source, and the compensation, purchase price, reimbursement or award
for such requisition, purchase or other taking of such title or ownership
due to the Owner from such Government, department, agency or representative
thereof, or any authority acting under colour of government or other
source, is hereby declared payable to the Mortgagee, who shall be entitled
to receive the same, and shall apply the same as provided in Clause 8.1
hereof; and in the event of any requisition, purchase or taking, the Owner
shall promptly execute and deliver to the Mortgagee such documents, 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 compensation, purchase
price, reimbursement or award.
5.20 Environmental Matters: Representations and Warranties
------------------------------------------------------
The Owner hereby represents and warrants to the Mortgagee that:-
(A) having made reasonable enquiries, it is satisfied that all applicable
Environmental Laws and Environmental Approvals relating to the Vessel,
its operation and management and the business of the Owner (as now
conducted and as reasonably anticipated to be conducted in the future)
have been complied with;
(B) no Environmental Claim has been made or threatened against the Owner,
the Bareboat Charterer or otherwise in connection with the Vessel; and
(C) no Environmental Incident has occurred.
6. PROTECTION AND MAINTENANCE OF SECURITY
--------------------------------------
6.1 Action to secure compliance
---------------------------
The Mortgagee may at any time and as often as may be necessary take any
such action as it may in its discretion think fit to protect and maintain
the security created by the Security Documents (including, without
limitation) the exercise of any of the rights set out in this Clause 6 and
its rights as the Mortgagee of the Vessel and, if the Owner does not comply
with the provisions of Clause 4 or Clause 5, the Mortgagee may take such
action as it may in its entire discretion think fit to procure compliance
with the terms thereof.
6.2 Reimbursement of cost
---------------------
Each and every cost, expense or liability incurred by the Mortgagee
referred to in this Clause shall be repayable to the Mortgagee by the Owner
on demand together with interest thereon at the Default Rate from the date
when the same was incurred until the date of actual receipt (as well after
as before any judgment).
<PAGE>
- 17 -
6.3 Remedies cumulative
-------------------
The provisions of this Clause shall be without prejudice to the Mortgagee's
other rights under the Security Documents. The Mortgagee shall not be under
any obligation to exercise any of its rights under this Clause.
7. ENFORCEMENT OF RIGHTS
---------------------
On the happening of any Event of Default the security created by this
Mortgage shall become immediately enforceable and the Mortgagee shall
become entitled as and when it may see fit to exercise immediately all the
powers possessed by it as mortgagee of the Vessel by law and as set out in
this Mortgage and in particular, but without limitation:-
(A) to exercise all of the rights and remedies in foreclosure and
otherwise given to a mortgagee by the provisions of applicable law;
(B) to take possession of the Vessel whether actually or constructively
and/or otherwise to take control of the Vessel wherever the Vessel may
be and cause the Owner or any other person in possession of the Vessel
forthwith upon demand to surrender the same to the Mortgagee without
legal process and without liability of the Mortgagee for any losses or
damages incurred thereby and without having to render accounts to the
Owner in association therewith;
(C) to require that all policies, contracts and other records relating to
the Insurances (including details of and correspondence concerning
outstanding claims) be immediately delivered to such persons as the
Mortgagee may nominate;
(D) to collect, recover, compromise and give a good discharge for all
claims then outstanding or thereafter arising under the Insurances and
to take over or institute all such proceedings in connection therewith
as the Mortgagee in its absolute discretion thinks fit and to permit
any brokers to charge the usual brokerage therefor;
(E) to sell the Vessel or any share therein (but subject to the Mortgagee
giving at least twenty (20) calendar days prior notice that he intends
to sell the Vessel and such notice to be given to the Owner in
accordance with Article 1527 of the Code of Commerce of the Republic
of Panama) in any part of the world with or without notice to the
Owner (without the benefit of the Seas Charter but with the benefit of
any other charterparty or contract of employment and free of any claim
of or by the Owner of any nature whatsoever) by public auction or
private contract and upon such terms in the absence of wilful
misconduct and gross negligence as the Mortgagee in its absolute
discretion may determine with power to postpone any such sale and
without being answerable for any loss resulting from such sale or the
postponement thereof and to purchase the Vessel itself and set off the
purchase price against all or any part of the Outstanding
Indebtedness. On any such sale of the Vessel or
<PAGE>
- 18 -
any share therein, the purchaser shall not be bound to see or enquire
whether the power of sale herein has arisen, the sale shall be deemed
to be within the power of the Mortgagee and the receipt of the
Mortgagee for the purchase money shall effectively discharge the
purchaser who shall not be concerned with the application of the
proceeds of sale or be in any way answerable therefor. The Owner
agrees that any sale of the Vessel made in accordance with the
foregoing provisions is made in a commercially reasonable manner
insofar as the Owner is concerned;
(F) to remove the Vessel or to require the Vessel to be removed from any
place where she may be to any other place for the purposes of docking,
laying up, repair, management, employment, maintenance, or sale or to
preserve or maintain the security of the Mortgagee in the Vessel in
such manner as the Mortgagee may in its complete discretion deem
necessary;
(G) to manage, insure, maintain and repair the Vessel and to employ or lay
up the Vessel in the absence of wilful misconduct and gross negligence
in such manner and for such period as the Mortgagee in its absolute
discretion deems expedient; to do all acts and things incidental or
conducive thereto and in particular to enter into such arrangements
respecting the Vessel, her insurance, management, maintenance, repair,
classification and employment in all respects as if the Mortgagee were
the owner of the Vessel and without being responsible for any loss
thereby incurred;
(H) by notice to the Owner to appoint a receiver of the whole or part of
the Vessel. The receiver so appointed shall be the agent of the Owner
(who shall be solely responsible for his acts and defaults and
remuneration) and shall have power to exercise all or any of the
powers conferred on the Mortgagee by law and by each Security Document
and shall be entitled to the same protection as is granted to the
Mortgagee under this Mortgage;
(I) to take over or institute (if necessary using the name of the Owner)
all such proceedings in connection with the Vessel as the Mortgagee in
its absolute discretion thinks fit and to discharge, compound, release
or compromise claims against the Owner in respect of the Vessel which
have given or may give rise to any charge or lien on the Vessel or
which are or may be enforceable by proceedings against the Vessel;
(J) the Mortgagee shall not be obliged (nor shall any receiver of the
Vessel be obliged) to make any enquiry as to the nature or sufficiency
of any payment received by it or on its behalf under this Mortgage or
to make any claim or to take any action to collect any monies or
enforce any rights to which the Mortgagee, or any such receiver, may
at any time be entitled hereunder;
(K) generally, in the absence of wilful misconduct and gross negligence to
recover from the Owner on demand each and every expense, liability or
loss incurred by the Mortgagee in or about or incidental to the
exercise of any of the powers aforesaid.
<PAGE>
- 19 -
8. APPLICATION OF MONEYS
---------------------
8.1 Amounts paid to the Mortgagee
-----------------------------
All proceeds of sale of the Vessel and other moneys received by the
Mortgagee under this Mortgage (subject, in the case of the Insurances
payable in the event of a Total Loss, to the provisions of Clause 7.3 of
the Loan Agreement and in the case of sale proceeds receivable in the event
of a sale of a Vessel, to the provisions of Clause 7.4 of the Loan
Agreement) be applied by the Mortgagee:-
(A) Firstly to pay all legal fees, court costs and all other costs,
expenses or advances whatsoever incurred or made in connection with
the recovery of moneys under this Mortgage and/or the other Security
Documents or the sale of the Vessel, the taking possession of the
Vessel, the protection of the Mortgagee's security and/or in exercise
of its rights hereunder under the other Security Documents and at law;
(B) Secondly in payment of amounts due to the Mortgagee under the Security
Documents in accordance with Clause 10.5 of the Loan Agreement.
8.2 Amounts paid to receiver
------------------------
All proceeds of sale of the Vessel and all other moneys received by a
receiver appointed pursuant to Clause 7(H) of this Mortgage and the other
Security Documents shall be applied by the receiver firstly in payment of
the remuneration of the receiver at the rate specified in the instrument
appointing the receiver or otherwise reasonably agreed between the receiver
and the Mortgagee and the balance shall be paid to the Mortgagee to be
applied in accordance with Clause 8.1.
9. WAIVER OF PREFERRED STATUS
--------------------------
9.1 If any provision of this Mortgage should be deemed invalid or shall be
deemed adversely to affect the first preferred status of this Mortgage
under any applicable law, such provision shall cease to be a part of this
Mortgage without affecting the remaining provisions, which shall remain in
full force and effect.
9.2 In the event that the Loan Agreement or this Mortgage or any of the
documents or instruments which may from time to time be delivered hereunder
or thereunder or any provision hereof or thereof shall be deemed
invalidated by present or future law of any nation or by decision or any
court, this shall not affect the validity and/or enforceability of all or
any other parts of the Loan Agreement or the Mortgage or such documents or
instruments and, in any such case, the Owner covenants and agrees that, on
demand, it will execute and deliver such other and further agreements
and/or documents and/or instruments and do such things as the Mortgagee in
its sole discretion may deem to be necessary to carry out the true intent
of this Mortgage and of all amounts secured hereby.
<PAGE>
- 20 -
9.3 Notwithstanding anything herein to the contrary it is intended that nothing
herein shall waive the first preferred status of this Mortgage and that, if
any provision or portion thereof herein shall be construed to waive the
first preferred status of this Mortgage, then such provision to such extent
shall be void and of no effect.
10. MISCELLANEOUS
-------------
10.1 Power of attorney
-----------------
The Owner hereby irrevocably appoints the Mortgagee and each receiver
appointed pursuant to Clause 7(H) as its attorney-in-fact for the duration
of the Security Period for the purpose of doing in its name all acts which
the Owner itself could do in relation to the Vessel, including but not
limited to the execution and delivery of a bill of sale transferring title
to the Vessel and (if required) the execution and recording of a mortgage
on the Vessel similar in form and content to this Mortgage. The power of
attorney granted herein shall be exercisable only upon the occurrence of an
Event of Default.
10.2 Delegation
----------
The Mortgagee shall be entitled at any time and as often as it may consider
to be expedient to delegate all or any of the powers and discretions vested
in it by this Mortgage (including the power vested in it by virtue of
Clause 10.1) in such manner, upon such terms and to such persons as it may
in its absolute discretion think fit.
10.3 Further assurance
-----------------
The Owner hereby further undertakes at its own expense to execute, sign,
perfect, do and (if required) register every such further assurance,
document, act or thing as in the opinion of the Mortgagee may be necessary
or desirable for the purpose of more effectively mortgaging the Vessel or
perfecting the security constituted by this Mortgage. The Owner hereby
irrevocably appoints the Mortgagee as its attorney-in-fact for the purpose
of executing, signing, perfecting, doing and registering every such further
assurance, document, act or thing as aforesaid.
10.4 Taking of action by Mortgagee
-----------------------------
The Mortgagee need not before exercising any of the rights, powers or
remedies conferred upon it by this Mortgage, or by law (i) take action or
obtain judgment against any Obligor or any other person in any court, (ii)
make or file claim or proof in a winding-up or liquidation of any Obligor
or of any other person or (iii) enforce or seek to enforce the recovery of
the moneys and liabilities hereby and thereby secured or any other security
for the performance in full of the obligations of the Obligor under the
Security Documents.
<PAGE>
- 21 -
10.5 Indulgence and variations
-------------------------
The Mortgagee may in its discretion (i) grant time or other indulgence or
make any other arrangement in respect of any of the moneys and liabilities
secured by this Mortgage or of any other security therefor or of any other
company or companies, person or persons not parties hereto or (ii) vary any
provision of the Security Documents or any of them or any document related
thereto or any security therefor without prejudice to this security and the
security created by this Mortgage shall not be in any way discharged or
impaired by reason of any other circumstance which might (but for this
provision) constitute a legal or equitable discharge of such security.
10.6 Exclusion of subrogation
------------------------
The Owner shall not unless and until its obligations and each other
Obligor's obligations under the Security Documents shall have been
unconditionally and irrevocably paid and discharged in full be entitled to
share in or succeed to or benefit from (whether by subrogation or
otherwise) any rights which the Mortgagee may have or any security,
indemnity or guarantee which the Mortgagee may hold in respect of
indebtedness or liabilities of any Obligor or any proceeds thereof.
10.7 Exclusion of rights
-------------------
The Owner shall not without the prior written consent of the Mortgagee at
any time prior to the unconditional and irrevocable payment and discharge
in full of the obligations of the Obligors under the Security Documents
have the benefit of, exercise, claim or enforce or attempt to have the
benefit of, exercise, claim or enforce any rights (including any right of
set-off) which the Owner may have against any Obligor or any other person
arising by reason of or in connection with this Mortgage or any provision
hereof or by reason of the Mortgagee having received a part only of the
monies and liabilities outstanding under any of the Security Documents. Any
monies or other property (including the benefit of any right of set-off)
received by the Owner (with or without such consent) by virtue of any such
exercise, enforcement or claim shall be held by the Owner in trust to be
paid to the Mortgagee as if they were monies recovered under this Deed.
11. NOTICES
-------
11.1 Mode of communication
---------------------
Except as otherwise provided herein each notice, request, demand or other
communication or document to be given or made hereunder shall be given in
writing but, unless otherwise stated, may be made by telex or telefax.
11.2 Address
-------
Any notice, demand or other communication to be made or delivered pursuant
to this Mortgage shall be made or delivered as follows:-
<PAGE>
- 22 -
(i) if to the Owner to it at its registered address as aforesaid,
telefax number (507) 2635335 marked for the attention of Alfonso
Arias with copy to the Bareboat Charterer at 4000 Hollywood
Boulevard, Hollywood, Florida 33021, telefax number (305) 9672147
marked for the attention of Alan Pritzker and Fred Mayer and a
further copy to the Parent at c/o Ardon Management Services, Ltd.,
c/o Richards Francis & Francis, Cedarpark Centre, 48 Cedar Avenue,
Hamilton, HM 11, Bermuda, telefax number (809) 2920567 with a
further copy to Broad & Cassel, Miami Centre, 201 South Biscayne
Boulevard, Suite 3000, Miami, Florida 33131 telefax number 305 373
9493 marked for the attention of James Cassel with a further copy to
JeMJ Financial Services Inc, TelMed, Inc., 9350 S. Dixie Highway,
Suite 1220, Miami, Florida 33156 telefax number (305) 238 6248
marked for the attention of Jeffrey I. Binder;
(ii) if to the Mortgagee to it c/o Effjohn OY AB at Bulevardi 1A, PO Box
659, 00101 Helsinki, Finland telefax number 3580 627736 marked for
the attention of finance department
or such other address telex number or telefax number as each such addressee
may specify to the other relevant party or parties by not less then fifteen
(15) days' written notice.
11.3 Receipt
-------
Each such notice, demand, request or other communication shall be deemed to
have been made or delivered when:-
(A) (in the case of telex) the addressee's answerback shall have been
received at the end of the transmission or (in the case of telefax)
when a materially complete and legible copy of the communication has
been received by the addressee (unless the date of despatch is not a
Banking Day in the country of the addressee or the time of despatch is
outside normal business hours in the country of the addressee, in
which case such telex or telefax shall be deemed to have been received
at the opening of business on the next such Banking Day); or
(B) (in the case of any letter) when delivered to the addressee's address
as specified in or notified pursuant to Clause 11.2 or, if sent by
first class postage prepaid in an envelope addressed to the addressee
at that address five (5) days after being deposited in the post.
11.4 Language
--------
Each notice, demand or other communication made or delivered by one party
to another pursuant to this Mortgage shall be in the English language or
accompanied by a certified English translation.
<PAGE>
- 23 -
12. JURISDICTION
------------
12.1 Submission to jurisdiction
--------------------------
For the exclusive benefit of the Mortgagee, the Owner hereby irrevocably
submits to the non-exclusive jurisdiction of the courts of any country or
state to the jurisdiction of which the Vessel may be subject without
limiting the right of the Mortgagee to commence proceedings against the
Owner in any jurisdiction it shall think fit or in any two or more
jurisdictions.
12.2 Service of legal process
------------------------
The Owner agrees that any legal process in connection with this Mortgage
may be duly served if served on the master of the Vessel (or other officer
for the time being in command) and/or in such other manner as the courts of
the country in which such process is issued may permit or require.
13. GOVERNING LAW
-------------
This Mortgage shall be governed by and construed in accordance with the
laws of the Republic of Panama.
14. ASSIGNMENT
----------
This Mortgage shall enure to the benefit of each party hereto and its
successors and assigns and the terms "Owner" and "Mortgagee" shall be
construed accordingly. The Owner may not assign or transfer its rights or
obligations hereunder including its right of redemption. The Mortgagee may
at any time assign all or any part of its rights and benefits hereunder or
transfer in accordance with Clause 19.2 of the Loan Agreement and the Owner
hereby consents to the assignment on the date hereof by the Mortgagee to
the Bank of its rights and benefits hereunder.
15. COUNTERPARTS
------------
This Mortgage may be executed in any number of counterparts each of which
shall be an original but such counterparts shall together constitute but
one and the same instrument.
16. APPOINTMENT OF AGENT IN PANAMA
------------------------------
The parties hereby confer a special power of attorney on Tapia Linares Y
Alfaro of the City of Panama in the Republic of Panama empowering such firm
of lawyers to take all necessary steps to record this instrument of
mortgage and the prohibition contained in Clause 5.9 in the appropriate
registries in the City of Panama in accordance with the laws of the
Republic of Panama with full power of substitution in respect of the
special power of attorney herein granted.
<PAGE>
- 24 -
IN WITNESS WHEREOF, the Owner has caused this First Preferred Mortgage to be
duly executed the day and year first above written.
Azure Investments, Inc.
By: [SIGNATURE ILLEGIBLE]
------------------------
Attorney-in-fact
<PAGE>
- 25 -
ACCEPTANCE OF MORTGAGE
----------------------
The Mortgagee hereby declares that it accepts this Mortgage upon the Vessel as a
security for the moneys stated herein to be secured hereby and for the
obligations of the Owner referred to herein
Effjohn International Cruise Holdings Inc.
By: /s/ Thomas Forss
-----------------------
Name: Thomas Forss
Title: Attorney
<PAGE>
- 26 -
Schedule "A"
------------
Loan Agreement
--------------
<PAGE>
Execution Copy
--------------
Dated 14th July 1995
--------------------
Almira Enterprises, Inc.
as owner
to
Effjohn International Cruise Holdings Inc.
as lender
---------------------------------------
First Priority Panamanian Mortgage
- on -
"ENCHANTED ISLE"
--------------------------------------
Sinclair Roche & Temperley
Broadwalk House
5 Appold Street
London EC2A 2NN
Tel: 0171-638 9044
Ref: JPM/180210
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Clause Subject Page
- ------ ------- ----
<S> <C> <C>
1. Definitions And Construction........................................ 1
2. Performance Of Obligations Under Security Documents................. 4
3. Security............................................................ 4
4. Insurance........................................................... 5
5. Operation And Maintenance........................................... 11
6. Protection And Maintenance Of Security.............................. 16
7. Enforcement Of Rights............................................... 17
8. Application Of Moneys............................................... 19
9. Waiver Of Preferred Status.......................................... 19
10. Miscellaneous....................................................... 20
11. Notices............................................................. 21
12. Jurisdiction........................................................ 22
13. Governing Law....................................................... 23
14. Assignment.......................................................... 23
15. Counterparts........................................................ 23
16. Appointment Of Agent In Panama...................................... 23
Schedule "A"............................................................... 26
</TABLE>
<PAGE>
THIS FIRST PREFERRED NAVAL MORTGAGE is made the 14th day of July 1995 by:-
(1) ALMIRA ENTERPRISES, INC., a company incorporated under the laws of the
Republic of Panama whose registered office is at c/o Galindo Arias &
Lopez, 200 Via Espana, Panama 5, Panama City, Republic of Panama (the
"Owner") in favour of:-
(2) EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC., a company incorporated under
the laws of the Cayman Islands whose registered office is at c/o
Caledonian Bank & Trust Limited, P O Box 1043, Grand Cayman, Cayman
Islands (the "Mortgagee");
WHEREAS:-
(A) The Owner is the sole registered and beneficial owner of the whole of the
M.V. "ENCHANTED ISLE" duly documented in the name of the Owner under the
laws and flag of Panama under Provisional Patente Number 12525-PEXT-6
having radio call letters in the International Code of Signals 3FMG2 with
a registered gross capacity in tons of 14,208.12 registered net capacity
in tons of 5,472.95 length of 175.14 metres breadth of 26.84 metres and
depth of 12.09 metres.
(B) By a loan agreement dated 14 July 1995 (the "Loan Agreement") (a copy of
which is annexed hereto as "Schedule A" and hereby made part hereof) and
made between (i) the Owner and Azure Investments, Inc. as borrowers
(together the "Borrowers") (ii) the Mortgagee and (iii) New Commodore
Cruise Lines Limited and Commodore Holdings Limited (together the
"Guarantors") the Mortgagee agreed to advance to the Borrowers a loan (the
"Loan") of USD24,500,000 on the terms and conditions set out therein.
(C) To secure the repayment of the Loan interest thereon and the due
performance and observance of all the agreements, covenants and provisions
contained in this Mortgage and in the other Security Documents the Owner
has duly authorised the execution and delivery of this First Preferred
Naval Mortgage.
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions
-----------
In this Mortgage (unless the context otherwise requires):-
(A) "Default Rate" means the rate of interest determined in accordance
with Clause 6.5 of the Loan Agreement;
(B) "Environmental Approvals" means all approvals, licences, permits,
exemptions or authorisations required under applicable Environmental
Laws;
(C) "Environmental Claim" means:-
(a) any claim by, or directive from, any applicable governmental,
judicial or other regulatory authority alleging breach of, or
non-compliance with, any Environmental Laws or Environmental
Approvals or
<PAGE>
- 2 -
otherwise howsoever relating to or arising out of an
Environmental Incident; or
(b) any claim by any other third party howsoever relating to or
arising out of an Environmental Incident,
and in each case "claim" shall mean a claim for damages,
clean-up costs, compliance, remedial action or otherwise;
(D) "Environmental Incident" means:-
(a) any release of Environmentally Sensitive Material from the
Vessel; or
(b) any incident in which Environmentally Sensitive Material is
released from a ship other than the Vessel and which involves
collision between the Vessel and such other ship or some other
incident of navigation or operation, in either case, where the
Vessel, the Owner or the Bareboat Charterer is actually or
allegedly at fault or otherwise liable (in whole or in part);
or
(c) any incident in which Environmentally Sensitive Material is
released from a ship other than the Vessel and where the
Vessel is actually or potentially liable to be arrested as a
result and/or where the Owner or the Bareboat Charterer is
actually or allegedly at fault or otherwise liable;
(E) "Environmental Laws" means all laws, regulations, conventions and
agreements whatsoever relating to pollution or protection of the
environment (including, but not limited to, the United States Oil
Pollution Act of 1990 and any comparable laws of the individual
States of the United States of America);
(F) "Environmentally Sensitive Material" means oil, oil products, any
other substance which is polluting, toxic or hazardous or any
substance the release of which into the environment is regulated,
prohibited or penalised by or pursuant to any Environmental Law;
(G) "Outstanding Indebtedness" means all sums of any kind arising at any
time for any reason payable actually or contingently by the
Borrowers under or pursuant to this Mortgage and each of the other
Security Documents (whether by way of payment of principal, payment
of interest or default interest, payment upon any indemnity or
counter-indemnity, reimbursements for costs or otherwise howsoever);
(H) "Vessel" means the ship described in Recital (A) and includes her
machinery, outfit, spare gear, fuel and consumable or other stores,
belongings and appurtenances, whether on board or ashore and whether
now owned or hereafter acquired;
<PAGE>
- 3 -
(I) words and expressions defined in the Loan Agreement shall have the
same meanings when used in this Mortgage except where the same words
and expressions are defined differently herein.
1.2 Construction
------------
In this Mortgage unless the context otherwise requires:-
(A) Clause headings are inserted for convenience of reference only and
shall be ignored in the interpretation of this Mortgage;
(B) references to Clauses and Schedules are to be construed as
references to clauses of and schedules to this Mortgage unless
otherwise stated and references to this Mortgage are to be construed
as references to this Mortgage including its Schedules;
(C) references to (or to any specified provision thereof) of this
Mortgage or any other Subject Document shall be construed as
reference to this Mortgage, that provision or that Subject Document
as from time to time amended, supplemented and/or novated;
(D) without prejudice to the provisions of Clause 14 references to any
party to this Mortgage or any such other Subject Document shall
include reference to such party's successors and permitted assigns;
(E) words importing the plural shall include the singular and vice
versa;
(F) references to a person shall be construed as references to an
individual, firm, company, corporation, unincorporated body of
persons or any state or any agency thereof;
(G) where any matter under any Security Document requires the approval
or consent of the Mortgagee such approval or consent shall not be
deemed to have been given unless the approval or consent is given in
writing; where any matter under any Security Document is required to
be acceptable to the Mortgagee, the Mortgagee shall not be deemed to
have accepted such matter unless its acceptance is communicated in
writing; the Mortgagee may give or withhold its consent, approval or
acceptance under any Security Document subject to it not being
unreasonably withheld or delayed and such consent, approval or
acceptance may be given by the Mortgagee subject to such conditions
as it may reasonably impose;
(H) a certificate by the Mortgagee as to any amount due or calculation
made hereunder shall be conclusive except for manifest error; and
(I) references to any statutory or other legislative provision are to be
construed as references to any such statute or other legislative
provision as the same may
<PAGE>
- 4 -
be re-enacted or modified or substituted by any subsequent statute
or legislative provision.
2. PERFORMANCE OF OBLIGATIONS UNDER SECURITY DOCUMENTS
---------------------------------------------------
The Owner hereby undertakes to the Mortgagee that:-
2.1 it will repay the Loan and pay interest in accordance with the Loan
Agreement and will pay all other amounts due or to become due to the
Mortgagee in accordance with the Security Documents to which it is a party
and that it will duly perform its other obligations under the Security
Documents; and
2.2 it will pay interest at the Default Rate on any moneys which are due in
accordance with the Security Documents but unpaid from the date on which
such moneys were due until the date of receipt by the Mortgagee (whether
before or after judgment).
3. SECURITY
--------
3.1 Mortgage
--------
In consideration of the agreement of the Mortgagee to make the Loan
available to the Borrowers and in order to secure the Outstanding
Indebtedness in accordance with the provisions of the Security Documents
and to secure the due performance and observance of all of the agreements,
covenants, undertakings and provisions contained in this Mortgage and in
the other Security Documents to which the Owner is a party, the Owner
hereby executes and constitutes a first preferred naval mortgage on the
whole of the Vessel to the Mortgagee.
3.2 Panamanian Legislation
----------------------
This Mortgage is granted in accordance with the provisions of Chapter V
Title IV of Book Second of the Code of Commerce of the Republic of Panama
and of the pertinent provisions of the Civil Code and other legislation of
the Republic of Panama .
3.3 Extent of security
------------------
By virtue of this Mortgage, the Owner shall have and hold the Vessel unto
the Mortgagee for its own use and benefit for use upon the terms set out
herein for the enforcement of payment of the Loan and interest thereon in
accordance with the provisions of the Security Documents and to secure the
performance and observance of and the compliance with the covenants terms
and conditions contained expressed or implied in this Mortgage and the
other Security Documents
3.4 Discharge
---------
If the Owner repays the Loan and pays interest thereon in accordance with
the terms of this Mortgage and any other sums owing under this Mortgage
and performs and
<PAGE>
- 5 -
complies with all the covenants terms and conditions herein contained the
rights hereunder shall cease, terminate and be void but shall otherwise
remain in full force and effect.
4. INSURANCE
---------
4.1 Duration
--------
The Owner undertakes to the Mortgagee that throughout the Security Period
it will at its own expense effect and maintain insurance in accordance
with the following provisions of this Clause.
4.2 Risks insured
-------------
The Owner will insure the Vessel and keep her insured in the name of the
Owner and, if required, the Mortgagee against loss or damage from any
cause whatsoever including fire and usual marine risks, excess risks, war
risks and additional perils (and such other perils as the Mortgagee may
reasonably require).
4.3 Amount insured
--------------
For the purposes of all hull and machinery and war and political risks
insurance the Vessel and the Seas shall be insured on an agreed value
basis for the greater of:-
(A) an amount which is equal to 120% of the Loan; and
(B) the aggregate market value of the Vessel and the Seas for the time
being as agreed between the Owner and the Mortgagee or, failing
agreement, as determined by the Mortgagee in its sole discretion.
4.4 Hull and Machinery Insurances
-----------------------------
The Owner will effect and maintain hull and machinery insurance on the
usual Institute hull clauses (or as otherwise agreed by the Mortgagee)
with policy limits agreed by the Mortgagee from time to time and including
an endorsement that a breach of warranty by one assured shall not
invalidate the insurance as to all other named insureds.
4.5 War risks
---------
The Owner will effect and maintain war risks insurance with policy limits
agreed by the Mortgagee from time to time and including an endorsement
that a breach of warranty by one assured shall not invalidate the
insurance as to all other named insureds.
<PAGE>
- 6 -
4.6 Port risk cover
---------------
While the Vessel is laid up and if the Mortgagee approves, port risk
insurance may be taken out on the Vessel by the Owner instead of hull
insurance, on terms and for amounts approved by the Mortgagee.
4.7 Protection and Indemnity coverage
---------------------------------
The Owner will effect and maintain insurance or an entry or entries in a
protection and indemnity association in the name of the Owner on such
terms and in such amounts as the Mortgagee may require in respect of
protection and indemnity risks (other than in respect of crew) for which
cover is available from a first class protection and indemnity
association.
Without limitation, the risks to be insured shall include:-
(A) claims of employees, agents or sub-contractors of the Owner, the
Bareboat Charterer, any other charterer of the Vessel, passengers,
third parties (including governments or other authorities) and their
dependants who may suffer damage to property, financial loss or
personal injury or arising from the death of any such persons;
(B) such other risks as may be required by statute, order or regulations
of the Republic of Panama and of all other countries to whose
jurisdiction the Vessel may from time to time become subject and/or
which the Mortgagee may direct; and
(C) Protection and indemnity insurance (as well as required insurance
against liability for pollution or the spillage or leakage of cargo)
which shall:
(i) be in the highest amount from time to time available for
ships of the same type, size, age and flag as the Vessel.
Without limitation of the foregoing, coverage against
liability for pollution or the spillage or leakage of cargo
shall in no event be less than USD500,000,000 for any one
incident or such other amount which may be the highest
available cover from time to time from a first class
protection and indemnity association;
(ii) if applicable include as areas of its cover the United States
of America and the Exclusive Economic Zone of the United
States of America ("EEZ") as such term is defined in the US
Oil Pollution Act of 1990. The Owner shall procure that the
protection and indemnity cover in respect of the Vessel shall
at no time contain a clause excluding the Vessel from trading
in United States' or EEZ waters (a "US Trading Exclusion
Clause") and for this purpose the Owner shall deliver to the
relevant protection and indemnity association such quarterly
or other declarations of the Vessel's voyages as may from
time to time be required in accordance with the association's
rules to obtain deletion
<PAGE>
- 7 -
of the US Trading Exclusion Clause. The Owner agrees to
deliver to the Mortgagee a copy of each such voyage
declaration simultaneously with its being delivered to the
protection and indemnity association. The Owner further
agrees to provide the Mortgagee with such evidence as it
shall reasonably request that the US Trading Exclusion Clause
has been and remains deleted and undertakes to use its best
endeavours, if requested by the Mortgagee, to procure that
the protection and indemnity association confirms such
deletion in writing direct to the Mortgagee; and
(iii) include as areas of cover all other jurisdictions which may
require specific inclusion following the promulgation of
legislation imposing liability for oil pollution which
requires specific cover under current protection and
indemnity association rules.
4.8 Terms of cover
--------------
The Owner shall ensure that the Insurances shall:-
(A) be effected through brokers and with insurance companies,
underwriters, war risks and protection and indemnity associations
each internationally recognised and approved by the Mortgagee;
(B) be in a form and on terms and in amounts approved by the Mortgagee;
(C) provide that all amounts payable thereunder shall be payable in
Dollars or another currency approved by the Mortgagee;
(D) if the Mortgagee shall not have effected and maintained a
mortgagee's interest policy pursuant to Clause 4.21, include a
provision on terms approved by the Mortgagee whereby no breach of
warranty or condition or lack of due diligence on the part of the
Owner shall prevent or prejudice the Mortgagee collecting the full
amount which it would have been entitled to receive as assignee of
the Insurances but for such breach or lack of due diligence;
(E) provide that they may not lapse, be terminated, cancelled or
materially modified without thirty days' prior notice to the
Mortgagee and to such other persons as the Mortgagee may nominate;
(F) be endorsed with a note of the Mortgagee's interest, and shall
further ensure that such interest is endorsed upon all slips, cover
notes and other instruments of insurance, in a form satisfactory to
the Mortgagee and a notice of assignment and a loss payable and
notice of cancellation clause in such terms as the Mortgagee may
require.
<PAGE>
- 8 -
4.9 Production of insurance documents
---------------------------------
When requested the Owner shall produce certified copies of the policies,
certificates of insurance or entry and cover notes in respect of the
Insurances (or evidence of their existence) to the Mortgagee. In the case
of the Insurances the Owner shall produce to the Mortgagee evidence of
each such renewal at least fourteen (14) days before expiry.
4.10 Payment of premiums and calls
-----------------------------
The Owner shall promptly pay all premiums and calls and shall produce to
the Mortgagee the receipts (or other evidence of payment) for such
premiums and calls within fourteen (14) days of such payment together with
a letter from the broker, insurance company, war risks or protection and
indemnity association to which the premium or call is paid, confirming
that no credit has been extended or is outstanding in respect of premiums
or calls or, if credit has been extended, the terms of such credit and
amount of premiums and calls then outstanding. The Owner shall not take
credit in respect of the payment of premiums or calls without the approval
of the Mortgagee. The Owner shall procure that its brokers and the
insurance companies with which the Vessel is insured and the protection
and indemnity association and/or war risk association in which the Vessel
is entered shall waive any lien for premiums or calls except in relation
to premiums or calls attributable to the Vessel.
4.11 Information from brokers
------------------------
The Owner shall procure that its insurance brokers give to the Mortgagee
and its insurance advisers such information as to the Insurances as the
Mortgagee or its insurance advisers may request.
4.12 Notice of amendments to cover
-----------------------------
If any variation is made to the Insurances or if any other insurance in
relation to the Vessel or to third party risks in relation thereto is
taken out, the Owner shall forthwith give written notice to the Mortgagee.
The Owner shall not be entitled to make any alteration to any of the
Insurances without the consent of the Mortgagee and shall not take any
action or omit to take any action which would render any instrument of
insurance invalid, void, voidable or unenforceable or render any sum
payable thereunder repayable in whole or in part.
4.13 Letters of undertaking
----------------------
The Owner shall cause its insurers, brokers and/or the managers of any
protection and indemnity or war risks association in which the Vessel may
be entered to deliver to the Mortgagee letters of undertaking in such
terms as the Mortgagee may reasonably require.
<PAGE>
- 9 -
4.14 Cover in case of default by Owner
---------------------------------
If the Owner shall fail to comply with any of the provisions of this
Clause, the Mortgagee shall be entitled to procure that insurance is
effected in accordance with the provisions of this Clause (at the Owner's
expense). Alternatively or in addition (without prejudice to the rights of
the Mortgagee under Clause 7) whilst such failure is continuing the
Mortgagee may require the Vessel to remain in port (or proceed to and
remain in a reasonably convenient port designated by the Mortgagee) until
such provisions are fully complied with.
4.15 Total loss
----------
In the event of a Total Loss the proceeds of all insurance claims shall be
payable to the Mortgagee without deduction or withholding except for
customary brokers' collection commissions and save as provided in Clause
7.3 of the Loan Agreement the Mortgagee shall apply the proceeds in
accordance with the provisions of Clause 8.
4.16 Average damage
--------------
In the event of the occurrence of any loss or damage other than a Total
Loss, insurance moneys in respect of such loss or damage shall be paid to
the Mortgagee (subject to the provisions of any loss payable and notice of
cancellation clause approved by the Mortgagee) and:-
(A) if no Event of Default has occurred, the Mortgagee shall, either
------
consent that such moneys on receipt by the Mortgagee shall be
applied for repairs, salvage or other charges or, if the Owner has
--
first fully repaired the damage or secured complete discharge of the
liability insured against the Mortgagee shall reimburse the Owner
therefor up to the amount received by the Mortgagee PROVIDED THAT
the insurers through whom the fire and usual marine risks insurances
are effected may in the case of a major casualty (being a claim in
excess of USD1,500,000 or its equivalent in another currency) and
with the previous consent in writing of the Mortgagee make payment
on account of repairs in the course of being effected; or
(B) if an Event of Default has occurred, the Mortgagee shall be entitled
to receive such insurance moneys from the underwriters or insurers
and may apply them in prepayment of the Loan and/or other amounts
due or to become due under the Loan Agreement or under this Mortgage
or under any other Security Document.
4.17 Receipt of proceeds by Owner
----------------------------
If, despite the provisions of Clauses 4.15 and 4.16 the Owner receives any
insurance moneys before having made good the loss or restoring the damage
or discharging the liability in respect of which the moneys are paid, the
Owner shall (unless the Mortgagee agrees otherwise) immediately pay the
moneys to the Mortgagee (and until
<PAGE>
- 10 -
payment the Owner shall hold the moneys on trust for the Mortgagee). The
provisions of Clause 4.15 shall apply if the moneys are received in
respect of a Total Loss and the provisions of Clause 4.16 if the moneys
are received in respect of any other insurance claim.
4.18 Independent report
------------------
At the request of the Mortgagee, the Owner will at its expense promptly
either once a year if there is no change to the then current Insurances or
from time to time if there are changes to the then current Insurances
provide the Mortgagee with a detailed report signed by an independent firm
of marine insurance brokers appointed by the Mortgagee to examine the
adequacy of the Insurances and shall procure that there is delivered to
such brokers any and all information in relation to the Insurances as the
brokers may require for the purposes of such report. Each such report
shall affirm compliance of the Insurances with the requirements of this
Clause 4.18 and state such brokers' opinion as to the adequacy thereof for
the protection of the interests of the Mortgagee.
4.19 Assistance by Owner
-------------------
The Owner undertakes to do all things necessary and to provide all
documents, evidence and information to enable the Mortgagee to collect or
recover any moneys which at any time become due in respect of the
Insurances and for such purpose the Owner shall permit the Mortgagee if
necessary to sue in the name of the Owner. The Owner will not settle,
compromise or abandon claims under the Insurances for a Total Loss or
major casualty (being a claim in excess of USD1,500,000 or its equivalent
in another currency) without the consent of the Mortgagee.
4.20 Employment in conformity with insurance cover
---------------------------------------------
The Owner will not at any time employ the Vessel or permit her to be
employed except in accordance with the terms of the Insurances (including
any express or implied warranties) without first obtaining the consent of
the underwriters or insurers or protection and indemnity or war risk
association to such employment and complying with requirements as to extra
premium and other requirements prescribed by them.
4.21 Mortgagee's interest insurance
------------------------------
The Mortgagee shall effect a mortgagee's interest policy (to include, if
required, cover in respect of Additional Perils) in respect of its
interest in the Vessel as mortgagee on such terms as the Mortgagee
considers appropriate. It is agreed that the mortgagee's interest
insurance in respect of the Vessel shall not exceed 120% of the Loan. The
Owner will pay to the Mortgagee on demand the cost of effecting and
maintaining this insurance.
<PAGE>
- 11 -
4.22 Certificates of Financial Responsibility
----------------------------------------
The Owner will ensure that the Vessel holds certificates of Financial
Responsibility as required by the Oil Pollution Act.
5. OPERATION AND MAINTENANCE
-------------------------
5.1 Duration
--------
The Owner undertakes to the Mortgagee that it will comply with the
obligations set out in this Clause at its own expense throughout the
Security Period.
5.2 Standard of maintenance
-----------------------
The Owner will keep the Vessel in a good and efficient state of repair so
as to entitle the Vessel to maintain its current classification free of
all recommendations and qualifications with Lloyds Register of Shipping or
such other classification society approved by the Mortgagee. On the date
hereof and annually thereafter, the Owner will furnish to the Mortgagee a
statement by such classification society that such classification is
maintained. The Owner will comply with all recommendations, regulations
and requirements (statutory or otherwise) from time to time applicable to
the Vessel and shall have on board as and when required thereby valid
certificates showing compliance therewith and shall procure that all
repairs to or replacements of any damaged, worn or lost parts or equipment
are carried out (both as regards workmanship and quality of materials) so
as not to diminish the value or class of the Vessel. No part or item of
equipment shall be removed unless it is replaced forthwith by a suitable
part or item and the replacement part is (i) in the same or better
condition than that removed; (ii) free from any Encumbrance in favour of
any person other than the Mortgagee and (iii) is subject to the security
constituted by this Mortgage. The Owner will not make any substantial
modifications or alterations to the Vessel or any part thereof without the
prior consent of the Mortgagee, save that the Owner is entitled to modify
or alter the Vessel if such modification or alteration can reasonably be
said to have enhanced the value of the Vessel.
5.3 Survey
------
The Owner will submit the Vessel to continuous survey and such other
surveys as may be required for classification purposes and, if so required
by the Mortgagee, the Owner will supply to the Mortgagee copies in English
of the survey reports.
5.4 Inspection
----------
The Owner will permit surveyors or agents appointed by the Mortgagee to
board the Vessel at all reasonable times to inspect her condition or
satisfy themselves as to repairs proposed or already carried out. The
Owner will afford all proper facilities for such inspections.
<PAGE>
- 12 -
5.5 Employment to comply with law
-----------------------------
The Owner will not employ the Vessel or permit her employment in any trade
or business which is forbidden by any applicable law or is otherwise
illicit or in carrying illicit or prohibited goods or in any manner
whatsoever which may render her liable to condemnation in a prize court or
to destruction, seizure or confiscation or that may expose the Vessel to
penalties. In the event of hostilities in any part of the world (whether
war be declared or not) the Owner will not employ the Vessel or permit her
employment in carrying any contraband goods.
5.6 Information
-----------
The Owner will promptly provide the Mortgagee with all information which
the Mortgagee may periodically require regarding the Vessel, her
employment, position and engagements, particulars of all towages and
salvages and copies of all charters and other contracts for her employment
and otherwise concerning the Vessel.
5.7 Notification of accidents, etc.
-------------------------------
The Owner will give notice to the Mortgagee forthwith and in reasonable
detail of:-
(A) accidents to the Vessel involving repairs the cost of which will or
is likely to exceed USD1,500,000 (or its equivalent in another
currency);
(B) the Vessel becoming or being likely to become a Total Loss;
(C) any recommendation or requirement made by any insurer or
classification society or by any competent authority which is not
complied with within any time limit relating thereto;
(D) any writ served against or any arrest of the Vessel or the exercise
of any lien or purported lien on the Vessel her Earnings or
Insurances;
(E) the occurrence of any Event of Default or Possible Event of Default;
(F) the Vessel ceasing to be registered as a Panamanian ship or anything
which is done or not done whereby such registration may be
imperilled;
(G) it becoming impossible or unlawful for the Owner to fulfil any of
its obligations under the Security Documents;
(H) anything done or permitted or not done in respect of the Vessel by
any person which is likely to imperil the security created by this
Mortgage;
(I) the intended drydocking of the Vessel; and
(J) any Environmental Claim being made against the Owner, the Bareboat
Charterer or otherwise in connection with the Vessel or any
Environmental
<PAGE>
- 13 -
Incident occurring, and to keep the Mortgagee advised in writing on
such regular basis and in such detail as the Mortgagee shall require
of the Owner's response to each Environmental Claim or Environmental
Incident.
5.8 Payment of trading expenses and wages
-------------------------------------
The Owner will promptly pay and discharge all debts, damages and
liabilities, taxes, assessments, governmental charges, fines, penalties,
tolls, dues and other outgoings in respect of the Vessel and keep proper
books of account in respect thereof. As and when the Mortgagee may so
require and upon giving reasonable notice the Owner will make such books
available for inspection on behalf of the Mortgagee and provide evidence
satisfactory to the Mortgagee that the wages and allotments and the
insurance and pension contributions of the master and crew are being
regularly paid, that all deductions from crew's wages in respect of any
tax liability are being properly accounted for and that the master has no
claim for disbursements other than those incurred in the ordinary course
of trading on the voyage then in progress or completed prior to such
inspection.
5.9 Negative pledge
---------------
Save as contemplated by the other Security Documents, the Owner will not
without the prior consent of the Mortgagee agree to or actually mortgage,
charge, assign or in any other way encumber the Vessel or any share or
interest therein. Neither the Owner, nor the master, nor any charterer of
the Vessel, nor any other person has the right or authority to create,
incur or permit the creation or continuance of any such mortgage, charge
or assignment or encumbrance to or in favour of any person other than the
Mortgagee or liens in respect of crew's wages or salvage.
5.10 Avoidance of repairer's liens
-----------------------------
The Owner will not put the Vessel into the possession of any person
without the prior consent of the Mortgagee (such consent not to be
unreasonably withheld by reason only that such person shall not provide a
written undertaking to the Mortgagee whereby it agrees not to exercise its
lien on the Vessel or her Earnings for the cost of such work or any other
reason) for the purpose of work being done on her in an amount exceeding
or likely to exceed USD1,500,000 or its equivalent in another currency.
5.11 Management
----------
The Owner will not without the prior written consent of the Mortgagee
appoint a commercial manager of the Vessel other than the Bareboat
Charterer or a technical manager of the Vessel other than the Technical
Manager nor cause or allow the Isle Charter or the Technical Management
Agreement to be amended.
<PAGE>
- 14 -
5.12 Avoidance and discharge of other liens
--------------------------------------
The Owner will promptly pay and discharge all liabilities which have given
rise, or may give rise, to liens or claims enforceable against the Vessel
under the laws of all countries to whose jurisdiction the Vessel may from
time to time be subject. If the Vessel is arrested or detained for any
reason the Owner will, upon receiving notice thereof, procure the prompt
release of the Vessel by providing bail or taking such other steps as the
circumstances may require.
5.13 Notice as to outstanding debts
------------------------------
The Owner will give to the Mortgagee at such times as it may from time to
time require (which will normally be no more than twice per annum) a
certificate, duly signed on behalf of the Owner as to the amount of any
debts, damages and liabilities relating to the Vessel only and, if so
required by the Mortgagee, forthwith discharge such debts, damages and
liabilities to the Mortgagee's satisfaction.
5.14 Restriction on sale or transfer
-------------------------------
Except as specifically permitted by the provisions of Clause 15.2(j) of
the Loan Agreement, the Owner will not without the Mortgagee's prior
consent agree to or actually sell, assign or otherwise transfer or dispose
of the Vessel or any share or interest therein.
5.15 Restrictions on employment
--------------------------
The Owner will not without the Mortgagee's prior consent let or employ the
Vessel below the market rate prevailing at the time the Vessel is fixed:-
(A) (other than the Isle Charter) on demise charter for any period; or
(B) by any time or consecutive voyage charter for a period which exceeds
or by virtue of any optional extensions might exceed thirteen (13)
months duration; or
(C) on terms whereby more than two (2) months hire (or the equivalent)
is payable in advance;
Provided always that in respect of the matters referred to above in this
clause 5.15 the Mortgagee's consent shall be deemed to have been given
thereto if the Owner shall not have been informed by the Mortgagee either
in writing or by word of mouth that such consent is refused within five
(5) Banking Days of the time at which the application for such consent was
acknowledged as received by the Mortgagee (who shall promptly give such
acknowledgement).
<PAGE>
- 15 -
5.16 Registration of Vessel
----------------------
The Owner will maintain the registration of the Vessel (in its present
name) as a Panamanian vessel at such port as the Mortgagee may approve.
The Owner will not do or permit anything to be done whereby such
registration may be forfeited or imperilled.
5.17 US Anti Drug Abuse Act
----------------------
The Owner will take all reasonable precautions to prevent any
infringements of the Anti-Drug Abuse Act of 1986 of the United States of
America (as the same may be amended and/or re-enacted from time to time
hereafter) or any similar legislation applicable to the Vessel in any
other jurisdiction in which the Vessel shall trade.
5.18 Notice of mortgage
------------------
The Owner will do everything necessary under the laws of Panama for the
purpose of perfecting and maintaining this Mortgage as a valid and
enforceable first preferred mortgage and, in particular (but without
limitation), it will:-
(A) keep on board the Vessel each such document or record as may be
required by law and cause such particulars relating to the Mortgage
to be recorded as may be required by law:-
(B) carry on board the Vessel with the ship's papers a properly
certified copy of this Mortgage; and
(C) keep prominently displayed in the chart room and in the
master's cabin of the Vessel a framed printed notice (the print
on which shall measure at least six inches by nine inches)
reading as follows:-
"NOTICE OF MORTGAGE
This Vessel is owned by Almira Enterprises, Inc., and is
subject to a first preferred mortgage in favour of Effjohn
International Cruise Holdings Inc. Under the terms of the said
Mortgage neither the Owner, nor the master, nor any charterer
of the Vessel nor any other person has the right or authority
to create, incur or permit any lien, charge or encumbrance to
be placed on the Vessel other than sums for crews' wages and
salvage".
5.19 Requisition of title, etc.
--------------------------
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, or any authority acting or
purporting to act under colour of government, 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
<PAGE>
- 16 -
compensation of the Owner for its interest in the Vessel from such
Government or department, agency or representative thereof, or from any
other source, and the compensation, purchase price, reimbursement or award
for such requisition, purchase or other taking of such title or ownership
due to the Owner from such Government, department, agency or
representative thereof, or any authority acting under colour of government
or other source, is hereby declared payable to the Mortgagee, who shall be
entitled to receive the same, and shall apply the same as provided in
Clause 8.1 hereof; and in the event of any requisition, purchase or
taking, the Owner shall promptly execute and deliver to the Mortgagee such
documents, 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
compensation, purchase price, reimbursement or award.
5.20 Environmental Matters: Representations and Warranties
------------------------------------------------------
The Owner hereby represents and warrants to the Mortgagee that:-
(A) having made reasonable enquiries, it is satisfied that all
applicable Environmental Laws and Environmental Approvals relating
to the Vessel, its operation and management and the business of the
Owner (as now conducted and as reasonably anticipated to be
conducted in the future) have been complied with;
(B) no Environmental Claim has been made or threatened against the Owner
or the Bareboat Charterer or otherwise in connection with the
Vessel; and
(C) no Environmental Incident has occurred.
6. PROTECTION AND MAINTENANCE OF SECURITY
--------------------------------------
6.1 Action to secure compliance
---------------------------
The Mortgagee may at any time and as often as may be necessary take any
such action as it may in its discretion think fit to protect and maintain
the security created by the Security Documents (including, without
limitation) the exercise of any of the rights set out in this Clause 6 and
its rights as the Mortgagee of the Vessel and, if the Owner does not
comply with the provisions of Clause 4 or Clause 5, the Mortgagee may take
such action as it may in its entire discretion think fit to procure
compliance with the terms thereof.
6.2 Reimbursement of cost
---------------------
Each and every cost, expense or liability incurred by the Mortgagee
referred to in this Clause shall be repayable to the Mortgagee by the
Owner on demand together with interest thereon at the Default Rate from
the date when the same was incurred until the date of actual receipt (as
well after as before any judgment).
<PAGE>
- 17 -
6.3 Remedies cumulative
-------------------
The provisions of this Clause shall be without prejudice to the
Mortgagee's other rights under the Security Documents. The Mortgagee shall
not be under any obligation to exercise any of its rights under this
Clause.
7. ENFORCEMENT OF RIGHTS
---------------------
On the happening of any Event of Default the security created by this
Mortgage shall become immediately enforceable and the Mortgagee shall
become entitled as and when it may see fit to exercise immediately all the
powers possessed by it as mortgagee of the Vessel by law and as set out in
this Mortgage and in particular, but without limitation:-
(A) to exercise all of the rights and remedies in foreclosure and
otherwise given to a mortgagee by the provisions of applicable law;
(B) to take possession of the Vessel whether actually or constructively
and/or otherwise to take control of the Vessel wherever the Vessel
may be and cause the Owner or any other person in possession of the
Vessel forthwith upon demand to surrender the same to the Mortgagee
without legal process and without liability of the Mortgagee for any
losses or damages incurred thereby and without having to render
accounts to the Owner in association therewith;
(C) to require that all policies, contracts and other records relating
to the Insurances (including details of and correspondence
concerning outstanding claims) be immediately delivered to such
persons as the Mortgagee may nominate;
(D) to collect, recover, compromise and give a good discharge for all
claims then outstanding or thereafter arising under the Insurances
and to take over or institute all such proceedings in connection
therewith as the Mortgagee in its absolute discretion thinks fit and
to permit any brokers to charge the usual brokerage therefor;
(E) to sell the Vessel or any share therein (but subject to the
Mortgagee giving at least twenty (20) calendar days prior notice
that he intends to sell the Vessel and such notice to be given to
the Owner in accordance with Article 1527 of the Code of Commerce of
the Republic of Panama) in any part of the world with or without
notice to the Owner (without the benefit of the Isle Charter but
with the benefit of any other charterparty or contract of employment
and free of any claim of or by the Owner of any nature whatsoever)
by public auction or private contract and upon such terms in the
absence of wilful misconduct and gross negligence as the Mortgagee
in its absolute discretion may determine with power to postpone any
such sale and without being answerable for any loss resulting from
such sale or the postponement thereof and to purchase the Vessel
itself and set off the purchase price against all or any part of the
Outstanding Indebtedness. On any such sale of the Vessel or
<PAGE>
- 18 -
any share therein, the purchaser shall not be bound to see or
enquire whether the power of sale herein has arisen, the sale shall
be deemed to be within the power of the Mortgagee and the receipt of
the Mortgagee for the purchase money shall effectively discharge the
purchaser who shall not be concerned with the application of the
proceeds of sale or be in any way answerable therefor. The Owner
agrees that any sale of the Vessel made in accordance with the
foregoing provisions is made in a commercially reasonable manner
insofar as the Owner is concerned;
(F) to remove the Vessel or to require the Vessel to be removed from any
place where she may be to any other place for the purposes of
docking, laying up, repair, management, employment, maintenance, or
sale or to preserve or maintain the security of the Mortgagee in the
Vessel in such manner as the Mortgagee may in its complete
discretion deem necessary;
(G) to manage, insure, maintain and repair the Vessel and to employ or
lay up the Vessel in the absence of wilful misconduct and gross
negligence in such manner and for such period as the Mortgagee in
its absolute discretion deems expedient; to do all acts and things
incidental or conducive thereto and in particular to enter into such
arrangements respecting the Vessel, her insurance, management,
maintenance, repair, classification and employment in all respects
as if the Mortgagee were the owner of the Vessel and without being
responsible for any loss thereby incurred;
(H) by notice to the Owner to appoint a receiver of the whole or part of
the Vessel. The receiver so appointed shall be the agent of the
Owner (who shall be solely responsible for his acts and defaults and
remuneration) and shall have power to exercise all or any of the
powers conferred on the Mortgagee by law and by each Security
Document and shall be entitled to the same protection as is granted
to the Mortgagee under this Mortgage;
(I) to take over or institute (if necessary using the name of the Owner)
all such proceedings in connection with the Vessel as the Mortgagee
in its absolute discretion thinks fit and to discharge, compound,
release or compromise claims against the Owner in respect of the
Vessel which have given or may give rise to any charge or lien on
the Vessel or which are or may be enforceable by proceedings against
the Vessel;
(J) the Mortgagee shall not be obliged (nor shall any receiver of the
Vessel be obliged) to make any enquiry as to the nature or
sufficiency of any payment received by it or on its behalf under
this Mortgage or to make any claim or to take any action to collect
any monies or enforce any rights to which the Mortgagee, or any such
receiver, may at any time be entitled hereunder;
(K) generally, in the absence of wilful misconduct and gross negligence
to recover from the Owner on demand each and every expense,
liability or loss incurred by the Mortgagee in or about or
incidental to the exercise of any of the powers aforesaid.
<PAGE>
- 19 -
8. APPLICATION OF MONEYS
---------------------
8.1 Amounts paid to the Mortgagee
-----------------------------
All proceeds of sale of the Vessel and other moneys received by the
Mortgagee under this Mortgage (subject, in the case of the Insurances
payable in the event of a Total Loss, to the provisions of Clause 7.3 of
the Loan Agreement and in the case of sale proceeds receivable in the
event of a sale of a Vessel, to the provisions of Clause 7.4 of the Loan
Agreement) be applied by the Mortgagee:-
(A) Firstly to pay all legal fees, court costs and all other costs,
expenses or advances whatsoever incurred or made in connection with
the recovery of moneys under this Mortgage and/or the other Security
Documents or the sale of the Vessel, the taking possession of the
Vessel, the protection of the Mortgagee's security and/or in
exercise of its rights hereunder under the other Security Documents
and at law;
(B) Secondly in payment of amounts due to the Mortgagee under the
Security Documents in accordance with Clause 10.5 of the Loan
Agreement.
8.2 Amounts paid to receiver
------------------------
All proceeds of sale of the Vessel and all other moneys received by a
receiver appointed pursuant to Clause 7(H) of this Mortgage and the other
Security Documents shall be applied by the receiver firstly in payment of
the remuneration of the receiver at the rate specified in the instrument
appointing the receiver or otherwise reasonably agreed between the
receiver and the Mortgagee and the balance shall be paid to the Mortgagee
to be applied in accordance with Clause 8.1.
9. WAIVER OF PREFERRED STATUS
--------------------------
9.1 If any provision of this Mortgage should be deemed invalid or shall be
deemed adversely to affect the first preferred status of this Mortgage
under any applicable law, such provision shall cease to be a part of this
Mortgage without affecting the remaining provisions, which shall remain in
full force and effect.
9.2 In the event that the Loan Agreement or this Mortgage or any of the
documents or instruments which may from time to time be delivered
hereunder or thereunder or any provision hereof or thereof shall be deemed
invalidated by present or future law of any nation or by decision or any
court, this shall not affect the validity and/or enforceability of all or
any other parts of the Loan Agreement or the Mortgage or such documents or
instruments and, in any such case, the Owner covenants and agrees that, on
demand, it will execute and deliver such other and further agreements
and/or documents and/or instruments and do such things as the Mortgagee in
its sole discretion may deem to be necessary to carry out the true intent
of this Mortgage and of all amounts secured hereby.
<PAGE>
- 20 -
9.3 Notwithstanding anything herein to the contrary it is intended that
nothing herein shall waive the first preferred status of this Mortgage and
that, if any provision or portion thereof herein shall be construed to
waive the first preferred status of this Mortgage, then such provision to
such extent shall be void and of no effect.
10. MISCELLANEOUS
-------------
10.1 Power of attorney
-----------------
The Owner hereby irrevocably appoints the Mortgagee and each receiver
appointed pursuant to Clause 7(H) as its attorney-in-fact for the duration
of the Security Period for the purpose of doing in its name all acts which
the Owner itself could do in relation to the Vessel, including but not
limited to the execution and delivery of a bill of sale transferring title
to the Vessel and (if required) the execution and recording of a mortgage
on the Vessel similar in form and content to this Mortgage. The power of
attorney granted herein shall be exercisable only upon the occurrence of
an Event of Default.
10.2 Delegation
----------
The Mortgagee shall be entitled at any time and as often as it may
consider to be expedient to delegate all or any of the powers and
discretions vested in it by this Mortgage (including the power vested in
it by virtue of Clause 10.1) in such manner, upon such terms and to such
persons as it may in its absolute discretion think fit.
10.3 Further assurance
-----------------
The Owner hereby further undertakes at its own expense to execute, sign,
perfect, do and (if required) register every such further assurance,
document, act or thing as in the opinion of the Mortgagee may be necessary
or desirable for the purpose of more effectively mortgaging the Vessel or
perfecting the security constituted by this Mortgage. The Owner hereby
irrevocably appoints the Mortgagee as its attorney-in-fact for the purpose
of executing, signing, perfecting, doing and registering every such
further assurance, document, act or thing as aforesaid.
10.4 Taking of action by Mortgagee
-----------------------------
The Mortgagee need not before exercising any of the rights, powers or
remedies conferred upon it by this Mortgage, or by law (i) take action or
obtain judgment against any Obligor or any other person in any court, (ii)
make or file claim or proof in a winding-up or liquidation of any Obligor
or of any other person or (iii) enforce or seek to enforce the recovery of
the moneys and liabilities hereby and thereby secured or any other
security for the performance in full of the obligations of the Obligor
under the Security Documents.
<PAGE>
- 21 -
10.5 Indulgence and variations
-------------------------
The Mortgagee may in its discretion (i) grant time or other indulgence or
make any other arrangement in respect of any of the moneys and liabilities
secured by this Mortgage or of any other security therefor or of any other
company or companies, person or persons not parties hereto or (ii) vary
any provision of the Security Documents or any of them or any document
related thereto or any security therefor without prejudice to this
security and the security created by this Mortgage shall not be in any way
discharged or impaired by reason of any other circumstance which might
(but for this provision) constitute a legal or equitable discharge of such
security.
10.6 Exclusion of subrogation
------------------------
The Owner shall not unless and until its obligations and each other
Obligor's obligations under the Security Documents shall have been
unconditionally and irrevocably paid and discharged in full be entitled to
share in or succeed to or benefit from (whether by subrogation or
otherwise) any rights which the Mortgagee may have or any security,
indemnity or guarantee which the Mortgagee may hold in respect of
indebtedness or liabilities of any Obligor or any proceeds thereof.
10.7 Exclusion of rights
-------------------
The Owner shall not without the prior written consent of the Mortgagee at
any time prior to the unconditional and irrevocable payment and discharge
in full of the obligations of the Obligors under the Security Documents
have the benefit of, exercise, claim or enforce or attempt to have the
benefit of, exercise, claim or enforce any rights (including any right of
set-off) which the Owner may have against any Obligor or any other person
arising by reason of or in connection with this Mortgage or any provision
hereof or by reason of the Mortgagee having received a part only of the
monies and liabilities outstanding under any of the Security Documents.
Any monies or other property (including the benefit of any right of
set-off) received by the Owner (with or without such consent) by virtue of
any such exercise, enforcement or claim shall be held by the Owner in
trust to be paid to the Mortgagee as if they were monies recovered under
this Deed.
11. NOTICES
-------
11.1 Mode of communication
---------------------
Except as otherwise provided herein each notice, request, demand or other
communication or document to be given or made hereunder shall be given in
writing but, unless otherwise stated, may be made by telex or telefax.
11.2 Address
-------
Any notice, demand or other communication to be made or delivered pursuant
to this Mortgage shall be made or delivered as follows:-
<PAGE>
- 22 -
(i) if to the Owner to it at its registered address as aforesaid,
telefax number (507) 2635335 marked for the attention of Alfonso
Arias with copy to the Bareboat Charterer at 4000 Hollywood
Boulevard, Hollywood, Florida 33021, telefax number (305) 9672147
marked for the attention of Alan Pritzker and Fred Mayer and a
further copy to the Parent at c/o Ardon Management Services Ltd.,
c/o Richards Francis & Francis, Cedarpark Centre, 48 Cedar Avenue,
Hamilton HM11, Bermuda, telefax number (809) 2920567 with a further
copy to Broad & Cassel, Miami Centre, 201 South Biscayne Boulevard,
Suite 3000, Miami, Florida 33131 telefax number (305) 373 9493
marked for the attention of James Cassel with a further copy to JeMJ
Financial Services Inc, TelMed, Inc., 9350 S. Dixie Highway, Suite
1220, Miami, Florida 33156 telefax number (305) 238 6248 marked for
the attention of Jeffrey I. Binder;
(ii) if to the Mortgagee to it c/o Effjohn OY AB at Bulevardi 1A, PO Box
659, 00101 Helsinki, Finland telefax number 3580 627736 marked for
the attention of finance department
or such other address telex number or telefax number as each such
addressee may specify to the other relevant party or parties by not less
then fifteen (15) days' written notice.
11.3 Receipt
-------
Each such notice, demand, request or other communication shall be deemed
to have been made or delivered when:-
(A) (in the case of telex) the addressee's answerback shall have been
received at the end of the transmission or (in the case of telefax)
when a materially complete and legible copy of the communication has
been received by the addressee (unless the date of despatch is not a
Banking Day in the country of the addressee or the time of despatch
is outside normal business hours in the country of the addressee, in
which case such telex or telefax shall be deemed to have been
received at the opening of business on the next such Banking Day);
or
(B) (in the case of any letter) when delivered to the addressee's
address as specified in or notified pursuant to Clause 11.2 or, if
sent by first class postage prepaid in an envelope addressed to the
addressee at that address five (5) days after being deposited in the
post.
11.4 Language
--------
Each notice, demand or other communication made or delivered by one party
to another pursuant to this Mortgage shall be in the English language or
accompanied by a certified English translation.
<PAGE>
- 23 -
12. JURISDICTION
------------
12.1 Submission to jurisdiction
--------------------------
For the exclusive benefit of the Mortgagee, the Owner hereby irrevocably
submits to the non-exclusive jurisdiction of the courts of any country or
state to the jurisdiction of which the Vessel may be subject without
limiting the right of the Mortgagee to commence proceedings against the
Owner in any jurisdiction it shall think fit or in any two or more
jurisdictions.
12.2 Service of legal process
------------------------
The Owner agrees that any legal process in connection with this Mortgage
may be duly served if served on the master of the Vessel (or other officer
for the time being in command) and/or in such other manner as the courts
of the country in which such process is issued may permit or require.
13. GOVERNING LAW
-------------
This Mortgage shall be governed by and construed in accordance with the
laws of the Republic of Panama.
14. ASSIGNMENT
----------
This Mortgage shall enure to the benefit of each party hereto and its
successors and assigns and the terms "Owner" and "Mortgagee" shall be
construed accordingly. The Owner may not assign or transfer its rights or
obligations hereunder including its right of redemption. The Mortgagee may
at any time assign all or any part of its rights and benefits hereunder or
transfer in accordance with Clause 19.2 of the Loan Agreement and the
Owner hereby consents to the assignment on the date hereof by the
Mortgagee to the Bank of its rights and benefits hereunder.
15. COUNTERPARTS
------------
This Mortgage may be executed in any number of counterparts each of which
shall be an original but such counterparts shall together constitute but
one and the same instrument.
16. APPOINTMENT OF AGENT IN PANAMA
------------------------------
The parties hereby confer a special power of attorney on Tapia Linares Y
Alfaro of the City of Panama in the Republic of Panama empowering such
firm of lawyers to take all necessary steps to record this instrument of
mortgage and the prohibition contained in Clause 5.9 in the appropriate
registries in the City of Panama in accordance with the laws of the
Republic of Panama with full power of substitution in respect of the
special power of attorney herein granted.
<PAGE>
- 24 -
IN WITNESS WHEREOF, the Owner has caused this First Preferred Mortgage to be
duly executed the day and year first above written.
Almira Enterprises, Inc.
By: [SIGNATURE ILLEGIBLE]
-----------------------
Attorney-in-fact
<PAGE>
- 25 -
ACCEPTANCE OF MORTGAGE
----------------------
The Mortgagee hereby declares that it accepts this Mortgage upon the Vessel as a
security for the moneys stated herein to be secured hereby and for the
obligations of the Owner referred to herein
Effjohn International Cruise Holdings Inc.
By:/s/ Thomas Forss
-----------------------------
Name: Thomas Forss
Title: Attorney
<PAGE>
Execution Copy
--------------
DATED 14 July 1995
------------------
NEW COMMODORE CRUISE LINES LIMITED
as Shareholder
to
EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC.
as lender
---------------------------------
FIRST PRIORITY CHARGE OVER SHARES
of AZURE INVESTMENTS,
---------------------------------
Sinclair Roche & Temperley
Broadwalk House
5 Appold Street
London EC2A 2NN
Tel: 0171-638 9044
Ref: JPM/180210
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Clause Subject Page
- ------ ------- ----
<S> <C> <C>
1. Definitions and Construction....................................... 1
2. Charge............................................................. 3
3. Survival of Shareholder's Liability................................ 3
4. Continuing Charge.................................................. 4
5. Exclusion of the Shareholder's Rights.............................. 5
6. Obligation to prove in Liquidation................................. 6
7. Suspense Account................................................... 6
8. Enforcement........................................................ 6
9. Representations and Warranties..................................... 8
10. Undertakings....................................................... 9
11. Miscellaneous...................................................... 11
12. Assignment......................................................... 11
13. Notices............................................................ 12
14. Governing Law...................................................... 13
15. Waiver of Immunity................................................. 13
16. Jurisdiction....................................................... 13
SCHEDULE 1.............................................................. 16
SCHEDULE 2.............................................................. 17
</TABLE>
<PAGE>
THIS DEED OF CHARGE is made the 14 day of July 1995
BY:-
(1) NEW COMMODORE CRUISE LINES LIMITED, a company incorporated under the laws
of Bermuda with its registered office at c/o Ardon Management Services
Ltd., c/o Richards Francis & Francis, Cedarpark Centre, 48 Cedar Avenue,
Hamilton HM11, Bermuda as shareholder (the "Shareholder")
IN FAVOUR OF:-
(2) EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC., a company incorporated under
the laws of the Cayman Islands with its registered office at Caledonian
Bank & Trust Limited, P O Box 1043, Grand Cayman, Cayman Islands (the
"Lender").
WHEREAS:-
(A) By a loan facility agreement dated 14 July 1995 made between (1) Azure
Investments, Inc. (the "Company") and Almira Enterprises, Inc. (the
"Borrowers"), (2) the Lender and (3) the Shareholder and Commodore Holdings
Limited as guarantors, the Lender has agreed, on the terms and conditions
therein set out, to make available to the Borrowers a loan of twenty four
million five hundred thousand Dollars (USD24,500,000) and the Shareholder
has agreed to guarantee to the Lender the payment by the Borrowers of the
Outstanding Indebtedness and the performance and observance by the
Borrowers of all the agreements, covenants undertakings and provisions
contained in the Loan Agreement and other Security Documents.
(B) The Shareholder is the sole beneficial owner of all the shares in the
Company and is the registered owner of all the said shares.
(C) It is a condition precedent to the utilisation by the Borrowers of the said
facility that the Shareholder enters into this Deed.
NOW THEREFORE THIS DEED WITNESSES as follows:-
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions
-----------
In this Deed including the preamble and recitals hereto (unless the context
otherwise requires) any term or expression defined in the preamble or the
recitals shall have the meaning ascribed to it therein and the following
terms and expressions shall have the meanings set out below. In addition,
terms and expressions not defined herein but whose meanings are defined in
the Loan Agreement shall have the meanings set out therein.
<PAGE>
-2-
"Charged Property" means all and singular those 500 issued shares in
respect of the Company (being the entire issued
share capital of the Company) as are registered in
the name of the Shareholder and all dividends or
other distributions and interest paid or payable
in connection therewith after the date hereof and
all stocks, shares, warranties, rights, moneys and
property (and dividends or other distributions and
interest paid or payable thereon) accruing or
acquired at any time and from time to time by way
of bonus, redemption, preference option rights or
otherwise to or in respect of or derived from or
in substitution for any of the said shares or any
derivatives thereof and including all moneys for
the time being forming part of the net proceeds of
sale of any of the said shares pursuant to Clause
8 and any investments for the time being
representing the same;
"Loan Agreement" means the loan facility agreement referred to in
recital (A) hereto;
"Loan" means the loan facility referred to in recital (A)
hereto;
"Outstanding
Indebtedness" means all sums of any kind arising at any time
owing, actually or contingently by the Borrowers
or any other Obligor to the Lender under or
pursuant to the Security Documents or any of them
(whether by way of repayment of principal, payment
of interest or default interest, payment upon any
indemnity or counter-indemnity, reimbursement for
costs or otherwise howsoever).
1.2 Construction
------------
(A) Clause headings are inserted for convenience of reference only and
shall be ignored in the construction of this Deed;
(B) references to Clauses and Schedules are to be construed as references
to Clauses of and Schedules to this Deed unless otherwise stated and
references to this Deed are to be construed as references to this Deed
including its Schedules;
(C) references to (or to any specified provision of) this Deed or any
other Subject Document shall be construed as reference to this Deed,
that provision or that Subject Document as from time to time amended,
supplemented and/or novated;
<PAGE>
-3-
(D) without prejudice to the provisions of Clause 12 references to any
party to this Deed or any other Subject Document shall include
reference to such party's successors and permitted assigns;
(E) words importing the plural shall include the singular and vice versa;
(F) references to a person shall be construed as references to an
individual, firm, company, corporation, unincorporated body of persons
or any state or any agency thereof;
(G) where any matter under any Security Document requires the approval or
consent of the Lender, such approval or consent shall not be deemed to
have been given unless given in writing; where any matter under any
Security Document is required to be acceptable to the Lender, the
Lender shall not be deemed to have accepted such matter unless its
acceptance is communicated in writing; the Lender may give or withhold
its consent, approval or acceptance under any Security Document
subject to it not being unreasonably withheld or delayed and such
consent, approval or acceptance may be given by the Lender subject to
such conditions as it may reasonably impose;
(H) a certificate by the Lender as to any amount due or calculation made
hereunder shall be conclusive except for manifest error; and
(I) references to any statute or other legislative provision are to be
construed as references to any such statute or other legislative
provision as the same may be re-enacted or modified or substituted by
any subsequent statute or legislative provision.
2. CHARGE
------
In consideration of the sum of USD10 and other good and valuable
consideration and the Lender agreeing at the request of the Shareholder to
make the Loan available to the Borrowers in accordance with the terms of
the Loan Agreement and in order to secure the payment of the Outstanding
Indebtedness in accordance with the provisions of the Security Documents
and to secure the performance and observance of all of the agreements,
covenants, undertakings and provisions contained in the Security Documents,
the Shareholder hereby charges the Charged Property to the Lender by way of
first priority fixed charge.
3. SURVIVAL OF SHAREHOLDER'S LIABILITY
-----------------------------------
The Shareholder's liability to the Lender under this Deed shall not be
discharged, impaired or otherwise affected by reason of any of the
following events or circumstances (regardless of whether any such events or
circumstances occur with or without the Shareholder's knowledge or
consent):-
(A) any time, forbearance or other indulgence given or agreed by the
Lender to or with any Obligor in respect of any of its obligations
under any of the Security Documents; or
<PAGE>
-4-
(B) any legal limitation, disability or incapacity relating to any
Obligor; or
(C) any invalidity, irregularity, unenforceability, imperfection or
avoidance of or any defect in any security granted by, or the
obligations of any Obligor under the Security Documents or any of them
or any amendment to or variation thereof or of any other document or
security comprised therein (whether or not known to the Lender); or
(D) any change in the name, constitution or otherwise of any Obligor or
the merger of any Obligor by or with any other person; or
(E) the liquidation, bankruptcy or dissolution (or proceedings analogous
thereto) of any Obligor or the appointment of a receiver or
administrative receiver or administrator or trustee or similar officer
of any of the assets of any Obligor or the occurrence of any
circumstances whatsoever affecting any Obligor's liability to
discharge its respective obligations under any of the Security
Documents; or
(F) any challenge, dispute or avoidance by any liquidator of any Obligor
in respect of any claim by the Shareholder by right of subrogation in
any such liquidation; or
(G) any release, renewal, exchange or realisation of any security or
obligation provided under or by virtue of any of the Security
Documents or the provision by the Lender at any time of any further
security for the obligations of the Obligors under any of the Security
Documents; or
(H) any release of any guarantor or any release of any third party Obligor
in respect of the obligations of any of the Obligors' under any of the
Security Documents; or
(I) any failure on the part of the Lender (whether intentional or not) to
take or perfect any security agreed to be taken under or in relation
to any of the Security Documents; or
(J) any other act, matter or thing which might otherwise constitute a
legal or equitable discharge of the obligations of the Shareholder
hereunder.
4. CONTINUING CHARGE
-----------------
4.1 Duration of charge
------------------
The charge herein shall be:-
(A) a continuing security remaining in full force and effect until payment
in full has been received by the Lender of each and every part and the
ultimate balance of the Outstanding Indebtedness in whatever currency
or currencies the same may from time to time be denominated in
accordance with the Loan Agreement;
<PAGE>
-5-
(B) in addition to and not in substitution for or in derogation of any
other security held by the Lender from time to time in respect of the
Outstanding Indebtedness or any part thereof.
4.2 Restriction on discharge of this Deed
-------------------------------------
Any satisfaction of obligations by the Shareholder to the Lender or any
discharge given by the Lender to the Shareholder or any other agreement
reached between the Lender and the Shareholder in relation to this Deed
shall be, and be deemed always to have been, void ab initio if any act
satisfying any of the said obligations or on the faith of which any such
discharge was given or any such agreement was entered into is subsequently
avoided in whole or in part by or pursuant to any provision of any
applicable law whatsoever.
5. EXCLUSION OF THE SHAREHOLDER'S RIGHTS
-------------------------------------
Until the actual and contingent obligations of each Obligor under the
Security Documents have been performed in full the Shareholder shall not:-
(A) be entitled to share in or succeed to or benefit from (by subrogation
or otherwise) any rights which the Lender may have in respect of the
Outstanding Indebtedness or any security therefor or all or any of the
proceeds of such rights or security; or
(B) without the prior consent of the Lender:-
(i) exercise in respect of any amount paid by it hereunder any
right of subrogation, contribution or any other right or remedy
which it may have in respect thereof; or
(ii) claim payment of any other moneys for the time being due to it
by any other Obligor or exercise any other right or remedy in
respect thereof; or
(iii) prove in a liquidation of any Obligor in competition with the
Lender for any moneys owing to the Shareholder by any other
Obligor on any account whatsoever;
(iv) take from any Obligor any undertaking or security in respect of
the liability of the Shareholder hereunder or in respect of any
other liability of any Obligor to the Shareholder; or
(v) exercise any right of set-off or counterclaim to which the
Shareholder may be entitled against any Obligor;
provided always that if the Shareholder, in breach of this Clause, receives
or recovers any moneys pursuant to any such exercise, claim or proof, such
moneys shall be held by the Shareholder upon trust for the Lender to apply
the same as if they were moneys received or recovered by the Lender under
this Deed.
<PAGE>
-6-
6. OBLIGATION TO PROVE IN LIQUIDATION
----------------------------------
The Shareholder shall, if the Lender so instructs, prove in a liquidation
of an Obligor for any amounts owed to the Shareholder by such Obligor in
connection with this Deed provided that any moneys received or recovered by
the Shareholder in such liquidation shall be paid to the Lender on its
request and, pending such payment, be held by the Shareholder upon trust
for the Lender to apply the same as if they were moneys received or
recovered by the Lender under this Deed.
7. SUSPENSE ACCOUNT
----------------
Any moneys received or recovered by the Lender under or in connection with
this Deed may, at the Lender's discretion, be credited to any suspense or
impersonal account with the Lender and may be held in such account for so
long as the Lender thinks fit pending application at the Lender's
discretion from time to time in or towards the discharge of the obligations
of any Obligor under the Security Documents. Provided that the Lender is
satisfied that payment received from the Shareholder is not liable to be
set aside and that the Lender may not be placed under an obligation to
repay such amount to the Shareholder or any liquidator or similar official
appointed in respect of the Shareholder or its assets, the Lender shall,
when the amount accumulated in the suspense account is sufficient to meet
in full all the Outstanding Indebtedness, apply the balance standing to the
credit of the suspense account to discharge the Outstanding Indebtedness.
8. ENFORCEMENT
-----------
8.1 Enforceability
--------------
The security constituted by this Deed shall become immediately enforceable
upon the happening of any Event of Default.
8.2 Taking of action
----------------
At any time after the happening of any Event of Default the Lender shall be
entitled without further notice to the Shareholder:-
(A) to apply any cash for the time being comprised in the Charged
Property in or towards payment of the Outstanding Indebtedness in
accordance with the provisions of Clause 10.5 of the Loan Agreement;
(B) to sell or convert into money all or any part of the Charged Property
(not consisting of cash) in such manner and upon such terms and for
such consideration, whether in cash, securities or other assets and
whether deferred or not, as the Lender may in its unfettered
discretion think fit;
(C) to exercise all other powers or rights incidental to the Charged
Property or any part thereof (including, without limitation, to
complete the letters of resignation referred to in Clause 10.2 by
dating the same and to appoint
<PAGE>
-7-
directors and managers of the Company) in such manner as the Lender
may in its unfettered discretion think fit; and
(D) to complete by dating the same the share transfer forms made out in
blank delivered to the Lender pursuant to Clause 10.2 in respect of
the shares comprised in the Charged Property and to transfer all or
any of such shares into the name of the Lender or its nominee as
registered owner and to exercise the voting rights attached to the
shares in such manner as the Lender may in its unfettered discretion
think fit.
8.3 Notice of taking of action
--------------------------
The Lender confirms that as a matter of practice it is its intention to
give notice to the Shareholder of any proposal by it to exercise its rights
and powers specified above but failure by the Lender to give any such
notice shall not prejudice its right to exercise such rights and powers or
give rise to any liability to the Shareholder.
8.4 Sale of Charged Property
------------------------
On any sale of the Charged Property or part thereof, the purchaser shall
not be bound to see or enquire whether the Lender's power of sale has
arisen in the manner provided herein and the sale shall be deemed to be
within the power of the Lender and the receipt of the Lender for the
purchase money shall effectively discharge the purchaser who shall not be
concerned with the manner of application of the proceeds of sale or be in
any way answerable therefor.
8.5 Law of Property Act 1925
------------------------
Sections 93 and 103 of the Law of Property Act 1925 shall not apply hereto.
8.6 Rights prior to commencement of charge
--------------------------------------
Until the security hereby constituted becomes enforceable, the Shareholder
shall be entitled to exercise all the voting rights attaching to the shares
comprised in the Charged Property at any annual or extraordinary meeting of
the shareholders of the Company. The Lender shall be provided with a
certified copy of resolutions passed at any such meeting.
8.7 Steps to enforce security
-------------------------
The Lender shall not be obliged before taking steps to enforce its rights
under this Deed:-
(A) to obtain judgment against any Obligor in any court or other tribunal;
or
(B) to make or file any claim in a bankruptcy or liquidation of any
Obligor; or
(C) to take any action whatsoever against any Obligor under any of the
Security Documents;
<PAGE>
-8-
and the Shareholder hereby waives all such formalities or rights to which
it would otherwise be entitled or which the Lender would otherwise first be
required to satisfy or fulfil before proceeding or making demand against
the Shareholder hereunder.
8.8 Cost and expenses
-----------------
All legal and other costs and expenses (including stamp duty, if any)
reasonably incurred by the parties hereto in connection with the
negotiation, preparation, completion and any registration and/or recording
of this Deed and the other Security Documents and the action to be taken to
give effect to them including all costs and expenses incurred by the Lender
in enforcing this Deed and in protecting and enforcing its interests
hereunder in any court of law or otherwise shall be paid in accordance with
clause 20 of the Loan Agreement.
9. REPRESENTATIONS AND WARRANTIES
------------------------------
9.1 The Shareholder represents and warrants to the Lender at the date hereof
and/or as otherwise specified herein that:-
(A) Status
------
It is a limited liability company, duly constituted and validly
existing under the laws of the Bermuda possessing the capacity to sue
and be sued in its own name and the power to own its assets and carry
on its business as it is now being conducted.
(B) Power and authority
-------------------
It has the power to enter into and perform its obligations under this
Deed and the charge created hereby and has taken all necessary
corporate and shareholder action to authorise the entry into and
performance of this Deed.
(C) Legal validity
--------------
This Deed constitutes legal, valid and binding obligations of the
Shareholder enforceable in accordance with its terms except as such
enforcement may be limited by any relevant bankruptcy, insolvency,
administration or similar laws affecting creditors' rights generally
and by principles of equity.
(D) Non-conflict with laws
----------------------
The entry into and performance of this Deed and the transactions
contemplated hereby do not and will not be a breach of or conflict
with:-
(i) any law or regulation or any official or judicial order
existing at the date hereof; or
(ii) the constitutional documents of the Shareholder; or
<PAGE>
-9-
(iii) any agreement or document to which the Shareholder is a party
or which is binding upon it or any of its assets;
nor result in the creation or imposition of any Encumbrance on any of
its assets pursuant to the provisions of any such agreement or
document.
(E) Consents
--------
All authorisations, approvals, consents, licences, exemptions,
filings, registrations, notarisations and other matters, official or
otherwise, required in connection with the entry into, performance,
validity and enforceability of this Deed and the transactions
contemplated hereby have been obtained or effected and are in full
force and effect.
(F) Registration of Deed
--------------------
The Shareholder does not have a place of business in any jurisdiction
other than in Bermuda which would require this Deed to be filed or
registered if the Shareholder had a place of business in that
jurisdiction to ensure the validity of this Deed.
(G) Ownership of shares
-------------------
All the issued shares of the Company are legally and beneficially
owned by the Shareholder, each of the said shares is fully paid and
non-assessable and none of the said shares in the Company is subject
to any option or Encumbrance except as created by this Deed.
9.2 Survival of representations and warranties
------------------------------------------
The representations and warranties set out in Clause 9.1 (A), (B), (C),
(D)(ii), (D)(iii), (F) and (G) shall survive the execution of this Deed and
shall be deemed to be repeated with reference mutatis mutandis to the facts
and circumstances then subsisting, as if made on each day until the actual
and contingent obligations of each Obligor under the Security Documents
have been performed in full.
10. UNDERTAKINGS
------------
10.1 Duration
--------
The undertakings in this Clause 10 shall remain in force from and after the
date hereof until all the actual and contingent obligations of each Obligor
under the Security Documents have been performed in full.
10.2 Deposit of documents
--------------------
The Shareholder shall procure that until the Outstanding Indebtedness has
been discharged there shall be deposited by way of security with the
Lender:-
<PAGE>
-10-
(A) the Articles of Incorporation and By-Laws, minute books, all blank
stock or other certificates and all corporate seals of the Company;
(B) the stock or share certificates representing the shares comprised in
the Charged Property together with executed and undated share transfer
forms in respect of such shares made out in blank and any other
documents of title to any part of the Charged Property;
(C) the share register (if any) of the Company;
(D) executed undated resignations from each director and officer of the
Company from time to time in the form of Schedule 1;
(E) an irrevocable proxy from the Shareholder in respect of the shares
comprised in the Charged Property in the form of Schedule 2.
10.3 Negative pledge
---------------
The Shareholder shall not, save as herein provided, without the prior
consent of the Lender, sell, assign, transfer, charge, pledge or encumber
in any manner any part of the Charged Property or agree to do any of the
aforesaid or suffer to exist any Encumbrance or option on, over or in
respect of all or any part of the Charged Property except by way of
Permitted Encumbrances.
10.4 Restriction on issue of further shares
--------------------------------------
The Shareholder shall not, without the prior consent of the Lender, procure
or authorise or permit the issue of any further shares in the Company
unless such further shares are charged to the Lender in terms similar to
the terms hereof as if they were included in the Charged Property. If,
despite the provisions of this sub-clause, any further such shares are
issued without the prior consent of the Lender, the Shareholder shall
procure that such further shares are held on the terms hereof as if they
were included in the Charged Property.
10.5 Appointment of directors and officers
-------------------------------------
The Shareholder shall notify the Lender immediately upon the appointment of
any further director or officer of the Company and shall procure that,
unless the Lender agrees otherwise, there is promptly delivered to the
Lender an executed undated resignation from such director or officer in the
form of Schedule 1.
10.6 Notice of this Deed
-------------------
The Shareholder shall deliver a certified copy of this Deed to the Company
for the purpose of giving the Company notice of the charge herein contained
and shall procure that the Company will deliver to the Lender an
acknowledgement of such notice.
<PAGE>
-11-
10.7 Further assurance
-----------------
The Shareholder shall, from time to time on being required to do so by the
Lender, do or procure the doing of all such acts and/or execute or procure
the execution of all such documents in a form satisfactory to the Lender as
the Lender may reasonably consider necessary for giving full effect to any
of the Security Documents including this Deed or securing to the Lender the
full benefit of the rights, powers and remedies conferred upon it in any
such Security Document including this Deed.
11. MISCELLANEOUS
-------------
11.1 No waiver
---------
No failure to exercise and no delay in exercising on the part of the Lender
any right or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy. No
waiver by the Lender shall be effective unless it is in writing.
11.2 Remedies cumulative
-------------------
The rights and remedies of the Lender provided herein are cumulative and
not exclusive of any rights or remedies provided by law.
11.3 Severability
------------
If any provision of this Deed or any of the other Security Documents is
prohibited or unenforceable in any jurisdiction, such prohibition or
unenforceability shall not invalidate the remaining provisions hereof or
affect the validity or enforceability of such provision in any other
jurisdiction.
11.4 Time of essence
---------------
Time is of the essence in respect of all of the obligations of the
Shareholder under this Deed.
12. ASSIGNMENT
----------
12.1 Benefit of assignment
---------------------
This Deed shall be binding upon the Shareholder and its successors and
shall inure to the benefit of the Lender and its successors and assigns.
12.2 Transfers of rights and obligations
-----------------------------------
The Shareholder may shall not be entitled to assign or transfer all or any
of its rights, benefits and obligations hereunder. The Lender may at any
time assign all or any part of its rights and benefits hereunder or
transfer in accordance with Clause 19. 2
<PAGE>
-12-
of the Loan Agreement and the Shareholder hereby consents to the assignment
on the date hereof by the Lender to the Bank of its rights and benefits
hereunder.
12.3 Disclosure of information
-------------------------
The Lender may disclose to any actual or potential assignee, transferee or
to any person who may otherwise propose to enter into contractual relations
with any of them in relation to this Deed or the other Security Documents
or any of them such information about the Shareholder and any Obligors as
the Lender shall consider appropriate.
12.4 Effectiveness
-------------
The Shareholder will, at the request of the Lender execute or procure the
execution of such documents and do (or procure the doing of) all such acts
and things as may be necessary or desirable to give effect to any transfer
or assignment pursuant to this Clause 12.
13. NOTICES
-------
13.1 Mode of Communication
---------------------
Except as otherwise provided herein, each notice, request, demand or other
communication or document to be given or made hereunder shall be given in
writing but unless otherwise stated, may be made by telex or telefax.
13.2 Address
-------
Any notice, demand or other communication to be made or delivered pursuant
to this Deed shall be made or delivered as follows:-
(i) if to the Shareholder to it at 4000 Hollywood Boulevard, Hollywood,
Florida 33021, telefax number (305) 9672147 marked for the attention
of Alan Pritzker and Fred Mayer with a further copy to Broad &
Cassel, Miami Centre, 201 South Biscayne Boulevard, Suite 3000,
Miami, Florida 33131 telefax number 305 373 9493 marked for the
attention of James Cassel with a further copy to JeMJ Financial
Services Inc, TelMed, Inc., 9350 S. Dixie Highway, Suite 1220,
Miami, Florida 33156 telefax number (305) 238 6248 marked for the
attention of Jeffrey I. Binder;
(ii) if to the Lender to it c/o Effjohn OY AB at Bulevardi 1A, PO Box
659, 00101 Helsinki, Finland telefax number 3580 627736 marked for
the attention of finance department
or such other address telex number or telefax number as each such addressee
may specify to the other relevant party or parties by not less than fifteen
(15) days' written notice.
13.3 Receipt
-------
<PAGE>
-13-
Each such notice, demand, request or other communication shall be deemed to
have been made or delivered when:-
(A) (in the case of telex) the addressee's answerback shall have been
received at the end of the transmission or (in the case of telefax)
when a materially complete and legible copy of the communication has
been received by the addressee (unless the date of despatch is not a
Banking Day in the country of the addressee or the time of despatch is
outside normal business hours in the country of the addressee, in
which case such telex or telefax shall be deemed to have been received
at the opening of business on the next such Banking Day; or
(B) (in the case of any letter) when delivered to the addressee's address
as specified in or notified pursuant to Clause 13.2 or, if sent by
post first class postage prepaid in an envelope addressed to the
addressee at that address five (5) days after being deposited in the
post.
13.4 Language
--------
Each notice, demand, request or other communication made or delivered by
one party to another pursuant to this Deed or any other Security Document
shall be in the English language or accompanied by a certified English
translation.
14. GOVERNING LAW
-------------
This Deed shall be governed by and construed in accordance with English
law.
15. WAIVER OF IMMUNITY
------------------
The Shareholder irrevocably and unconditionally:-
(A) waives any right of immunity which it or its assets now has or may
hereafter acquire in relation to any legal proceedings (including but
without limitation actions in rem and/or in personam) brought against it or
its assets in relation to this Deed by the Lender; and
(B) consents generally in respect of any such proceedings to the giving of
any relief or the issue of any process in connection with such proceedings,
including, without limitation, the making, enforcement or execution against
any property whatsoever (irrespective of its use or intended use) of any
order or judgment which may be made or given in such proceedings.
16. JURISDICTION
------------
16.1 Submission to jurisdiction
--------------------------
For the exclusive benefit of the Lender, the parties hereto hereby
irrevocably submit to the non-exclusive jurisdiction of the High Courts of
Justice in England provided that the Lender (but not the Shareholder) shall
be at liberty in addition or alternatively
<PAGE>
-14
to take proceedings in the courts of any other country which may have
jurisdiction or in which the Shareholder may reasonably be thought to have
assets. The Shareholder hereby irrevocably authorises and appoints the
Process Agent for the acceptance of service of legal proceedings under this
Deed, service upon whom shall be deemed to constitute good service of legal
process without prejudice to any other lawful means and undertakes to
maintain a process agent in England.
IN WITNESS whereof this Deed has been executed by the Shareholder on the day
first written above.
<PAGE>
-15-
THE SHAREHOLDER
- ---------------
SIGNED SEALED AND DELIVERED AS A DEED )
by James Scott Cassel )
the duly authorised Attorney-in-Fact ) /s/ James Scott Cassel
for and on behalf of )
NEW COMMODORE CRUISE LINES LIMITED )
in the presence of:- LARA DOBSON of 5, APPOLD
STREET, LONDON, EC2 SOLICITOR. /s/ Lara Dodson
THE LENDER
- ----------
SIGNED SEALED AND DELIVERED AS A DEED )
by Thomas Forss ) /s/ Thomas Forss
the duly authorised Attorney-in-Fact )
for and on behalf of )
EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC. )
in the presence of:- LARA DOBSON of 5, APPOLD
STREET, LONDON EC2 SOLICITOR. /s/ Lara Dodson
<PAGE>
-16-
SCHEDULE 1
----------
Letter of Resignation
---------------------
To: The Secretary
Azure Investments, Inc.
(the "Company")
Dear Sirs,
Loan Agreement dated 1995
(the "Loan Agreement")
----------------------
1. I hereby resign as a [director/secretary/or other officer] of the Company
and confirm that I have no claims against the Company for loss of office,
arrears of pay or otherwise howsoever.
2. This resignation is to be effective as at the date hereof.
Yours faithfully,
<PAGE>
-17-
SCHEDULE 2
----------
Irrevocable Proxy
-----------------
The undersigned, being the owner of 500 shares (the "Shares") of Azure
Investments, Inc., (the "Company"), a Panamanian corporation hereby makes,
constitutes and appoints Effjohn International Cruise Holdings Inc. as the true
and lawful attorney and proxy of the undersigned with full power to appoint a
nominee or nominees to act hereunder from time to time to vote all or any of the
shares represented by the share certificates of the Company numbered 1 at all
annual and special general meetings of the shareholders of the Company with the
same force and effect as the undersigned might or could do and to requisition
and convene a meeting or meetings of the shareholders of the Company for the
purposes of appointing or confirming the appointment of new directors of the
Company and/or such other matters as may in the opinion of Effjohn International
Cruise Holdings Inc. be necessary or desirable for the purpose of implementing
the Deed of Charge referred to below and the undersigned hereby ratifies and
confirms all that the said attorney or its nominee or nominees shall do or cause
to be done by virtue hereof.
The said shares have been charged to Effjohn International Cruise Holdings Inc.
pursuant to a deed (the "Deed of Charge") dated 1995.
This power and proxy is coupled with an interest and is irrevocable and shall
remain irrevocable as long as the Deed of Charge is outstanding.
IN WITNESS whereof this instrument has been duly executed as a deed this
day of 1995.
SIGNED SEALED AND DELIVERED AS A DEED )
by )
the duly authorised Attorney-in-Fact )
for and on behalf of )
NEW COMMODORE CRUISE LINES LIMITED )
in the presence of:- )
<PAGE>
Letter of Resignation
Messrs.
Azure Investments, Inc.
(the "Company")
Dear Sirs:
I hereby resign as Secretary of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof,
Yours faithfully,
/s/ Lil Webster
----------------------
Lil de Webster
<PAGE>
Letter of Resignation
Messrs.
Azure Investments, Inc.
(the "Company")
Dear Sirs:
I hereby resign as director of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof,
Yours faithfully,
/s/ Lil Webster
---------------------
Lil de Webster
<PAGE>
Letter of Resignation
Messrs.
Azure Investments, Inc.
(the "Company")
Dear Sirs:
I hereby resign as President of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof,
Yours faithfully,
/s/ Luia E. Cespedes
------------------------
Luia Eduardo Cespedes
<PAGE>
Letter of Resignation
Messrs.
Azure Investments, Inc.
(the "Company")
Dear Sirs:
I hereby resign as Treasurer of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof,
Yours faithfully,
/s/ Miguel Urriola
---------------------------
Miguel Urriola
<PAGE>
Letter of Resignation
Messrs.
Azure Investments, Inc.
(the "Company")
Dear Sirs:
I hereby resign as director of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof,
Yours faithfully,
/s/ Luis Eduardo Cespedes
---------------------------
Luis Eduardo Cespedes
<PAGE>
Letter of Resignation
Messrs.
Azure Investments, Inc.
(the "Company")
Dear Sirs:
I hereby resign as director of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof,
Yours faithfully,
/s/ Leopoldo Lopez
-----------------------
Leopoldo Lopez
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, New Commodore Cruise Lines Limited
------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
----------------------------------
hereby sell, assign and transfer unto __________________________________________
________________________________________________________________________________
________________________________________________________________________________
( 500 ) Shares of the __________________ Capital Stock of ______________
- ---------------
Azure Investments Inc. Standing in my (our)
- -------------------------------------------------------
name(s) on the books of said Corporation represented by Certificate(s) No(s) 1
----
herewith, and do hereby irrevocably constitute and appoint _____________________
_____________________________________________ attorney to transfer the said
stock on the books of said Corporation with full power of substitution in the
premises.
Dated ______________________________
/s/ James Scott Cassel
----------------------
Attorney-in-Fact
In presence of
/s/ Lara Dobson
- ---------------------
Solicitor
<PAGE>
[STOCK CERTIFICATE APPEARS HERE]
<PAGE>
Irrevocable Proxy
-----------------
The undersigned, being the owner of 500 shares (the "Shares") of Azure
Investments, Inc., (the "Company"), a Paramanian corporation hereby makes,
constitutes and appoints Effjohn International Cruise Holdings Inc. as the true
and lawful attorney and proxy of the undersigned with full power to appoint a
nominee or nominees to act hereunder from time to time to vote all or any of the
shares represented by the share certificates of the Company numbered 1 at all
annual and special general meetings of the shareholders of the Company with the
same force and effect as the undersigned might or could do and to requisition
and convene a meeting or meetings of the shareholders of the Company for the
purposes of appointing or confirming the appointment of new directors of the
Company and/or such other matters as may in the opinion of Effjohn
International Cruise Holdings Inc. be necessary or desirable for the purpose of
implementing the Deed of Charge referred to below and the undersigned hereby
ratifies and confirms all that the said attorney or its nominee or nominees
shall do or cause to be done by virtue hereof.
The said shares have been charged to Effjohn International Cruise Holdings Inc.
pursuant to a deed (the "Deed of Charge") dated 14 July 1995.
This power and proxy is coupled with an interest and is irrevocable and shall
remain irrevocable as long as the Deed of Charge is outstanding.
IN WITNESS whereof this instrument has been duly executed as a deed this 14 day
of July 1995.
SIGNED SEALED AND DELIVERED AS A DEED )
by JAMES SCOTT CASTEL )
the duly authorized Attorney-in-Fact ) /s/ James Scott Cassel
for and on behalf of )
NEW COMMODORE CRUISE LINES LIMITED )
in the presence of:- LARA DODSON OF 5 APPOLD )
STREET, LONDON, EC2. SOLICITOR.
/s/ L. Dodson
<PAGE>
Execution Copy
--------------
Dated 14 July, 1995
-------------------
NEW COMMODORE CRUISE LINES LIMITED
as Shareholder
to
EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC.
as lender
---------------------------------
FIRST PRIORITY CHARGE OVER SHARES
of ALMIRA ENTERPRISES, INC.
---------------------------------
Sinclair Roche & Temperley
Broadwalk House
5 Appold Street
London EC2A 2NN
Tel: 0171-638 9044
Ref: JPM/180210
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Clause Subject Page
- ------ ------- ----
<S> <C> <C>
1. Definitions and Construction.................. 1
2. Charge........................................ 3
3. Survival of Shareholder's Liability........... 3
4. Continuing Charge............................. 4
5. Exclusion of the Shareholder's Rights......... 5
6. Obligation to prove in Liquidation............ 6
7. Suspense Account.............................. 6
8. Enforcement................................... 6
9. Representations and Warranties................ 8
10. Undertakings.................................. 9
11. Miscellaneous................................. 11
12. Assignment.................................... 12
13. Notices....................................... 12
14. Governing Law................................. 13
15. Waiver of Immunity............................ 13
16. Jurisdiction.................................. 14
SCHEDULE 1......................................... 16
SCHEDULE 2......................................... 17
</TABLE>
<PAGE>
THIS DEED OF CHARGE is made the 14 day of July 1995
BY:-
(1) NEW COMMODORE CRUISE LINES LIMITED, a company incorporated under the laws
of Bermuda with its registered office at c/o Ardon Management Services,
Ltd., c/o Richards Francis & Francis, Cederpark Centre, 48 Cedar Avenue,
Hamilton HM11, Bermuda as shareholder (the "Shareholder")
IN FAVOUR OF:-
(2) EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC., a company incorporated under
the laws of the Cayman Islands with its registered office at Caledonian
Bank & Trust Limited, P O Box 1043, Grand Cayman, Cayman Islands (the
"Lender").
WHEREAS:-
(A) By a loan facility agreement dated 14 July 1995 made between (1) Almira
Enterprises, Inc. (the "Company") and Azure Investments, Inc. (the
"Borrowers"), (2) the Lender and (3) the Shareholder and Commodore Holdings
Limited as guarantors, the Lender has agreed, on the terms and conditions
therein set out, to make available to the Borrowers a loan of twenty four
million five hundred thousand Dollars (USD24,500,000) and the Shareholder
has agreed to guarantee to the Lender the payment by the Borrowers of the
Outstanding Indebtedness and the performance and observance by the
Borrowers of all the agreements, covenants undertakings and provisions
contained in the Loan Agreement and other Security Documents.
(B) The Shareholder is the sole beneficial owner of all the shares in the
Company and is the registered owner of all the said shares.
(C) It is a condition precedent to the utilisation by the Borrowers of the said
facility that the Shareholder enters into this Deed.
NOW THEREFORE THIS DEED WITNESSES as follows:-
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions
-----------
In this Deed including the preamble and recitals hereto (unless the context
otherwise requires) any term or expression defined in the preamble or the
recitals shall have the meaning ascribed to it therein and the following
terms and expressions shall have the meanings set out below. In addition,
terms and expressions not defined herein but whose meanings are defined in
the Loan Agreement shall have the meanings set out therein.
<PAGE>
- 2 -
"Charged Property" means all and singular those 500 issued
shares in respect of the Company (being the
entire issued share capital of the Company)
as are registered in the name of the
Shareholder and all dividends or other
distributions and interest paid or payable in
connection therewith after the date hereof
and all stocks, shares, warranties, rights,
moneys and property (and dividends or other
distributions and interest paid or payable
thereon) accruing or acquired at any time and
from time to time by way of bonus,
redemption, preference option rights or
otherwise to or in respect of or derived from
or in substitution for any of the said shares
or any derivatives thereof and including all
moneys for the time being forming part of the
net proceeds of sale of any of the said
shares pursuant to Clause 8 and any
investments for the time being representing
the same;
"Loan Agreement" means the loan facility agreement referred to
in recital (A) hereto;
"Loan" means the loan facility referred to in
recital (A) hereto;
"Outstanding Indebtedness" means all sums of any kind arising at any
time owing, actually or contingently by the
Borrowers or any other Obligor to the Lender
under or pursuant to the Security Documents
or any of them (whether by way of repayment
of principal, payment of interest or default
interest, payment upon any indemnity or
counter-indemnity, reimbursement for costs or
otherwise howsoever).
1.2 Construction
------------
(A) Clause headings are inserted for convenience of reference only and
shall be ignored in the construction of this Deed;
(B) references to Clauses and Schedules are to be construed as references
to Clauses of and Schedules to this Deed unless otherwise stated and
references to this Deed are to be construed as references to this Deed
including its Schedules;
(C) references to (or to any specified provision of) this Deed or any
other Subject Document shall be construed as reference to this Deed,
that provision or that Subject Document as from time to time amended,
supplemented and/or novated;
<PAGE>
- 3 -
(D) without prejudice to the provisions of Clause 12 references to any
party to this Deed or any other Subject Document shall include
reference to such party's successors and permitted assigns;
(E) words importing the plural shall include the singular and vice versa;
(F) references to a person shall be construed as references to an
individual, firm, company, corporation, unincorporated body of persons
or any state or any agency thereof;
(G) where any matter under any Security Document requires the approval or
consent of the Lender, such approval or consent shall not be deemed to
have been given unless given in writing; where any matter under any
Security Document is required to be acceptable to the Lender, the
Lender shall not be deemed to have accepted such matter unless its
acceptance is communicated in writing; the Lender may give or withhold
its consent, approval or acceptance under any Security Document
subject to it not being unreasonably withheld or delayed and such
consent, approval or acceptance may be given by the Lender subject to
such conditions as it may reasonably impose;
(H) a certificate by the Lender as to any amount due or calculation made
hereunder shall be conclusive except for manifest error; and
(I) references to any statute or other legislative provision are to be
construed as references to any such statute or other legislative
provision as the same may be re-enacted or modified or substituted by
any subsequent statute or legislative provision.
2. CHARGE
------
In consideration of the sum of USD10 and other good and valuable
consideration and the Lender agreeing at the request of the Shareholder to
make the Loan available to the Borrowers in accordance with the terms of
the Loan Agreement and in order to secure the payment of the Outstanding
Indebtedness in accordance with the provisions of the Security Documents
and to secure the performance and observance of all of the agreements,
covenants, undertakings and provisions contained in the Security Documents,
the Shareholder hereby charges the Charged Property to the Lender by way of
first priority fixed charge.
3. SURVIVAL OF SHAREHOLDER'S LIABILITY
-----------------------------------
The Shareholder's liability to the Lender under this Deed shall not be
discharged, impaired or otherwise affected by reason of any of the
following events or circumstances (regardless of whether any such events or
circumstances occur with or without the Shareholder's knowledge or
consent):-
(A) any time, forbearance or other indulgence given or agreed by the
Lender to or with any Obligor in respect of any of its obligations
under any of the Security Documents; or
<PAGE>
- 4 -
(B) any legal limitation, disability or incapacity relating to any
Obligor; or
(C) any invalidity, irregularity, unenforceability, imperfection or
avoidance of or any defect in any security granted by, or the
obligations of any Obligor under the Security Documents or any of them
or any amendment to or variation thereof or of any other document or
security comprised therein (whether or not known to the Lender); or
(D) any change in the name, constitution or otherwise of any Obligor or
the merger of any Obligor by or with any other person; or
(E) the liquidation, bankruptcy or dissolution (or proceedings analogous
thereto) of any Obligor or the appointment of a receiver or
administrative receiver or administrator or trustee or similar officer
of any of the assets of any Obligor or the occurrence of any
circumstances whatsoever affecting any Obligor's liability to
discharge its respective obligations under any of the Security
Documents; or
(F) any challenge, dispute or avoidance by any liquidator of any Obligor
in respect of any claim by the Shareholder by right of subrogation in
any such liquidation; or
(G) any release, renewal, exchange or realisation of any security or
obligation provided under or by virtue of any of the Security
Documents or the provision by the Lender at any time of any further
security for the obligations of the Obligors under any of the Security
Documents; or
(H) any release of any guarantor or any release of any third party Obligor
in respect of the obligations of any of the Obligors' under any of the
Security Documents; or
(I) any failure on the part of the Lender (whether intentional or not) to
take or perfect any security agreed to be taken under or in relation
to any of the Security Documents; or
(J) any other act, matter or thing which might otherwise constitute a
legal or equitable discharge of the obligations of the Shareholder
hereunder.
4. CONTINUING CHARGE
-----------------
4.1 Duration of charge
------------------
The charge herein shall be:-
(A) a continuing security remaining in full force and effect until payment
in full has been received by the Lender of each and every part and the
ultimate balance of the Outstanding Indebtedness in whatever currency
or currencies the same may from time to time be denominated in
accordance with the Loan Agreement;
<PAGE>
- 5 -
(B) in addition to and not in substitution for or in derogation of any
other security held by the Lender from time to time in respect of the
Outstanding Indebtedness or any part thereof.
Restriction on discharge of this Deed
-------------------------------------
4.2 Any satisfaction of obligations by the Shareholder to the Lender or any
discharge given by the Lender to the Shareholder or any other agreement
reached between the Lender and the Shareholder in relation to this Deed
shall be, and be deemed always to have been, void ab initio if any act
satisfying any of the said obligations or on the faith of which any such
discharge was given or any such agreement was entered into is subsequently
avoided in whole or in part by or pursuant to any provision of any
applicable law whatsoever.
5. EXCLUSION OF THE SHAREHOLDER'S RIGHTS
-------------------------------------
Until the actual and contingent obligations of each Obligor under the
Security Documents have been performed in full the Shareholder shall not:-
(A) be entitled to share in or succeed to or benefit from (by subrogation
or otherwise) any rights which the Lender may have in respect of the
Outstanding Indebtedness or any security therefor or all or any of the
proceeds of such rights or security; or
(B) without the prior consent of the Lender:-
(i) exercise in respect of any amount paid by it hereunder any
right of subrogation, contribution or any other right or remedy
which it may have in respect thereof; or
(ii) claim payment of any other moneys for the time being due to it
by any other Obligor or exercise any other right or remedy in
respect thereof; or
(iii) prove in a liquidation of any Obligor in competition with the
Lender for any moneys owing to the Shareholder by any other
Obligor on any account whatsoever;
(iv) take from any Obligor any undertaking or security in respect of
the liability of the Shareholder hereunder or in respect of any
other liability of any Obligor to the Shareholder; or
(v) exercise any right of set-off or counterclaim to which the
Shareholder may be entitled against any Obligor;
provided always that if the Shareholder, in breach of this Clause, receives
or recovers any moneys pursuant to any such exercise, claim or proof, such
moneys shall be held
<PAGE>
- 6 -
by the Shareholder upon trust for the Lender to apply the same as if they
were moneys received or recovered by the Lender under this Deed.
6. OBLIGATION TO PROVE IN LIQUIDATION
----------------------------------
The Shareholder shall, if the Lender so instructs, prove in a liquidation
of an Obligor for any amounts owed to the Shareholder by such Obligor in
connection with this Deed provided that any moneys received or recovered by
the Shareholder in such liquidation shall be paid to the Lender on its
request and, pending such payment, be held by the Shareholder upon trust
for the Lender to apply the same as if they were moneys received or
recovered by the Lender under this Deed.
7. SUSPENSE ACCOUNT
----------------
Any moneys received or recovered by the Lender under or in connection with
this Deed may, at the Lender's discretion, be credited to any suspense or
impersonal account with the Lender and may be held in such account for so
long as the Lender thinks fit pending application at the Lender's
discretion from time to time in or towards the discharge of the obligations
of any Obligor under the Security Documents. Provided that the Lender is
satisfied that payment received from the Shareholder is not liable to be
set aside and that the Lender may not be placed under an obligation to
repay such amount to the Shareholder or any liquidator or similar official
appointed in respect of the Shareholder or its assets, the Lender shall,
when the amount accumulated in the suspense account is sufficient to meet
in full all the Outstanding Indebtedness, apply the balance standing to the
credit of the suspense account to discharge the Outstanding Indebtedness.
8. ENFORCEMENT
-----------
8.1 Enforceability
--------------
The security constituted by this Deed shall become immediately enforceable
upon the happening of any Event of Default.
8.2 Taking of action
----------------
At any time after the happening of any Event of Default the Lender shall be
entitled without further notice to the Shareholder :-
(A) to apply any cash for the time being comprised in the Charged Property
in or towards payment of the Outstanding Indebtedness in accordance
with the provisions of Clause 10.5 of the Loan Agreement;
(B) to sell or convert into money all or any part of the Charged Property
(not consisting of cash) in such manner and upon such terms and for
such consideration, whether in cash, securities or other assets and
whether deferred or not, as the Lender may in its unfettered
discretion think fit;
<PAGE>
- 7 -
(C) to exercise all other powers or rights incidental to the Charged
Property or any part thereof (including, without limitation, to
complete the letters of resignation referred to in Clause 10.2 by
dating the same and to appoint directors and managers of the Company)
in such manner as the Lender may in its unfettered discretion think
fit; and
(D) to complete by dating the same the share transfer forms made out in
blank delivered to the Lender pursuant to Clause 10.2 in respect of
the shares comprised in the Charged Property and to transfer all or
any of such shares into the name of the Lender or its nominee as
registered owner and to exercise the voting rights attached to the
shares in such manner as the Lender may in its unfettered discretion
think fit.
8.3 Notice of taking of action
--------------------------
The Lender confirms that as a matter of practice it is its intention to
give notice to the Shareholder of any proposal by it to exercise its rights
and powers specified above but failure by the Lender to give any such
notice shall not prejudice its right to exercise such rights and powers or
give rise to any liability to the Shareholder.
8.4 Sale of Charged Property
------------------------
On any sale of the Charged Property or part thereof, the purchaser shall
not be bound to see or enquire whether the Lender's power of sale has
arisen in the manner provided herein and the sale shall be deemed to be
within the power of the Lender and the receipt of the Lender for the
purchase money shall effectively discharge the purchaser who shall not be
concerned with the manner of application of the proceeds of sale or be in
any way answerable therefor.
8.5 Law of Property Act 1925
------------------------
Sections 93 and 103 of the Law of Property Act 1925 shall not apply hereto.
8.6 Rights prior to commencement of charge
--------------------------------------
Until the security hereby constituted becomes enforceable, the Shareholder
shall be entitled to exercise all the voting rights attaching to the shares
comprised in the Charged Property at any annual or extraordinary meeting of
the shareholders of the Company. The Lender shall be provided with a
certified copy of resolutions passed at any such meeting.
8.7 Steps to enforce security
-------------------------
The Lender shall not be obliged before taking steps to enforce its rights
under this Deed:-
(A) to obtain judgment against any Obligor in any court or other tribunal;
or
(B) to make or file any claim in a bankruptcy or liquidation of any
Obligor; or
<PAGE>
- 8 -
(C) to take any action whatsoever against any Obligor under any of the
Security Documents;
and the Shareholder hereby waives all such formalities or rights to which
it would otherwise be entitled or which the Lender would otherwise first be
required to satisfy or fulfil before proceeding or making demand against
the Shareholder hereunder.
8.8 Cost and expenses
-----------------
All legal and other costs and expenses (including stamp duty, if any)
reasonably incurred by the parties hereto in connection with the
negotiation, preparation, completion and any registration and/or recording
of this Deed and the other Security Documents and the action to be taken to
give effect to them including all costs and expenses incurred by the Lender
in enforcing this Deed and in protecting and enforcing its interests
hereunder in any court of law or otherwise shall be paid in accordance with
clause 20 of the Loan Agreement.
9. REPRESENTATIONS AND WARRANTIES
------------------------------
9.1 The Shareholder represents and warrants to the Lender at the date hereof
and/or as otherwise specified herein that:-
(A) Status
------
It is a limited liability company, duly constituted and validly
existing under the laws of the Bermuda possessing the capacity to sue
and be sued in its own name and the power to own its assets and carry
on its business as it is now being conducted.
(B) Power and authority
-------------------
It has the power to enter into and perform its obligations under this
Deed and the charge created hereby and has taken all necessary
corporate and shareholder action to authorise the entry into and
performance of this Deed.
(C) Legal validity
--------------
This Deed constitutes legal, valid and binding obligations of the
Shareholder enforceable in accordance with its terms except as such
enforcement may be limited by any relevant bankruptcy, insolvency,
administration or similar laws affecting creditors' rights generally
and by principles of equity.
(D) Non-conflict with laws
----------------------
The entry into and performance of this Deed and the transactions
contemplated hereby do not and will not be a breach of or conflict
with:-
(i) any law or regulation or any official or judicial order
existing at the date hereof; or
<PAGE>
- 9 -
(ii) the constitutional documents of the Shareholder; or
(iii) any agreement or document to which the Shareholder is a party
or which is binding upon it or any of its assets;
nor result in the creation or imposition of any Encumbrance on any of
its assets pursuant to the provisions of any such agreement or
document.
(E) Consents
--------
All authorisations, approvals, consents, licences, exemptions,
filings, registrations, notarisations and other matters, official or
otherwise, required in connection with the entry into, performance,
validity and enforceability of this Deed and the transactions
contemplated hereby have been obtained or effected and are in full
force and effect.
(F) Registration of Deed
--------------------
The Shareholder does not have a place of business in any jurisdiction
other than in Bermuda which would require this Deed to be filed or
registered if the Shareholder had a place of business in that
jurisdiction to ensure the validity of this Deed.
(G) Ownership of shares
-------------------
All the issued shares of the Company are legally and beneficially
owned by the Shareholder, each of the said shares is fully paid and
non-assessable and none of the said shares in the Company is subject
to any option or Encumbrance except as created by this Deed.
9.2 Survival of representations and warranties
------------------------------------------
The representations and warranties set out in Clause 9.1 (A), (B), (C),
(D)(ii), (D)(iii), (F) and (G) shall survive the execution of this Deed and
shall be deemed to be repeated with reference mutatis mutandis to the facts
and circumstances then subsisting, as if made on each day until the actual
and contingent obligations of each Obligor under the Security Documents
have been performed in full.
10. UNDERTAKINGS
------------
10.1 Duration
--------
The undertakings in this Clause 10 shall remain in force from and after the
date hereof until all the actual and contingent obligations of each Obligor
under the Security Documents have been performed in full.
<PAGE>
- 10 -
10.2 Deposit of documents
--------------------
The Shareholder shall procure that until the Outstanding Indebtedness has
been discharged there shall be deposited by way of security with the
Lender:-
(A) the Articles of Incorporation and By-Laws, minute books, all blank
stock or other certificates and all corporate seals of the Company;
(B) the stock or share certificates representing the shares comprised in
the Charged Property together with executed and undated share transfer
forms in respect of such shares made out in blank and any other
documents of title to any part of the Charged Property;
(C) the share register (if any) of the Company;
(D) executed undated resignations from each director and officer of the
Company from time to time in the form of Schedule 1;
(E) an irrevocable proxy from the Shareholder in respect of the shares
comprised in the Charged Property in the form of Schedule 2.
10.3 Negative pledge
---------------
The Shareholder shall not, save as herein provided, without the prior
consent of the Lender, sell, assign, transfer, charge, pledge or encumber
in any manner any part of the Charged Property or agree to do any of the
aforesaid or suffer to exist any Encumbrance or option on, over or in
respect of all or any part of the Charged Property except by way of
Permitted Encumbrances.
10.4 Restriction on issue of further shares
--------------------------------------
The Shareholder shall not, without the prior consent of the Lender, procure
or authorise or permit the issue of any further shares in the Company
unless such further shares are charged to the Lender in terms similar to
the terms hereof as if they were included in the Charged Property. If,
despite the provisions of this sub-clause, any further such shares are
issued without the prior consent of the Lender, the Shareholder shall
procure that such further shares are held on the terms hereof as if they
were included in the Charged Property.
10.5 Appointment of directors and officers
-------------------------------------
The Shareholder shall notify the Lender immediately upon the appointment of
any further director or officer of the Company and shall procure that,
unless the Lender agrees otherwise, there is promptly delivered to the
Lender an executed undated resignation from such director or officer in the
form of Schedule 1.
<PAGE>
- 11 -
10.6 Notice of this Deed
-------------------
The Shareholder shall deliver a certified copy of this Deed to the Company
for the purpose of giving the Company notice of the charge herein contained
and shall procure that the Company will deliver to the Lender an
acknowledgement of such notice.
10.7 Further assurance
-----------------
The Shareholder shall, from time to time on being required to do so by the
Lender, do or procure the doing of all such acts and/or execute or procure
the execution of all such documents in a form satisfactory to the Lender as
the Lender may reasonably consider necessary for giving full effect to any
of the Security Documents including this Deed or securing to the Lender the
full benefit of the rights, powers and remedies conferred upon it in any
such Security Document including this Deed.
11. MISCELLANEOUS
-------------
11.1 No waiver
---------
No failure to exercise and no delay in exercising on the part of the Lender
any right or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy. No
waiver by the Lender shall be effective unless it is in writing.
11.2 Remedies cumulative
-------------------
The rights and remedies of the Lender provided herein are cumulative and
not exclusive of any rights or remedies provided by law.
11.3 Severability
------------
If any provision of this Deed or any of the other Security Documents is
prohibited or unenforceable in any jurisdiction, such prohibition or
unenforceability shall not invalidate the remaining provisions hereof or
affect the validity or enforceability of such provision in any other
jurisdiction.
11.4 Time of essence
---------------
Time is of the essence in respect of all of the obligations of the
Shareholder under this Deed.
<PAGE>
- 12 -
12. ASSIGNMENT
----------
12.1 Benefit of assignment
---------------------
This Deed shall be binding upon the Shareholder and its successors and
shall inure to the benefit of the Lender and its successors and assigns.
12.2 Transfers of rights and obligations
-----------------------------------
The Shareholder may shall not be entitled to assign or transfer all or any
of its rights, benefits and obligations hereunder. The Lender may at any
time assign all or any part of its rights and benefits hereunder or
transfer in accordance with Clause 19.2 of the Loan Agreement and the
Shareholder hereby consents to the assignment on the date hereof by the
Lender to the Bank of its rights and benefits hereunder.
12.3 Disclosure of information
-------------------------
The Lender may disclose to any actual or potential assignee, transferee or
to any person who may otherwise propose to enter into contractual relations
with any of them in relation to this Deed or the other Security Documents
or any of them such information about the Shareholder and any Obligors as
the Lender shall consider appropriate.
12.4 Effectiveness
-------------
The Shareholder will, at the request of the Lender execute or procure the
execution of such documents and do (or procure the doing of) all such acts
and things as may be necessary or desirable to give effect to any transfer
or assignment pursuant to this Clause 12.
13. NOTICES
-------
13.1 Mode of Communication
---------------------
Except as otherwise provided herein, each notice, request, demand or other
communication or document to be given or made hereunder shall be given in
writing but unless otherwise stated, may be made by telex or telefax.
13.2 Address
-------
Any notice, demand or other communication to be made or delivered pursuant
to this Deed shall be made or delivered as follows:-
(i) if to the Shareholder to it at 4000 Hollywood Boulevard, Hollywood,
Florida 33021 telefax number (305) 9672147 marked for the attention
of Alan Pritzker and Fred Mayer with a further copy to Broad &
Cassel, Miami Centre, 201 South Biscayne Boulevard, Suite 3000,
Miami, Florida 33131 telefax number 305 373 9493 marked for the
attention of James Cassel with a further copy to JeMJ Financial
Services Inc, TelMed, Inc., 9350 S. Dixie Highway, Suite
<PAGE>
- 13 -
1220 Miami, Florida 33156 telefax number (305) 238 6248 marked for
the attention of Jeffrey I. Binder;
(ii) if to the Lender to it c/o Effjohn OY AB at Bulevardi 1A, PO Box
659, 00101 Helsinki, Finland telefax number 3580 627736 marked for
the attention of finance department
or such other address telex number or telefax number as each such addressee
may specify to the other relevant party or parties by not less than fifteen
(15) days' written notice.
13.3 Receipt
-------
Each such notice, demand, request or other communication shall be deemed to
have been made or delivered when:-
(A) (in the case of telex) the addressee's answerback shall have been
received at the end of the transmission or (in the case of telefax)
when a materially complete and legible copy of the communication has
been received by the addressee (unless the date of despatch is not a
Banking Day in the country of the addressee or the time of despatch is
outside normal business hours in the country of the addressee, in
which case such telex or telefax shall be deemed to have been received
at the opening of business on the next such Banking Day; or
(B) (in the case of any letter) when delivered to the addressee's address
as specified in or notified pursuant to Clause 13.2 or, if sent by
post first class postage prepaid in an envelope addressed to the
addressee at that address five (5) days after being deposited in the
post.
13.4 Language
--------
Each notice, demand, request or other communication made or delivered by
one party to another pursuant to this Deed or any other Security Document
shall be in the English language or accompanied by a certified English
translation.
14. GOVERNING LAW
-------------
This Deed shall be governed by and construed in accordance with English
law.
15. WAIVER OF IMMUNITY
------------------
The Shareholder irrevocably and unconditionally:-
(A) waives any right of immunity which it or its assets now has or may
hereafter acquire in relation to any legal proceedings (including but
without limitation actions in rem and/or in personam) brought against
it or its assets in relation to this Deed by the Lender; and
<PAGE>
- 14 -
(B) consents generally in respect of any such proceedings to the giving of
any relief or the issue of any process in connection with such
proceedings, including, without limitation, the making, enforcement or
execution against any property whatsoever (irrespective of its use or
intended use) of any order or judgment which may be made or given in
such proceedings.
16. JURISDICTION
------------
16.1 Submission to jurisdiction
--------------------------
For the exclusive benefit of the Lender, the parties hereto hereby
irrevocably submit to the non-exclusive jurisdiction of the High Courts of
Justice in England provided that the Lender (but not the Shareholder) shall
be at liberty in addition or alternatively to take proceedings in the
courts of any other country which may have jurisdiction or in which the
Shareholder may reasonably be thought to have assets. The Shareholder
hereby irrevocably authorises and appoints the Process Agent for the
acceptance of service of legal proceedings under this Deed, service upon
whom shall be deemed to constitute good service of legal process without
prejudice to any other lawful means and undertakes to maintain a process
agent in England.
IN WITNESS whereof this Deed has been executed by the Shareholder on the day
first written above.
<PAGE>
- 15 -
THE SHAREHOLDER
- ---------------
SIGNED SEALED AND DELIVERED AS A DEED )
by /s/ James Scott Cassel ) /s/ James Scott Cassel
the duly authorised Attorney-in-Fact )
for and on behalf of )
NEW COMMODORE CRUISE LINES LIMITED )
in the presence of:- [TEXT ILLEGIBLE] )
/s/ L. Dodson
THE LENDER
- ----------
SIGNED SEALED AND DELIVERED AS A DEED )
by [SIGNATURE ILLEGIBLE] ) /s/ Thomas Forss
the duly authorized Attorney-in-Fact )
for and on behalf of )
EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC. )
in the presence of:- [SIGNATURE ILLEGIBLE] )
/s/ L. Dodson
<PAGE>
- 16 -
SCHEDULE 1
----------
Letter of Resignation
---------------------
To: The Secretary
Almira Enterprises, Inc.
(the "Company")
Dear Sirs,
Loan Agreement dated 1995
(the "Loan Agreement")
----------------------
1. I hereby resign as a [director/secretary/or other officer] of the Company
and confirm that I have no claims against the Company for loss of office,
arrears of pay or otherwise howsoever.
2. This resignation is to be effective as at the date hereof.
Yours faithfully,
<PAGE>
- 17 -
SCHEDULE 2
----------
Irrevocable Proxy
-----------------
The undersigned, being the owner of 500 shares (the "Shares") of Almira
Enterprises, Inc., (the "Company"), a Panamanian corporation hereby makes,
constitutes and appoints Effjohn International Cruise Holdings Inc. as the true
and lawful attorney and proxy of the undersigned with full power to appoint a
nominee or nominees to act hereunder from time to time to vote all or any of the
shares represented by the share certificates of the Company numbered 1 at all
annual and special general meetings of the shareholders of the Company with the
same force and effect as the undersigned might or could do and to requisition
and convene a meeting or meetings of the shareholders of the Company for the
purposes of appointing or confirming the appointment of new directors of the
Company and/or such other matters as may in the opinion of Effjohn International
Cruise Holdings Inc. be necessary or desirable for the purpose of implementing
the Deed of Charge referred to below and the undersigned hereby ratifies and
confirms all that the said attorney or its nominee or nominees shall do or cause
to be done by virtue hereof.
The said shares have been charged to Effjohn International Cruise Holdings Inc.
pursuant to a deed (the "Deed of Charge") dated 1995.
This power and proxy is coupled with an interest and is irrevocable and shall
remain irrevocable as long as the Deed of Charge is outstanding.
IN WITNESS whereof this instrument has been duly executed as a deed this
day of 1995.
SIGNED SEALED AND DELIVERED AS A DEED )
by )
the duly authorised Attorney-in-Fact )
for and on behalf of )
NEW COMMODORE CRUISE LINES LIMITED )
in the presence of:- )
<PAGE>
Letter of Resignation
Messrs.
Almira Enterprises, Inc.
(the "Company")
Dear Sirs:
I hereby resign as President of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof.
Yours faithfully,
/s/ Leopoldo Lopez
------------------
Leopoldo Lopez
<PAGE>
Letter of Resignation
Messrs.
Almira Enterprises, Inc.
(the "Company")
Dear Sirs:
I hereby resign as Secretary of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof.
Yours faithfully,
/s/ Maxilia Cedeno de Morales
-----------------------------
Maxilia Cedeno de Morales
<PAGE>
Letter of Resignation
Messrs.
Almira Enterprises, Inc.
(the "Company")
Dear Sirs:
I hereby resign as Treasurer of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof.
Yours faithfully,
/s/ Roberto Chevalier Valencia
------------------------------
Roberto Chevalier Valencia
<PAGE>
Letter of Resignation
Messrs.
Almira Enterprises, Inc.
(the "Company")
Dear Sirs:
I hereby resign as director of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof.
Yours faithfully,
/s/ Roberto Chevalier Valencia
------------------------------
Roberto Chevalier Valencia
<PAGE>
Letter of Resignation
Messrs.
Almira Enterprises, Inc.
(the "Company")
Dear Sirs:
I hereby resign as director of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof.
Yours faithfully,
/s/ Maxilia Cadeno de Morales
-----------------------------
Maxilia Cadeno de Morales
<PAGE>
Letter of Resignation
Messrs.
Almira Enterprises, Inc.
(the "Company")
Dear Sirs:
I hereby resign as director of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
This resignation is to be effective as at the date hereof.
Yours faithfully,
/s/ Leopolda Lopez
------------------
Leopolda Lopez
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, New Commodore Cruise Lines Limited
------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
----------------------------------
hereby sell, assign and transfer unto __________________________________________
________________________________________________________________________________
________________________________________________________________________________
( 500 ) Shares of the __________________ Capital Stock of ______________
- ---------------
Almira Enterprises, Inc. Standing in my (our)
- -------------------------------------------------------
name(s) on the books of said Corporation represented by Certificate(s) No(s) 1
----
herewith, and do hereby irrevocably constitute and appoint _____________________
_____________________________________________ attorney to transfer the said
stock on the books of said Corporation with full power of substitution in the
premises.
Dated ______________________________
/s/ James Scott Cassel
----------------------
Attorney-in-Fact
In presence of
/s/ Lara Dobson
- ---------------------
Solicitor
<PAGE>
[STOCK CERTIFICATE APPEARS HERE]
<PAGE>
Irrevocable Proxy
-----------------
The undersigned, being the owner of 500 shares (the "Shares") of Almira
Enterprises, Inc., (the "Company"), a Panamanian corporation hereby makes,
constitutes and appoints Effjohn International Cruise Holdings Inc. as the true
and lawful attorney and proxy of the undersigned with full power to appoint a
nominee or nominees to act hereunder from time to time to vote all or any of the
shares represented by the share certificates of the Company numbered 1 at all
annual and special general meetings of the shareholders of the Company with the
same force and effect as the undersigned might or could do and to requistion and
convene a meeting or meetings of the shareholders of the Company for the
purposes of appointing or confirming the appointment of new directors of the
Company and/or such other matters as may in the opinion of Effjohn
International Cruise Holdings inc. be necessary or desirable for the purpose of
implementing the Deed of Charge referred to below and the undersigned hereby
ratifies and confirms all that the said attorney or its nominee or nominees
shall do or cause to be done by virtue hereof.
The said shares have been charged to Effjohn International Cruise Holdings Inc.
pursuant to a deed (the "Deed of Charge") dated 14 July 1995.
This power and proxy is coupled with an interest and is irrevocable and shall
remain irrevocable as long as the Deed of Charge is outstanding.
IN WITNESS whereof this instructor has been duly executed as a deed this 14 day
of July 1995.
SIGNED SEALED AND DELIVERED AS A DEED )
by JAMES SCOTT CASSEL )
the duly authorized Attorney-in-Fact )
for and on behalf of ) /s/ James Scott Cassel
NEW COMMODORE CRUISE LINES LIMITED )
in the presence of :- LARA DOBSON, )
LONDON SOLICITOR )
/s/ L. Dobson
<PAGE>
EXECUTION COPY
--------------
Dated 14 July ,1995
---------------------
Azure Investments, Inc.
as owner
New Commodore Cruise Lines Limited
as bareboat charterer
- and -
Effjohn International Cruise Holdings, Inc.
as lender
------------------------------------------
FIRST PRIORITY TRIPARTITE DEED
IN RESPECT OF M.V. "Enchanted Seas"
------------------------------------------
Sinclair Roche & Temperley
Broadwalk House
5 Appold Street
London EC2A 2NN
Tel: 0171 638 9044
Ref: JPM/180210
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Clause Subject Matter Page
- ------ -------------- ----
<S> <C> <C>
1. Definitions 2
2. Representations and Warranties 4
3. Assignment and Charge 7
4. Owner's Undertakings 9
5. Bareboat Charterer's Undertakings 11
6. General Undertakings 13
7. Owner's and Bareboat Charterer's Liability Not Affected 15
8. Performance 16
9. Appointment of Attorney 17
10. Consent 17
11. Taxes 17
12. Further Assurance 17
13. Continuing Security 17
14. Obligation to Prove in Liquidation 18
15. Suspense Account 18
16. Protection of Security 18
17. Lender's Powers 19
18. Application of Moneys 20
19. Successors and Assigns 20
20. Notices 20
21. Expenses 21
22. Law and Jurisdiction 21
23. Currency Losses 22
24. Miscellaneous 22
SCHEDULE A 25
SCHEDULE B 27
SCHEDULE C 28
SCHEDULE D 32
</TABLE>
<PAGE>
THIS DEED is made the 14 day of July , 1995
BETWEEN:-
(1) AZURE INVESTMENTS, INC., a company incorporated under the laws of the
Republic of Panama, with its registered office at c/o Galindo Arias &
Lopez, 200 Via Espana, Panama 5, Panama City, Republic of Panama as owner
(the "Owner");
(2) NEW COMMODORE CRUISE LINES LIMITED, a company incorporated under the laws
of the Bermuda with its registered office at c/o Ardon Management Services,
Ltd., c/o Richards Francis & Francis, Cedarpark Centre, 48 Cedar Avenue,
Hamilton HM11, Bermuda as bareboat charterer (the "Bareboat Charterer");
(3) EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC., a company incorporated under
the laws of the Cayman Islands with its registered office at Caledonian
Bank & Trust Limited, P O Box 1043, Grand Cayman, Cayman Islands as lender
(the "Lender").
WHEREAS:-
(A) The Owner is the registered owner of m.v. "Enchanted Seas", registered in
the name and ownership of the Owner under the laws and flag of the Republic
of the Panama under Provisional Patente 12355-text-g(the "Vessel");
(B) By a loan agreement dated 14 July , 1995 (as the same may from time to time
be amended and supplemented called the "Loan Agreement") and made between
(1) Almira Enterprises, Inc and the Owner (the "Borrowers") (2) the Lender
(3) the Bareboat Charterer and Commodore Holdings Limited as guarantors the
Lender has agreed at the request of the Borrowers to make available to the
Borrowers jointly and severally a loan facility of twenty four million five
hundred thousand Dollars (USD24,500,000) (the "Loan") for the purposes and
on the terms and conditions therein contained;
(C) By a bareboat charter dated 14 July 199 (as the same may be amended and
supplemented called the "Bareboat Charter") made between (1) the Owner and
(2) the Bareboat Charterer, the Owner has agreed to let and the Bareboat
Charterer has agreed to take the Vessel for the period and upon the terms
and conditions therein mentioned with effect from the date hereof on
bareboat charter;
(D) As security for the Owner's obligations to the Lender under the Loan
Agreement, the Owner has agreed to execute in favour of the Lender a first
preferred mortgage over the Vessel of even date hereof (as the same may be
amended and supplemented called the "Mortgage");
(F) As further security for the Owner's obligations under the Loan Agreement
and as a condition precedent to the drawdown of the Loan the Owner and the
Bareboat Charterer have agreed to execute this Deed in favour of the
Lender.
(G) The Bareboat Charterer has received a copy of the Mortgage and the Loan
Agreement and is fully conversant with the terms thereof.
<PAGE>
- 2 -
NOW THIS DEED WITNESSETH as follows:-
1. DEFINITIONS
- -- -----------
1.1 In this Deed including the recitals, the following terms and expressions
shall have the meanings set out below; in addition, terms and expressions
not defined herein but whose meanings are defined in the Loan Agreement
shall have the meanings set out therein:-
"Assigned Property" means the Owner's Assigned Property and/or the Bareboat
Charterer's Assigned Property (as hereinafter defined) as the context may
require;
"Bareboat Charter" means the Bareboat Charter referred to in recital (C);
"Bareboat Charterer" means the Bareboat Charterer referred to in the
recitals;
"Bareboat Charterer's Assigned Property" means all of the Bareboat
Charterer's rights, title and interest in, to and under the Bareboat
Charterer's Earnings, the Insurances (including claims of whatsoever nature
and return of premiums in respect of the Insurances), Requisition
Compensation, and any sub-charter;
"Bareboat Charterer's Earnings" means that part of the Earnings constituted
by all moneys whatsoever due or to become due for the account of the
Bareboat Charterer arising howsoever in connection with any sub-charter;
"this Deed" means this first priority general assignment;
"Default Rate" means the rate of interest specified in Clause 6.5 of the
Loan Agreement;
"Drawdown Date" means the date of drawdown of the Loan;
"excess risks" means the proportion of claims for general average and
salvage charges and under the ordinary running-down clause not recoverable
in consequence of the value at which a vessel is assessed for the purpose
of such claim exceeding her insured value;
"Insurer" means any underwriter, insurer, club and/or association providing
and/or effecting any of the Insurances and/or any broker or agent through
whom any of the Insurances are provided and/or effected;
"Owner's Assigned Property" means all of the Owner's rights, title and
interest in, to and under the Earnings, the Insurances (including claims of
whatsoever nature and return of premiums in respect of the Insurances),
Requisition Compensation, the Bareboat Charter and the Owner's Earnings;
"Owner's Earnings" means that part of the Earnings constituted by all
moneys whatsoever due or to become due to or for the account of the Owner
arising howsoever in connection with the Bareboat Charter;
<PAGE>
- 3 -
"protection and indemnity risks" means all risks covered by a major
protection and indemnity association including the proportion not
recoverable in case of collision under the ordinary running-down clause;
"war risks" means the risk of mines and all risks excluded from the
standard form of English marine policy by the free of capture and seizure
clause.
1.2 In this Deed unless the context otherwise requires:-
1.3 clause headings are inserted for convenience of reference only and shall be
ignored in the interpretation of this Deed;
1.4 references to Clauses and Schedules are to be construed as references to
Clauses of and Schedules to this Deed unless otherwise stated and
references to this Deed are to be construed as references to this Deed
including its Schedules;
1.5 reference to (or to any specified provision thereof) of this Deed or any
other Subject Document shall be construed as reference to this Deed, that
provision or that Subject Document, as from time to time amended,
supplemented and/or novated;
1.6 without prejudice to the provisions of Clause 19 references to any party to
this Deed or any other Subject Document shall, include reference to such
party's successors and permitted assigns;
1.7 words importing the plural shall include the singular and vice versa;
1.8 reference to a person shall be construed as references to an individual,
firm, company, corporation, unincorporated body of persons or any state or
any agency thereof;
1.9 where any matter under any Security Document requires the approval or
consent of the Lender such approval or consent shall not be deemed to have
been given unless given in writing; where any matter under any Security
Document is required to be acceptable to the Lender, the Lender shall not
be deemed to have accepted such matter unless its acceptance is
communicated in writing; the Lender may give or withhold its consent,
approval or acceptance under any Security Document subject to it not being
unreasonably withheld or delayed and such consent, approval or
1.10 acceptance may be given by the Lender subject to such conditions as it may
reasonably impose;
1.11 a certificate by the Lender as to any amount due or calculation made
hereunder shall be conclusive except for manifest error; and references to
any statute or other legislative provision are to be construed as
references to any such statute or other legislative provision as the same
may be re-enacted or modified or substituted by any subsequent statute or
legislative provision.
<PAGE>
- 4 -
2. REPRESENTATIONS AND WARRANTIES
- -- ------------------------------
2.1 The Bareboat Charterer hereby represents and warrants to the Lender that:-
(a) it is and will remain duly incorporated and validly existing under its
country of incorporation as a limited liability company, has full
power and capacity to carry on its business as it is now being
conducted and to own its property and other assets and has complied
with all statutory and other requirements relative to its business;
(b) upon the expiry of the Lay-Up Period the Vessel will not be subject to
any contract commitment or other arrangement for its employment except
for the Bareboat Charter or any permitted sub-charter or as otherwise
as disclosed to and agreed by the Lender;
(c) to the extent of its obligations thereunder, it has and will continue
to have full power and authority to enter into and perform such of the
Subject Documents to which it is or is to become a party, has taken
all necessary corporate or other action (as the case may be) required
to enable it to do so and will duly perform and observe the terms
thereof;
(d) each of the Subject Documents to which it is or is to become a party
constitutes or will, upon execution and delivery, constitute valid and
legally binding obligations of the parties thereto enforceable by the
Obligors thereto in accordance with its terms save for laws
restricting creditor's rights generally;
(e) except for the registration of the Mortgage with the appropriate
authorities of the Flag State and the charges created by the Security
Documents recorded in the appropriate companies' registry, or filed in
the relevant jurisdictions in the United States of America all
consents, licences, approvals, registrations or authorisations of
governmental authorities and agencies or declarations to creditors
required
(i) to make each of the Subject Documents valid, enforceable and
admissible in evidence and
(ii) to authorise or otherwise permit the execution and delivery of
the Subject Documents and the performance by the parties thereto
(except the Lender) of each of them
have been obtained or made and are in full force and effect and there
has been no material default in the observance of any of the terms or
conditions of any of them;
(f) except for registration of the Mortgage with the appropriate
authorities of the Flag State and the lodging for registration of
certain of the Subject Documents at any appropriate companies'
registry or filed in the relevant jurisdictions in the United States
of America none of the Subject Documents is required to be
<PAGE>
- 5 -
filed, recorded, enrolled or in any way whatsoever registered with any
governmental authority or agency of or in England, Panama, Bermuda,
the United States of America, or, to the best of its belief in any
other country, or to be stamped with any stamp duty or similar tax,
levy or impost in any such country in order to ensure the legal
validity, enforceability or admissibility in evidence thereof;
(g) it is not in default under any agreement to which it is a party or by
which it may be bound (actually or contingently) which default would
be likely to have a material adverse effect on its business, assets or
condition or its ability to perform its obligations under such of the
Subject Documents to which it is a party and, as at the date hereof,
except as disclosed in writing to the Lender, no litigation or
administrative proceedings involving it of or before any board of
arbitration, court or governmental authority or agency is proceeding
pending or (to its knowledge) threatened anywhere in the world the
result of which would (if adversely determined) have or is likely to
have a material adverse effect on the business, assets or financial
condition of it and, in the event that any such litigation or
proceedings shall hereafter arise, it hereby undertakes to give notice
thereof to the Lender as soon as it becomes aware of any such
litigation or proceedings;
(h) it is not required by the laws of any country from which it may make
any payment hereunder or under any of the Subject Documents to which
it is a party to make any deduction or withholding from any such
payment;
(i) the execution, delivery and performance of such of the Subject
Documents to which it is or will be a party will not violate or exceed
the powers conferred upon it under its articles of incorporation and
by-laws or other constituting or corporate documents or any provision
of any applicable law existing at the date hereof or of any
regulation, order or decree to which it is subject as at the date
hereof or result howsoever in the creation or imposition of any
Encumbrance (other than a Permitted Encumbrance) on all or part of its
undertaking or assets;
(j) such written financial and other information in respect of it as has
been given to the Lender prior to the date hereof presented fairly and
accurately the financial position of it as at the date such
information was given and it does not have any material liabilities
(contingent or otherwise) which were not disclosed;
(k) the obligations of it under this Deed are its direct, general and
unconditional obligations and rank at least pari passu with all its
present and future unsecured and unsubordinated obligations (including
contingent obligations) with the exception of such obligations as are
mandatorily preferred by law and not by contract;
(l) other than its office in Miami it does not have an office in the
United States of America or in the United Kingdom or does business
outside Florida or in the United Kingdom which gives rise to any
liability to taxation or the registration of any Subject Documents;
<PAGE>
-6-
(m) to the best of its knowledge and belief no event or circumstance
constituting an Event of Default or Possible Event of Default has
occurred and is continuing;
(n) the technical management of the Vessel will be undertaken by the
Technical Manager;
(o) the commercial management of the Vessel will be undertaken by the
Bareboat Charterer;
(p) all information furnished by it or on its behalf in writing in
connection with the negotiation and preparation of this Deed and the
rest of the Subject Documents is to the best of its knowledge true and
accurate in all respects and not misleading and does not omit any
facts and there are no other facts the omission of which would make
any such information misleading.
2.2 Each of the Owner and the Bareboat Charterer hereby represents and warrants
to the Lender that:-
(a) the Bareboat Charter has been duly entered into, is in full force and
effect, and is enforceable in accordance with the terms thereof and no
amendments thereto or variations thereof have been (or will be
otherwise than within the terms of this Deed) agreed and there are no
commissions, rebates, premiums or other payments in connection with
the Bareboat Charter other than as disclosed to the Lender in writing
on or prior to the date of this Deed;
(b) save as disclosed to the Lender in writing, neither the Owner nor the
Bareboat Charterer are in default under the Bareboat Charter and there
are no actions suits or proceedings threatened by or against either
the Owner or the Bareboat Charterer in connection with or arising out
of the Bareboat Charter which would entitle any party to repudiate
otherwise terminate or otherwise withdraw from (including in respect
of the Owner, the right to withdraw the Vessel and in respect of the
Bareboat Charterer to suspend payment of hire) or frustrate or in any
way render the Bareboat Charter inoperative or unenforceable;
(c) the Vessel has been delivered to and accepted by the Bareboat
Charterer for service under the Bareboat Charter and is in every way
fit for service under the Bareboat Charter;
2.3 Each of the Owner and the Bareboat Charterer hereby further represents and
warrants to the Lender that on the Execution Date, the Drawdown Date and at
the end of each Interest Period (other than in respect of (b), (g), (h),
(n) and (o)) the representations and warranties contained in this Clause 2
(updated mutatis mutandis to each such date) shall be true and correct as
if made at that time.
<PAGE>
- 7 -
3. ASSIGNMENT AND CHARGE
---------------------
3.1 In consideration of the Lender agreeing to make the Loan available to the
Borrowers, the Owner as registered owner of the Vessel and for the purpose
of securing the payment to the Lender of the Outstanding Indebtedness
HEREBY ASSIGNS AND AGREES TO ASSIGN absolutely to the Lender by way of a
first priority assignment all of the Owner's Assigned Property.
3.2 In consideration of the Lender agreeing to make the Loan available to the
Borrowers and further in consideration of the Lender approving the terms
and provisions of the Bareboat Charter, the Bareboat Charterer as disponent
owner of the Vessel and for the purpose of securing the payment to the
Lender of the Outstanding Indebtedness HEREBY ASSIGNS and AGREES TO ASSIGN
absolutely to the Lender by way of a first priority assignment all of the
Bareboat Charterer's Assigned Property.
3.3 The Owner further undertakes that in the event that the Bareboat Charter is
terminated for whatever reason before the expiry of the Security Period the
Owner shall forthwith upon being requested to do so by the Lender execute
and deliver in favour of the Lender a specific assignment in writing of all
its right, title and interest in, to and under any replacement charter or
other contract or employment in respect of the Vessel.
3.4 (a) Throughout the Security Period the Owner and the Bareboat Charterer
shall procure that:-
(i) in the event that the FMC Guarantor has issued a letter of
credit or other surety that is secured by the deposit in the
FMC Collateral Account all moneys received in respect of
advance bookings in respect of the Vessel are paid into the
Operating Account at all times during such relevant part of the
Security Period;
(ii) in the event that the provisions of (i) do not apply all moneys
received in respect of advance bookings in respect of the
Vessel are paid into the Seas FMC Account in respect of the
Vessel at all times throughout such relevant part of the
Security Period;
(iii) upon the release of any moneys from the Seas FMC Account
pursuant to (ii) above such monies shall be paid into the
Operating Account;
(iv) all other Earnings of the Vessel shall be paid into the
Operating Account at all times throughout the Security Period;
and applied in accordance with clause 10 of the Loan Agreement.
(b) Upon the occurrence of an Event of Default to the extent permitted by
applicable law:-
(i) the Owner and the Bareboat Charterer shall forthwith and the
Lender may at any time thereafter instruct the persons from
whom the
<PAGE>
- 8 -
Earnings or Owner's Earnings or Bareboat Charterer's Earnings
are or shall be due to pay the same to the Lender or as it may
direct; and
(ii) any sum in respect of Earnings or Owner's Earnings or Bareboat
Charterer's Earnings then in the hands of the Owner's and/or
the Bareboat Charterer's brokers, bankers or other agents or
representatives shall be deemed to have been received by them
for the use and on behalf of the Lender;
(c) Each of the Owner and the Bareboat Charterer agree to comply with any
instruction given to it under this Clause.
(d) The Owner and the Bareboat Charterer each covenant with the Lender
that the Earnings are free from any Encumbrance and shall be paid in
the manner and currency or currencies as set out in accordance with
Clause 11.
3.5 By virtue of being party to this Deed, the Bareboat Charterer hereby
acknowledges the assignment by the Owner in favour of the Lender of the
Owner's rights, title and interest in and to the Owner's Assigned Property
and agrees to the assignment hereto.
3.6 The Bareboat Charterer undertakes that it will immediately (upon being
requested to do so by the Lender) give notice of any assignment of sub-
charter executed in favour of the Lender to any relevant sub-charterer or
other person in the form of Schedule D hereto and will procure such
person's acknowledgement thereto in the form of Schedule D hereto.
3.7 Each of the Owner and the Bareboat Charterer undertakes immediately to give
notice of the assignment of Insurances contained in this Clause 3 to all
Insurers in the form of Schedule B hereto and to obtain from such Insurers
duly completed letters of undertaking substantially in the form of Schedule
C or in such other form or forms as the Lender may agree.
3.8 Prior to the occurrence of an Event of Default any sums recoverable in
respect of the Insurances shall be payable as follows:-
(a) any and every sum recoverable in respect of a Total Loss under the
Insurances against fire and all marine risks and war risks shall be
paid to the Lender, and
(b) any and every sum recoverable in respect of any claim exceeding one
Million five Hundred Thousand Dollars (USD1,500,000) or its equivalent
in any other currency ("Major Casualty") under the Insurances against
fire and usual marine risks and war risks shall be paid to the Lender
but so that such insurance monies should be applied by the Lender in
or towards payment on behalf of the Bareboat Charterer to the relevant
repairer, salvor or other relevant creditor in respect of the cost of
repairs, salvage or other charges unless the Bareboat Charterer has
first fully repaired the damage or secured complete discharge of the
liability insured against or otherwise made good the loss in which
case the Lender shall reimburse the Bareboat Charterer therefore up to
the amount received by the Lender; and
<PAGE>
- 9 -
(c) any and every other sum recoverable under the Insurances against fire
and usual marine risks and war risks shall be paid to the Bareboat
Charterer and shall be applied by the Bareboat Charterer for the
purpose of making good the loss and fully repairing all damage in
respect whereof the insurance moneys shall have been received; and
(d) all sums recoverable under the Insurances against protection and
indemnity risks shall be paid direct to the person to whom was
incurred the liability to which such sum relates (or to the Bareboat
Charterer or the Owner in reimbursement to either of them of moneys
expended in satisfaction of such liability); and
on or after the occurrence of an Event of Default any sums recoverable
under the Insurances shall be payable to the Lender;
(e) any Requisition Compensation shall at all times be payable to the
Lender.
3.9 (a) To the extent that any Bareboat Charterer's Earnings are received and
applied by the Lender or otherwise in accordance with Clause 3.4, such
application shall be treated as being in pro tanto satisfaction of:-
(i) the obligations of the Bareboat Charterer to make payments of
those amounts to the Owner under the Bareboat Charter; and
(ii) the obligations of the Owner to make payments of those amounts
to the Lender under this Deed or any of the other Security
Documents.
(b) To the extent that any Owner's Earnings are received and applied by
the Lender or otherwise in accordance with Clause 3.4, such
application shall be treated as being in pro tanto satisfaction of:-
(i) the obligations of the Bareboat Charterer to make payments of
those amounts to the Owner under the Bareboat Charter; and
(ii) the obligations of the Owner to make payments of those amounts
to the Lender under this Deed or any of the other Security
Documents.
4. OWNER'S UNDERTAKINGS
- -- --------------------
4.1 The Owner undertakes with the Lender throughout the Security Period:-
(a) to do and permit to be done each and every act or thing which the
Lender may from time to time require to be done for the purpose of
better securing, protecting or enforcing the Lender's rights under the
assignment contained in Clause 3 and to permit the Owner's name to be
used as and when required by the Lender for that purpose;
(b) if any Event of Default shall occur, to the extent permitted by
applicable law, to take all steps and do all things necessary to
enable the Lender to enforce all other rights and benefits accruing to
the Owner under or in respect of the
<PAGE>
- 10 -
Owner's Assigned Property and for this purpose to take over or
institute proceedings in respect thereof;
(c) to perform its obligations under the Bareboat Charter or under the
Insurances or the Earnings and to use its best endeavours to procure
the due performance by the Bareboat Charterer of its obligations in
respect of the Vessel, the Insurances or the Earnings and shall,
notwithstanding the assignment herein contained, take such action to
collect any monies or enforce any rights and benefits hereby assigned
until notified in writing by the Lender;
(d) it is the sole legal and beneficial owner of the whole of the Owner's
Assigned Property;
(e) the Bareboat Charter shall not in any circumstances be terminated by
the Owner (or the Vessel withdrawn by the Owner from hire under the
Bareboat Charter) for any reason whatsoever (including, without
limitation, by reason of any breach or alleged breach of the Bareboat
Charter by the Bareboat Charterer) unless the Lender shall first have
given its consent in writing to such termination or withdrawal
PROVIDED that any such termination or withdrawal after such consent is
given shall be without responsibility on the part of the Lender who
shall be under no liability whatsoever in the event that such
termination or withdrawal be thereafter adjudged to have constituted a
wrongful repudiation of the Bareboat Charter by the Owner;
(f) in the event of any payment of hire not being made by the Bareboat
Charterer within five (5) days of the due date or if any other
circumstance shall occur entitling the Owner to withdraw the Vessel
from hire under the Bareboat Charter the Owner will advise the Lender
in accordance with Clause 6.2(a) and, if so directed by the Lender in
writing, exercise its right to withdraw the Vessel from hire under the
Bareboat Charter at such time and in such manner as the Lender shall
so direct;
(g) it will supply to the Lender upon the Lender's request all
information, documents and records that may be necessary or of
assistance to enable the Lender to verify the amount of all payments
of hire payable under the Bareboat Charter;
(h) it will pay all such expenses, claims, liabilities, losses, costs,
duties, fees, charges or other moneys as are stated in this Deed to be
payable by the Owner to or recoverable from the Owner by the Lender
(or in respect of which the Owner agrees in this Deed to indemnify the
Lender) at the times in the manner specified in this Deed;
(i) it will pay interest on any such expenses, claims, liabilities,
losses, costs, duties, fees, charges or other moneys referred to in
Clause 4.1(h) from the day following the date on which the relevant
expense, liability, loss, cost, duty, fee charge or other money is
paid or incurred by the Lender until the date of reimbursement thereof
to the Lender (both before and after any relevant judgment) at the
Default Rate, such interest to be compounded in accordance with clause
6.5 of the Loan Agreement and payable on demand.
<PAGE>
- 11 -
4.2 The Owner hereby further undertakes with the Lender that the Owner will not
(without the prior written consent of the Lender):-
(a) further assign, charge, pledge or otherwise encumber the Owner's
Assigned Property, or any of its rights or benefits thereunder or in
respect thereof, to anyone other than the Lender;
(b) take or omit to take any action the taking or omission of which might
result in any alteration or impairment of any of the rights or
benefits thereby created or created by this Deed;
(c) (i) agree to any material variation of the Bareboat Charter; or
(ii) release the Bareboat Charterer from any of the Bareboat
Charterer's obligations under the Bareboat Charter or waive any
breach of the Bareboat Charterer's obligations thereunder or
consent to any such act or omission of the Bareboat Charterer
as would otherwise constitute such breach;
(d) enter into any charter in respect of the Vessel other than the
Bareboat Charter.
5. BAREBOAT CHARTERER'S UNDERTAKINGS
- --- ---------------------------------
5.1 The Bareboat Charterer hereby covenants with the Lender throughout the
Security Period that:-
(a) it will perform each and every obligation on its part to be performed
under the Bareboat Charter;
(b) it will observe perform and comply with all the covenants and
undertakings in respect of Insurances, operation and maintenance to be
observed performed and complied with by or on behalf of the Owner
under the Mortgage (including, but without limitation, all warranties
and conditions relating to the Insurances, and/or the operation of the
Vessel) and if and to the extent that any of such covenants and
undertakings may conflict with any of the provisions of the Bareboat
Charter, such covenants and undertakings shall (as between the Owner
and the Bareboat Charterer on the one hand and the Lender on the other
hand but not otherwise) prevail;
(c) it will, in the event that upon a Total Loss or requisition of the
Vessel the Lender is disabled from recovering under any Insurances
relating to the Vessel or the amount of the recovery thereunder is
diminished and such disablement or diminution results from any breach
of the covenants undertaken by the Bareboat Charterer under this
Clause 5, pay to the Lender upon the Lender's first written demand a
sum equal to the amount which would but for such disablement have been
recoverable under such Insurances or a sum equal to the amount whereby
the insurance recovery has been diminished;
(d) it will, in the event of the Vessel at any time being arrested,
seized, detained or subjected to distress by reason of any process,
claim, lien or encumbrance
<PAGE>
- 12 -
of whatsoever nature arising out of the use or operation of the Vessel
by the Bareboat Charterer or the operation by the Bareboat Charterer
of any other vessel owned by or chartered to the Bareboat Charterer,
at its own cost and expense take prompt action to secure the release
of the Vessel and be responsible for discharging each and every
liability in connection with any such process claim lien or
encumbrance;
(e) it will indemnify the Lender and hold it harmless against all
liabilities of whatsoever nature (including penalties claims demands
orders or judgments) which the Owner or the Lender may suffer which
arise out of the use or operation of the Vessel by the Bareboat
Charterer or the operation by the Bareboat Charterer of any other
vessel owned by or chartered to the Bareboat Charterer;
(f) it will do and permit to be done each and every act or thing which the
Lender may from time to time require to be done for the purpose of
better securing, protecting or enforcing the Lender's rights under the
assignment contained in Clause 3 and to permit the Bareboat
Charterer's name to be used as and when required by the Lender for the
purpose;
(g) it will, upon the happening of an Event of Default to the extent
permitted by applicable law, permit the Lender to enforce all other
rights and benefits accruing to the Bareboat Charterer under or in
respect of the Bareboat Charterer's Assigned Property and for this
purpose to take over or institute proceedings in respect thereof;
(h) it is the sole legal and beneficial owner of the whole of the Bareboat
Charterer's Assigned Property.
5.2 The Bareboat Charterer hereby further undertakes with the Lender that the
Bareboat Charterer will not (without the prior written consent of the
Lender) throughout the Security Period:-
(a) further assign, charge, pledge or otherwise encumber the Bareboat
Charterer's Assigned Property or any of its rights or benefits
thereunder or in respect thereof, to anyone other than the Lender;
(b) assign, charge, pledge or otherwise encumber the Bareboat Charter to
which it is a party or any of its rights or benefits thereunder or in
respect thereof to anyone whatsoever;
(c) take or omit to take any action the taking or omission of which might
result in any alteration or impairment of any of the rights or
benefits thereby created or created by this Deed;
(d) claim or exercise any lien upon hire or sub-freights which might
otherwise be available to it under any other sub-charter in respect of
the Vessel or its Earnings in competition with the Lender;
<PAGE>
- 13 -
(e) enter into any charter in respect of the Vessel below the market rate
prevailing at the time the Vessel is fixed without the Lender's prior
consent:
(i) (other than the Bareboat Charter) on demise charter for any
period; or
(ii) by any time or consecutive voyage charter for a period which
exceeds or by virtue of any optional extensions might exceed
thirteen (13) months duration; or
(iii) on terms whereby more than two (2) months' hire (or the
equivalent) is payable in advance;
Provided always that in respect of the matters referred to above in
this clause 5.2(e) the Lender's consent shall be deemed to have been
given thereto if the Bareboat Charterer shall not have been informed
by the Lender either in writing or by word of mouth that such consent
is refused within five (5) Banking Days of the time at which the
application for such consent was acknowledged as received by the
Lender (who shall promptly give such acknowledgement);
(f) amend, vary, terminate, repudiate or cancel the Bareboat Charter to
which it is a party for whatever reason or take any action which would
in any way render the Bareboat Charter inoperative or unenforceable;
(g) grant any consent relating to any term or condition of the Bareboat
Charter which may be required from the Bareboat Charterer pursuant to
the provisions of the Bareboat Charter;
(h) determine the Bareboat Charter (notwithstanding anything contained
therein) for any reason whatsoever provided always that any
determination of the Bareboat Charter by the Bareboat Charterer after
such consent is given shall be without responsibility on the part of
the Lender who shall be under no liability whatsoever in the event
that such determination be thereafter adjudged to constitute a
repudiation of the Bareboat Charter by the Bareboat Charterer.
6. GENERAL UNDERTAKINGS
- --- --------------------
6.1 Each of the Owner and the Bareboat Charterer hereby jointly and severally
undertakes with the Lender throughout the Security Period:-
(a) to insure the Vessel with Insurers acceptable to the Lender and keep
the Vessel insured in accordance with the provisions of clause 4 of
the Mortgage as if the same were set forth in full herein;
(b) to perform its respective obligations under the Bareboat Charter and
under the Insurances or the Earnings and to use its best endeavours to
procure the due performance of the respective obligations of any other
party to any contract in respect of the Vessel or its Earnings and
shall notwithstanding the assignment herein contained take such action
to collect any monies or enforce any rights and benefits hereby
assigned until notified in writing by the Lender;
<PAGE>
- 14 -
(c) promptly to notify the Lender of any default by any party under the
Bareboat Charter or under any sub-charter or any other contract in
respect of the Vessel or its Insurances or its Earnings;
(d) not without the prior written consent of the Lender register the
Vessel in any other jurisdiction other than in the Flag State;
(e) to apply any proceeds in respect of the sale or Total Loss of the
Vessel in accordance with the terms of the Loan Agreement and the rest
of the Security Documents;
(f) to subordinate all rights it may have (in the case of the Bareboat
Charterer this shall include all its rights as commercial manager of
the Vessel) against each other, the Vessel, the Insurances or the
Earnings to the rights of the Lender under the Mortgage and the other
Security Documents and that it will not exercise any of its rights
aforesaid in competition with the Lender;
(g) not without the approval of the Lender share the Earnings with any
other person;
(h) to ensure that the Operating Account and any other accounts opened
during the Security Period for the receipt of Earnings in respect of
the Vessel are maintained separately for that purpose alone and that
no monies in respect of any other vessel owned by the Owner and
operated by the Bareboat Charterer are credited to such accounts.
6.2 It is agreed by and between the parties hereto:-
(a) that, notwithstanding anything contained in the Bareboat Charter upon
the occurrence of an Event of Default under the Loan Agreement and/or
the Mortgage and if the Lender becomes entitled to put into force and
exercise all the powers possessed by it as mortgagee of the Vessel the
Lender shall be entitled (but not bound) to terminate the Bareboat
Charter at any time by notice in writing to the Owner and the Bareboat
Charterer;
(b) that upon termination of the Bareboat Charter pursuant to Clause 6.2
(a) all liabilities whatsoever of the Owner and the Bareboat Charterer
thereunder shall be absolutely discharged and extinguished;
(c) that in the event that the circumstances wherein the Lender becomes
entitled under Clause 6.2(a) to terminate the Bareboat Charter shall
constitute or include grounds whereon the Owner was entitled to
terminate the same, any termination by the Lender shall, as between
the Owner and the Bareboat Charterer, operate as an acceptance by the
Owner of the Bareboat Charterer's repudiation of the Bareboat Charter
and the Owner's right to recover damages in respect of such
repudiation shall be fully preserved;
(d) that notwithstanding anything herein contained the Owner, the Bareboat
Charterer shall remain liable to perform all the obligations assumed
by it under the Bareboat Charter and the Lender shall have no
obligations
<PAGE>
- 15 -
whatsoever thereunder or be under any liability whatsoever to the
Owner, the Bareboat Charterer in the event of any failure by the Owner
or the Bareboat Charterer to perform its obligations thereunder or
hereunder
(e) that notwithstanding anything herein contained, in the event of a sale
of the Vessel during the Security Period pursuant to the power in that
behalf vested in the Lender by virtue of the Security Documents, such
sale shall be free of the Bareboat Charter and the Owner and the
Bareboat Charterer shall enter into such form of agreement or
agreements as the Lender may require for termination of the Bareboat
Charter by mutual consent.
7. OWNER'S AND BAREBOAT CHARTERER'S LIABILITY NOT AFFECTED
- --- -------------------------------------------------------
7.1 The liability of the Owner and the Bareboat Charterer to the Lender under
this Deed shall not be discharged, impaired or otherwise affected by reason
of any of the following events or circumstances (regardless of whether any
such events or circumstances occur with or without its knowledge or
consent):-
(a) any time, forbearance or other indulgence given or agreed by the
Lender to or with any of the other Obligors in respect of any of their
respective obligations under any of the Security Documents; or
(b) any legal limitation, disability or incapacity relating to any other
Obligor; or
(c) any invalidity, irregularity, unenforceability, imperfection or
avoidance of or any defect in security granted by, or the obligations
of any other Obligor under the Security Documents or any of them or
any amendment to or variation thereof or any other document or
security comprised therein (whether or not known to the Lender); or
(d) any change in the name, constitution or otherwise of any other Obligor
or the merger of any other Obligor by or with any other person; or
(e) the liquidation, bankruptcy or dissolution (or proceedings analogous
thereto) of any other Obligor or the appointment of a receiver or
administrative receiver or administrator or trustee or similar officer
of any of the assets of any other Obligor or the occurrence of any
circumstances whatsoever affecting such Obligor's liability to
discharge its respective obligations under any of the Security
Documents; or
(f) any challenge, dispute or avoidance by any liquidator of any other
Obligor in respect of any claim by any other Obligor by right of
subrogation in any such liquidation; or
(g) any release, renewal, exchange or realisation of any security or
obligation provided under or by virtue of any of the Security
Documents or the provision by the Lender at any time if any further
security is given for the obligations of the Obligors under any of the
Security Documents; or
<PAGE>
- 16 -
(h) any release of any guarantor or any release of any third party Obligor
in respect of any of the Obligors' obligations under any of the
Security Documents; or
(i) any failure on the part of the Lender (whether intentional or not) to
take or perfect any security agreed to be taken under or in relation
to any of the Security Documents; or
(j) any other act, matter or thing which might otherwise constitute a
legal or equitable discharge of the obligations of any other Obligor
hereunder.
8. PERFORMANCE
- --- -----------
8.1 It is further agreed between the parties hereto that to the extent that the
Bareboat Charterer duly performs and discharges (or procures the
performance and discharge of) the duties and liabilities referred to in
Clause 5.1 (b) hereof and to the further extent that the Bareboat
Charterer, pursuant to the Bareboat Charter performs and discharges further
duties and liabilities undertaken by the Owner in the Mortgage, then such
performance and discharge of the said duties and liabilities by the
Bareboat Charterer shall to that extent be deemed to be proper and due
performance and discharge of the Owner's duties and liabilities under the
Mortgage.
8.2 Notwithstanding anything herein contained to the contrary, the Lender shall
not be under any obligation or liability with respect to the Bareboat
Charter or to any contract or obligation giving rise to any of the Earnings
or the Insurances by reason of this Deed or anything arising thereout, nor
shall the Lender be required to assume or be under any obligation in any
manner to perform or fulfil any obligation with respect to any contract or
obligation giving rise to any of the Earnings or the Insurances, or to make
any payment thereunder, or to enforce against any party any term or
condition or any other contract with respect to the Earnings or the
Insurances or to make any enquiries as to the nature or sufficiency of any
payment received under or by virtue of this Deed.
8.3 The Owner and the Bareboat Charterer hereby waive the entitlement conferred
by Section 93 of the Law of Property Act 1925 and agree that Section 103 of
that Act shall not apply to the security created by this Deed. For the
avoidance of doubt, the powers of the Lender and any receiver by virtue of
this Deed shall not be limited to those specified in Section 101 of the Law
of Property Act 1925.
8.4 In the event of any circumstances whereby further performance of the
Bareboat Charter becomes impossible or unlawful or is otherwise frustrated
no moneys then paid to the Lender shall be recoverable from it.
8.5 After the Outstanding Indebtedness has been fully and unconditionally
discharged to the satisfaction of the Lender this Deed shall be returned to
the Owner and the Bareboat Charterer and the Assigned Property re-assigned
as appropriate at their cost.
<PAGE>
- 17 -
9. APPOINTMENT OF ATTORNEY
- --- -----------------------
9.1 Each of the Owner and the Bareboat Charterer irrevocably appoints and
constitutes the Lender as its true and lawful attorney with full power of
substitution, (in the name of the Owner, the Bareboat Charterer or
otherwise) in the event that an Event of Default has occurred, to the
extent permitted by applicable law, to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for moneys
due and to become due, to endorse any cheque or other instrument or orders
in connection therewith and to file any claims or take any action or
institute any proceedings which the Lender may deem necessary or advisable
and otherwise to do any and all things which the Owner or the Bareboat
Charterer itself could do in relation to the property hereby assigned
provided always that the power shall not be exercised by the Lender until
an Event of Default has occurred.
9.2 The exercise of such power as is referred to in Clause 9.1 and 6.2 by or on
behalf of the Lender shall not put any person dealing with the Lender upon
any enquiry as to whether the Mortgage and this Deed shall have become
enforceable nor shall such notice that the Mortgage and this Deed shall
have not become enforceable and, in relation to Clause 9.1 and 6.2, the
exercise by the Lender or any receiver of such power shall be conclusive
evidence of its right to exercise the same.
10. CONSENT
- ---- -------
10.1 In consideration of the covenants on the part of the Owner and the Bareboat
Charterer herein contained, the Lender hereby grants its consent to the
Vessel being let to the Bareboat Charterer under the Bareboat Charter.
11. TAXES
- ---- -----
11.1 The Owner and the Bareboat Charterer agree to pay or to cause to be paid
directly to the appropriate governmental authority or to the Lender the
cost of any and all present and future Taxes in accordance with Clause 18
of the Loan Agreement.
12. FURTHER ASSURANCE
- ---- -----------------
12.1 Each of the Owner and the Bareboat Charterer agrees that at any time and
from time to time upon written request of the Lender each will promptly and
duly execute and deliver to the Lender any and all such further instruments
and documents as the Lender may deem necessary and/or desirable in
obtaining the full benefits of the rights and powers herein granted.
13. CONTINUING SECURITY
- ---- -------------------
13.1 The security created by this Deed shall be held by the Lender as a
continuing security for the payment of the Outstanding Indebtedness and the
performance and observance of and the compliance with all of the covenants,
terms and conditions contained in the Security Documents and the security
so created shall not be set aside by any intermediate payment or
satisfaction of any part of the amount hereby and thereby secured and the
security so created shall be in addition to and shall not in any way be
prejudiced or affected by any collateral or other security now or hereafter
held by
<PAGE>
- 18 -
the Lender for all or any part of the moneys hereby and thereby secured and
every power and remedy given to the Lender hereunder shall be in addition
to and not a limitation of any and every power or remedy vested in the
Lender under the Security Documents or at law and all the powers so vested
in the Lender may be exercised from time to time and as often as the Lender
may deem expedient and no delay or omission of the Lender to exercise any
right or power shall be construed as a waiver of or an acquiescence in any
default by the Owner and/or the Bareboat Charterer.
13.2 Any settlement or discharge under this Deed between the Lender, the Owner
and the Bareboat Charterer shall be conditional upon no security or payment
to the Lender by the Owner or the Bareboat Charterer or any other person
being avoided or set aside or ordered to be refunded or reduced by any
provision or enactment relating to bankruptcy, insolvency, administration
or liquidation for the time being in force and, if such condition is not
satisfied, the Lender shall be entitled to recover from the Owner and/or
the Bareboat Charterer on demand the value of such security or the amount
of any such payment as if such settlement or discharge had not occurred.
14. OBLIGATION TO PROVE IN LIQUIDATION
- ---- ----------------------------------
14.1 The Owner and/or the Bareboat Charterer shall, if the Lender so instructs,
prove in a liquidation of any Obligor for any amounts owed to the Owner
and/or the Bareboat Charterer by such Obligor in connection with this Deed
provided that any monies received or recovered by the Owner and/or the
Bareboat Charterer in such liquidation shall be paid to the Lender on its
request and, pending such payments, be held by the Owner and/or the
Bareboat Charterer as trustee upon trust for the Lender to apply the same
as if they were monies received or recovered by the Lender under this Deed.
15. SUSPENSE ACCOUNT
- ---- ----------------
15.1 Any monies received or recovered by the Lender under or in connection with
this Deed may, at its discretion, be credited to any suspense or impersonal
account and may be held in such account for so long as the Lender thinks
fit pending application at the Lender's discretion from time to time in or
towards the discharge of the Outstanding Indebtedness or any part thereof
in accordance with the terms of the Loan Agreement.
16. PROTECTION OF SECURITY
- ---- ----------------------
16.1 The Lender shall without prejudice to its other rights and powers under
this Deed and the other Security Documents be entitled (but not bound) at
any time and as often as may be necessary to take any such action as it may
in its discretion think fit for the purpose of protecting or maintaining
the security created by this Deed and each and every reasonable expense,
liability and loss (including, without limitation, legal fees) reasonably
incurred by the Lender in or about the protection or maintenance of the
said security together with interest payable thereon under Clause 4.1 (i)
shall be repayable to it by the Owner on demand.
<PAGE>
- 19 -
17. LENDER'S POWERS
- ---- ---------------
17.1 After the occurrence of an Event of Default to the extent permitted by
applicable law the Lender (irrespective of whether or not it shall have
taken steps to enforce any of the powers specified or referred to in clause
7.1 of the Mortgage and Clause 6.2 of this Deed) shall become forthwith
entitled, as and when it may see fit, to put into force and exercise all or
any of the powers possessed by it as assignee of the Assigned Property and
in particular:-
(a) to collect, recover, compromise and give a good discharge for any and
all moneys or claims for moneys then outstanding or thereafter arising
under the Insurances or in respect of the Earnings and to permit any
brokers through whom collection or recovery is effected to charge the
usual brokerage therefor;
(b) to take over or institute (if necessary using the name of the Owner
and the Bareboat Charterer) all such proceedings in connection with
the Assigned Property as the Lender in its absolute discretion thinks
fit;
(c) generally, to recover from the Owner on demand each and every expense,
liability or loss incurred by the Lender in or about or incidental to
the exercise by it of any of the powers aforesaid.
17.2 Neither the Lender, nor any receiver, nor any agents, managers, officers,
employees, delegates and advisers shall be liable for any expense, claim,
liability, loss, cost, damages or expense incurred or arising in connection
with the exercise or purported exercise of any rights, powers and
discretions under this Deed in the absence of negligence or wilful
misconduct.
17.3 Neither the Lender, nor any receiver, shall by reason of the Lender or such
receiver taking possession of the whole or any part of the Assigned
Property be liable to account as mortgagee-in-possession or for anything
except actual receipts or be liable for any loss upon realisation or for
any default or omission for which a mortgagee-in-possession might be liable
in the absence of negligence or wilful misconduct.
17.4 Upon the security constituted by the Mortgage becoming immediately
enforceable pursuant to clause 7.1 of the Mortgage and Clause 6.2 of this
Deed, the Lender shall (in addition to the powers described in Clause 17.1)
become forthwith entitled (but not bound) to appoint, by an instrument in
writing under its Common Seal or under the hand of any director or officer
of the Lender, a receiver and/or manager of the Assigned Property upon such
terms as to reasonable remuneration and otherwise as the Lender shall deem
fit with power from time to time to remove any receiver and appoint another
in his stead and any receiver shall be the agent of the Owner and/or the
Bareboat Charterer (who shall be solely responsible for his acts and
defaults and remuneration) and shall have all the powers conferred by the
Law of Property Act 1925 (save that Section 103 of that Act shall not
apply) and the Insolvency Act 1986 and by way of addition to, but without
limiting, those powers any receiver shall have all the powers specified or
otherwise referred to in Clauses 16 and 17.1 (including but not limited to
the right to recover from the Owner every such expense, liability
<PAGE>
- 20 -
or loss as is therein described) and generally shall be entitled to the
same projections and to exercise the same powers and discretions as are
granted to the Lender under this Deed and the Bareboat Charterer hereby
undertakes to comply with all instructions received from such a receiver
and/or manager.
18. APPLICATION OF MONEYS
- ---- ---------------------
18.1 All moneys received by the Lender after an Event of Default in respect of
the Assigned Property shall be applied in the manner specified in clause
10.5 of the Loan Agreement.
19. SUCCESSORS AND ASSIGNS
- ---- ----------------------
19.1 This Deed shall be binding upon and enure to the benefit of the Owner and
the Bareboat Charterer and the Lender and their respective successors and
assigns, except that neither the Owner nor the Bareboat Charterer may
assign any of their respective rights or obligations hereunder.
19.2 The Lender shall be entitled at any time to transfer or assign the whole or
any part of its rights and benefits under this Deed in accordance with
clause 19 of the Loan Agreement and the Owner hereby consents to the
assignment on the date hereof by the Lender to the Bank of its rights and
benefits hereunder.
20. NOTICES
- ---- -------
20.1 Except as otherwise provided herein, each notice, request, demand or other
communication or document to be given or made hereunder shall be given in
writing but unless otherwise stated, may be made by telex or telefax.
20.2 Any notice, demand or other communication to be made or delivered pursuant
to this Deed shall be made or delivered as follows:-
(i) if to the Owner to it at its registered address as aforesaid telefax
number (507) 263 5335 marked for the attention of Alfonso Arias;
(ii) if to the Bareboat Charterer to it at 4000 Hollywood Boulevard,
Hollywood, Florida 33021 telefax number (305) 967 2147 marked for
the attention of Alan Pritzker and Fred Mayer;
(iii) if to the Lender to it c/o Effjohn OY AB at Bulevardi 1A, PO Box
659, 00101 Helsinki, Finland telefax number 3580 627736 marked for
the attention of finance department; and
(iv) in the case of the Owner and the Bareboat Charterer with copy to
Broad & Cassel, Miami Centre, 201 South Biscayne Boulevard, Suite
3000, Miami, Florida 33131 telefax number (305) 373 9493 marked for
the attention of James Cassel and with a further copy to JeMJ
Financial Services Inc, TelMed, Inc., 9350 S. Dixie Highway, Suite
1220, Miami, Florida 33156 telefax number (305) 238 6248 marked for
the attention of Jeffrey I. Binder
<PAGE>
- 21 -
or such other address, telex number or telefax number as each such
addressee may specify to the other relevant party or parties by not less
then fifteen (15) days' written notice.
20.3 Each such notice, demand, request or other communication shall be deemed to
have been made or delivered when:-
(a) (in the case of telex) the addressee's answerback shall have been
received at the end of the transmission or (in the case of telefax)
when a materially complete and legible copy of the communication has
been received by the addressee (unless the date of despatch is not a
Banking Day in the country of the addressee or the time of despatch is
outside normal business hours in the country of the addressee, in
which case such telex or telefax shall be deemed to have been received
at the opening of business on the next such Banking Day); or
(b) (in the case of any letter) when delivered to the addressee's address
as specified in or notified pursuant to Clause 20.2 or, if sent by
post first class postage prepaid in an envelope addressed to the
addressee at that address five (5) days after being deposited in the
post.
20.4 Each notice, demand, request or other communication made or delivered by
one party to another pursuant to this Deed shall be in the English language
or accompanied by a certified English translation.
21. EXPENSES
- ---- --------
21.1 All legal and other costs and expenses (including stamp duty, if any)
reasonably incurred by the parties hereto in connection with the
negotiation, preparation, completion and any registration and/or recording
of this Deed and the other Security Documents and the action to be taken to
give effect to them including all costs and expenses incurred by the Lender
in enforcing this Deed and in protecting and enforcing its interests
hereunder in any court of law or otherwise shall be paid in accordance with
clause 20 of the Loan Agreement.
22. LAW AND JURISDICTION
- ---- --------------------
22.1 This Deed shall be governed by and construed in accordance with the laws of
England and for the exclusive benefit of the Lender, the parties hereto
hereby irrevocably submit to the non-exclusive jurisdiction of the High
Courts of Justice in England provided that the Lender (but not the Owner
nor the Bareboat Charterer) shall be at liberty in addition or
alternatively to take proceedings in the courts of any other country which
may have jurisdiction or in which the Owner and/or the Bareboat Charterer
may reasonably be thought to have assets. Each of the Owner and the
Bareboat Charterer hereby irrevocably authorises and appoints the Process
Agent for the acceptance of service of legal proceedings hereunder and
under the other Security Documents to which it is a party, service upon
whom shall be deemed to constitute good service of legal process without
prejudice to any other lawful means and undertakes to maintain a process
agent in England.
<PAGE>
- 22 -
23. CURRENCY LOSSES
- ---- ---------------
23.1 The Owner and the Bareboat Charterer shall indemnify the Lender against any
loss or damage which, consequent upon any judgment being obtained or
enforced in respect of the non-payment by the Owner or the Bareboat
Charterer of any amounts due under or pursuant to one or more of the
Security Documents, arises from any variation in rates of exchange between
the currency in which such amount was due and the currency in which
judgment is obtained or enforced between the date of the said amounts
becoming due (or the date of the said judgment being obtained, as the case
may be) and the date of actual payment thereof.
23.2 The indemnities contained in this Clause 23 shall apply irrespective of any
indulgence granted to the Owner and/or the Bareboat Charterer from time to
time and shall continue in full force and effect notwithstanding any
payment in favour of the Lender and any amount due from the Owner and the
Bareboat Charterer under this Clause 23 will be due as a separate debt and
shall not be affected by judgment being obtained for any other sums due or
in respect of one or more of the Security Documents.
24. MISCELLANEOUS
- ---- -------------
24.1 All documents, notices or other communications submitted, served or made
under this Deed shall, unless the Lender shall otherwise require, be in the
English language or, if in another language shall be accompanied by a
certified translation into English by a translator acceptable to the Lender
which translation (otherwise than in the case of official consents) shall
be the governing version.
24.2 Any provisions contained in this Deed prohibited by or unlawful or
unenforceable under any applicable law shall, to the extent required by
such law, be ineffective without modifying the remaining provisions of this
Deed. Where however the provisions of any such applicable law may be
waived, they are hereby waived by the parties hereto to the full extent
permitted by such law to the end that this Deed shall be valid and binding
agreements enforceable in accordance with their respective terms.
24.3 Time is the essence of this Deed but no failure or delay on the part of the
Lender in exercising any right, power or privilege hereunder and no course
of dealing between the Owner, the Bareboat Charterer and/or any other
person and the Lender shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this Deed
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies in this Deed expressly
provided are cumulative and not exclusive of any rights or remedies which
any or all of the parties hereto would otherwise have. No notice to or
demand on the Owner and/or the Bareboat Charterer in any case shall entitle
such persons to any other or further notice or demand to similar or other
circumstances or constitute a waiver of the rights of the Lender to any
other or further action in any circumstances without notice or demand.
24.4 This Deed may be executed in counterparts, each of which shall be deemed an
original and all of which, taken together, shall constitute but one and the
same instrument which may be sufficiently evidenced by one counterpart.
<PAGE>
- 23 -
EXECUTION PAGE
--------------
IN WITNESS whereof this Deed has been duly executed the day and year first above
written.
THE OWNER
- ---------
SIGNED, SEALED and DELIVERED )
as a DEED )
by JAMES SCOTT CASSEL ) /s/ James Scott Cassel
the duly appointed attorney in fact of )
AZURE INVESTMENTS, INC. )
in the presence of:- )
Name: LARA DODSON
Address: 5, APPOLD STREET, LONDON ECZ /s/ L. Dodson
Occupation: SOLICITOR
THE BAREBOAT CHARTERER
- -----------------------
SIGNED SEALED and DELIVERED )
as a DEED )
by JAMES SCOTT CASSEL ) /s/ James Scott Cassel
the duly appointed attorney-in-fact of )
NEW COMMODORE CRUISE )
LINES LIMITED )
in the presence of:- )
Name: LARA DODSON /s/ L. Dodson
Address 5, APPOLD STREET, LONDON ECZ
Occupation:
<PAGE>
- 24 -
THE LENDER
- ----------
SIGNED SEALED and DELIVERED )
as a DEED by )
THOMAS FORSS ) /s/ Thomas Fross
for and on behalf of )
EFFJOHN INTERNATIONAL CRUISE )
HOLDINGS INC. )
in the presence of:- )
Name: LARA DODSON
Address 5, APPOLD STREET, LONDON ECZ /s/ L. Dodson
Occupation:
<PAGE>
- 25 -
SCHEDULE A
----------
HULL & MACHINERY & WAR RISKS
----------------------------
LOSS PAYABLE CLAUSE
-------------------
m.v. "Enchanted Seas"
(the "Vessel")
"It is noted that by a first assignment in writing dated , 1995
Azure Investments, Inc., (the "Owner") being the registered owner of the Vessel
and New Commodore Cruise Lines Limited (the "Bareboat Charterer") being the
demise charterer of the Vessel have assigned absolutely to Effjohn International
Cruise Holdings Inc of c/o Caledonian Bank & Trust Limited, P O Box 1043 Grand
Cayman, Cayman Islands (the "Lender") all of the interests of the Owner and the
Bareboat Charterer in this policy and all benefits thereof including all claims
of whatsoever nature hereunder.
Claims payable in respect of a actual or constructive total or an arranged
or agreed or compromised total loss or requisition for title or other
compulsory acquisition of the Vessel shall be payable to the Lender.
Subject thereto all other claims, unless and until the underwriters have
received notice from the Lender in which event all claims under such policy
of Insurance shall be payable direct to the Lender, shall be payable as
follows:-
(i) a claim not exceeding USD1,500,000 or its equivalent in any other
currency shall be released directly to the Bareboat Charterer or to
its order for the repair salvage or other charges involved or as
reimbursement if it has fully repaired the damage and paid all of
the salvage or other charges;
(ii) a claim exceeding USD1,500,000 or the equivalent in any other
currency shall, subject to the prior written consent of the Lender
be paid to the Bareboat Charterer or to its order as and when the
Vessel is restored to her former state and condition and the
liability in respect of which the insurance loss is payable is
discharged provided that the insurers may with such consent as
aforesaid make payment on account of repairs in the course of being
effected;"
<PAGE>
- 26 -
PROTECTION & INDEMNITY
----------------------
LOSS PAYABLE CLAUSE
-------------------
m.v. "Enchanted Seas"
(the "Vessel")
"It is noted that by a first assignment in writing dated , 1995
Azure Investments, Inc., (the "Owner") being the registered owner of the Vessel
and New Commodore Cruise Lines Limited (the "Bareboat Charterer") being the
demise charterer of the Vessel has assigned absolutely to Effjohn International
Cruise Holdings Inc of Caledonian Bank & Trust Limited, P O Box 1043, Grand
Cayman, Cayman Islands (the "Lender") all the interests of the Owner and the
Bareboat Charterer in this policy and all benefits thereof including all claims
of whatever nature hereunder.
Claims hereunder for all losses shall be paid direct to the Owner or the
Bareboat Charterer unless and until the Lender shall have given notice in
writing that the Owner or the Bareboat Charterer or any of them is in
default whereafter such claims shall be payable to the Lender up to the
amount of the mortgagees' mortgage interest".
<PAGE>
- 27 -
SCHEDULE B
----------
NOTICE OF FIRST ASSIGNMENT
--------------------------
We, Azure Investments, Inc., of Panama, being the registered owner and New
Commodore Cruise Lines Limited of Bermuda, being the demise charterer of m.v.
"Enchanted Seas" (the "Vessel") HEREBY GIVE NOTICE that all our rights, title
and interest in the insurances in respect of the Vessel, including the
insurances constituted by the Policy whereon this Notice is endorsed, have by
virtue of a deed dated , 1995 been assigned
to Effjohn International Cruise Holdings Inc of Caledonian Bank & Trust Limited,
P O Box 1043, Grand Cayman, Cayman Islands as first assignee of the Vessel's
Insurances.
Dated this day , 1995.
Azure Investments, Inc.
by: ______________________________
(attorney-in-fact)
New Commodore Cruise Lines Limited
by: ______________________________
(attorney-in-fact)
<PAGE>
- 28 -
SCHEDULE C
----------
(HULL AND MACHINERY/WAR RISKS)
To: Effjohn International Cruise Holdings Inc.,
Caledonian Bank & Trust Limited,
P O Box 1043,
Grand Cayman,
Cayman Islands
Dated: 1995
Dear Sirs,
m.v. "Enchanted Seas"
Owners Azure Investments, Inc.
------------------------------
Bareboat Charterer: New Commodore Cruise Lines Limited
------------------------------------------------------
We confirm that we have effected insurances for the account of the above Owners
and Bareboat Charterer as set out in Appendix A attached.
Pursuant to instructions received and in consideration of your approving our
appointment as Brokers in connection with the insurances covered by this letter,
we hereby undertake:-
1. to hold the Insurance Slips or Contracts, the Policies when issued and any
renewals of such Policies or new Policies or any Policies substituted (with
your consent) therefor and the benefit of the insurances thereunder to your
order in accordance with the terms of the Loss Payable Clause set out in
Appendix B attached; and
2. to arrange for the said Loss Payable Clause to be included on the Policies
when issued; and
3. to have endorsed on each and every Policy as and when the same is issued a
Notice of Assignment in the form of Appendix C hereto dated and signed by
the Owners and acknowledged by Underwriters in accordance with market
practice; and
4. to advise you immediately we cease to be the Broker for the Assured or in
the event of any material changes which may be made to the terms of the
insurances and following an application received from you not later than
one month before expiry of these insurances to notify you within fourteen
days of the receipt of such application in the event of our not having
received notice of renewal instructions from the Owners, the Bareboat
Charterer and/or their agents, and in the event of our receiving
instructions to renew to advise you promptly of the details thereof.
Our above undertakings are given subject to our lien on the Policies for
premiums due specifically in respect of the Ship named above and subject to our
right of cancellation on default in payment of such premiums but we undertake to
advise you immediately if any
<PAGE>
- 29 -
premiums are not paid to us by due date and not to exercise such rights of
cancellation without giving you fourteen days' notice in writing, either by
letter, telex or cable, and a reasonable opportunity of paying any premiums
outstanding. (In the case of War Risks the terms of the Automatic Termination of
Cover Clause contained in the War Risk Policies shall override any undertakings
given by us as Brokers).
It is understood and agreed that the operation of any Automatic Termination of
Cover, Cancellation or Amendment Provisions contained in the policy conditions
shall override any Undertaking given by us as Brokers.
There shall be no recourse against you as Mortgagee for payment of premium on
any insurance carried on these ships.
Notwithstanding the terms of the said Loss Payable Clause and the said Notice of
Assignment, unless and until we receive notice from you to the contrary, we
shall be empowered to arrange for a collision and/or salvage guarantee where the
aggregate liability under any guarantees given in respect of any one casualty
shall not exceed USD1,500,000 or the equivalent in any other currency to be
given in the event of bail being required in order to prevent the arrest of the
ship or to secure the release of a ship from arrest following a casualty. Where
a guarantee has been given as aforesaid and the guarantor has paid any sum under
the guarantee in respect of such claim, there shall be payable directly to the
guarantor out of proceeds of the said Policies a sum equal to the sum so paid.
Finally, it is understood that all claims and returns of premiums shall be
collected through us, as Brokers.
Yours faithfully,
<PAGE>
- 30 -
(PROTECTION AND INDEMNITY)
--------------------------
To: Effjohn International Cruise Holdings Inc.,
Caledonian Bank & Trust Limited,
P O Box 1043,
Grand Cayman,
Cayman Islands
Dated: 1995
Dear Sirs,
m.v. "Enchanted Seas"
Owners: Azure Investments, Inc.
Bareboat Charterer: New Commodore Cruise Lines Limited
We acknowledge receipt of a letter from Messrs, Sinclair Roche & Temperley
giving notice of a first priority assignment to you of the insurances on the
above ship. So far as this Association is concerned, the managers to not
consent to such assignment for the purposes of Rule , other than to give
efficacy to the Loss Payable Clause set out below and subject always to the
Association's right under Rule .
We do confirm however that such ship is entered in this Association for
Protections and Indemnity risks on the terms and conditions set out or to be set
out in the Certificate of Entry. Furthermore, in consideration of your agreeing
to the entry or continuing entry of the ship in this Association, the managers
agree:-
(a) that the Owner shall not cease to be insured by the Association in respect
of that ship by reason of such assignment (see Rule ), and
(b) that, notwithstanding that the ship is mortgaged to you and that no
undertaking or guarantee has been given to the Association to pay all
contributions due in respect of such ship, the Owner does so not cease to
be insured by reason of the operation of Rule .
It is further agreed that the following Loss Payable Clause will be included in
the Certificate of Entry.
"Payment of any recovery the Owner is entitled to make out of the funds of
the Association in respect of any liability, costs of expenses incurred by
it shall be made to the Owner or to its order unless and until the
Association received notice from Effjohn International Cruise Holdings Inc
that the Owner is in default under a First Mortgage dated 1995
in which event all recoveries shall thereafter be paid to Effjohn
International Cruise Holdings Inc or its order, provided always that
<PAGE>
- 31 -
no liability whatsoever shall attach to the Association, its managers or
their agents for failure to comply with the obligations herein until after
the expiry of two clear days from the receipt of such notice."
Notwithstanding anything contained herein, the association shall (unless and
until the mortgagees shall have given notice in writing to the contrary) be at
liberty at the request of the owner to provide bail or other security to prevent
the arrest or obtain of the release of the vessel.
The Association undertakes:-
(a) to inform you if the Directors give the Owner of the above ship notice
under Rule that its insurance in the Association in respect of such
ship is to cease at the end of the then current Policy year;
(b) to give you fourteen days' notice of the Association's intention to cancel
the insurance of the Owner by reason of its failure to pay when due and
demanded any sum due from it to the Association.
Yours faithfully
<PAGE>
- 32 -
SCHEDULE D
----------
NOTICE OF FIRST ASSIGNMENT OF CHARTER AND EARNINGS
--------------------------------------------------
TO: [Charterer]
Date 19
m.v. "Enchanted Seas" the ("Vessel")
------------------------------------
We refer to the charterparty (the "Charter") dated 19 made
between us and you whereby you have agreed to take the Vessel on charter for the
period and upon the terms and conditions therein.
NOW WE HEREBY GIVE YOU NOTICE:-
- -----------------------------
1. That by a first assignment in writing dated , 199 made
between (inter alia) us and Effjohn International Cruise Holdings Inc.,
(the "Lender") we have assigned to the Lender all our rights title and
interest to and in the Charter and any moneys whatsoever payable to us
under the Charter and all other rights and benefit whatsoever accruing to
us thereunder by way of a first assignment.
2. That you are hereby irrevocably authorised and instructed to pay such
moneys as aforesaid to [ ] for the
account no. [ ] Reference "Enchanted Seas" (or
at such other place as the Lender may from time to time direct).
3. That notwithstanding the said assignment we shall remain liable to perform
all our obligations under the Charter and the Lender shall be under no
obligation of any kind thereunder.
The authority and instructions herein contained cannot be revoked or varied
by us without the consent of the Lender.
___________________________________________
for and on behalf of
Azure Investments, Inc.
<PAGE>
- 33 -
To: Effjohn International Cruise Holdings Inc.,
Caledonian Bank & Trust Limited,
P O Box 1043,
Grand Cayman,
Cayman Islands
Dated: 199
We acknowledge receipt of the Notice set out above and agree to make
payments in accordance with the payment instructions contained therein.
___________________________________________
for and on behalf of
<PAGE>
EXECUTION COPY
--------------
Dated 14 July,1995
------------------
Almira Enterprises, Inc.
as owner
New Commodore Cruise Lines Limited
as bareboat charterer
- and -
Effjohn International Cruise Holdings, Inc.
as lender
-----------------------------------
FIRST PRIORITY TRIPARTITE DEED
IN RESPECT OF M.V. "ENCHANTED ISLE"
-----------------------------------
Sinclair Roche & Temperley
Broadwalk House
5 Appold Street
London EC2A 2NN
Tel: 0171 638 9044
Ref: JPM/180210
<PAGE>
<TABLE>
<CAPTION>
INDEX
-----
Clause Subject Matter Page
- ------ -------------- ----
<S> <C> <C>
1. DEFINITIONS 2
2. REPRESENTATIONS AND WARRANTIES 4
3. ASSIGNMENT AND CHARGE 7
4. OWNER'S UNDERTAKINGS 9
5. BAREBOAT CHARTERER'S UNDERTAKINGS 11
6. GENERAL UNDERTAKINGS 13
7. OWNER'S AND BAREBOAT CHARTERER'S LIABILITY NOT AFFECTED 15
8. PERFORMANCE 16
9. APPOINTMENT OF ATTORNEY 17
10. CONSENT 17
11. TAXES 17
12. FURTHER ASSURANCE 17
13. CONTINUING SECURITY 17
14. OBLIGATION TO PROVE IN LIQUIDATION 18
15. SUSPENSE ACCOUNT 18
16. PROTECTION OF SECURITY 18
17. LENDER'S POWERS 19
18. APPLICATION OF MONEYS 20
19. SUCCESSORS AND ASSIGNS 20
20. NOTICES 20
21. EXPENSES 21
22. LAW AND JURISDICTION 21
23. CURRENCY LOSSES 22
24. MISCELLANEOUS 22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SCHEDULE A 25
SCHEDULE B 27
SCHEDULE C 28
SCHEDULE D 32
</TABLE>
<PAGE>
THIS DEED is made the 14 day of July, 1995
BETWEEN:-
(1) ALMIRA ENTERPRISES, INC., a company incorporated under the laws of the
Republic of Panama, with its registered office at c/o Galindo Arias &
Lopez, 200 Via Espana, Panama 5, Panama City, Republic of Panama as owner
(the "Owner");
(2) NEW COMMODORE CRUISE LINES LIMITED, a company incorporated under the laws
of the Bermuda with its registered office at c/o Ardon Management
Services Ltd., c/o Richards Francis & Francis, Cedarpark Centre, 48 Cedar
Avenue, Hamilton HM 11, Bermuda as bareboat charterer (the "Bareboat
Charterer");
(3) EFFJOHN INTERNATIONAL CRUISE HOLDINGS INC., a company incorporated under
the laws of the Cayman Islands with its registered office at Caledonian
Bank & Trust Limited, P O Box 1043, Grand Cayman, Cayman Islands as
lender (the "Lender").
WHEREAS:-
(A) The Owner is the registered owner of m.v. "Enchanted Isle", registered in
the name and ownership of the Owner under the laws and flag of the
Republic of the Panama under Provisional Patente 12535-PEXT-6 (the
"Vessel");
(B) By a loan agreement dated 14 July, 1995 (as the same may from time to
time be amended and supplemented called the "Loan Agreement") and made
between (1) Azure Investments, Inc. and the Owner (the "Borrowers") (2)
the Lender (3) the Bareboat Charterer and Commodore Holdings Limited as
guarantors the Lender has agreed at the request of the Borrowers to make
available to the Borrowers jointly and severally a loan facility of
twenty four million five hundred thousand Dollars (USD24,500,000) (the
"Loan") for the purposes and on the terms and conditions therein
contained;
(C) By a bareboat charter dated 14 July, 1995 (as the same may be amended and
supplemented called the "Bareboat Charter") made between (1) the Owner
and (2) the Bareboat Charterer, the Owner has agreed to let and the
Bareboat Charterer has agreed to take the Vessel for the period and upon
the terms and conditions therein mentioned with effect from the date
hereof on bareboat charter;
(D) As security for the Owner's obligations to the Lender under the Loan
Agreement, the Owner has agreed to execute in favour of the Lender a
first preferred mortgage over the Vessel of even date hereof (as the same
may be amended and supplemented called the "Mortgage");
(F) As further security for the Owner's obligations under the Loan Agreement
and as a condition precedent to the drawdown of the Loan the Owner and
the Bareboat Charterer have agreed to execute this Deed in favour of the
Lender.
(G) The Bareboat Charterer has received a copy of the Mortgage and the Loan
Agreement and is fully conversant with the terms thereof.
<PAGE>
- 2 -
NOW THIS DEED WITNESSETH as follows:-
1. DEFINITIONS
- --- -----------
1.1 In this Deed including the recitals, the following terms and expressions
shall have the meanings set out below; in addition, terms and
expressions not defined herein but whose meanings are defined in the
Loan Agreement shall have the meanings set out therein:-
"Assigned Property" means the Owner's Assigned Property and/or the
Bareboat Charterer's Assigned Property (as hereinafter defined) as the
context may require;
"Bareboat Charter" means the Bareboat Charter referred to in recital
(C);
"Bareboat Charterer" means the Bareboat Charterer referred to in the
recitals;
"Bareboat Charterer's Assigned Property" means all of the Bareboat
Charterer's rights, title and interest in, to and under the Bareboat
Charterer's Earnings, the Insurances (including claims of whatsoever
nature and return of premiums in respect of the Insurances), Requisition
Compensation, and any sub-charter;
"Bareboat Charterer's Earnings" means that part of the Earnings
constituted by all moneys whatsoever due or to become due for the
account of the Bareboat Charterer arising howsoever in connection with
any sub-charter;
"this Deed" means this first priority general assignment;
"Default Rate" means the rate of interest specified in Clause 6.5 of the
Loan Agreement;
"Drawdown Date" means the date of drawdown of the Loan;
"excess risks" means the proportion of claims for general average and
salvage charges and under the ordinary running-down clause not
recoverable in consequence of the value at which a vessel is assessed
for the purpose of such claim exceeding her insured value;
"Insurer" means any underwriter, insurer, club and/or association
providing and/or effecting any of the Insurances and/or any broker or
agent through whom any of the Insurances are provided and/or effected;
"Owner's Assigned Property" means all of the Owner's rights, title and
interest in, to and under the Earnings, the Insurances (including claims
of whatsoever nature and return of premiums in respect of the
Insurances), Requisition Compensation, the Bareboat Charter and the
Owner's Earnings;
"Owner's Earnings" means that part of the Earnings constituted by all
moneys whatsoever due or to become due to or for the account of the
Owner arising howsoever in connection with the Bareboat Charter;
<PAGE>
- 3 -
"protection and indemnity risks" means all risks covered by a major
protection and indemnity association including the proportion not
recoverable in case of collision under the ordinary running-down clause;
"war risks" means the risk of mines and all risks excluded from the
standard form of English marine policy by the free of capture and
seizure clause.
1.2 In this Deed unless the context otherwise requires:-
1.3 clause headings are inserted for convenience of reference only and shall
be ignored in the interpretation of this Deed;
1.4 references to Clauses and Schedules are to be construed as references to
Clauses of and Schedules to this Deed unless otherwise stated and
references to this Deed are to be construed as references to this Deed
including its Schedules;
1.5 reference to (or to any specified provision thereof) of this Deed or any
other Subject Document shall be construed as reference to this Deed,
that provision or that Subject Document, as from time to time amended,
supplemented and/or novated;
1.6 without prejudice to the provisions of Clause 19 references to any party
to this Deed or any other Subject Document shall, include reference to
such party's successors and permitted assigns;
1.7 words importing the plural shall include the singular and vice versa;
1.8 reference to a person shall be construed as references to an individual,
firm, company, corporation, unincorporated body of persons or any state
or any agency thereof;
1.9 where any matter under any Security Document requires the approval or
consent of the Lender such approval or consent shall not be deemed to
have been given unless given in writing; where any matter under any
Security Document is required to be acceptable to the Lender, the Lender
shall not be deemed to have accepted such matter unless its acceptance
is communicated in writing; the Lender may give or withhold its consent,
approval or acceptance under any Security Document subject to it not
being unreasonably withheld or delayed and such consent, approval or
acceptance may be given by the Lender subject to such conditions as it
may reasonably impose;
1.10 a certificate by the Lender as to any amount due or calculation made
hereunder shall be conclusive except for manifest error; and
1.11 references to any statute or other legislative provision are to be
construed as references to any such statute or other legislative
provision as the same may be re-enacted or modified or substituted by
any subsequent statute or legislative provision.
<PAGE>
- 4 -
2. REPRESENTATIONS AND WARRANTIES
- --- ------------------------------
2.1 The Bareboat Charterer hereby represents and warrants to the Lender
that:-
(a) it is and will remain duly incorporated and validly existing under
its country of incorporation as a limited liability company, has
full power and capacity to carry on its business as it is now
being conducted and to own its property and other assets and has
complied with all statutory and other requirements relative to its
business;
(b) on the Drawdown Date the Vessel will not be subject to any
contract commitment or other arrangement for its employment except
for the Bareboat Charter or any permitted sub-charter or as
otherwise as disclosed to and agreed by the Lender;
(c) to the extent of its obligations thereunder, it has and will
continue to have full power and authority to enter into and
perform such of the Subject Documents to which it is or is to
become a party, has taken all necessary corporate or other action
(as the case may be) required to enable it to do so and will duly
perform and observe the terms thereof;
(d) each of the Subject Documents to which it is or is to become a
party constitutes or will, upon execution and delivery, constitute
valid and legally binding obligations of the parties thereto
enforceable by the Obligors thereto in accordance with its terms
save for laws restricting creditor's rights generally;
(e) except for the registration of the Mortgage with the appropriate
authorities of the Flag State and the charges created by the
Security Documents recorded in the appropriate companies'
registry, or filed in the relevant jurisdictions in the United
States of America all consents, licences, approvals, registrations
or authorisations of governmental authorities and agencies or
declarations to creditors required
(i) to make each of the Subject Documents valid, enforceable and
admissible in evidence and
(ii) to authorise or otherwise permit the execution and delivery
of the Subject Documents and the performance by the parties
thereto (except the Lender) of each of them
have been obtained or made and are in full force and effect and
there has been no material default in the observance of any of the
terms or conditions of any of them;
(f) except for registration of the Mortgage with the appropriate
authorities of the Flag State and the lodging for registration of
certain of the Subject Documents at any appropriate companies'
registry or filed in the relevant jurisdictions in the United
States of America none of the Subject Documents is required to be
<PAGE>
- 5 -
filed, recorded, enrolled or in any way whatsoever registered with
any governmental authority or agency of or in England, Panama,
Bermuda, the United States of America, or, to the best of its
belief in any other country, or to be stamped with any stamp duty
or similar tax, levy or impost in any such country in order to
ensure the legal validity, enforceability or admissibility in
evidence thereof;
(g) it is not in default under any agreement to which it is a party or
by which it may be bound (actually or contingently) which default
would be likely to have a material adverse effect on its business,
assets or condition or its ability to perform its obligations
under such of the Subject Documents to which it is a party and, as
at the date hereof, except as disclosed in writing to the Lender,
no litigation or administrative proceedings involving it of or
before any board of arbitration, court or governmental authority
or agency is proceeding pending or (to its knowledge) threatened
anywhere in the world the result of which would (if adversely
determined) have or is likely to have a material adverse effect on
the business, assets or financial condition of it and, in the
event that any such litigation or proceedings shall hereafter
arise, it hereby undertakes to give notice thereof to the Lender
as soon as it becomes aware of any such litigation or proceedings;
(h) it is not required by the laws of any country from which it may
make any payment hereunder or under any of the Subject Documents
to which it is a party to make any deduction or withholding from
any such payment;
(i) the execution, delivery and performance of such of the Subject
Documents to which it is or will be a party will not violate or
exceed the powers conferred upon it under its articles of
incorporation and by-laws or other constituting or corporate
documents or any provision of any applicable law existing at the
date hereof or of any regulation, order or decree to which it is
subject as at the date hereof or result howsoever in the creation
or imposition of any Encumbrance (other than a Permitted
Encumbrance) on all or part of its undertaking or assets;
(j) such written financial and other information in respect of it as
has been given to the Lender prior to the date hereof presented
fairly and accurately the financial position of it as at the date
such information was given and it does not have any material
liabilities (contingent or otherwise) which were not disclosed;
(k) the obligations of it under this Deed are its direct, general and
unconditional obligations and rank at least pari passu with all
its present and future unsecured and unsubordinated obligations
(including contingent obligations) with the exception of such
obligations as are mandatorily preferred by law and not by
contract;
(l) other than its office in Miami it does not have an office in the
United States of America or in the United Kingdom or does business
outside Florida or in the United Kingdom which gives rise to any
liability to taxation or the registration of any Subject
Documents;
<PAGE>
- 6 -
(m) to the best of its knowledge and belief no event or circumstance
constituting an Event of Default or Possible Event of Default has
occurred and is continuing;
(n) the technical management of the Vessel will be undertaken by the
Technical Manager;
(o) the commercial management of the Vessel will be undertaken by the
Bareboat Charterer;
(p) all information furnished by it or on its behalf in writing in
connection with the negotiation and preparation of this Deed and
the rest of the Subject Documents is to the best of its knowledge
true and accurate in all respects and not misleading and does not
omit any facts and there are no other facts the omission of which
would make any such information misleading.
2.2 Each of the Owner and the Bareboat Charterer hereby represents and
warrants to the Lender that:-
(a) the Bareboat Charter has been duly entered into, is in full force
and effect, and is enforceable in accordance with the terms
thereof and no amendments thereto or variations thereof have been
(or will be otherwise than within the terms of this Deed) agreed
and there are no commissions, rebates, premiums or other payments
in connection with the Bareboat Charter other than as disclosed to
the Lender in writing on or prior to the date of this Deed;
(b) save as disclosed to the Lender in writing, neither the Owner nor
the Bareboat Charterer are in default under the Bareboat Charter
and there are no actions suits or proceedings threatened by or
against either the Owner or the Bareboat Charterer in connection
with or arising out of the Bareboat Charter which would entitle
any party to repudiate otherwise terminate or otherwise withdraw
from (including in respect of the Owner, the right to withdraw the
Vessel and in respect of the Bareboat Charterer to suspend payment
of hire) or frustrate or in any way render the Bareboat Charter
inoperative or unenforceable;
(c) the Vessel has been delivered to and accepted by the Bareboat
Charterer for service under the Bareboat Charter and is in every
way fit for service under the Bareboat Charter;
2.3 Each of the Owner and the Bareboat Charterer hereby further represents
and warrants to the Lender that on the Execution Date, the Drawdown Date
and at the end of each Interest Period (other than in respect of (b),
(g), (h), (n) and (o)) the representations and warranties contained in
this Clause 2 (updated mutatis mutandis to each such date) shall be true
and correct as if made at that time.
<PAGE>
- 7 -
3. ASSIGNMENT AND CHARGE
---------------------
3.1 In consideration of the Lender agreeing to make the Loan available to
the Borrowers, the Owner as registered owner of the Vessel and for the
purpose of securing the payment to the Lender of the Outstanding
Indebtedness HEREBY ASSIGNS AND AGREES TO ASSIGN absolutely to the
Lender by way of a first priority assignment all of the Owner's Assigned
Property.
3.2 In consideration of the Lender agreeing to make the Loan available to
the Borrowers and further in consideration of the Lender approving the
terms and provisions of the Bareboat Charter, the Bareboat Charterer as
disponent owner of the Vessel and for the purpose of securing the
payment to the Lender of the Outstanding Indebtedness HEREBY ASSIGNS and
AGREES TO ASSIGN absolutely to the Lender by way of a first priority
assignment all of the Bareboat Charterer's Assigned Property.
3.3 The Owner further undertakes that in the event that the Bareboat Charter
is terminated for whatever reason before the expiry of the Security
Period the Owner shall forthwith upon being requested to do so by the
Lender execute and deliver in favour of the Lender a specific assignment
in writing of all its right, title and interest in, to and under any
replacement charter or other contract or employment in respect of the
Vessel.
3.4 (a) Throughout the Security Period the Owner and the Bareboat
Charterer shall procure that:-
(i) in the event that the FMC Guarantor has issued a letter of
credit or other surety that is secured by the deposit in the
FMC Collateral Account all moneys received in respect of
advance bookings in respect of the Vessel are paid into the
Operating Account at all times during such relevant part of
the Security Period;
(ii) in the event that the provisions of (i) do not apply all
moneys received in respect of advance bookings in respect of
the Vessel are paid into the Isle FMC Account in respect of
the Vessel at all times throughout such relevant part of the
Security Period;
(iii) upon the release of any moneys from the Isle FMC Account
pursuant to (ii) above such monies shall be paid into the
Operating Account;
(iv) all other Earnings of the Vessel shall be paid into the
Operating Account at all times throughout the Security
Period;
and applied in accordance with clause 10 of the Loan Agreement.
(b) Upon the occurrence of an Event of Default to the extent permitted
by applicable law:-
(i) the Owner and the Bareboat Charterer shall forthwith and the
Lender may at any time thereafter instruct the persons from
whom the
<PAGE>
- 8 -
Earnings or Owner's Earnings or Bareboat Charterer's
Earnings are or shall be due to pay the same to the Lender
or as it may direct; and
(ii) any sum in respect of Earnings or Owner's Earnings or
Bareboat Charterer's Earnings then in the hands of the
Owner's and/or the Bareboat Charterer's brokers, bankers or
other agents or representatives shall be deemed to have been
received by them for the use and on behalf of the Lender;
(c) Each of the Owner and the Bareboat Charterer agree to comply with
any instruction given to it under this Clause.
(d) The Owner and the Bareboat Charterer each covenant with the Lender
that the Earnings are free from any Encumbrance and shall be paid
in the manner and currency or currencies as set out in accordance
with Clause 11.
3.5 By virtue of being party to this Deed, the Bareboat Charterer hereby
acknowledges the assignment by the Owner in favour of the Lender of the
Owner's rights, title and interest in and to the Owner's Assigned
Property and agrees to the assignment hereto.
3.6 The Bareboat Charterer undertakes that it will immediately (upon being
requested to do so by the Lender) give notice of any assignment of sub-
charter executed in favour of the Lender to any relevant sub-charterer
or other person in the form of Schedule D hereto and will procure such
person's acknowledgement thereto in the form of Schedule D hereto.
3.7 Each of the Owner and the Bareboat Charterer undertakes immediately to
give notice of the assignment of Insurances contained in this Clause 3
to all Insurers in the form of Schedule B hereto and to obtain from such
Insurers duly completed letters of undertaking substantially in the form
of Schedule C or in such other form or forms as the Lender may agree.
3.8 Prior to the occurrence of an Event of Default any sums recoverable in
respect of the Insurances shall be payable as follows:-
(a) any and every sum recoverable in respect of a Total Loss under the
Insurances against fire and all marine risks and war risks shall
be paid to the Lender, and
(b) any and every sum recoverable in respect of any claim exceeding
one Million five hundred thousand Dollars (USD1,500,000) or its
equivalent in any other currency ("Major Casualty") under the
Insurances against fire and usual marine risks and war risks shall
be paid to the Lender but so that such insurance monies should be
applied by the Lender in or towards payment on behalf of the
Bareboat Charterer to the relevant repairer, salvor or other
relevant creditor in respect of the cost of repairs, salvage or
other charges unless the Bareboat Charterer has first fully
repaired the damage or secured complete discharge of the liability
insured against or otherwise made good the loss in which case the
Lender shall reimburse the Bareboat Charterer therefor up to the
amount received by the Lender; and
<PAGE>
- 9 -
(c) any and every other sum recoverable under the Insurances against
fire and usual marine risks and war risks shall be paid to the
Bareboat Charterer and shall be applied by the Bareboat Charterer
for the purpose of making good the loss and fully repairing all
damage in respect whereof the insurance moneys shall have been
received; and
(d) all sums recoverable under the Insurances against protection and
indemnity risks shall be paid direct to the person to whom was
incurred the liability to which such sum relates (or to the
Bareboat Charterer or the Owner in reimbursement to either of them
of moneys expended in satisfaction of such liability); and
on or after the occurrence of an Event of Default any sums recoverable
under the Insurances shall be payable to the Lender;
(e) any Requisition Compensation shall at all times be payable to the
Lender.
3.9 (a) To the extent that any Bareboat Charterer's Earnings are received
and applied by the Lender or otherwise in accordance with Clause
3.4, such application shall be treated as being in pro tanto
satisfaction of:-
(i) the obligations of the Bareboat Charterer to make payments
of those amounts to the Owner under the Bareboat Charter;
and
(ii) the obligations of the Owner to make payments of those
amounts to the Lender under this Deed or any of the other
Security Documents.
(b) To the extent that any Owner's Earnings are received and applied
by the Lender or otherwise in accordance with Clause 3.4, such
application shall be treated as being in pro tanto satisfaction
of:-
(i) the obligations of the Bareboat Charterer to make payments
of those amounts to the Owner under the Bareboat Charter;
and
(ii) the obligations of the Owner to make payments of those
amounts to the Lender under this Deed or any of the other
Security Documents.
4. OWNER'S UNDERTAKINGS
- --- --------------------
4.1 The Owner undertakes with the Lender throughout the Security Period:-
(a) to do and permit to be done each and every act or thing which the
Lender may from time to time require to be done for the purpose of
better securing, protecting or enforcing the Lender's rights under
the assignment contained in Clause 3 and to permit the Owner's
name to be used as and when required by the Lender for that
purpose;
(b) if any Event of Default shall occur, to the extent permitted by
applicable law, to take all steps and do all things necessary to
enable the Lender to enforce all other rights and benefits
accruing to the Owner under or in respect of the
<PAGE>
- 10 -
Owner's Assigned Property and for this purpose to take over or
institute proceedings in respect thereof;
(c) to perform its obligations under the Bareboat Charter or under the
Insurances or the Earnings and to use its best endeavours to
procure the due performance by the Bareboat Charterer of its
obligations in respect of the Vessel, the Insurances or the
Earnings and shall, notwithstanding the assignment herein
contained, take such action to collect any monies or enforce any
rights and benefits hereby assigned until notified in writing by
the Lender;
(d) it is the sole legal and beneficial owner of the whole of the
Owner's Assigned Property;
(e) the Bareboat Charter shall not in any circumstances be terminated
by the Owner (or the Vessel withdrawn by the Owner from hire under
the Bareboat Charter) for any reason whatsoever (including,
without limitation, by reason of any breach or alleged breach of
the Bareboat Charter by the Bareboat Charterer) unless the Lender
shall first have given its consent in writing to such termination
or withdrawal PROVIDED that any such termination or withdrawal
after such consent is given shall be without responsibility on the
part of the Lender who shall be under no liability whatsoever in
the event that such termination or withdrawal be thereafter
adjudged to have constituted a wrongful repudiation of the
Bareboat Charter by the Owner;
(f) in the event of any payment of hire not being made by the Bareboat
Charterer within five (5) days of the due date or if any other
circumstance shall occur entitling the Owner to withdraw the
Vessel from hire under the Bareboat Charter the Owner will advise
the Lender in accordance with Clause 6.2(a) and, if so directed by
the Lender in writing, exercise its right to withdraw the Vessel
from hire under the Bareboat Charter at such time and in such
manner as the Lender shall so direct;
(g) it will supply to the Lender upon the Lender's request all
information, documents and records that may be necessary or of
assistance to enable the Lender to verify the amount of all
payments of hire payable under the Bareboat Charter;
(h) it will pay all such expenses, claims, liabilities, losses, costs,
duties, fees, charges or other moneys as are stated in this Deed
to be payable by the Owner to or recoverable from the Owner by the
Lender (or in respect of which the Owner agrees in this Deed to
indemnify the Lender) at the times in the manner specified in this
Deed;
(i) it will pay interest on any such expenses, claims, liabilities,
losses, costs, duties, fees, charges or other moneys referred to
in Clause 4.1(h) from the day following the date on which the
relevant expense, liability, loss, cost, duty, fee charge or other
money is paid or incurred by the Lender until the date of
reimbursement thereof to the Lender (both before and after any
relevant judgment) at the Default Rate, such interest to be
compounded in accordance with clause 6.5 of the Loan Agreement and
payable on demand.
<PAGE>
- 11 -
4.2 The Owner hereby further undertakes with the Lender that the Owner will
not (without the prior written consent of the Lender):-
(a) further assign, charge, pledge or otherwise encumber the Owner's
Assigned Property, or any of its rights or benefits thereunder or
in respect thereof, to anyone other than the Lender;
(b) take or omit to take any action the taking or omission of which
might result in any alteration or impairment of any of the rights
or benefits thereby created or created by this Deed;
(c) (i) agree to any material variation of the Bareboat Charter; or
(ii) release the Bareboat Charterer from any of the Bareboat
Charterer's obligations under the Bareboat Charter or waive
any breach of the Bareboat Charterer's obligations
thereunder or consent to any such act or omission of the
Bareboat Charterer as would otherwise constitute such
breach;
(d) enter into any charter in respect of the Vessel other than the
Bareboat Charter.
5. BAREBOAT CHARTERER'S UNDERTAKINGS
- --- ---------------------------------
5.1 The Bareboat Charterer hereby covenants with the Lender throughout the
Security Period that:-
(a) it will perform each and every obligation on its part to be
performed under the Bareboat Charter;
(b) it will observe perform and comply with all the covenants and
undertakings in respect of Insurances, operation and maintenance
to be observed performed and complied with by or on behalf of the
Owner under the Mortgage (including, but without limitation, all
warranties and conditions relating to the Insurances, and/or the
operation of the Vessel) and if and to the extent that any of such
covenants and undertakings may conflict with any of the provisions
of the Bareboat Charter, such covenants and undertakings shall (as
between the Owner and the Bareboat Charterer on the one hand and
the Lender on the other hand but not otherwise) prevail;
(c) it will, in the event that upon a Total Loss or requisition of the
Vessel the Lender is disabled from recovering under any Insurances
relating to the Vessel or the amount of the recovery thereunder is
diminished and such disablement or diminution results from any
breach of the covenants undertaken by the Bareboat Charterer under
this Clause 5, pay to the Lender upon the Lender's first written
demand a sum equal to the amount which would but for such
disablement have been recoverable under such Insurances or a sum
equal to the amount whereby the insurance recovery has been
diminished;
(d) it will, in the event of the Vessel at any time being arrested,
seized, detained or subjected to distress by reason of any
process, claim, lien or encumbrance
<PAGE>
- 12 -
of whatsoever nature arising out of the use or operation of the
Vessel by the Bareboat Charterer or the operation by the Bareboat
Charterer of any other vessel owned by or chartered to the
Bareboat Charterer, at its own cost and expense take prompt action
to secure the release of the Vessel and be responsible for
discharging each and every liability in connection with any such
process claim lien or encumbrance;
(e) it will indemnify the Lender and hold it harmless against all
liabilities of whatsoever nature (including penalties claims
demands orders or judgments) which the Owner or the Lender may
suffer which arise out of the use or operation of the Vessel by
the Bareboat Charterer or the operation by the Bareboat Charterer
of any other vessel owned by or chartered to the Bareboat
Charterer;
(f) it will do and permit to be done each and every act or thing which
the Lender may from time to time require to be done for the
purpose of better securing, protecting or enforcing the Lender's
rights under the assignment contained in Clause 3 and to permit
the Bareboat Charterer's name to be used as and when required by
the Lender for the purpose;
(g) it will, upon the happening of an Event of Default to the extent
permitted by applicable law, permit the Lender to enforce all
other rights and benefits accruing to the Bareboat Charterer under
or in respect of the Bareboat Charterer's Assigned Property and
for this purpose to take over or institute proceedings in respect
thereof;
(h) it is the sole legal and beneficial owner of the whole of the
Bareboat Charterer's Assigned Property.
5.2 The Bareboat Charterer hereby further undertakes with the Lender that
the Bareboat Charterer will not (without the prior written consent of
the Lender) throughout the Security Period:-
(a) further assign, charge, pledge or otherwise encumber the Bareboat
Charterer's Assigned Property or any of its rights or benefits
thereunder or in respect thereof, to anyone other than the Lender;
(b) assign, charge, pledge or otherwise encumber the Bareboat Charter
to which it is a party or any of its rights or benefits thereunder
or in respect thereof to anyone whatsoever;
(c) take or omit to take any action the taking or omission of which
might result in any alteration or impairment of any of the rights
or benefits thereby created or created by this Deed;
(d) claim or exercise any lien upon hire or sub-freights which might
otherwise be available to it under any other sub-charter in
respect of the Vessel or its Earnings in competition with the
Lender;
<PAGE>
- 13 -
(e) enter into any charter in respect of the Vessel below the market
rate prevailing at the time the Vessel is fixed without the
Lender's prior consent:
(i) (other than the Bareboat Charter), on demise charter for any
period; or
(ii) by any time or consecutive voyage charter for a period which
exceeds or by virtue of any optional extensions might exceed
thirteen (13) months duration; or
(iii) on terms whereby more than two (2) months' hire (or the
equivalent) is payable in advance;
Provided always that in respect of the matters referred to above
in this clause 5.2(e) the Lender's consent shall be deemed to have
been given thereto if the Bareboat Charterer shall not have been
informed by the Lender either in writing or by word of mouth that
such consent is refused within five (5) Banking Days of the time
at which the application for such consent was acknowledged as
received by the Lender (who shall promptly give such
acknowledgement);
(f) amend, vary, terminate, repudiate or cancel the Bareboat Charter
to which it is a party for whatever reason or take any action
which would in any way render the Bareboat Charter inoperative or
unenforceable;
(g) grant any consent relating to any term or condition of the
Bareboat Charter which may be required from the Bareboat Charterer
pursuant to the provisions of the Bareboat Charter;
(h) determine the Bareboat Charter (notwithstanding anything contained
therein) for any reason whatsoever provided always that any
determination of the Bareboat Charter by the Bareboat Charterer
after such consent is given shall be without responsibility on the
part of the Lender who shall be under no liability whatsoever in
the event that such determination be thereafter adjudged to
constitute a repudiation of the Bareboat Charter by the Bareboat
Charterer.
6. GENERAL UNDERTAKINGS
- --- --------------------
6.1 Each of the Owner and the Bareboat Charterer hereby jointly and
severally undertakes with the Lender throughout the Security Period:-
(a) to insure the Vessel with Insurers acceptable to the Lender and
keep the Vessel insured in accordance with the provisions of
clause 4 of the Mortgage as if the same were set forth in full
herein;
(b) to perform its respective obligations under the Bareboat Charter
and under the Insurances or the Earnings and to use its best
endeavours to procure the due performance of the respective
obligations of any other party to any contract in respect of the
Vessel or its Earnings and shall notwithstanding the
<PAGE>
- 14 -
assignment herein contained take such action to collect any monies
or enforce any rights and benefits hereby assigned until notified
in writing by the Lender;
(c) promptly to notify the Lender of any default by any party under
the Bareboat Charter or under any sub-charter or any other
contract in respect of the Vessel or its Insurances or its
Earnings;
(d) not without the prior written consent of the Lender register the
Vessel in any other jurisdiction other than in the Flag State;
(e) to apply any proceeds in respect of the sale or Total Loss of the
Vessel in accordance with the terms of the Loan Agreement and the
rest of the Security Documents;
(f) to subordinate all rights it may have (in the case of the Bareboat
Charterer this shall include all its rights as commercial manager
of the Vessel) against each other, the Vessel, the Insurances or
the Earnings to the rights of the Lender under the Mortgage and
the other Security Documents and that it will not exercise any of
its rights aforesaid in competition with the Lender;
(g) not without the approval of the Lender share the Earnings with any
other person;
(h) to ensure that the Operating Account and any other accounts opened
during the Security Period for the receipt of Earnings in respect
of the Vessel are maintained separately for that purpose alone and
that no monies in respect of any other vessel owned by the Owner
and operated by the Bareboat Charterer are credited to such
accounts.
6.2 It is agreed by and between the parties hereto:-
(a) that, notwithstanding anything contained in the Bareboat Charter
upon the occurrence of an Event of Default under the Loan
Agreement and/or the Mortgage and/or if the Lender becomes
entitled to put into force and exercise all the powers possessed
by it as mortgagee of the Vessel the Lender shall be entitled (but
not bound) to terminate the Bareboat Charter at any time by notice
in writing to the Owner and the Bareboat Charterer;
(b) that upon termination of the Bareboat Charter pursuant to Clause
6.2 (a) all liabilities whatsoever of the Owner and the Bareboat
Charterer thereunder shall be absolutely discharged and
extinguished;
(c) that in the event that the circumstances wherein the Lender
becomes entitled under Clause 6.2(a) to terminate the Bareboat
Charter shall constitute or include grounds whereon the Owner was
entitled to terminate the same, any termination by the Lender
shall, as between the Owner and the Bareboat Charterer, operate as
an acceptance by the Owner of the Bareboat Charterer's repudiation
of the Bareboat Charter and the Owner's right to recover damages
in respect of such repudiation shall be fully preserved;
<PAGE>
- 15 -
(d) that notwithstanding anything herein contained the Owner, the
Bareboat Charterer shall remain liable to perform all the
obligations assumed by it under the Bareboat Charter and the
Lender shall have no obligations whatsoever thereunder or be under
any liability whatsoever to the Owner, the Bareboat Charterer in
the event of any failure by the Owner or the Bareboat Charterer to
perform its obligations thereunder or hereunder
(e) that notwithstanding anything herein contained, in the event of a
sale of the Vessel during the Security Period pursuant to the
power in that behalf vested in the Lender by virtue of the
Security Documents, such sale shall be free of the Bareboat
Charter and the Owner and the Bareboat Charterer shall enter into
such form of agreement or agreements as the Lender may require for
termination of the Bareboat Charter by mutual consent.
7. OWNER'S AND BAREBOAT CHARTERER'S LIABILITY NOT AFFECTED
- --- -------------------------------------------------------
7.1 The liability of the Owner and the Bareboat Charterer to the Lender
under this Deed shall not be discharged, impaired or otherwise affected
by reason of any of the following events or circumstances (regardless of
whether any such events or circumstances occur with or without its
knowledge or consent):-
(a) any time, forbearance or other indulgence given or agreed by the
Lender to or with any of the other Obligors in respect of any of
their respective obligations under any of the Security Documents;
or
(b) any legal limitation, disability or incapacity relating to any
other Obligor; or
(c) any invalidity, irregularity, unenforceability, imperfection or
avoidance of or any defect in security granted by, or the
obligations of any other Obligor under the Security Documents or
any of them or any amendment to or variation thereof or any other
document or security comprised therein (whether or not known to
the Lender); or
(d) any change in the name, constitution or otherwise of any other
Obligor or the merger of any other Obligor by or with any other
person; or
(e) the liquidation, bankruptcy or dissolution (or proceedings
analogous thereto) of any other Obligor or the appointment of a
receiver or administrative receiver or administrator or trustee or
similar officer of any of the assets of any other Obligor or the
occurrence of any circumstances whatsoever affecting such
Obligor's liability to discharge its respective obligations under
any of the Security Documents; or
(f) any challenge, dispute or avoidance by any liquidator of any other
Obligor in respect of any claim by any other Obligor by right of
subrogation in any such liquidation; or
(g) any release, renewal, exchange or realisation of any security or
obligation provided under or by virtue of any of the Security
Documents or the provision
<PAGE>
- 16 -
by the Lender at any time if any further security is given for the
obligations of the Obligors under any of the Security Documents;
or
(h) any release of any guarantor or any release of any third party
Obligor in respect of any of the Obligors' obligations under any
of the Security Documents; or
(i) any failure on the part of the Lender (whether intentional or not)
to take or perfect any security agreed to be taken under or in
relation to any of the Security Documents; or
(j) any other act, matter or thing which might otherwise constitute a
legal or equitable discharge of the obligations of any other
Obligor hereunder.
8. PERFORMANCE
- --- -----------
8.1 It is further agreed between the parties hereto that to the extent that
the Bareboat Charterer duly performs and discharges (or procures the
performance and discharge of) the duties and liabilities referred to in
Clause 5.1 (b) hereof and to the further extent that the Bareboat
Charterer, pursuant to the Bareboat Charter performs and discharges
further duties and liabilities undertaken by the Owner in the Mortgage,
then such performance and discharge of the said duties and liabilities
by the Bareboat Charterer shall to that extent be deemed to be proper
and due performance and discharge of the Owner's duties and liabilities
under the Mortgage.
8.2 Notwithstanding anything herein contained to the contrary, the Lender
shall not be under any obligation or liability with respect to the
Bareboat Charter or to any contract or obligation giving rise to any of
the Earnings or the Insurances by reason of this Deed or anything
arising thereout, nor shall the Lender be required to assume or be under
any obligation in any manner to perform or fulfil any obligation with
respect to any contract or obligation giving rise to any of the Earnings
or the Insurances, or to make any payment thereunder, or to enforce
against any party any term or condition or any other contract with
respect to the Earnings or the Insurances or to make any enquiries as to
the nature or sufficiency of any payment received under or by virtue of
this Deed.
8.3 The Owner and the Bareboat Charterer hereby waive the entitlement
conferred by Section 93 of the Law of Property Act 1925 and agree that
Section 103 of that Act shall not apply to the security created by this
Deed. For the avoidance of doubt, the powers of the Lender and any
receiver by virtue of this Deed shall not be limited to those specified
in Section 101 of the Law of Property Act 1925.
8.4 In the event of any circumstances whereby further performance of the
Bareboat Charter becomes impossible or unlawful or is otherwise
frustrated no moneys then paid to the Lender shall be recoverable from
it.
8.5 After the Outstanding Indebtedness has been fully and unconditionally
discharged to the satisfaction of the Lender this Deed shall be returned
to the Owner and the Bareboat Charterer and the Assigned Property re-
assigned as appropriate at their cost.
<PAGE>
9. APPOINTMENT OF ATTORNEY
- --- -----------------------
9.1 Each of the Owner and the Bareboat Charterer irrevocably appoints and
constitutes the Lender as its true and lawful attorney with full power
of substitution, (in the name of the Owner, the Bareboat Charterer or
otherwise) in the event that an Event of Default has occurred, to the
extent permitted by applicable law, to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for
moneys due and to become due, to endorse any cheque or other instrument
or orders in connection therewith and to file any claims or take any
action or institute any proceedings which the Lender may deem necessary
or advisable and otherwise to do any and all things which the Owner or
the Bareboat Charterer itself could do in relation to the property
hereby assigned provided always that the power shall not be exercised by
the Lender until an Event of Default has occurred.
9.2 The exercise of such power as is referred to in Clause 9.1 and 6.2 by or
on behalf of the Lender shall not put any person dealing with the Lender
upon any enquiry as to whether the Mortgage and this Deed shall have
become enforceable nor shall such notice that the Mortgage and this Deed
shall have not become enforceable and, in relation to Clause 9.1 and
6.2, the exercise by the Lender or any receiver of such power shall be
conclusive evidence of its right to exercise the same.
10. CONSENT
- --- -------
10.1 In consideration of the covenants on the part of the Owner and the
Bareboat Charterer herein contained, the Lender hereby grants its
consent to the Vessel being let to the Bareboat Charterer under the
Bareboat Charter.
11. TAXES
- --- -----
11.1 The Owner and the Bareboat Charterer agree to pay or to cause to be paid
directly to the appropriate governmental authority or to the Lender the
cost of any and all present and future Taxes in accordance with Clause
18 of the Loan Agreement.
12. FURTHER ASSURANCE
- --- -----------------
12.1 Each of the Owner and the Bareboat Charterer agrees that at any time and
from time to time upon written request of the Lender each will promptly
and duly execute and deliver to the Lender any and all such further
instruments and documents as the Lender may deem necessary and/or
desirable in obtaining the full benefits of the rights and powers herein
granted.
13. CONTINUING SECURITY
- --- -------------------
13.1 The security created by this Deed shall be held by the Lender as a
continuing security for the payment of the Outstanding Indebtedness and
the performance and observance of and the compliance with all of the
covenants, terms and conditions contained in the Security Documents and
the security so created shall not be set aside by any intermediate
payment or satisfaction of any part of the amount hereby and thereby
secured and the security so created shall be in addition to and shall
not in any way be prejudiced or affected by any collateral or other
security now or hereafter held by
<PAGE>
- 18 -
the Lender for all or any part of the moneys hereby and thereby secured
and every power and remedy given to the Lender hereunder shall be in
addition to and not a limitation of any and every power or remedy vested
in the Lender under the Security Documents or at law and all the powers
so vested in the Lender may be exercised from time to time and as often
as the Lender may deem expedient and no delay or omission of the Lender
to exercise any right or power shall be construed as a waiver of or an
acquiescence in any default by the Owner and/or the Bareboat Charterer.
13.2 Any settlement or discharge under this Deed between the Lender, the
Owner and the Bareboat Charterer shall be conditional upon no security
or payment to the Lender by the Owner or the Bareboat Charterer or any
other person being avoided or set aside or ordered to be refunded or
reduced by any provision or enactment relating to bankruptcy,
insolvency, administration or liquidation for the time being in force
and, if such condition is not satisfied, the Lender shall be entitled to
recover from the Owner and/or the Bareboat Charterer on demand the value
of such security or the amount of any such payment as if such settlement
or discharge had not occurred.
14. OBLIGATION TO PROVE IN LIQUIDATION
- --- ----------------------------------
14.1 The Owner and/or the Bareboat Charterer shall, if the Lender so
instructs, prove in a liquidation of any Obligor for any amounts owed to
the Owner and/or the Bareboat Charterer by such Obligor in connection
with this Deed provided that any monies received or recovered by the
Owner and/or the Bareboat Charterer in such liquidation shall be paid to
the Lender on its request and, pending such payments, be held by the
Owner and/or the Bareboat Charterer as trustee upon trust for the Lender
to apply the same as if they were monies received or recovered by the
Lender under this Deed.
15. SUSPENSE ACCOUNT
- --- ----------------
15.1 Any monies received or recovered by the Lender under or in connection
with this Deed may, at its discretion, be credited to any suspense or
impersonal account and may be held in such account for so long as the
Lender thinks fit pending application at the Lender's discretion from
time to time in or towards the discharge of the Outstanding Indebtedness
or any part thereof in accordance with the terms of the Loan Agreement.
16. PROTECTION OF SECURITY
- --- ----------------------
16.1 The Lender shall without prejudice to its other rights and powers under
this Deed and the other Security Documents be entitled (but not bound)
at any time and as often as may be necessary to take any such action as
it may in its discretion think fit for the purpose of protecting or
maintaining the security created by this Deed and each and every
reasonable expense, liability and loss (including, without limitation,
legal fees) reasonably incurred by the Lender in or about the protection
or maintenance of the said security together with interest payable
thereon under Clause 4.1 (i) shall be repayable to it by the Owner on
demand.
<PAGE>
- 19 -
17. LENDER'S POWERS
- --- ---------------
17.1 After the occurrence of an Event of Default to the extent permitted by
applicable law the Lender (irrespective of whether or not it shall have
taken steps to enforce any of the powers specified or referred to in
clause 7.1 of the Mortgage and Clause 6.2 of this Deed) shall become
forthwith entitled, as and when it may see fit, to put into force and
exercise all or any of the powers possessed by it as assignee of the
Assigned Property and in particular:-
(a) to collect, recover, compromise and give a good discharge for any
and all moneys or claims for moneys then outstanding or thereafter
arising under the Insurances or in respect of the Earnings and to
permit any brokers through whom collection or recovery is effected
to charge the usual brokerage therefor;
(b) to take over or institute (if necessary using the name of the
Owner and the Bareboat Charterer) all such proceedings in
connection with the Assigned Property as the Lender in its
absolute discretion thinks fit;
(c) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Lender in or about or
incidental to the exercise by it of any of the powers aforesaid.
17.2 Neither the Lender, nor any receiver, nor any agents, managers,
officers, employees, delegates and advisers shall be liable for any
expense, claim, liability, loss, cost, damages or expense incurred or
arising in connection with the exercise or purported exercise of any
rights, powers and discretions under this Deed in the absence of
negligence or wilful misconduct.
17.3 Neither the Lender, nor any receiver, shall by reason of the Lender or
such receiver taking possession of the whole or any part of the Assigned
Property be liable to account as mortgagee-in-possession or for anything
except actual receipts or be liable for any loss upon realisation or for
any default or omission for which a mortgagee-in-possession might be
liable in the absence of negligence or wilful misconduct.
17.4 Upon the security constituted by the Mortgage becoming immediately
enforceable pursuant to clause 7.1 of the Mortgage and Clause 6.2 of
this Deed, the Lender shall (in addition to the powers described in
Clause 17.1) become forthwith entitled (but not bound) to appoint, by an
instrument in writing under its Common Seal or under the hand of any
director or officer of the Lender, a receiver and/or manager of the
Assigned Property upon such terms as to reasonable remuneration and
otherwise as the Lender shall deem fit with power from time to time to
remove any receiver and appoint another in his stead and any receiver
shall be the agent of the Owner and/or the Bareboat Charterer (who shall
be solely responsible for his acts and defaults and remuneration) and
shall have all the powers conferred by the Law of Property Act 1925
(save that Section 103 of that Act shall not apply) and the Insolvency
Act 1986 and by way of addition to, but without limiting, those powers
any receiver shall have all the powers specified or otherwise referred
to in Clauses 16 and 17.1 (including but not limited to the right to
recover from the Owner every such expense, liability
<PAGE>
- 20 -
or loss as is therein described) and generally shall be entitled to the
same projections and to exercise the same powers and discretions as are
granted to the Lender under this Deed and the Bareboat Charterer hereby
undertakes to comply with all instructions received from such a receiver
and/or manager.
18. APPLICATION OF MONEYS
- --- ---------------------
18.1 All moneys received by the Lender after an Event of Default in respect
of the Assigned Property shall be applied in the manner specified in
clause 10.5 of the Loan Agreement.
19. SUCCESSORS AND ASSIGNS
- --- ----------------------
19.1 This Deed shall be binding upon and enure to the benefit of the Owner
and the Bareboat Charterer and the Lender and their respective
successors and assigns, except that neither the Owner nor the Bareboat
Charterer may assign any of their respective rights or obligations
hereunder.
19.2 The Lender shall be entitled at any time to transfer or assign the whole
or any part of its rights and benefits under this Deed in accordance
with clause 19 of the Loan Agreement and the Owner hereby consents to
the assignment on the date hereof by the Lender to the Bank of its
rights and benefits hereunder.
20. NOTICES
- --- -------
20.1 Except as otherwise provided herein, each notice, request, demand or
other communication or document to be given or made hereunder shall be
given in writing but unless otherwise stated, may be made by telex or
telefax.
20.2 Any notice, demand or other communication to be made or delivered
pursuant to this Deed shall be made or delivered as follows:-
(i) if to the Owner to it at its registered address as aforesaid
telefax number (507) 2635335 marked for the attention of Alfonso
Arias;
(ii) if to the Bareboat Charterer to it at 4000 Hollywood Boulevard,
Hollywood, Florida 33021, telefax number (305) 9672147 marked for
the attention of Alan Pritzker and Fred Mayer;
(iii) if to the Lender to it c/o Effjohn OY AB at Bulevardi 1A, PO Box
659, 00101 Helsinki, Finland telefax number 3580 627736 marked
for the attention of finance department; and
(iv) in the case of the Owner and the Bareboat Charterer with copy to
Broad & Cassel, Miami Centre, 201 South Biscayne Boulevard, Suite
3000, Miami, Florida 33131 telefax number (305) 373 9493 marked
for the attention of James Cassel and with a further copy to JeMJ
Financial Services Inc, TelMed, Inc., 9350 S. Dixie Highway,
Suite 1220, Miami, Florida 33156 telefax number (305) 238 6248
marked for the attention of Jeffrey I. Binder
<PAGE>
- 21 -
or such other address, telex number or telefax number as each such
addressee may specify to the other relevant party or parties by not less
then fifteen (15) days' written notice.
20.3 Each such notice, demand, request or other communication shall be deemed
to have been made or delivered when:-
(a) (in the case of telex) the addressee's answerback shall have been
received at the end of the transmission or (in the case of
telefax) when a materially complete and legible copy of the
communication has been received by the addressee (unless the date
of despatch is not a Banking Day in the country of the addressee
or the time of despatch is outside normal business hours in the
country of the addressee, in which case such telex or telefax
shall be deemed to have been received at the opening of business
on the next such Banking Day); or
(b) (in the case of any letter) when delivered to the addressee's
address as specified in or notified pursuant to Clause 20.2 or, if
sent by post first class postage prepaid in an envelope addressed
to the addressee at that address five (5) days after being
deposited in the post.
20.4 Each notice, demand, request or other communication made or delivered by
one party to another pursuant to this Deed shall be in the English
language or accompanied by a certified English translation.
21. EXPENSES
- --- --------
21.1 All legal and other costs and expenses (including stamp duty, if any)
reasonably incurred by the parties hereto in connection with the
negotiation, preparation, completion and any registration and/or
recording of this Deed and the other Security Documents and the action
to be taken to give effect to them including all costs and expenses
incurred by the Lender in enforcing this Deed and in protecting and
enforcing its interests hereunder in any court of law or otherwise shall
be paid in accordance with clause 20 of the Loan Agreement.
22. LAW AND JURISDICTION
- --- --------------------
22.1 This Deed shall be governed by and construed in accordance with the laws
of England and for the exclusive benefit of the Lender, the parties
hereto hereby irrevocably submit to the non-exclusive jurisdiction of
the High Courts of Justice in England provided that the Lender (but not
the Owner nor the Bareboat Charterer) shall be at liberty in addition or
alternatively to take proceedings in the courts of any other country
which may have jurisdiction or in which the Owner and/or the Bareboat
Charterer may reasonably be thought to have assets. Each of the Owner
and the Bareboat Charterer hereby irrevocably authorises and appoints
the Process Agent for the acceptance of service of legal proceedings
hereunder and under the other Security Documents to which it is a party,
service upon whom shall be deemed to constitute good service of legal
process without prejudice to any other lawful means and undertakes to
maintain a process agent in England.
<PAGE>
- 22 -
23. CURRENCY LOSSES
- --- ---------------
23.1 The Owner and the Bareboat Charterer shall indemnify the Lender against
any loss or damage which, consequent upon any judgment being obtained or
enforced in respect of the non-payment by the Owner or the Bareboat
Charterer of any amounts due under or pursuant to one or more of the
Security Documents, arises from any variation in rates of exchange
between the currency in which such amount was due and the currency in
which judgment is obtained or enforced between the date of the said
amounts becoming due (or the date of the said judgment being obtained,
as the case may be) and the date of actual payment thereof.
23.2 The indemnities contained in this Clause 23 shall apply irrespective of
any indulgence granted to the Owner and/or the Bareboat Charterer from
time to time and shall continue in full force and effect notwithstanding
any payment in favour of the Lender and any amount due from the Owner
and the Bareboat Charterer under this Clause 23 will be due as a
separate debt and shall not be affected by judgment being obtained for
any other sums due or in respect of one or more of the Security
Documents.
24. MISCELLANEOUS
- --- -------------
24.1 All documents, notices or other communications submitted, served or made
under this Deed shall, unless the Lender shall otherwise require, be in
the English language or, if in another language shall be accompanied by
a certified translation into English by a translator acceptable to the
Lender which translation (otherwise than in the case of official
consents) shall be the governing version.
24.2 Any provisions contained in this Deed prohibited by or unlawful or
unenforceable under any applicable law shall, to the extent required by
such law, be ineffective without modifying the remaining provisions of
this Deed. Where however the provisions of any such applicable law may
be waived, they are hereby waived by the parties hereto to the full
extent permitted by such law to the end that this Deed shall be valid
and binding agreements enforceable in accordance with their respective
terms.
24.3 Time is the essence of this Deed but no failure or delay on the part of
the Lender in exercising any right, power or privilege hereunder and no
course of dealing between the Owner, the Bareboat Charterer and/or any
other person and the Lender shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under
this Deed preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies in this
Deed expressly provided are cumulative and not exclusive of any rights
or remedies which any or all of the parties hereto would otherwise have.
No notice to or demand on the Owner and/or the Bareboat Charterer in any
case shall entitle such persons to any other or further notice or demand
to similar or other circumstances or constitute a waiver of the rights
of the Lender to any other or further action in any circumstances
without notice or demand.
24.4 This Deed may be executed in counterparts, each of which shall be deemed
an original and all of which, taken together, shall constitute but one
and the same instrument which may be sufficiently evidenced by one
counterpart.
<PAGE>
- 23 -
EXECUTION PAGE
--------------
IN WITNESS whereof this Deed has been duly executed the day and year first above
written.
THE OWNER
- ---------
SIGNED, SEALED and DELIVERED )
as a DEED )
by JAMES SCOTT CASSEL ) /s/ James Scott Cassel
the duly appointed attorney in fact of )
ALMIRA ENTERPRISES, INC. )
in the presence of:- )
Name: LARA DODSON
Address: 5 APPOLD STREET, LONDON EC2
Occupation: SOLICITOR /s/ L. Dodson
THE BAREBOAT CHARTERER
- -----------------------
SIGNED SEALED and DELIVERED )
as a DEED )
by JAMES SCOTT CASSEL ) /s/ James Scott Cassel
the duly appointed attorney-in-fact of )
NEW COMMODORE CRUISE )
LINES LIMITED )
in the presence of:- )
Name: LARA DODSON
Address 5 APPOLD STREET, LONDON EC2
Occupation: /s/ L. Dodson
<PAGE>
- 24 -
THE LENDER
- ----------
SIGNED SEALED and DELIVERED )
as a DEED by )
THOMAS FORSS )
for and on behalf of ) /s/ Thomas Forss
EFFJOHN INTERNATIONAL CRUISE )
HOLDINGS INC. )
in the presence of:- )
Name: LARA DODSON
Address 5 APPOLD STREET, LONDON EC2
Occupation: /s/ L. Dodson
<PAGE>
- 25 -
SCHEDULE A
----------
HULL & MACHINERY & WAR RISKS
----------------------------
LOSS PAYABLE CLAUSE
-------------------
m.v. "Enchanted Isle"
(the "Vessel")
"It is noted that by a first assignment in writing dated , 1995
Almira Enterprises, Inc., (the "Owner") being the registered owner of the
Vessel and New Commodore Cruise Lines Limited (the "Bareboat Charterer") being
the demise charterer of the Vessel have assigned absolutely to Effjohn
International Cruise Holdings Inc. of c/o Caledonian Bank & Trust Limited, P O
Box 1043 Grand Cayman, Cayman Islands (the "Lender") all of the interests of the
Owner and the Bareboat Charterer in this policy and all benefits thereof
including all claims of whatsoever nature hereunder.
Claims payable in respect of a actual or constructive total or an arranged
or agreed or compromised total loss or requisition for title or other
compulsory acquisition of the Vessel shall be payable to the Lender.
Subject thereto all other claims, unless and until the underwriters have
received notice from the Lender in which event all claims under such policy
of Insurance shall be payable direct to the Lender, shall be payable as
follows:-
(i) a claim not exceeding USD1,500,000 or its equivalent in any other
currency shall be released directly to the Bareboat Charterer or to
its order for the repair salvage or other charges involved or as
reimbursement if it has fully repaired the damage and paid all of
the salvage or other charges;
(ii) a claim exceeding USD1,500,000 or the equivalent in any other
currency shall, subject to the prior written consent of the Lender
be paid to the Bareboat Charterer or to its order as and when the
Vessel is restored to her former state and condition and the
liability in respect of which the insurance loss is payable is
discharged provided that the insurers may with such consent as
aforesaid make payment on account of repairs in the course of being
effected;"
<PAGE>
- 26 -
PROTECTION & INDEMNITY
----------------------
LOSS PAYABLE CLAUSE
-------------------
m.v. "Enchanted Isle"
(the "Vessel")
"It is noted that by a first assignment in writing dated , 1995
Almira Enterprises, Inc., (the "Owner") being the registered owner of the
Vessel and New Commodore Cruise Lines Limited (the "Bareboat Charterer") being
the demise charterer of the Vessel has assigned absolutely to Effjohn
International Cruise Holdings Inc. of Caledonian Bank & Trust Limited, P O Box
1043, Grand Cayman, Cayman Islands (the "Lender") all the interests of the Owner
and the Bareboat Charterer in this policy and all benefits thereof including all
claims of whatever nature hereunder.
Claims hereunder for all losses shall be paid direct to the Owner or the
Bareboat Charterer unless and until the Lender shall have given notice in
writing that the Owner or the Bareboat Charterer or any of them is in
default whereafter such claims shall be payable to the Lender up to the
amount of the mortgagees' mortgage interest".
<PAGE>
- 27 -
SCHEDULE B
----------
NOTICE OF FIRST ASSIGNMENT
--------------------------
We, Almira Enterprises, Inc., of Panama, being the registered owner and New
Commodore Cruise Lines Limited of Bermuda, being the demise charterer of m.v.
"Enchanted Isle" (the "Vessel") HEREBY GIVE NOTICE that all our rights, title
and interest in the insurances in respect of the Vessel, including the
insurances constituted by the Policy whereon this Notice is endorsed, have by
virtue of a deed dated , 1995 been assigned
to Effjohn International Cruise Holdings Inc. of Caledonian Bank & Trust
Limited, P O Box 1043, Grand Cayman, Cayman Islands as first assignee of the
Vessel's Insurances.
Dated this day , 1995.
Almira Enterprises, Inc.
by: _____________________________________
(attorney-in-fact)
New Commodore Cruise Lines Limited
by: ____________________________________
(attorney-in-fact)
<PAGE>
- 28 -
SCHEDULE C
----------
(HULL AND MACHINERY/WAR RISKS)
To: Effjohn International Cruise Holdings Inc.
Caledonian Bank & Trust Limited,
P O Box 1043,
Grand Cayman,
Cayman Islands
Dated: 1995
Dear Sirs,
m.v. "Enchanted Isle"
Owners Almira Enterprises, Inc.
-------------------------------
Bareboat Charterer: New Commodore Cruise Lines Limited
------------------------------------------------------
We confirm that we have effected insurances for the account of the above Owners
and Bareboat Charterer as set out in Appendix A attached.
Pursuant to instructions received and in consideration of your approving our
appointment as Brokers in connection with the insurances covered by this letter,
we hereby undertake:-
1. to hold the Insurance Slips or Contracts, the Policies when issued and any
renewals of such Policies or new Policies or any Policies substituted (with
your consent) therefor and the benefit of the insurances thereunder to your
order in accordance with the terms of the Loss Payable Clause set out in
Appendix B attached; and
2. to arrange for the said Loss Payable Clause to be included on the Policies
when issued; and
3. to have endorsed on each and every Policy as and when the same is issued a
Notice of Assignment in the form of Appendix C hereto dated and signed by
the Owners and acknowledged by Underwriters in accordance with market
practice; and
4. to advise you immediately we cease to be the Broker for the Assured or in
the event of any material changes which may be made to the terms of the
insurances and following an application received from you not later than
one month before expiry of these insurances to notify you within fourteen
days of the receipt of such application in the event of our not having
received notice of renewal instructions from the Owners, the Bareboat
Charterer and/or their agents, and in the event of our receiving
instructions to renew to advise you promptly of the details thereof.
Our above undertakings are given subject to our lien on the Policies for
premiums due specifically in respect of the Ship named above and subject to our
right of cancellation on default in payment of such premiums but we undertake to
advise you immediately if any
<PAGE>
- 29 -
premiums are not paid to us by due date and not to exercise such rights of
cancellation without giving you fourteen days' notice in writing, either by
letter, telex or cable, and a reasonable opportunity of paying any premiums
outstanding. (In the case of War Risks the terms of the Automatic Termination of
Cover Clause contained in the War Risk Policies shall override any undertakings
given by us as Brokers).
It is understood and agreed that the operation of any Automatic Termination of
Cover, Cancellation or Amendment Provisions contained in the policy conditions
shall override any Undertaking given by us as Brokers.
There shall be no recourse against you as Mortgagee for payment of premium on
any insurance carried on these ships.
Notwithstanding the terms of the said Loss Payable Clause and the said Notice of
Assignment, unless and until we receive notice from you to the contrary, we
shall be empowered to arrange for a collision and/or salvage guarantee where the
aggregate liability under any guarantees given in respect of any one casualty
shall not exceed USD1,500,000 or the equivalent in any other currency to be
given in the event of bail being required in order to prevent the arrest of the
ship or to secure the release of a ship from arrest following a casualty. Where
a guarantee has been given as aforesaid and the guarantor has paid any sum under
the guarantee in respect of such claim, there shall be payable directly to the
guarantor out of proceeds of the said Policies a sum equal to the sum so paid.
Finally, it is understood that all claims and returns of premiums shall be
collected through us, as Brokers.
Yours faithfully,
<PAGE>
- 30 -
(PROTECTION AND INDEMNITY)
--------------------------
To: Effjohn International Cruise Holdings Inc.
Caledonian Bank & Trust Limited,
P O Box 1043,
Grand Cayman,
Cayman Islands
Dated: 1995
Dear Sirs,
m.v. "Enchanted Isle"
Owners: Almira Enterprises, Inc.
Bareboat Charterer: New Commodore Cruise Lines Limited
We acknowledge receipt of a letter from Messrs, Sinclair Roche & Temperley
giving notice of a first priority assignment to you of the insurances on the
above ship. So far as this Association is concerned, the managers to not
consent to such assignment for the purposes of Rule , other than to give
efficacy to the Loss Payable Clause set out below and subject always to the
Association's right under Rule .
We do confirm however that such ship is entered in this Association for
Protections and Indemnity risks on the terms and conditions set out or to be set
out in the Certificate of Entry. Furthermore, in consideration of your agreeing
to the entry or continuing entry of the ship in this Association, the managers
agree:-
(a) that the Owner shall not cease to be insured by the Association in respect
of that ship by reason of such assignment (see Rule ), and
(b) that, notwithstanding that the ship is mortgaged to you and that no
undertaking or guarantee has been given to the Association to pay all
contributions due in respect of such ship, the Owner does so not cease to
be insured by reason of the operation of Rule .
It is further agreed that the following Loss Payable Clause will be included in
the Certificate of Entry.
"Payment of any recovery the Owner is entitled to make out of the funds of
the Association in respect of any liability, costs of expenses incurred by
it shall be made to the Owner or to its order unless and until the
Association received notice from Effjohn International Cruise Holdings Inc.
that the Owner is in default under a First Mortgage dated
1995 in which event all recoveries shall thereafter be paid to Effjohn
International Cruise Holdings Inc. or its order, provided always
<PAGE>
- 31 -
that no liability whatsoever shall attach to the Association, its managers
or their agents for failure to comply with the obligations herein until
after the expiry of two clear days from the receipt of such notice."
Notwithstanding anything contained herein, the association shall (unless and
until the mortgagees shall have given notice in writing to the contrary) be at
liberty at the request of the owner to provide bail or other security to prevent
the arrest or obtain of the release of the vessel.
The Association undertakes:-
(a) to inform you if the Directors give the Owner of the above ship notice
under Rule that its insurance in the Association in respect of such
ship is to cease at the end of the then current Policy year;
(b) to give you fourteen days' notice of the Association's intention to cancel
the insurance of the Owner by reason of its failure to pay when due and
demanded any sum due from it to the Association.
Yours faithfully
<PAGE>
- 32 -
SCHEDULE D
----------
NOTICE OF FIRST ASSIGNMENT OF CHARTER AND EARNINGS
--------------------------------------------------------
TO: [Charterer]
Date 19
m.v. "Enchanted Isle" the ("Vessel")
------------------------------------
We refer to the charterparty (the "Charter") dated
19 made between us and you whereby you have agreed to take the Vessel on
charter for the period and upon the terms and conditions therein.
NOW WE HEREBY GIVE YOU NOTICE:-
- ----------------------------------
1. That by a first assignment in writing dated , 199 made
between (inter alia) us and Effjohn International Cruise Holdings Inc.,
(the "Lender") we have assigned to the Lender all our rights title and
interest to and in the Charter and any moneys whatsoever payable to us
under the Charter and all other rights and benefit whatsoever accruing to
us thereunder by way of a first assignment.
2. That you are hereby irrevocably authorised and instructed to pay such
moneys as aforesaid to [ ]
for the account no. [ ] Reference "Enchanted Isle"
(or at such other place as the Lender may from time to time direct).
3. That notwithstanding the said assignment we shall remain liable to perform
all our obligations under the Charter and the Lender shall be under no
obligation of any kind thereunder.
The authority and instructions herein contained cannot be revoked or varied
by us without the consent of the Lender.
_________________________________________
for and on behalf of
Almira Enterprises, Inc.
<PAGE>
- 33 -
To: Effjohn International Cruise Holdings Inc.,
Caledonian Bank & Trust Limited,
P O Box 1043,
Grand Cayman,
Cayman Islands
Dated: 199
We acknowledge receipt of the Notice set out above and agree to make
payments in accordance with the payment instructions contained therein.
_________________________________________
for and on behalf of
<PAGE>
EXHIBIT 11
----------
COMMODORE HOLDINGS LIMITED
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Pro forma Six Months
Period Ended Year Ended Ended
September 30, September 30, March 31,
Computation for Statement of Operations 1995 1995 1996
- --------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C>
Primary Earnings (Loss) Per share:
Net earnings (loss)........................... $ 251,535 $ (13,434,399) $ 135,708
========== ========== ==========
Shares
Weighted average number of common
shares outstanding.......................... 4,124,815 4,931,833 4,931,833
Add: dilutive effect of warrants
(as determined by the application
of the treasury stock method)......... 252,778 252,778 252,778
---------- ---------- ----------
Weighted average common and common
equivalent shares......................... 4,377,593 5,184,611 5,184,611
========== ========== ==========
Earnings (loss) per common and common
equivalent shares........................... $ 0.06 $ (2.59) .03
========== ========== =========
Fully Diluted Earnings (Loss) Per Share:
Net earnings (loss) as per primary
calculation above........................... $ 0.06 $ (2.59) .03
========== ========== =========
</TABLE>
<PAGE>
EXHIBIT 23A
We have issued our report dated November 28, 1995, accompanying the consolidated
financial statements of Commodore Holdings Limited and Subsidiaries contained in
Amendment No. 1 to the Form S-1 Registration Statement and Prospectus. We
consent to the use of the aforementioned report in the Registration Statement
and Prospectus, and to the use of our name as it appears under the caption
"Experts."
/s/ GRANT THORTON, L.L.P.
Miami, Florida
May 23, 1996
<PAGE>
EXHIBIT 23B
The Board of Directors
S/S Enchanted Seas and S/S Enchanted Isle:
We consent to the use of our report dated May 7, 1996 of S/S Enchanted Seas and
S/S Enchanted Isle (operating units of Effjohn International B.V.) included
herein in this registration statement on Form S-1 of Commodore Holdings Limited
and to the reference to our firm under the heading "Experts" in the propectus.
/s/ KPMG Peat Marwick LLP
Ft. Lauderdale, Florida
May 17, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1996
<PERIOD-START> SEP-30-1995 OCT-01-1995
<PERIOD-END> SEP-30-1995 MAR-31-1996
<CASH> 3,274,993 1,937,805
<SECURITIES> 0 0
<RECEIVABLES> 79,069 264,941
<ALLOWANCES> 0 0
<INVENTORY> 691,001 935,101
<CURRENT-ASSETS> 6,158,067 5,247,013
<PP&E> 33,283,135 38,268,177
<DEPRECIATION> 197,926 818,025
<TOTAL-ASSETS> 44,097,276 47,751,165
<CURRENT-LIABILITIES> 7,074,228 10,325,083
<BONDS> 24,500,000 24,166,684
0 0
4,000,000 4,000,000
<COMMON> 49,319 49,319
<OTHER-SE> 8,470,111 8,745,819
<TOTAL-LIABILITY-AND-EQUITY> 44,097,276 47,751,165
<SALES> 0 0
<TOTAL-REVENUES> 7,255,830 19,174,088
<CGS> 0 0
<TOTAL-COSTS> 6,803,041 18,341,969
<OTHER-EXPENSES> (132,795) (556,411)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 319,994 275,708
<INCOME-TAX> 8,459 0
<INCOME-CONTINUING> 311,535 275,708
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 311,535 275,708
<EPS-PRIMARY> 0.06 0.03
<EPS-DILUTED> 0.06 0.03
</TABLE>
