SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM -------- TO--------
COMMISSION FILE NO. 0-20961
COMMODORE HOLDINGS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BERMUDA N/A
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4000 HOLLYWOOD BOULEVARD, SUITE 385-S, SOUTH TOWER, HOLLYWOOD, FL 33021
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
954-967-2100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
----------------------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
COMMON STOCK $.01 PAR VALUE
(TITLE OF CLASS)
REDEEMABLE WARRANTS TO PURCHASE COMMON STOCK AT $5.67 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 21, 1998, the aggregate market value of the Common Stock
held by non-affiliates was approximately $38,644,713.
As of December 21, 1998, the number of shares of Common Stock of the
registrant outstanding was 7,439,821.
DOCUMENTS INCORPORATED BY REFERENCE
Part III--Definitive Proxy Statement for the 1999 Annual Meeting of Shareholders
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TABLE OF CONTENTS
PART I
PAGE
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Item 1. Business 1
Item 2. Properties 13
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Optional Item. Executive Officers of the Registrant 15
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 16
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 24
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 24
PART III
Item 10. Directors and Executive Officers of the Registrant 25
Item 11. Executive Compensation 25
Item 12. Security Ownership of Certain Beneficial Owners and
Management 25
Item 13. Certain Relationships and Related Transactions 25
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 25
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PART I
ITEM 1. BUSINESS
GENERAL
Commodore Holdings Limited, a Bermuda exempted company (the "Company"),
was formed in 1995. 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"), and has chartered a
third ship, the M/V Enchanted Capri (the "Enchanted Capri") (collectively, the
"Cruise Ships"). 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"). Sea-Comm has space-chartered the vessel to Seawise, which operates
the educational "Semester at Sea" program during a portion of the year. Sea-Comm
operates cruises to Alaska aboard the Universe Explorer during the balance of
the year. The Company assigned its charter for the Enchanted Capri to Capri
Cruises, a joint venture formed in 1998 by the Company and Isle of Capri
Casinos, Inc. ("Isle of Capri") (formerly Casino America). The Enchanted Capri
offers two- and five-day cruises from the port of New Orleans that emphasize
gaming.
THE COMMODORE ACQUISITION
THE ACQUISITION AGREEMENTS. The Company entered into definitive
agreements with EffJohn International B.V. ("EffJohn"), which is the parent of
Commodore Cruise Line Limited, a Cayman Island company ("Old Commodore"), Old
Commodore, and its subsidiaries on April 28, 1995 (the "Acquisition
Agreements"). Pursuant to the Acquisition Agreements, the Company acquired the
Enchanted Isle and the Enchanted Seas, the trade names "Commodore" and
"Commodore Cruise Line" as well as certain related trade names and trademarks
(the "Trademarks"), substantially all of Old Commodore's existing operations,
certain advance ticket sales, marketing and sales personnel and information and
certain shoreside assets (collectively, the "Commodore Assets") from EffJohn and
its subsidiaries. The Commodore Acquisition closed on July 14, 1995 (the
"Commodore Closing").
The purchase price (the "Purchase Price") for the Commodore Assets was
$33,500,000 paid at the Commodore Closing as follows: $5,000,000 in cash;
$4,000,000 through the Company's issuance of 1,000,000 shares of the Company's
Convertible Series A preference shares (the "Series A Preference Shares") at an
agreed value of $4.00 per share; and $24,500,000 in promissory notes issued by
the Company to EffJohn International Cruise Holdings, Inc. (the "EffJohn
Lender"), an affiliate of EffJohn. The promissory notes were secured by
substantially all of the assets of the Company's wholly-owned subsidiary, New
Commodore Cruise Lines Limited, a Bermuda company ("New Commodore"), including
first preferred ship's mortgages on both the Enchanted Isle and the Universe
Explorer.
Pursuant to the Acquisition Agreements, Old Commodore and EffJohn
agreed not to compete with the Company for up to ten years from the date of
acquisition with respect to all routes in and out of the Port of New Orleans,
and for up to eight years from the date of acquisition 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 of Financial Responsibility"). The FMC requires companies to
establish a Certificate of Financial Responsibility in amounts and through
methods set by the FMC. The Company also arranged, through a bank in New
England, an escrow account for the purpose of selling cruises from U.S. ports on
the Universe Explorer and on the Enchanted Capri. This FMC escrow arrangement
requires the Company to deposit all monies received for such sailings, plus a
minimum
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amount as defined by the escrow agreement, in a restricted account, and to
report the balance of the account to the FMC on a weekly basis.
THE LOANS. The EffJohn Lender loaned the Company $24,500,000 (the
"EffJohn Loan") for purposes of acquiring the Enchanted Isle and the Universe
Explorer. The EffJohn Loan was secured by substantially all of the assets of New
Commodore including a first preferred ship mortgage on the Enchanted Isle. The
EffJohn Loan bears interest at LIBOR plus 2% (currently 7.75%) and was
originally to be repaid in 12 semi-annual installments of principal and interest
beginning on January 14, 1997. On November 15, 1995, the Company and the EffJohn
Lender amended the terms of the EffJohn Loan to require the Company to remit
monthly installments of principal and interest toward the January 14, 1997
payment. Such monthly payment schedule ended on January 14, 1997. In January
1997, the EffJohn Loan was amended to provide for monthly repayment of principal
and interest for the remaining term of the EffJohn Loan.
On December 4, 1998, the Company entered into a Loan and Security
agreement with KeyCorp Leasing Co. Inc. ("Key") for $10 million (the "Key
Loan"). The Key Loan is secured by a first preferred ship mortgage on the
Universe Explorer. In conjunction with this loan agreement, the Company entered
into an Interest Rate Swap Agreement with an affiliate of the leasing company,
whereby the interest rate on the loan agreement is fixed at 9.14% over the term
of the Key Loan. The monthly principal payments of the Key Loan are fixed for
the first year at $41,667, and the remainder of the loan is based on an
amortization schedule of 14 years. The remaining unpaid principal and interest
is due on December 4, 2006, the date of maturity. The proceeds from the Key Loan
were used to repay a portion of the EffJohn Loan relating to the Universe
Explorer, and for working capital.
In the event that the Company is required to withhold income tax on any
interest due to the EffJohn Lender or Key, the Company has agreed to pay the
required amount to be withheld and pay the EffJohn Lender or Key, the full
amount of interest due under its respective agreements with the Company.
The terms of the EffJohn and Key Loans 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 Enchanted Isle) without the prior
consent of the EffJohn Lender. Second, the Company is prohibited from paying
more than 50% of its net profits as dividends on its common stock, par value
$.01 per share (the "Common Stock"). Third, the Key Loan prohibits the Company
from placing any additional liens on the Universe Explorer and requires the
Company to meet certain financial covenants with respect to tangible net worth,
leverage and debt service coverage ratios. If the Company fails to meet any of
the foregoing requirements or cure any defaults within the permitted time
periods, the EffJohn Lender or Key could declare the Company in default under
the applicable loan, and potentially foreclose upon the Enchanted Isle, the
Universe Explorer 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 holders of the Series A Preference Shares were entitled
to a cumulative 7% dividend on an annual basis. This dividend was payable, in
cash, from a maximum of 10% of New Commodore's net profits for such year with
the remaining amount payable in Series A Preference Shares. EffJohn, as holder
of the Series A Preference Shares, was entitled to elect one member of the Board
of Directors of the Company, as long as it owned at least 125,000 Series A
Preference Shares. During fiscal 1998, all of the Series A Preference Shares
were sold by EffJohn and subsequently converted into common stock of the Company
at a conversion rate equal to USD $4.00 per share.
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.
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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 1980 approximately 1.4 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.
CALENDAR YEAR NORTH AMERICAN CRUISE PASSENGERS(1)
- ------------- -----------------------------------
(IN MILLIONS)
1993 4.5
1994 4.5
1995 4.4
1996 4.7
1997 5.1
- ----------------
(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 1997 was 8.5% over the 1996 figure, with demand
increasing during 1998. The average growth rate for North American cruise
passengers from 1980 through 1997 was approximately 7.9% 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 1998,
the North American market was served by 30 cruise lines, operating 131 vessels.
Aggregate 1998 market capacity is estimated at 138,841 berths, an increase of
17.4% over the previous year. In addition, an estimated 9 new cruise vessels
offering 15,806 additional berths will be added to the market through 1999.
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 percentage
of 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 "Business--Government 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.
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,
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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 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 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 $173 - $262. 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 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, 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 Enchanted Isle and the Universe Explorer from that of a
foreign country to the U.S.A. U.S. flag vessels 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.
CAPRI CRUISES
In March 1998, the Company chartered a 640-passenger ship, the M/V
Enchanted Capri until January 1, 2003. The Enchanted Capri is a 15,409-ton
cruise ship which was built in 1975, at Wartsila Shipyard in Turku, Finland. The
Enchanted Capri has 241 cabins, including eight suites, and eight passenger
decks. It is 512 feet long and 72 feet wide, and has a cruising speed of over 20
knots. The Enchanted Capri offers full cruise amenities such as a swimming pool,
restaurants, gift shops, bars, lounges, a theater, disco, gym, sauna, beauty
salon, and a full casino.
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In April 1998, the Company entered into a joint venture agreement with
Isle of Capri, the owner of five riverboat and dockside casinos. Pursuant to the
joint venture agreement, subsidiaries of Isle of Capri and the Company formed a
general partnership known as Capri Cruises, to jointly operate the Enchanted
Capri from New Orleans, Louisiana, commencing in June 1998. The Company and Isle
of Capri each own equal portions of Capri Cruises. As a result the Company has
assigned its interest in the Enchanted Capri charter to Capri Cruises. The
Enchanted Capri is operated pursuant to this agreement. The Company operates the
vessel while Isle of Capri manages the casino onboard the vessel as an "Isle of
Capri" casino, including establishing and maintaining the internal controls for
the casino. The Company and Isle of Capri also engage in joint marketing efforts
with the Company marketing the base cruise product and Isle of Capri marketing
the gaming product.
CRUISE OPERATIONS
ITINERARIES. The Company operates two-, five-, and seven-day cruises
aboard the Enchanted Isle and the Enchanted Capri that originate and end in New
Orleans. The two-day cruise is a "Weekender" cruise with no port calls. The
five-day cruise calls in Playa del Carmen (Mexico), and Cozumel (Mexico) and the
standard seven-day itinerary features calls in Playa del Carmen (Mexico),
Cozumel (Mexico), Grand Cayman (Cayman Islands) and Montego Bay (Jamaica).
Occasionally the Company varies its itineraries on the seven-day route and
offers Key West (Florida) or Roatan/Puerto Cortes (Honduras) instead of Grand
Cayman and Montego Bay. The two- and five-day cruises are operated by the
Enchanted Capri and the seven-day cruises by the Enchanted Isle.
MARKETING AND PROMOTION. The Company has committed significant
resources to marketing and promotion through advertising, public relations, and
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 an 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 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 marketing plan extends such advertising to include
additional states in which residents have historically purchased the most
cruises.
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 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 uses
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 Company. The
Company also places travel trade advertising via the most popular trade
publications, expanding the awareness of the Company's product and services.
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 10-20% 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, supported
by an in-house service staff.
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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.
CAPRI CRUISES MARKETING. In addition to the Company's cruise marketing,
the Company's partner in Capri Cruises markets the Enchanted Capri to its list
of repeat gaming clients. As is customary in the casino industry, passengers who
have repeatedly gambled high amounts of money are given many complimentary
services, including but not limited to, cabin upgrades, drinks, complimentary
tokens or chips to play in the casino, and in the case of the best customers,
complimentary accommodations.
REVENUES 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 25 people assist agents in securing passenger
reservations, arranging flights for air/sea passengers, coordinating ground
transportation and pre- and post-cruise tour hotel packages.
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. 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. The Company is also considering
expanding its sales to Latin 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 29-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 two 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 type of
cruise environment that its passengers expect.
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The Enchanted Capri was originally constructed by the Wartsila Shipyard
in Turku, Finland in 1975. The Enchanted Capri is designed to be a seagoing
resort with restaurant, discotheque, movie theater, full service communication
facilities, jogging courses, workout rooms, numerous bars, pool, sun deck areas
and deck activities. The Enchanted Capri features an "Isle of Capri" 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 Capri may not be as modern, as large, or
contain all the amenities of newer ships, the Company believes that it provides
the type of cruise environment that its passengers expect.
TICKET REVENUES. New Commodore's cruises are list-priced per person per
day (based on double occupancy) from $173 to $262, 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.
ON-BOARD AND OTHER REVENUES. Revenues onboard the Enchanted Isle and
the Enchanted Capri 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 and shore excursions. 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, art auctions, the sale of photographs to passengers 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 Premier Cruise Line. However, the Enchanted Isle and the
Enchanted Capri are currently two 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 1999, 9 additional ships
(representing approximately 15,806 berths) will be placed in service by the
Company's competitors and 14 additional ships (representing approximately 19,318
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 increased by 8.5% during 1997. 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 1997 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 43% 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. 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 SEA-COMM 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 Preferred Stock.
Seawise purchased 49.995% of Sea-Comm's Common Stock and 50% 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 operates
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 20 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 EffJohn Loan (assuming that the EffJohn Loan had
continued for the Universe Explorer according to its original terms)
attributable to the Universe Explorer. Sea-Comm also earns revenue from the sale
of the other 24% of the cabins (which hold approximately 176 persons) on the
vessel. Seawise has purchased these cabins from Sea-Comm for $1.5 million per
semester during 1999 and 2000, $1.65 million per semester in 2001 and 2002 and
$1.7325 million per semester in 2003 through 2005.
During the summer when the Semester at Sea program is not operating,
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 earns revenues from
ticket sales for all cabins and pay fees to WEC and Hemisphere for providing
certain services to Sea-Comm.
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 - 650 students from colleges and
universities across the United States and abroad around the world each fall and
spring semester. Since 1963, over 29,000 students have studied and traveled to
60 countries around the world through this program. Seawise operated the
Semester at Sea program for the first time aboard the Universe Explorer in the
Spring of 1996. 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 travel around the world aboard the
Universe Explorer and participate in a unique and dynamic learning environment.
A limited number of "non-student passengers" 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
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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.
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 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. In the summer of 1998, Sea-Comm operated, seven
14-day and one 7-day Alaska cruises onboard the Universe Explorer. The Company,
in conjunction with WEC, also offered 7-day cruises beginning in either
Vancouver or Seward, Alaska. In the summer of 1997 Sea-Comm operated seven
14-day Alaska cruises. In the summer of 1996, Sea-Comm planned to operate one
7-day and three 14-day Alaska cruises onboard the Universe Explorer. On July 27,
1996 a fire broke out aboard the Universe Explorer resulting in the cancellation
of the remainder of the 7 day cruise, the repatriation of all passengers and the
cancellation of the first 14-day cruise. The ship returned to service on August
14, 1996 and operated two 14-day cruises. All Alaska cruises begin and end in
Vancouver, British Columbia. Ports of call are Ketchikan, Juneau, Wrangell,
Glacier Bay, Sitka, Yakutat Bay/Hubbard Glacier, Seward, Skagway, and Victoria.
WEC has been operating Alaska cruises for 21 years. The Company
believes that Sea-Comm's operation of WEC's established program offers 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 remains 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 is the only operator of Alaska cruises that offers educational
seminars in conjunction with a cruise experience.
THE CARIBBEAN PROGRAM. In the winter of 1998, Sea-Comm operated one
8-day Caribbean and one 14-day Caribbean cruise. These cruises began and ended
in Nassau, Bahamas. Ports of call for the 8-day cruise were Playa Del
Carmen/Cozumel (Mexico), Grand Cayman (Cayman Islands) and Ocho Rios (Jamaica).
Ports of call for the 14-day cruise were Ocho Rios (Jamaica), Cartagena
(Columbia), a partial transit of the Panama Canal, Puerto Limon (Costa Rica) and
Playa Del Carmen/Cozumel (Mexico). At present there are no future plans for
Caribbean cruises on the Universe Explorer.
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 space charter and agreed-upon payments for the balance of
the cabins ), its revenue does not vary materially based on the number of
students or adult passengers aboard the vessel. As a result, marketing to
passengers is not of material importance to Sea-Comm.
With respect to the Alaska and Caribbean programs, WEC markets its
cruises through travel agents, and, in general, through the same avenues that
the Company markets its Caribbean cruises. WEC's cruise
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experience can be differentiated from that of its competitors both based on the
length of the cruise and on its focus. Although WEC's cruises feature all of the
cuisine, entertainment and services that cruise passenger have come to expect,
they offer a unique educational undercurrent, which WEC promotes as a unique
adventure for the body and soul. The Universe Explorer features an extensive
library in place of the casino and allows 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. 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 or
Caribbean itinerary, it is easily transformed back into a luxury cruise ship.
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 or Caribbean
programs, 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
$14,980 for double occupancy, to $17,980 for single occupancy for standard
accommodations during the full semesters. 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.
WEC's Alaska cruises are list-priced per person (based on double
occupancy) from $2,095 to $3,695 for its 14-day cruises and from $1,345 to
$2,395 for its 7-day cruise, excluding commissions to travel agents, which will
be paid by Sea-Comm. WEC's winter 1998 Caribbean cruises were list-priced per
person (based on double occupancy) from $1,445 to $3,095 for its 14-day cruise
and from $825 to $1,770 for its 8-day cruise, excluding commissions to travel
agents, which were 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. At present there are no future plans
for Caribbean cruises on the Universe Explorer.
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 and Caribbean
programs, Sea-Comm earns on-board revenue from certain on-board
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activities and services including beverage sales in a variety of bars,
restaurants and lounges, and shore excursions. Additional concession revenue is
earned from gift shop sales, beauty salon 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 June 1997 and
the Enchanted Isle was last taken out of service for maintenance in October
1997. The Enchanted Capri was out of service for approximately 3 months prior to
her delivery to the Company on June 3, 1998. In addition, the ship was stopped
for ten days in June 1998 for additional startup work. 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.
Due to the age of the Enchanted Isle and the Universe Explorer, 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.
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 872 people, of whom approximately 794
serve as officers and crew on the Cruise Ships and approximately 78 are employed
shoreside in various sales and marketing, as well as administrative and
management positions.
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
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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 any 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, $60,000 and $40,000 per day of lost
service for the Enchanted Isle, Universe Explorer and Enchanted Capri,
respectively, up to a maximum of 90 days, subject to a 15-day deductible. The
Company has established insurance coverage in connection with liability for
death or injury to passengers and crew with respect to the Enchanted Isle,
Universe Explorer and Enchanted Capri. Such coverage has no limitation, but is
subject to a deductible equal to $50,000, $10,000 and $23,000, respectively, 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 and Enchanted Capri have an escrow account
established pursuant to the rules and regulations of the FMC. The Universe
Explorer operated seven sailings from a U.S. port in Alaska in the summer of
1998. Deposits collected for these sailings were deposited in the escrow account
until the sailings operated. The Enchanted Capri sails from a U.S. port and has
its deposits placed in escrow as well. The Company reports the balances weekly
to both the escrow agent and to the FMC.
GOVERNMENT REGULATION
The Company's vessels are registered in Panama and the Bahamas, and are
subject to regulations issued by Panama and the Bahamas, 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 Cruise Ships will be inspected at least annually by the
Panamanian and Bahamian 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 is 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
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Company's operations. During recent years, the International Convention
on Safety of Life at Sea ("SOLAS") was amended and requires that most passenger
vessels, not fitted with sprinkler systems, 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 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 and other safety
equipment until on or before October 1, 2005. The Cruise Ships are not currently
fitted with any sprinkler systems and comply with the SOLAS 1974 requirements,
and thus the Company will not have to fit them with sprinkler systems and other
safety equipment until 2005. The Universe Explorer and the Enchanted Isle
classification societies and the Directorate of Consular and Maritime Affairs of
the ships' Flag State (Panama) have confirmed that such ships meet the SOLAS
1974 requirements. The Enchanted Capri, which was built in 1975, was built in
compliance with SOLAS 1974 requirements. The cost of installation of sprinkler
systems is estimated to be approximately $3,000,000 per vessel. The Company
installed on both the Universe Explorer and the Enchanted Isle the systems and
safety arrangements (other than sprinkler systems) required by SOLAS in June
1997 and October 1997, respectively. The Company carried out additional work to
the Universe Explorer in January 1998, in order to have that vessel in full
compliance with U.S. Coast Guard interpretations of the SOLAS requirements as
well.
In January 1999, the Company will place the Universe Explorer in
drydock primarily for the installation of a sprinkler system aboard the vessel.
In order to comply with SOLAS, a sprinkler system must be installed aboard each
of the Company's vessels on or before October 1, 2005. The installation of the
sprinkler system aboard the Universe Explorer is expected to be completed in
February 1999 at which time the ship will commence the Spring 1999 Semester at
Sea voyage.
In 1993, SOLAS was amended to adopt the "International Safety
Management Code" (the "ISM Code"). The ISM Code provides an international
standard for the safe management and operations of ships and for pollution
prevention. The ISM Code became mandatory for passenger vessel operators on July
1, 1998. All of the Company's vessels have obtained the required certificates
demonstrating compliance with ISM Code.
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 Enchanted Isle and the Universe
Explorer 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.
The Cruise Ships maintain the standards of design, construction and
maintenance appropriate to their trades and are operated and maintained under
the continuous maintenance survey system of the American Bureau of Shipping,
Lloyds Register of Shipping and Det Norske Veritas, 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.
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 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 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.
ITEM 2. PROPERTIES
New Commodore subleases from EffJohn, on a pass through basis,
approximately 14,194 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 Company has subleased, to an
unaffiliated third
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party, approximately 4,100 square feet of office space, at a price of $12.00 per
square foot until June 2000. The annual lease payment of approximately $14.44
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 $8.82
per square foot.
To provide for additional office space due to the addition of Capri
Cruises, the Company has leased, from an unaffiliated third party, approximately
3,300 square feet of office space, at a price of $12.00 per square foot until
June 2000.
The Company also pays a portion of the rent for office space in Miami,
Florida and New York, New York used by its Chairman and Chief Executive Officer,
respectively. The aggregate amount of such rent for fiscal 1998 was
approximately $55,000. The Company ceased paying for the New York, New York
space in June, 1998.
The Company also utilizes a pier at the Port of New Orleans, pursuant
to a written agreement, from which two of its Cruise Ships 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, as amended, which was assigned to the Company by Old
Commodore, permits the Company to operate a vessel from New Orleans until April
9, 2002. The Company has priority use of the terminal on weekends. No assurance
can be given that the Company will be able to continue to use the port of New
Orleans or its Caribbean ports, or that the Company will be able to locate
acceptable substitute ports.
ITEM 3. LEGAL PROCEEDINGS
In October 1995, Kristian Stensby filed an action in the Circuit Court
in Dade County, Florida against EffJohn, the EffJohn 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 alleged that he is entitled to damages as a result of the alleged behavior
of the various defendants. The court has entered summary judgment in favor of
the Company, Mr. Mayer and all other defendants except EffJohn on all counts
alleged by Mr. Stensby except the unfair competition and tortious interference
counts. The court is considering the Company's renewed motion for summary
judgment on these remaining two counts. The court is expected to rule on this
motion within the next 60 days. The Company does not believe that the ultimate
resolution of this action will have a material adverse effect on its financial
condition.
The Company is subject to claims and suits in the ordinary course of
its business, 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 claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
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OPTIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth as of December 17, 1998 certain
information regarding the executive officers of the Company. All executive
officers serve in their respective positions until their successors are
appointed.
NAME AGE POSITION AND PRINCIPAL BUSINESS EXPERIENCE
- ---- --- -------------------------------------------
Jeffrey I. Binder 52 Chairman of the Board since 1995; Chairman
of the Board of Tel-Med, a company which
developed medical products and provided
medical related services, from 1991 to
1997; Chairman of the Board and a
director of H.P. America, Inc., a
privately traded holding company which
owns medical practice companies, since
1995; Chairman of the Board and a
director of JeMJ Financial Services,
Inc., a private holding company since
1989.
Frederick A. Mayer 64 Vice Chairman of the Board and Chief
Executive Officer since 1995; Co-founder and
Vice Chairman of Regency Cruises Inc.
("Regency") between 1984 and April 1995;
President of Exprinter International USA, a
travel organization, between 1969 and 1995;
President of Marmara Marine, Inc. which owns
the S/S United States, since 1992. In
November 1995, Regency filed for Chapter 11
bankruptcy protection.
James R. Sullivan 61 President since 1995; Business and Marketing
consultant Sullivan Group, a marketing
consulting company, from 1993 to 1995;
Senior Vice President, Director of Cunard
Line Ltd.'s ("Cunard") Eastern Hemisphere
from 1989 to 1993; Senior Vice President of
Sales and Marketing for Cunard from 1981 to
1989; Vice President of Sales for Cunard
from 1977 to 1981; Vice President of
Marketing and Sales for Cunard's hotel
division from 1973 to 1977.
Alan Pritzker 44 Chief Financial Officer since 1995; Senior
Vice President of Regency from 1989 to May
1995; Controller of Regency from 1985 to
1989. In November 1995, Regency filed for
Chapter 11 bankruptcy protection.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company is traded on the Nasdaq National Market
("NNM") under the symbol CCLNF.
PRICE RANGE OF SECURITIES
The following table reflects the high and low closing bid prices for the
Company's Common Stock during each quarter between October 1, 1996, and
September 30, 1998. Such quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
COMMON STOCK
------------
FISCAL YEAR QUARTERS HIGH LOW
----------- -------- ---- ---
1997 First 4 1/4 2 1/4
Second 4 5/8 2 1/4
Third 3 13/32 2
Fourth 3 1/16 2 1/16
1998 First 3 7/8 2 1/8
Second 5 11/16 2 5/8
Third 6 11/16 4 3/8
Fourth 6 3/8 4
As of December 21, 1998 there were 45 record holders of the Company's Common
Stock and approximately 1,403 beneficial owners of the Company's Common Stock.
The closing bid price for the Common Stock on that day was $6.25.
DIVIDENDS
The Company has not declared any dividends on its Common Stock since
its inception, and has no present intention of paying any dividends on its
Common Stock in the foreseeable future. Pursuant to the terms of the EffJohn
Loan, the Company is prohibited from paying more than 50% of its net profits as
dividends on its Common Stock.
As part of the consideration for the sale of the Commodore Assets,
EffJohn received 1,000,000 Series A Preference Shares at an agreed value of
$4.00 per share. See "Item 1. Business--the Commodore Acquisition." The cash
portion of the dividend was limited to 10% of the Company's net profits for such
year. The remaining portion of the dividend, if any, was payable in Series A
Preference Shares based on a value of $4.00 per share. In fiscal years 1998 and
1997, the Company paid a dividend to the holders of its Series A Preference
Shares of $228,325 and $200,949 in cash and 14,825 and 20,251 Series A
Preference Shares, respectively. In fiscal 1998, all of the Series A Preference
Shares were converted to Common Stock.
16
<PAGE>
ITEM 6. 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 S/S Enchanted Seas and the S/S Enchanted Isle, operating units
of EffJohn (the "Predecessor"), and the Company, and is qualified in its
entirety by the detailed financial information appearing in the Consolidated
Financial Statements and the Notes thereto included in Item 14 herein.
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY PRO FORMA
---------------------- ------------ ------------
YEAR PERIOD ENDED YEAR ENDED
ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
---------------------- ------------ ------------
1994 1995(2) 1995(1)
------ ------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Total revenues $ 41,860 $ 7,256 $ 35,075
Operating expenses 28,527 4,941 33,337
Selling & administrative expenses 6,484 1,664 9,899
Depreciation and amortization 3,599 198 1,693
Interest Expense, net 1,294 133 1,933
Write-off of goodwill -- -- --
Other Income -- -- --
Loss on Vessel Fire 1,367 -- 1,367
Minority interest share of (earnings)
loss of consolidated joint venture -- -- --
Minority interest share of loss
of unconsolidated joint venture
Net earnings (loss) before tax 589 320 (13,154)
Provision for taxes -- 8 --
Net earnings (loss) before
preferred stock dividend 589 312 (13,154)
Provision for preferred stock
dividend -- 60 280
Net earnings (loss) available for
Common Stockholders $ 589 $ 312 $ (13,434)
Net earnings (loss) per share -
Basic(4) $ -- $ 0.06 $ (2.59)
Average shares outstanding - Basic
(000's) 4,378 5,185
Net earnings (loss) per share -
Diluted(3)(4) $ -- $ 0.06 $ --
Average shares outstanding
Diluted(000's) -- 4,378 5,185
OPERATING DATA (UNAUDITED):
Sailings 53 11 64
Traffic days(5) 371 77 444
Passenger days(6) 271,075 53,221 271,171
Load factor(7) 100.22% 94.81% 83.78%
BALANCE SHEET DATA
Property and equipment, net of
Depreciation $ 37,565 $ 33,085
Total assets $ 40,232 $ 44,097
Total borrowings $ 30,020 $ 24,500
Total stockholders' equity (deficit) $ (5,585) $ 12,519
THE COMPANY
-----------------------------------
YEARS ENDED
SEPTEMBER 30,
1996 1997 1998
INCOME STATEMENT DATA: ------ ------ -------
<S> <C> <C> <C>
Total revenues $ 47,817 $ 57,977 $ 63,128
Operating expenses 35,490 46,140 46,072
Selling & administrative expenses 7,238 7,513 8,715
Depreciation and amortization 1,614 2,108 2,216
Interest Expense, net 1,266 1,359 1,250
Write-off of goodwill -- -- --
Other Income 341 6 79
Loss on Vessel Fire 397 -- --
Minority interest share of (earnings)
loss of consolidated joint venture (143) 1,420 7
Equity in net loss of unconsolidated
joint venture (769)
Net earnings (loss) before tax
and preferred stock dividend 2,009 2,283 4,193
Provision for taxes -- -- --
Net earnings (loss) before
preferred stock dividend 2,009 2,283 4,193
Provision for preferred stock
dividend 280 280 170
Net earnings (loss) available for
Common Stockholders $ 1,729 $ 2,003 $ 4,023
Net earnings (loss) per share -
Basic(3)(4) $ 0.31 $ 0.36 $ 0.64
Average shares outstanding - Basic
(000's) 5,582 5,582 6,296
Net earnings (loss) per share -
Diluted(3)(4) $ 0.29 $ 0.33 $ 0.54
Average shares outstanding
Diluted(000's) 6,849 6,876 7,937
OPERATING DATA (UNAUDITED):
Sailings 56 63 63
Traffic days(5) 569 690 675
Passenger days(6) 384,638 479,386 492,254
Load factor(7) 92.66% 95.30% 100.04%
BALANCE SHEET DATA
Property and equipment, net of
Depreciation $ 36,147 $ 37,193 $ 38,296
Total assets $ 53,285 $ 53,118 $ 59,137
Total borrowings $ 24,239 $ 21,230 $ 18,137
Total stockholders' equity (deficit) $ 16,196 $ 18,341 $ 24,589
<FN>
(1) Assumes the Commodore Acquisition occurred on October 1, 1994.
(2) Such period begins April 13, 1995 (date of inception) and ends 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 to the dilutive common stock equivalents, the dividends on the
Series A Preference Shares, and interest expense on convertible debentures.
(4) Earnings per share do not apply to fiscal year 1994 because during such
period the Predecessor was an operating unit of EffJohn International B.V.
(5) Represents the number of sailings, multiplied by the number of days per
cruise (excluding Enchanted Capri).
(6) Represents the number of passengers, multiplied by the number of days of
their respective cruises (excluding Enchanted Capri).
(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. Because the Universe Explorer is space
chartered to Seawise during the majority of the year for the Semester-at-Sea
program, the load factor during these sailings is not as material to the Company
as it is during normal cruise operations. The Company has computed the load
factor for the Semester at Sea voyages by including all passengers, including
university staff and faculty, as well as student and adult participants.
</FN>
</TABLE>
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following is an analysis of the Company's results of operation,
liquidity and capital resources. To the extent that such analysis contains
statements which are not of a historical nature, such statements are
forward-looking statements, which involve risks and uncertainties. These risks
include competing in a saturated industry against modern and larger fleets; the
ability of the Company to obtain additional financing for the acquisition of
additional ships; a high percentage of debt on assets owned by the Company, the
potential for additional governmental regulations; the need for expensive
upgrades and/or maintenance to aging vessels; general economic factors in
markets where the Company operates; and other factors discussed in the Company's
filings with the Securities and Exchange Commission.
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 (Enchanted Isle and Enchanted
Capri only), 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 operations, the Company earns revenue primarily
from reimbursements from Sea-Comm for all operating costs, food costs and all of
the principal and interest due on the portion of the EffJohn Loan attributable
to the Universe Explorer (assuming such EffJohn Loan was still in existence)
during the approximately 320 days each year the vessel is used in the Semester
at Sea and Alaska programs. As the majority owner of Sea-Comm, the Company
includes all of Sea-Comm's revenues and expenses in its consolidated financial
statements and makes an appropriate entry to account for the minority interest
of its partner. Because the Semester at Sea program is operated by Seawise
pursuant to a charter, the income and losses of the Semester at Sea program are
substantially realized by Seawise, not Sea-Comm. With respect to the Alaska and
Caribbean WEC programs, however, all income and losses are borne by Sea-Comm.
With respect to Capri Cruises, the Company earns income from the profit
or loss of the Capri Cruises venture as a whole. Because the Company owns
exactly half of Capri Cruises, it accounts for its interest in Capri Cruises
using the equity method and does not consolidate the revenues and expenses of
the venture in its consolidated financial statements. Instead, such financial
statements are prepared independently and the Company includes an appropriate
line item for the net income or loss from this unconsolidated joint venture in
its financial statements.
18
<PAGE>
The following table presents statements of operations data as a percentage
of total revenues:
THE COMPANY
-----------
YEARS ENDED SEPTEMBER 30,
-------------------------
1998 1997 1996
------ ------ ------
Revenues 100.0% 100.0% 100.0%
Expenses:
Operating 73.0% 79.6% 74.2%
Selling and Administrative 13.8% 13.0% 15.1%
Depreciation and Amortization 3.5% 3.6% 3.4%
Total 90.3% 96.2% 92.7%
Operating Income 9.7% 3.8% 7.3%
Other Income (Expense)(1) -3.1% 0.1% -3.1%
Net Earnings before
Provision for Preferred
Stock Dividend 6.6% 3.9% 4.2%
(1) The Company has included the fiscal 1996 loss from the fire on the Universe
Explorer as other income (expense).
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.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998, COMPARED TO YEAR ENDED SEPTEMBER 30, 1997
Revenues increased by $5,150,990, or 8.9%, for fiscal 1998 compared to
fiscal 1997, primarily due to higher passenger yields and an eight day charter,
on the Company's New Orleans itinerary. Revenues also increased during fiscal
1998 due to the increase in load factors for the Alaska program which increased
from approximately 75% in fiscal 1997 to approximately 96% in fiscal 1998. The
increased loads yielded higher revenues.
The Company's operating expenses decreased by $68,144, in fiscal 1998
compared to fiscal 1997. As a percentage of revenue, operating expenses
represented 73% of revenues in fiscal 1998, as compared to 79.6% of revenue in
fiscal 1997. The primary reason for the decrease in operating expenses as a
percentage of revenue is a result of the 8.9% increase in revenues, as a
majority of the Company's operating expenses are fixed costs.
Marketing, selling and administrative expenses increased by $1,201,718,
or 16.0%, in fiscal 1998 compared to fiscal 1997. The higher expenses were
primarily due to increased salary and related expenses. Additionally,
the Company operated more WEC Alaska and Caribbean cruises during fiscal 1998
than in fiscal 1997, which required additional advertising and promotional
expenses.
19
<PAGE>
Depreciation and amortization increased by $107,526, or 5.1%, in fiscal
1998 compared to fiscal 1997, due to the additional capital expenditures
incurred by the Company in conjunction with meeting its SOLAS requirements on
its two owned vessels. Interest expense, net, decreased by $108,952 or 8.0% from
fiscal 1997 to fiscal 1998 due to lower outstanding principal amounts on the
Company's loans.
Seawise's interest in the Company's Sea-Comm joint venture is reflected in
the $7,056 and $1,420,154 line item for "Minority interest share in loss of
consolidated joint venture" for fiscal 1998 and 1997, respectively. Sea-Comm
lost $14,113 during fiscal 1998 as compared to $2,840,592 during fiscal 1997.
The decline in such loss was primarily due to the increase in load factors
for the Alaska program which increased from approximately 75% in fiscal 1997 to
approximately 96% in fiscal 1998. The increased loads yielded higher revenues
and a better net result. Seawise, through its minority interest, absorbs
approximately 50% of the Company's loss on the Sea-Comm joint venture.
The Company accounts for the Capri Cruises joint venture under the
equity method. The Company's 50% investment in Capri Cruises resulted in a net
loss of $768,928 for the period ended September 30, 1998. These losses were due
to costs related to the start up operation, including losses related to the late
delivery of the vessel and other expenses for which Capri Cruises was not
contractually responsible. The Company expects Capri Cruises to become
profitable in the future, however, Capri Cruises is expected to continue to
incur losses, on a declining basis, in the near future as it defines its market.
Such losses, if significant, could have a material impact on the Company's
operations.
The provision for preferred stock dividend decreased from $280,000 in
fiscal 1997 to $170,000 in fiscal 1998 as a result of the conversion of all of
the Company's Series A Preference Shares into Common Stock during fiscal 1998.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 130 (SFAS 130), "Reporting Comprehensive
Income," and No. 131 (SFAS 131), "Disclosures About Segments of an Enterprise
and Related Information." These statements are effective for fiscal years
commencing after December 15, 1997. The Company will be required to comply with
the provisions of these statements in fiscal 1999. The Company does not expect
these new standards to have a material impact on its consolidated financial
statements and/or disclosures.
YEAR ENDED SEPTEMBER 30, 1997, COMPARED TO YEAR ENDED SEPTEMBER 30, 1996
Revenues increased by $10,159,854, or 21.2%, for fiscal 1997 compared to
fiscal 1996, primarily due to the number of ships operated each month by the
Company during these periods. During fiscal 1997, the Company operated for
approximately 23 ship-months as compared to approximately 20 ship-months for
fiscal 1996. "Ship-months" are the aggregate number of months in which the
Company's ships operated during a fiscal year. Revenues also increased during
fiscal 1997 due to the Company's operation of the Alaska program for a total of
98 days during fiscal 1997, which generated greater revenues than the summer
Semester at Sea voyage (57 days) and Alaska program (32 days) operated in fiscal
1996. Despite this increase, the load factors for the Alaska program declined
from approximately 100% in fiscal 1996 to approximately 75% in fiscal 1997.
Finally, the Company has experienced greater load factors during fiscal 1997 on
its New Orleans itinerary than in fiscal 1996. The increased loads yielded
higher revenues.
The Company's operating expenses increased by $10,650,034, or 30.0%, in
fiscal 1997 compared to fiscal 1996. This increase was due to increased traffic
and passenger days in fiscal 1997, and lower load factors and relatively higher
operating costs for the Alaska and Caribbean programs, which offers luxury
cruise cuisine and luxury cabin services. As a percentage of revenue, operating
expenses represented 79.6% of revenues in fiscal 1997, as compared to 74.2% of
revenue in fiscal 1996. As a result of the prepaid drydock costs incurred in
fiscal 1996, the amortization of these costs resulted in higher operating costs
of $1,283,269 in fiscal 1997 versus $804,678 in fiscal 1996.
Marketing, selling and administrative expenses increased by $275,286, or
3.8%, in fiscal 1997 compared to fiscal 1996. The higher expenses were due to
the Company operating more WEC Alaska and Caribbean cruises during fiscal 1997
than in fiscal 1996 which resulted in higher marketing costs for the Company
than it incurred when the Semester at Sea program operated its summer semester.
Such increase was partially offset by lower marketing costs for the Company's
New Orleans itinerary.
20
<PAGE>
Depreciation and amortization increased by $494,578, or 30.7%, in fiscal
1997 compared to fiscal 1996, due to the additional capital expenditures
incurred by the Company in conjunction with meeting its SOLAS requirements on
the two vessels as well as a full year of depreciation on the Universe Explorer
which was in operation for approximately 8 months in fiscal 1996 versus 11
months in fiscal 1997. Interest expense, net, increased by $92,429 or 7.3% from
fiscal 1996 to fiscal 1997 due to the Company's capitalization, in fiscal 1996,
of approximately 3.5 months of interest incurred with respect to the Universe
Explorer, which had not yet been placed in service.
Seawise's interest in the Company's Sea-Comm joint venture is reflected in
the $1,420,154 and $(143,023) line item for "Minority interest share in loss
(earnings) of consolidated joint venture" for fiscal 1997 and 1996 respectively.
Sea-Comm lost $2,840,592 during fiscal 1997 as compared to net earnings of
$286,046 in fiscal 1996. This loss was due primarily to the decreased load
factors during the WEC programs operated by Sea-Comm in fiscal 1997. As a result
of losses sustained during the Caribbean and Alaska programs, Seawise, through
its minority interest, absorbs approximately 50% of the Company's loss on these
programs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficiency was $10,426,227 and $8,387,670
at September 30, 1998 and 1997, respectively. The Company's working capital
deficiency at September 30, 1998 and 1997 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, which was $7,741,365 and $5,674,811
at September 30, 1998 and 1997, respectively, is included in current
liabilities. The primary reason for the increase in the Company's working
capital deficiency from fiscal 1997 is the Company's investment in Capri Cruises
and capital expenditures in Sea-Comm.
Cash flows from operations provided $7,752,166, $7,202,564 and
$3,467,649, for fiscal 1998, 1997 and 1996, respectively. Cash flows for fiscal
1998 consisted primarily of increases in unearned revenues due to the addition
of the Enchanted Capri to the Company's fleet and collection of the insurance
claim receivable, and was partially offset by increases in restricted cash,
prepaid expenses, and amounts due to/from affiliates.
The Company's cash flow used in investing activities in fiscal 1998
exceeded the fiscal 1997 outlay by $2,313,012. The primary reason for the
increase was the Company's investment of $2 million in Capri Cruises.
Additionally, the Company continued its planned capital expenditures in
connection with the maintenance of its vessels.
The Company's cash flow used by financing activities decreased by
$1,350,471, from fiscal 1997 to fiscal 1998 primarily due to the net proceeds
received from the issuance of its convertible subordinated debentures.
At September 30, 1998, the Company owed $16,837,583 to the EffJohn
Lender in connection with the Commodore Acquisition. The EffJohn Loan was
secured by substantially all of the assets of New Commodore, including preferred
ships mortgages on both the Enchanted Isle and Universe Explorer, and bears
interest at LIBOR plus 2% (7.75% at September 30, 1998). In January 1997 the
Company and the EffJohn Lender amended the EffJohn Loan to provide for monthly
payments of interest and principal for the duration of the EffJohn Loan.
On December 4, 1998, the Company borrowed $10 million under the new
Key Loan Agreement. In conjunction with this loan agreement, the Company entered
into an Interest Rate Swap Agreement with an affiliate of Key, whereby the
interest rate on the Key Loan is fixed at 9.14% over the term of the loan. The
monthly principal payments of the Key Loan are fixed for the first year at
$41,667, and the remainder of the loan is based on an amortization schedule of
14 years. The remaining unpaid principal and interest is due on December 4,
2006, the date of maturity. The proceeds from the Key Loan, which is secured by
a first preferred ship's mortgage on the Universe Explorer, were used to repay a
portion of the EffJohn Loan and for working capital.
In the event that the Company is required to withhold income tax on any
amounts due to the EffJohn Lender or Key, the Company has agreed to pay the
required amount to be withheld and pay the EffJohn Lender or Key the full amount
of interest due under its agreements with the Company.
The terms of the EffJohn and Key Loans place certain restrictions on
the Company. First, the Company is not permitted to place any additional liens
on any of its assets (including the Enchanted Isle) without the prior consent of
the EffJohn Lender. Second, the Company is prohibited from paying more than 50%
of its net profits as dividends. The Key Loan also prohibits the Company from
placing any additional liens on the Universe Explorer and requires that the
Company meet certain financial covenants.
21
<PAGE>
On April 22, 1998, the Company borrowed $1.5 million on an unsecured
basis, from an unrelated third party. The Company repaid a portion of this
amount in August 1998 and renewed the loan for the balance of $1.3 million. This
amount was paid in full in December 1998. The interest on the loan was 10% per
annum.
On July 27, 1996, the Universe Explorer had a fire on-board, which resulted
in the death of five crew members and loss of revenues during the 17-day period
the ship was out of service. The majority of the losses by the passengers and
crew, damage to the hull and machinery of the vessel and loss of hire is covered
by the Company's insurance policies, subject to applicable deductibles. As a
result, as of September 30, 1998 and 1997 the Company had an insurance
receivable balance of $-0- and $305,038, respectively.
In December, 1997 the Company sold $2,150,000 of its 7% convertible
subordinated debentures that were due on December 31, 2003. The Company sold
these debentures at a 20% discount. In May, 1998 the Company exercised its right
to demand conversion of the debentures into 537,500 shares of common stock at
$4.00 per share. The net proceeds to the Company were approximately $1,580,000,
after deducting brokers' commissions and expenses of the offering. The Company
capitalized approximately $812,000 of the discount and expenses of the offering
to deferred interest expense and offset the unamortized balance of approximately
$753,000 against stockholders' equity upon conversion.
In January 1999, the Company will take the Universe Explorer out of
service primarily for the installation of a sprinkler system aboard the vessel.
The installation of the sprinkler system, which will bring the ship into
compliance with SOLAS work to be completed on or before October 1, 2005, is
expected to be completed in February 1999. The cost of the installation of the
sprinkler system is estimated at $4.2 million. The Company expects to pay for
such costs with the proceeds of the Key Loan and the proceeds of additional
financings to be obtained by the Company with the assistance of its joint
venture partner, Seawise. The Company expects to service such additional debt
through payments that will be received by the Company, from Seawise, that become
due pursuant to an agreement between the Company and Seawise.
During fiscal 1999, the Company anticipates that it may also require
additional capital for acquisitions of additional vessels or new business
opportunities. Although the Company has entered into a non-binding letter of
intent to form one joint venture to operate a vessel between San Diego,
California and Rosarito, Baja California, Mexico, the Company has not entered
into a definitive agreement for such business opportunity or any other proposed
venture, and thus cannot estimate the amount of capital it may require
for this venture, if it proceeds, or for any other business opportunity
preliminarily under consideration by the Company. In the event the Company
proceeds with any additional business opportunities, it anticipates that the
capital requirements therefore will be funded from cash from operations or from
financings arranged in connection therewith.
With respect to the Company's existing operations, the Company expects
to fund the operating cash needs for such operations, such as the Company's new
Capri Cruises venture, from cash flow from its established operations until such
ventures become profitable. Capri Cruises suffered certain unanticipated
expenses during its initial operations as a result of the failure of the other
party to the charter to meet certain of its contractual obligations associated
with the delivery of the vessel. The Company plans to pursue claims for its
losses against such party. In addition, Capri Cruises is continuing to
experience losses related to its start-up as it defines its market. The Company
expects that such losses will decline as Capri Cruises establishes its market
niche. Half of such losses will be funded by the Company's partner, Isle of
Capri. There can be no assurances that Capri Cruises' losses will not have a
material adverse effect on the Company.
YEAR 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
equipment and software and devices with embedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or a miscalculation, causing
disruptions of operations, including,
22
<PAGE>
among other things, temporary inability to process transactions, send invoices,
or engage in similar normal business activities.
Due to the expansion of the Company's business, the Company has
recently purchased a new AS400 for its reservations system, along with the
operating systems, that are the latest versions available. The Company also
installed new workstations for most of its non-reservations staff. The equipment
was installed after the Company's fiscal year end and will be included in
capital expenditures in the first quarter of fiscal 1999. Additionally, the
Company is in the process of installing a new general ledger and accounts
payable system that will be fully functional by the second quarter of fiscal
1999. The Company has undertaken various initiatives intended to ensure that its
computer equipment and software will function properly with respect to dates in
the Year 2000 and thereafter. The Company has already evaluated its on-board
point of sale computer equipment and reservations computer software and made the
changes and upgrades necessary, based on the opinion of the consultants and
vendors it has hired for such purpose, to assure that such equipment will
function properly in the Year 2000. The Company believes that it has identified
all Year 2000 problems with respect to its own computer equipment and software.
The Company has also contacted some of its significant vendors,
customers and service providers, including its technical manager, to determine
the extent to which such entities are vulnerable to Year 2000 issues and whether
the products and services purchased from or by such entities are Year 2000
compliant. A mailing to the balance of the Company's significant vendors and
follow-up mailing to significant vendors and service providers that did not
initially respond, or whose responses were deemed unsatisfactory by the Company,
will be conducted in January 1999. The response from the Company's initial
inquiries have not yielded enough information for the Company to determine
whether such vendors and service providers will be Year 2000 compliant on a
timely basis.
The Company has incurred an immaterial amount in costs associated
with the identification and remediation of its Year 2000 issues as it has
reprogrammed its reservations system using in-house personnel. The cost of the
new AS400 system, internal network of workstations and the accounts
payable/general ledger system is approximately, $162,000, $55,000 and $50,000,
respectively. If there exist other Year 2000 issues that the Company has not
identified, or if the Company's vendors and service providers fail to identify
and remediate their Year 2000 issues on a timely basis, there can be no
assurance that the Year 2000 issue will not have a material adverse effect on
the Company's operations or its relationships with its customers, vendors and
service providers.
The Company has not yet begun a comprehensive analysis of the
operational problems and costs (including the loss of revenues) that would be
reasonably likely to result from the failure of the Company and certain of its
significant vendors and service providers to complete efforts necessary to
achieve Year 2000 compliance on a timely basis. A contingency plan has not been
developed for dealing with the most reasonably likely worst case scenario, and
such scenario has not yet been clearly identified. The Company plans to complete
such analysis and contingency planning during its 1999 fiscal year.
The costs of the Company's Year 2000 identification, assessment, and
remediation and the dates upon which the Company will complete various actions
are based upon management's best estimates. There can be no assurance that these
estimates will prove to be accurate and actual results could differ materially
from those currently anticipated. Specific factors that could cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in Year 2000 issues and the ability of the Company to
require its vendors and service providers to thoroughly identify, assess and
remediate their Year 2000 issues. In addition, variability of definitions of
"compliance with Year 2000" may lead to different levels of compliance by the
Company, its vendors and service providers. No assurance can be given that the
Company and its significant vendors and service providers will be Year 2000
compliant on a timely basis, or that a partial lack of compliance will not lead
to claims against the Company, the magnitude of which are not currently
estimable. No assurance can be given that such claims will not have a material
adverse effect on the Company's results of operations.
INFLATION
The impact of inflation 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.
23
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's major market risk exposure is to changing interest rates.
The Company's policy is to manage interest rate risk through the use of a
combination of fixed and floating rate instruments, with respect to both its
liquid assets and its debt instruments.
The Company maintains a portion of its cash and cash equivalents,
including its deposit to secure its FMC Certificate of Financial
Responsibility, which equals $4,629,000, in financial instruments with original
maturities of three months or less. These financial instruments are subject to
interest rate declines. An immediate decline of 10% in interest rates would
reduce the Company's annual interest income by $52,000.
The Key Loan is a variable rate loan; however, the Company has
purchased interest rate protection for such loan in the form of an interest rate
swap. As a result, although the Key Loan bears interest at the prime rate plus
80 basis points, the interest rate swap provides that the rate shall effectively
be fixed at 9.14% over the term of the loan. The EffJohn Loan bears interest at
LIBOR plus 2%, and thus is affected by changes in interest rates. In the event
that interest rates increased by 10%, the Company's interest obligation would
increase by $65,000, $39,000, $22,000 and $6,000, respectively, in each of its
fiscal years 1999, 2000, 2001, and 2002.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14(a) hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
24
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the directors of the Company set forth under the
caption "Election of Directors" in the definitive Proxy Statement of the Company
for its 1999 Annual Meeting of Stockholders (the "1999 Proxy Statement") is
incorporated herein by reference.
Information concerning the executive officers of the Company is included in
Part I herein under the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the 1999 Proxy Statement under the caption
"Compensation of Officers" and "Board of Directors--Compensation" is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Principal Stockholders and
Security Ownership of Management" in the 1999 Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Transactions with Management
and Others" in the 1999 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See "Index to Financial Statements" on Page F-1.
2. Financial Statement Schedules
All schedules have been omitted because they are not applicable or the
required information is shown in the financial statements herein.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of Fiscal 1998.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- -----------------------
3a Memorandum of Association of the Company, as amended (1)
3b Bye-Laws (1)
4a Form of Common Stock Certificate (2)
4b Form of Warrant Certificate (3)
4c Form of Warrant Agent Agreement (3)
4d Form of Underwriter's Warrant Agreement (3)
25
<PAGE>
4e Stockholder Rights Plan (4)
4f Assignment and Assumption of Underwriter's Warrant Agreement
10a Employment Agreement dated May 3, 1995 between the Company and
Jeffrey I. Binder (1)
10b Employment Agreement dated May 3, 1995 between New Commodore and
Frederick A. Mayer, as amended (1)
10c Employment Agreement dated May 3, 1995 between New Commodore and
James R. Sullivan, as amended (1)
10d Employment Agreement dated May 3, 1995 between New Commodore and
Alan Pritzker, as amended (1)
10e USD $24,500,000 Loan Facility Agreement, dated July 14, 1995
among the EffJohn Lender, Almira, Azure, New Commodore and the
Company (1)
10f 1995 Stock Option Plan (1)
10g Joint Venture Agreement dated October 30, 1995 between the
Company, Seawise and Sea-Comm (1)
10h Management Services Agreement dated July 5, 1995 between New
Commodore and IMC (3)
10i Sublease for Office Space at 4000 Hollywood Boulevard dated June
30, 1995 between EffJohn and New Commodore (3)
10j Software Agreement between Reservations Technology, Inc. and New
Commodore (3)
10k Sublease of computer equipment and software between Old
Commodore and New Commodore (IBM Sublease) (3)
10l 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 (3)
10m Warrant Certificate for 250,000 Shares of Common Stock of the
Company dated July 14, 1995 in favor of JeMJ Financial Services,
Inc. (3)
10n Warrant Certificate for 250,000 Shares of Common Stock of the
Company dated July 14, 1995 in favor of Jeffrey I. and Rosalie
Binder (3)
10o Warrant Certificate for 250,000 shares of Common Stock of the
Company dated October 30, 1995 in favor of Seawise (3)
10p First Priority Panamanian Mortgage on the Enchanted Isle dated
July 14, 1995 between Almira and the EffJohn Lender (3)
10q First Priority Charge over the shares of Almira dated July 14,
1995 between the EffJohn Lender and New Commodore (3)
10r First Priority Tripartite Deed in respect of the Enchanted Isle
dated July 14, 1995 between Almira, New Commodore and the
EffJohn Lender (3)
10s Second Amendment to Employment Agreement by and between New
Commodore and Frederick Mayer dated May 3, 1997 (5)
10t First Amendment to Employment Agreement by and between the
Company and Jeffrey I. Binder dated July 15, 1997 (6)
10u First Amendment to USD $24,500,000 Loan Facility Agreement dated
December 4, 1998 among the EffJohn Lender, Azure, Almira, New
Commodore and the Company
10v Modification Agreement dated December 4, 1998 among Sea-Comm,
Seawise, WEC, HCT, Azure, New Commodore and the Company
10w Extension of the Financing and Berthing Agreement between New
Commodore and the Port of New Orleans dated August 24, 1998
10x Restated Warrant Certificate for 520,455 Shares of Common Stock
of the Company dated October 15, 1998 in favor of Jeffrey I. and
Rosalie Binder
10y Restated Warrant Certificate for 545,455 Shares of Common Stock
of the Company dated April 15, 1998 in favor of JeMJ Financial
Services, Inc.
10z First Preferred Marine Mortgage dated December 4, 1998 executed
by Azure in favor of KeyCorp
10aa Assignment of Mortgage in respect of the Enchanted Isle
10bb Charter Agreement dated March 9, 1998 between Cruise Charter,
Ltd. And Commodore Cruises Limited, as amended (7)
10cc Joint Venture Agreement of Capri Cruises dated April 17, 1998
between Commodore
26
<PAGE>
Cruises Limited and Isle of Capri Corporation(7)
10dd Promissory Note dated April 22, 1998 (7)
10ee Loan and Security Agreement dated December 4, 1998 between Azure
and KeyCorp
10ff Promissory Note dated December 4, 1998 between Azure and
KeyCorp
10gg ISDA Master Agreement dated December 4, 1998 between Azure and
KeyCorp, and the Schedule and Confirmation thereto
10hh Corporate Guaranty Agreement dated December 4, 1998 between the
Company and KeyCorp
21 Subsidiaries of the Company
24 Power of Attorney (included on signature page)
27 Financial Data Schedule (8)
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 333-01270) filed on February 12, 1996.
(2) Incorporated by reference to Amendment No. 2 to the Company's Registration
Statement on Form S-1 (No. 333-01270) filed on June 18, 1996.
(3) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-1 (No. 333-01270) filed on May 28, 1996.
(4) Incorporated by reference to the Company's Current Report on Form 8-K
filed on October 29, 1998.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.
(6) Incorporated by reference to the Company's 1997 Annual Report on Form
10-K for the year ended September 30, 1997.
(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998.
(8) Included only in electronic filing.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Hollywood, Florida on the 23rd day of December, 1997. The registrant and each
person whose signature appears below hereby authorizes and appoints Frederick A.
Mayer as attorney-in-fact to sign and file on behalf of the registrant and each
such person in each capacity below, any and all amendments to this report.
COMMODORE HOLDINGS LIMITED
By /s/ FREDERICK A. MAYER
---------------------------
Frederick A. Mayer, Vice-Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ JEFFREY I. BINDER Chairman of the Board December 29, 1998
- ---------------------------------
Jeffrey I. Binder
/s/ FREDERICK A. MAYER Vice-Chairman of the Board December 29, 1998
- --------------------------------- (Principal Executive Officer)
Frederick A. Mayer
/s/ JAMES R. SULLIVAN President December 29, 1998
- ---------------------------------
James R. Sullivan
/s/ ALAN PRITZKER Vice President, Finance and December 29, 1998
- --------------------------------- Chief Financial Officer
Alan Pritzker (Principal Financial and
Accounting Officer)
Director December __, 1998
- ---------------------------------
Ralph V. De Martino
/s/ MARK J. MAGED Director December 29, 1998
- ---------------------------------
Mark J. Maged
/s/ ARNOLD ADOLPHUS FRANCIS, Q.C. Director December 29, 1998
- ---------------------------------
Arnold Adolphus Francis, Q.C.
/s/ GORDON HILL Director December 29, 1998
- ---------------------------------
Gordon Hill
</TABLE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
-----
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
Report of Independent Certified Public Accountants .................... F-2
Consolidated Balance Sheets--September 30, 1998 and 1997 .............. F-3
Consolidated Statements of Earnings-- Years Ended September 30, 1998,
1997 and 1996........................................................... F-4
Consolidated Statement of Stockholders' Equity--September 30, 1998 ..... F-5
Consolidated Statements of Cash Flows-- Years Ended September 30, 1998,
1997 and 1996 ........................................................ F-6
Notes to Consolidated Financial Statements ............................. F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Commodore Holdings Limited and Subsidiaries
We have audited the accompanying consolidated balance sheets of Commodore
Holdings Limited and Subsidiaries as of September 30, 1998 and 1997 and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 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, 1998 and 1997 and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended September 30, 1998 in conformity with generally
accepted accounting principles.
/s/ Grant Thornton LLP
Miami, Florida
December 4, 1998
F-2
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
ASSETS
<TABLE>
<CAPTION>
1998 1997
---------------- ---------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,172,022 $ 3,530,563
Restricted cash 2,326,261 191,273
Trade and other receivables 481,623 321,191
Insurance claim receivable - 305,038
Due from affiliates 1,061,050 71,294
Inventories 1,465,593 1,870,128
Prepaid expenses 2,865,124 3,050,353
Other current assets 76,933 76,290
---------------- ---------------
Total current assets 11,448,606 9,416,130
Property and equipment, net 38,296,368 37,193,102
Investment in Joint Venture 1,481,072 -
Long-term receivable-affiliates 2,549,524 1,517,913
Investments restricted 4,629,000 4,629,000
Other assets 732,187 361,667
---------------- ---------------
$ 59,136,757 $ 53,117,812
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 4,392,408 $ 4,392,408
Note payable 1,300,000 -
Accounts payable 6,457,312 5,512,270
Accrued liabilities 710,192 1,576,504
Due to affiliates 1,200,622 574,873
Customer and other deposits 7,741,365 5,674,811
Accrued interest 72,934 72,934
---------------- ---------------
Total current liabilities 21,874,833 17,803,800
Long-term debt 12,445,175 16,837,582
Minority interest in subsidiary 227,622 135,037
Stockholders' equity
Preferred stock - authorized 10,000,000 shares of $.01 par
value; issued 0 in 1998 and 1,027,230 in 1997 - 10,272
Common stock - authorized 100,000,000 shares of $.01 par
value; issued 7,264,821 in 1998 and 5,581,933 in 1997 72,648 55,819
Additional paid-in capital 16,347,682 14,012,051
Retained earnings 8,168,797 4,263,251
---------------- ---------------
Total stockholders' equity 24,589,127 18,341,393
---------------- ---------------
$ 59,136,757 $ 53,117,812
================ ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Revenues $ 63,127,725 $ 57,976,735 $ 47,816,881
Expenses
Operating 46,071,603 46,139,747 35,489,713
Marketing, selling and administrative 8,715,152 7,513,434 7,238,148
Depreciation and amortization 2,215,772 2,108,246 1,613,668
------------- ------------- -------------
57,002,527 55,761,427 44,341,529
------------- ------------- -------------
Operating income 6,125,198 2,215,308 3,475,352
Other income (expense)
Other income 79,498 6,396 340,641
Interest income 436,485 483,214 382,101
Interest expense (1,686,139) (1,841,818) (1,648,276)
Minority interest share of loss (earnings)
of consolidated joint venture 7,056 1,420,154 (143,023)
Equity in net (loss) of unconsolidated
joint venture (768,928) - -
Loss on vessel fire - - (397,310)
------------- ------------- --------------
(1,932,028) 67,946 (1,465,867)
------------- ------------- -------------
Earnings before provision for
income taxes and provision for
preferred stock dividend 4,193,170 2,283,254 2,009,485
Provision for income taxes - - -
------------- ------------- -------------
Net earnings before provision
for preferred stock dividend 4,193,170 2,283,254 2,009,485
Provision for preferred stock dividend 170,000 280,000 280,000
------------- ------------- -------------
Net earnings available for
common stockholders $ 4,023,170 $ 2,003,254 $ 1,729,485
============= ============= =============
Earnings per share - Basic $ .64 $ .36 $ .31
============= ============= =============
Earnings per Share - Diluted $ .54 $ .33 $ .29
============= ============= =============
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------------------- -------------------------------- ADDITIONAL
NUMBER NUMBER PAID-IN
OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1995 1,000,000 $ 10,000 4,931,933 $ 49,319 $ 12,148,576
Net proceeds of initial public offering - - 650,000 6,500 1,692,104
Preferred stock dividend (Note G) 6,979 70 - - 27,846
Net earnings - - - - -
------------- ------------- ------------- ------------- --------------
Balance at September 30, 1996 1,006,979 10,070 5,581,933 55,819 13,868,526
Fair value of options to nonemployees - - - - 62,722
Preferred stock dividend (Note G) 20,251 202 - - 80,803
Net earnings - - - - -
------------- ------------- ------------- ------------- --------------
Balance at September 30, 1997 1,027,230 10,272 5,581,933 55,819 14,012,051
Fair value of options to nonemployees - - - - 276,751
Preferred stock dividend (Note G) 14,825 148 - - 59,151
Conversion of preferred stock
to common stock (Note G) (1,042,055) (10,420) 1,042,055 10,420 -
Conversion of subordinated
debentures to common stock (Note F) - - 537,500 5,375 1,391,597
Exercise of employee stock options - - 3,333 34 9,132
Issuance of common stock (Note G) - - 100,000 1,000 599,000
Net earnings - - - - -
------------- ------------- ------------- ------------- --------------
Balance at September 30, 1998 - $ - 7,264,821 $ 72,648 $ 16,347,682
============= ============= ============= ============= ==============
<CAPTION>
RETAINED
EARNINGS TOTAL
------------- ---------------
<S> <C> <C>
Balance at September 30, 1995 $ 311,535 $ 12,519,430
Net proceeds of initial public offering - 1,698,604
Preferred stock dividend (Note G) (59,069) (31,153)
Net earnings 2,009,485 2,009,485
------------- ---------------
Balance at September 30, 1996 2,261,951 16,196,366
Fair value of options to nonemployees - 62,722
Preferred stock dividend (Note G) (281,954) (200,949)
Net earnings 2,283,254 2,283,254
------------- ---------------
Balance at September 30, 1997 4,263,251 18,341,393
Fair value of options to nonemployees - 276,751
Preferred stock dividend (Note G) (287,624) (228,325)
Conversion of preferred stock
to common stock (Note G) - -
Conversion of subordinated
debentures to common stock (Note F) - 1,396,972
Exercise of employee stock options - 9,166
Issuance of common stock (Note G) - 600,000
Net earnings 4,193,170 4,193,170
------------- ---------------
Balance at September 30, 1998 $ 8,168,797 $ 24,589,127
============= ===============
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,193,170 $ 2,283,254 $ 2,009,485
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation of property and equipment 2,170,772 2,081,910 1,581,519
Amortization of deferred dry-dock 1,521,474 1,283,269 804,678
Amortization of organization cost 45,000 45,000 16,729
Fair value of options to nonemployees 221,799 62,722 -
Undistributed equity in loss of joint venture 768,928 - -
(Increase) decrease in operating assets
Restricted cash (2,134,988) 1,221,634 (1,049,445)
Trade and other receivables (160,432) 7,621 (249,743)
Insurance claim receivable 305,038 2,165,486 (2,470,525)
Due from affiliates (777,756) (28,373) 413,957
Inventories 404,535 (39,886) (1,139,241)
Prepaid expenses and other current assets (1,576,408) (1,869,780) (2,052,147)
Other assets - - (200,000)
Increase (decrease) in operating liabilities
Accounts payable 945,043 245,160 3,898,697
Accrued liabilities (866,312) 87,834 495,109
Due to affiliates 625,749 (174,758) 249,631
Customer and other deposits 2,066,554 (164,549) 1,494,703
Accrued interest - (3,980) (335,758)
------------- ------------- -------------
Net cash provided by operating
activities 7,752,166 7,202,564 3,467,649
Cash flows from investing activities:
Capital expenditures (3,274,038) (2,362,158) (4,642,139)
Long-term receivable - affiliates (1,031,611) (1,517,913) -
Decrease in capital leases obligation - - (223,960)
Investment in joint venture (2,038,000) - -
(Decrease) increase in minority interest 92,585 (57,981) 193,018
------------- ------------- -------------
Net cash used in investing activities (6,251,064) (3,938,052) (4,673,081)
Cash flows from financing activities:
Principal payments on debt (4,592,407) (3,009,165) (260,847)
Proceeds from exercise of employee stock options 9,166 - -
Proceeds from issuance of note payable 1,500,000 - -
Proceeds from initial public offering - - 1,698,604
Proceeds from issuance of subordinated debentures, net 1,451,923 - -
Preferred stock dividends paid (228,325) (200,949) (31,153)
------------- ------------- -------------
Net cash (used in) provided by
financing activities (1,859,643) (3,210,114) 1,406,604
------------- ------------- -------------
Net (decrease) increase in cash and cash equivalents (358,541) 54,398 201,172
Cash and cash equivalents at beginning of period 3,530,563 3,476,165 3,274,993
------------- ------------- -------------
Cash and cash equivalents at end of period $ 3,172,022 $ 3,530,563 $ 3,476,165
============= ============= =============
(continued)
</TABLE>
F-6
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,686,139 $ 1,845,798 $ 1,601,933
============= ============= =============
Cash paid during the period for taxes $ - $ - $ -
============= ============= =============
</TABLE>
Supplemental schedule of noncash investing and financing activities:
In March 1998, the Company issued 100,000 shares of common stock to acquire
a leasehold interest in a vessel. The market value of the common stock at
the date of issuance was $600,000.
In January 1998, January 1997 and April 1996, the Company issued 14,825,
20,251 shares and 6,979 shares, respectively of its Series A preference
shares in partial payment of its preferred share dividend.
In May 1998, the Company exercised its right to demand conversion of
$2,150,000 of convertible debentures. As a result, the debentures were
converted into 537,500 shares of the Company's common stock.
During fiscal 1998, all of the Series A preference shares were converted to
1,042,055 shares of the Company's common stock.
The accompanying notes are an integral part of this statement.
F-7
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
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
Universe Explorer, formerly known as the 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.
In October 1995, the Company entered into a joint venture agreement with
the Seawise Foundation ("Seawise"), a Liberian Corporation. The Company has
chartered the Universe Explorer to Sea-Comm, Ltd., a Liberian Corporation
("Sea-Comm") formed pursuant to the joint venture agreement, for a fee
equivalent to all operating costs plus principal and interest on its ship
mortgage. The Company owns 50.005% of Sea-Comm and Seawise owns the
remaining 49.995%.
CHL, NCCL, Almira, Azure and Sea-Comm are collectively referred to as
the "Company".
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CHL, its
wholly-owned subsidiaries and majority owned subsidiaries. All material
intercompany balances and transactions have been eliminated in
consolidation. The Company reflects its investments in its 50%-owned joint
venture at cost plus/(minus) its equity in undistributed net
earnings/(loss).
SEA-COMM
Sea-Comm has chartered the Universe Explorer to Seawise for 200 days per
year for an educational program. The terms of the charter provide that
Seawise 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 the Company's ship mortgage. Sea-Comm
will earn additional revenue from onboard revenues and the sale of the 24%
of the cabins on the vessel. Seawise has purchased these cabins from
Sea-Comm for $3 million per year. During the summer, Sea-Comm operates the
Universe Explorer in Alaska and during the winter, in the Caribbean.
(continued)
F-8
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
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.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
RESTRICTED CASH
In fiscal 1998, the Company entered into an escrow agreement whereas the
Company maintains certain advance passenger deposits in an escrow account
until the completion of the associated voyage. In addition, commencing in
November 1996, the Company had entered into an agreement with a credit card
processor which requires a chargeback reserve account that equals
approximately 2.5% of the Company's Visa/Master card deposits. The amounts
in the escrow account and the reserve account are classified as restricted
cash.
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 are charged to prepaid
expenses when incurred and expensed over the estimated period until the
next scheduled dry-dock (not to exceed two years). Prepaid dry-docking cost
of $1,502,442 and $1,439,658 net of accumulated amortization of $2,743,703
and $1,222,229 are recorded in prepaid expenses as of September 30, 1998
and 1997, respectively.
F-9
(continued)
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
MANAGEMENT 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 at
September 30, 1998 and September 30, 1997 and revenues and expenses during
the reporting periods. The actual outcome of the estimates could differ
from these estimates made in the preparation of the financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, trade receivables, and
accounts payable approximate fair value due to the short term maturities of
these instruments. The carrying value of the long-term receivable
affiliates approximates fair value as the interest rate earned on the
receivable approximates the current market rate.
PROPERTY AND EQUIPMENT
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 original useful lives of 18
years after a reduction for the estimated salvage value for vessels and
five to ten years for furniture and fixtures, improvements, and other
property and equipment.
INVESTMENTS - RESTRICTED
The Company has placed $4,629,000 on deposit with a bank, securing its
Federal Maritime Commission (FMC) Certificate of Financial Responsibility
(FMC Certificate) for the Enchanted Isle (see Note H).
ADVERTISING COSTS
Advertising costs are expensed as incurred and are included in marketing,
selling and administrative expenses.
(continued)
F-10
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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.
EARNINGS PER SHARE
The Company adopted Financial Accounting Standards No. 128 (FAS 128),
"Earnings Per Share" in fiscal 1998. FAS 128 requires dual presentation of
basic and diluted earnings per share on the face of the statement of
earnings as well as the restatement of prior periods presented.
Basic net earnings per share equals net earnings divided by the weighted
average shares outstanding during the year. The computation of diluted net
earnings per share includes dilutive common stock equivalents in the
weighted average shares outstanding. The reconciliation between the
computation is as follows:
<TABLE>
<CAPTION>
NET
EARNINGS - BASIC BASIC DILUTED DILUTED
FISCAL YEAR ENDED BASIC SHARES EPS SHARES EPS
----------------- ---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
1998 4,023,170 6,295,516 $ .64 7,936,528 $ .54
1997 2,003,254 5,581,933 $ .36 6,875,856 $ .33
1996 1,729,485 5,581,933 $ .31 6,849,102 $ .29
</TABLE>
Included in diluted shares are common stock equivalents relating to
options, warrants and preferred stock of 1,641,012, 1,293,923, and
1,267,169 for fiscal 1998, 1997 and 1996 respectively. Added back to
net earnings for diluted EPS purposes is the provision for preferred
stock dividends of $170,000, $280,000 and $280,000 for the years ended
September 30, 1998, 1997 and 1996, respectively, as well as interest
expense on convertible debentures of approximately $58,000 for the year
ended September 30, 1998. Warrants to purchase 1,063,799 shares of the
Company's common stock ranging from a per share exercise price of $4.75
to $7.05, which were outstanding during fiscal 1998, were not included
in the computation of diluted EPS because the warrants' exercise prices
were greater than the annual average market price of the common shares.
These warrants are all exercisable as of September 30, 1998. In
addition, in October 1998 and December 1998, the Company issued
warrants to purchase 50,000 and 81,633 shares of common stock for $5.45
and $6.13 per share (Note M) which were not included in the computation
of diluted EPS.
(continued)
F-11
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 130 (SFAS 130), "Reporting Comprehensive
Income," and No. 131 (SFAS 131), "Disclosures About Segments of an
Enterprise and Related Information." These statements are effective for
fiscal years commencing after December 15, 1997. The Company will be
required to comply with the provisions of these statements in fiscal 1999.
The Company does not expect these new standards to have a material impact
on its consolidated financial statements and/or disclosures.
LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standard No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS 121 requires that long-lived
assets and certain identifiable intangible assets to be held and used, or
disposed of, be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. During fiscal 1998 and 1997, the Company determined that none
of its long-lived assets had been impaired, and therefore the Company did
not adjust the carrying amounts of such assets.
STOCK OPTIONS
The Company has elected to account for employee stock options and
warrants under the intrinsic value method of APB Opinion 25 and
related Interpretations and therefore is not required to recognize
compensation expense for employee stock options and warrants.
Commencing October 1, 1996, the Company accounts for options and
warrants issued to non-employees, under SFAS 123, Accounting for Stock
Based Compensation.
F-12
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE B - INVESTMENT IN JOINT VENTURE
In March 1998, the Company chartered the M/V Enchanted Capri (formerly the
Island Holiday) for a period ending on January 1, 2003. In April 1998, the
Company entered into a joint venture agreement for a joint venture (Capri
Cruises) with Isle of Capri Casinos, Inc., the owner and operator of five
riverboat and dockside casinos. The Company assigned its rights under the
Enchanted Capri charter agreement to Capri Cruises. Pursuant to the
agreement, Isle of Capri Casinos, Inc. and the Company will jointly operate
cruises in strategic markets. The Company is accounting for the joint
venture under the equity method.
A condensed summary of the assets and liabilities and results of operations
of the joint venture follows:
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1998
-------------
<S> <C>
Current assets $ 2,734,677
Property and equipment, net 3,973,519
Other assets 865,299
-------------
Total assets $ 7,573,495
=============
Current liabilities $ 4,298,871
Other liabilities 312,480
Partners' capital accounts 2,962,144
-------------
Total liabilities and
partners' capital $ 7,573,495
=============
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 16,
1998
THROUGH
SEPTEMBER 30,
1998
--------------
<S> <C>
Revenues $ 6,165,937
Expenses 7,703,793
------------
Net loss $ 1,537,856
============
</TABLE>
(continued)
F-13
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE B - INVESTMENT IN JOINT VENTURE - Continued
The joint venture incurred a net loss of $1,537,856 for the period ended
September 30, 1998. If the joint venture continues to incur losses, it
could have a significant impact on the Company's operations.
The other party to the vessel charter failed to deliver the vessel free of
claims from its creditors. Capri Cruises has settled certain of these
claims and plans to pursue collection from the other party. While the
Company does not expect additional claims to be presented, there can be no
assurance that additional claims will not arise. The Company believes that
this will not have a significant future impact on the its operations.
The Company performs certain administrative services on behalf of Capri
Cruises. As a result, the Company charges certain expenses related to
these administrative services to Capri Cruises. For the year ended
September 30, 1998, the Company charged approximately $239,000 to Capri
Cruises which is included as part of other income on the consolidated
statement of earnings.
NOTE C - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Vessels $ 42,637,121 $ 39,165,024
Equipment and other 1,211,572 1,083,007
Construction in progress 470,000 765,983
--------------- ---------------
44,318,693 41,014,014
Accumulated depreciation (6,022,325) (3,820,912)
--------------- ---------------
$ 38,296,368 $ 37,193,102
=============== ===============
</TABLE>
NOTE D - INVENTORIES
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Food, beverage and supplies $ 1,296,780 $ 1,645,735
Fuel 168,813 224,393
--------------- ---------------
$ 1,465,593 $ 1,870,128
=============== ===============
</TABLE>
NOTE E - DEBT
NOTE PAYABLE
On April 22, 1998, the Company borrowed $1.5 million on an unsecured basis,
from an unrelated third party. As of September 30, 1998, the unpaid
balance of this note was $1.3 million. This amount was paid in full in
December 1998. The interest on the outstanding loan is 10% per annum. In
connection with these loans, the Company issued the lender warrants to
purchase 50,000 shares of the Company's common stock at an exercise price
of $5 per share. These warrants are exercisable commencing on April 22,
1999 and expire on April 23, 2003.
(continued)
F-14
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE E - DEBT - Continued
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
Universe Explorer. The loan bears interest at LIBOR plus 2% per annum
(7.75% at September 30, 1998). Commencing in February 1997, the remaining
principal balance is due in monthly principal installments of $366,034,
plus accrued interest, continuing until maturity, in July 2002.
In the event that the Company is required to withhold 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
accounts.
The minimum required principal payments as of September 30, 1998 on
long-term debt, are as follows:
1999 $ 4,392,408
2000 4,392,408
2001 4,392,408
2002 3,660,359
-----------------
$ 16,837,583
=================
On December 4, 1998, the Company borrowed $10 million under a Loan and
Security Agreement with a leasing company. In conjunction with this loan
agreement, the Company entered into an Interest Rate Swap Agreement with an
affiliate of the leasing company, whereas the interest rate on the loan
agreement is fixed at 9.14% over the term of the loan. This financial
instrument was not entered into for trading or speculative purposes, but
rather as an interest rate hedge. The Company has not purchased any other
derivative financial instruments. The monthly principal payments of the
loan are fixed at $41,667 for the first 12 months, at which time the
remaining monthly principal and interest payments are fixed at $97,166,
with the remaining unpaid principal and interest due on December 4, 2006,
the date of maturity. The proceeds from this loan was used to repay
the $8,418,792 loan to Effjohn secured by the Universe Explorer and for
working capital. This new loan is secured by a first mortgage on the
Universe Explorer. The terms of this loan requires the Company to comply
with certain loan covenants, including certain restrictions on future
borrowings. The revised minimum required principal payments as of
September 30, 1998 as if this new loan agreement was entered into as of
September 30, 1998 are as follows:
(continued)
F-15
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE E - DEBT - Continued
1999 $ 2,571,207
2000 2,582,778
2001 2,576,336
2002 2,244,606
2003 451,827
Thereafter 7,992,038
-----------------
$ 18,418,792
=================
NOTE F - CONVERTIBLE DEBT
In December 1997, the Company sold $2,150,000 of 7% convertible
subordinated debentures due December 31, 2003, at a 20% discount. In May
1998, the Company exercised its right to demand conversion of the
debentures into 537,500 shares of the Company's common stock. As a result
of this transaction, the Company's long-term debt decreased by $2.15
million and stockholders' equity increased by approximately $1.4 million,
after deducting approximately $753,000 of deferred financing costs.
NOTE G - STOCKHOLDERS' EQUITY
COMMON STOCK
In June 1998, the Company issued 100,000 shares of common stock to acquire
a leasehold interest in M/V Enchanted Capri.
COMMON STOCK PURCHASE RIGHTS PLAN
In September 1998, the Company implemented a Common Stock Purchase
Rights Plan and declared a dividend of one Common Stock Purchase Right
("Right") for each share of the Company's common stock outstanding. The
dividend is payable as of November 2, 1998 to stockholders of record on
that date and for each share of the Company's common stock issued
during the term of the plan. Each Right entitles the registered holder
to purchase from the Company one share of common stock at a per share
price of $28.34, subject to certain adjustments. The Rights are not
exercisable or transferable, apart from the Company's common stock,
until after a person or group acquires, or has the right to acquire,
beneficial ownership of 15 percent or more of the Company's common
stock or announces a tender or exchange offer to acquire ownership of
30 percent or more of the Company's common stock. The Rights will
expire in November 2008, unless earlier redeemed by the Company at the
option of the Company for $.01 per Right. (continued)
In the event that the Rights are not redeemed, become exercisable, and any
person, group of affiliated or associated persons becomes an acquiring
person, as defined by the agreement, the holder of a Right (other than an
acquiring person, whose Rights will be void) will have the right to
receive, upon payment of the exercise price, that number of shares of
common stock having a market value at the time of the transaction equal to
two times the exercise price.
F-16
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE G - STOCKHOLDERS' EQUITY - Continued
PREFERRED STOCK
As part of the consideration for the sale of the cruise line, EffJohn
received 1,000,000 shares of 7% Cumulative Convertible Redeemable Series A
Preferred Stock at a value of $4.00 per share totaling $4,000,000. The cash
payment of the dividend is limited to 10% of the Company's net profits for
each year. The remaining portion of the dividend, if any, is payable in
preferred stock based on a value of $4.00 per share.
In fiscal 1998, 1997 and 1996 the Company paid a dividend to the holders of
its Series A preference shares. The Company issued 14,825, 20,251 and
6,979, respectively, of Series A preference shares in partial payment of
the dividend and paid, in cash, an additional $228,325, $200,949 and
$31,153, respectively. During fiscal 1998, all the Series A preference
shares were sold by the original holders and converted to 1,042,055 shares
of the Company's common stock.
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 "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. (continued)
F-17
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE G - STOCKHOLDERS' EQUITY - Continued
STOCK OPTION PLAN - Continued
On October 1, 1996, the Company issued to its employees options to purchase
326,000 shares of the Company's common stock at $2.75 per share. The
options vest at variable rates based on each employee's length of service,
and expire on October 1, 2006. During fiscal 1998, stock options to
purchase 3,333 shares of common stock were exercised and stock options to
purchase 13,000 shares of common stock were cancelled. During fiscal 1997,
none of the stock options were exercised and stock options to purchase
18,000 shares of the Company's common stock were cancelled. In fiscal 1997,
the Company issued to its nonemployee directors options to purchase a total
of 60,000 shares of the Company's common stock at $2.75 per share. The
options vest over 3 years and expire in July 2007.
During fiscal 1998, the Company issued warrants to purchase 454,952 shares
of common stock to unrelated third parties. The warrants were issued with
exercise prices ranging from $3.30 to $5.00 per share. The total fair value
of the options, as determined under SFAS 123, was $337,521; $209,521 of
which was recorded as part of marketing, selling and administrative
expenses in fiscal 1998.
In fiscal 1998, certain antidilutive provisions of existing warrant
agreements were triggered as a result of the issuance of additional
warrants during the year, as well as the conversion of the convertible debt
into common stock. As a result of these transactions, the number of
outstanding warrants as well as the related exercise prices of certain of
the warrants were adjusted, resulting in the issuance of additional
warrants to purchase 604,709 shares of the Company's common stock, 590,910
of the 604,709 of additional shares were issued at an exercise price of
$2.75 per share, while the remaining shares were issued at exercise prices
ranging from $5.67 - $7.05 per share. In addition to the additional shares
issued, the exercise price of warrants to purchase 500,000 shares of the
Company's common stock was adjusted from $6 per share to $2.75 per share.
During fiscal 1997, the Company issued warrants to purchase 150,000 shares
of common stock to an outside consultant. The warrants were issued with an
exercise price of $2.75 per share. The total fair value of the options, as
determined under SFAS 123, was $75,000; $62,722 of which was recorded as
part of marketing, selling and administrative expenses in fiscal 1997. The
remaining $12,278 was recorded as part of marketing, selling and
administrative expenses in fiscal 1998.
(continued)
F-18
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE G - STOCKHOLDERS' EQUITY - Continued
STOCK OPTION PLAN - Continued
The exercise price of all options granted by the Company to its employees
equals or exceeds the market price of the Company's common stock at the
date of the grant. Accordingly, no compensation expense has been
recognized.
Had compensation cost for the Stock Option Plan and non-qualified options
to employees been determined based on the fair value of the options at the
grant dates consistent with the method of SFAS 123, the Company's net
earnings and earnings per share would have changed to the pro forma amounts
below.
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ----------------
<S> <C> <C> <C>
Net earnings, available for
common stockholders
As reported $ 4,023,170 $ 2,003,254 1,729,485
Pro forma $ 3,491,761 $ 1,912,201 1,717,485
Basic earnings per share
As reported $ .64 $ .36 $ .31
Pro forma $ .55 $ .34 $ .31
Diluted earnings per share
As reported $ .54 $ .33 $ .29
Pro forma $ .47 $ .32 $ .29
</TABLE>
The above pro forma disclosures may not be representative of the effects on
reported net earnings for future years as certain options vest over several
years and the Company may continue to grant options and warrants to
employees.
The fair value of each option grant is estimated on the date of grant using
the binomial option-pricing model with the following weighted-average
assumptions used for grants in fiscal 1998, fiscal 1997, and fiscal 1996,
respectively: dividend yield of 0.0 percent for all years; expected
volatility ranging from 53% to 58% for the fiscal 1998 grants and 38% for
the fiscal 1997 and 1996 grants; risk-free interest rates of 5.5%; and
expected holding periods of 2-6 years.
(continued)
F-19
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE G - STOCKHOLDERS' EQUITY - Continued
STOCK OPTION PLAN - Continued
A summary of the status of the Company's fixed stock options and warrants
as of September 30, 1998 and 1997, and changes during the years ending on
those dates is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
--------------------------------- --------------------------------
WEIGHTED - WEIGHTED -
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of
year 2,318,000 $ 4.57 1,800,000 $ 5.10
Granted 1,059,661 $ 3.18 536,000 $ 2.75
Exercised (3,333) $ 2.75 - -
Expired - - -
Cancelled (13,000) $ 2.75 (18,000) $ 2.75
----------- ----------
Outstanding at end of year 3,361,328 $ 3.67 2,318,000 $ 4.57
Options exercisable at end
of year 2,884,829 1,584,584
Weighted average fair value
of options and warrants
granted during the year $ 1.75 $ .89
</TABLE>
The following information applies to options outstanding at September 30,
1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------- --------------------------
WEIGHTED -
AVERAGE WEIGHTED - WEIGHTED -
RANGES OF REMAINING AVERAGE AVERAGE
EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
--------------- --------- ---------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$1.00 - $1.00 325,000 4.08 years $ 1.00 325,000 $ 1.00
$2.75 - $4.00 1,972,549 5.78 years $ 2.88 1,546,030 $ 2.81
$4.75 - $7.05 1,063,779 3.33 years $ 5.96 1,013,799 $ 5.89
--------- ---------
3,361,328 2,884,829
========= =========
</TABLE>
(continued)
F-20
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE G - STOCKHOLDERS' EQUITY - Continued
WARRANTS
As part of the Company's IPO in July 1996, the Company issued warrants to
purchase 725,000 shares of common stock at $6 per share. In fiscal 1998,
certain antidilusion provisions, as defined by the warrant agreement, were
triggered. As a result, the Company issued an additional 11,671 warrants,
and the exercise price of all of the outstanding warrants was adjusted to
$5.67 per share.
In March 1998, the Company issued warrants to purchase a total of 25,000
shares of the Company's common stock to three nonemployees at an exercise
price of $4 per share. These warrants are exercisable commencing on March
2, 1998 and expire on March 2, 2003.
In February 1998, the Company issued warrants to purchase a total of
300,000 shares of the Company's common stock to certain nonemployees at an
exercise price of $3.30 per share. These warrants are exercisable
commencing on February 18, 1999 and expire on February 17, 2003.
In December 1997, the Company issued warrants to purchase a total of 54,952
shares of the Company's common stock to certain nonemployees at an exercise
price of $3.76 per share. These warrants are exercisable commencing on
December 24, 1997 and expire on December 15, 2002. In November 1998,
warrants to purchase 25,000 shares of the Company's common stock were
exercised by certain of these warrant holders.
In July 1998, the Company issued warrants to purchase 25,000 shares of the
Company's common stock to an unrelated third party at an exercise price of
$4.75 per share. These warrants are exercisable commencing on July 10, 1998
and expire on July 9, 2003.
In October 1995, the Company issued a warrant to purchase 250,000 shares of
common stock at an exercise price of $6.00 per share to the Seawise
Foundation. The warrants are exercisable for a period of 5 years commencing
on January 7, 1996.
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 have an exercise price of $6.00 per share and are
exercisable through July 14, 2002. In fiscal 1998, certain antidilutive
provisions, as defined by the warrant agreement, were triggered. As a
result, the Company issued an additional 590,910 warrants, and the exercise
price of all of the outstanding warrants was adjusted to $2.75 per share.
(continued)
F-21
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE G - STOCKHOLDERS' EQUITY - Continued
WARRANTS - Continued
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 are all exercisable as of
September 30, 1998.
In October 1996, the Company issued 150,000 warrants to an outside
consultant. The warrants entitle the holder to purchase up to 150,000
shares of the Company's common stock at an initial exercise price of $2.75
per share. The warrants were exercisable on November 22, 1997 and expire on
November 21, 2001. In November 1998, all of these warrants were exercised.
The number of shares to be purchased and the exercise price of each of the
above warrants are subject to adjustment in certain events as defined by
the warrant agreement.
NOTE H - COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
In May 1995, the Company signed employment agreements with four of its
executive officers 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. In May 1997, the Company renewed three of the agreements with
terms ranging from a month to month basis through five years, and extended
the Chairman of the Board's contract by two years.
LITIGATION
In October 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.
(continued)
F-22
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE H - COMMITMENTS AND CONTINGENCIES - Continued
FEDERAL MARITIME COMMISSION CERTIFICATES OF FINANCIAL RESPONSIBILITY
In order to operate a passenger cruise vessel from U.S. ports, the Company
is required to obtain an FMC Certificate. The Company placed $4,629,000 on
deposit with a bank to secure the FMC Certificate in the event of
non-performance of obligations to passengers of the Enchanted Isle as
required by the FMC. The FMC requires companies to establish a Certificate
of Financial Responsibility in amounts and through methods set by the FMC.
The Company also arranged, through a bank in New England, an escrow account
for the purpose of selling cruises from U.S. ports on the Universe Explorer
and on the Enchanted Capri. This FMC escrow arrangement requires the
Company to deposit all monies received for such sailings, plus a minimum
cash amount as defined by the escrow agreement.
ADVANCE DEPOSITS RELATED TO THE ENCHANTED CAPRI
NCCL acts as the sole operating and ticketing agent for the Enchanted
Capri. Accordingly, the Company maintains all of the Enchanted Capri
advance passenger deposits until the completion of the voyages, at which
time, the amounts are remitted to Capri Cruises. As of September 30, 1998,
the Company has $1,918,699 of advance deposits related to future sailings
onboard the Enchanted Capri.
PREMISES
The Company leases office space under noncancellable, operating leases.
Future minimum annual lease commitments at September 30, 1998 are as
follows:
1999 $ 284,039
2000 224,812
2001 26,784
2002 20,489
2003 5,363
------------------
$ 561,487
==================
Rental and lease expense for the years ended September 30, 1998,
1997 and 1996, amounted to approximately $450,000, $442,000 and
$417,000, respectively.
(continued)
F-23
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE H - COMMITMENTS AND CONTINGENCIES - Continued
SAFETY OF LIFE AT SEA
During recent years, Safety of Life at Sea (SOLAS) standards have been
amended and required among other things, that most passenger vessels not
fitted with sprinkler systems to install such systems and other safety
arrangements, including the addition of smoke detectors systems,
low-location lighting and enclosed escape stairwells by October 1, 1997. In
the event a vessel meets the SOLAS 1974 requirements, it will not be
required to be fitted with a sprinkler system until on or before October 1,
2005. In fiscal 1997, the ships were fitted with the safety arrangements
required by SOLAS and thus currently comply with SOLAS requirements. The
Company's ships met the SOLAS 1974 requirements and are not currently
fitted with any sprinkler systems.
In January 1999, the Company will take the Universe Explorer out of service
primarily for the installation of a sprinkler system aboard the vessel. The
installation of the sprinkler system, which will bring the ship into
compliance with SOLAS work to be completed on or before October 1, 2005, is
expected to be completed in February 1999. The cost of the installation of
the sprinkler system is estimated at $4.2 million.
EMPLOYEE BENEFIT PLAN
Effective October 1, 1996, the Company joined a group Retirement and
Savings Plan. The Plan is a defined contribution plan under Section 401(k)
of the Internal Revenue Service Code covering all eligible employees of the
Company. Employees who have attained the age of 21 are eligible to become
participants on the first day of the calendar month following the year of
service in which they have worked a minimum of 1,000 hours. The Company may
contribute a discretionary matching contribution equal to a percentage of
the employee's contribution. This percentage may vary from year to year.
The amounts charged to earnings for this plan during the three years ended
September 30, 1998, were not significant.
NOTE I - RELATED PARTIES
Sea-Comm operates cruises to Alaska through World Explorer Cruises and
Tours, Inc. (WEC). WEC and Seawise may be deemed to be under common
control. Sea-Comm and WEC are parties to an agreement whereby the Universe
Explorer enjoys certain permits issued by the U.S. Parks Service to cruise
in the Glacier Bay Alaska area. Pursuant to this agreement, Sea-Comm earns
all revenues and pays all of WEC's marketing and overhead expenses in
conjunction with the Alaska cruises. As of September 30, 1998 and 1997, the
Company has a receivable due from WEC of $1,140,306 and $471,294,
respectively, of which $400,000 is included in long-term
receivable-affiliates and the remaining amount is included in due from
affiliates.
(continued)
F-24
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE I - RELATED PARTIES - Continued
The Company advanced Capri Cruises certain amounts during the year and pays
certain expenses on their behalf. As of September 30, 1998 and 1997, the
amount due from Capri Cruises was $511,235 and $0, respectively. This
receivable is included in due from affiliates.
During fiscal 1998 and 1997, the Company received a series of unsecured
loans totaling $500,000 and $574,873, respectively, from Seawise, its joint
venture partner as well as capital contributions totaling $99,990 and
$1,362,173, respectively. The interest rate on these loans is 8% per annum
and these loans have no set maturity date. The liability of $1,074,873 and
$574,873 related to the loans is recorded as part of Due to Affiliates as
of September 30, 1998 and 1997, respectively. Also included in Due to
Affiliates is a payable of $125,749 due to WEC as of September 30, 1998.
As part of the joint venture agreement with Seawise (Note A), the Company
is entitled to be reimbursed by Seawise for certain improvements made to
the Universe Explorer. The terms of the reimbursement is based on the joint
venture agreement. The first payment is not required until fiscal 1999. As
of September 30, 1998 and 1997, the related receivable from Seawise is
$2,149,524 and $1,117,913, respectively, and is included in long-term
receivable affiliates.
NOTE J - INCOME TAXES
Certain entities are exempt from U.S. corporate income tax on U.S. source
income from their international shipping operations if (i) their countries
of incorporation exempt shipping operations of U.S. persons from income tax
(the "Incorporation Test") and (ii) they meet the "Ultimate Owner Test." A
foreign company meets the Ultimate Owner Test if its stock is primarily and
regularly traded on a U.S. stock exchange or on a stock exchange in a
foreign country that exempts U.S. persons from tax on shipping earnings.
The Company is involved in international shipping operations which meet the
Incorporation Test because the Company and its subsidiaries are
incorporated in Bermuda and Panama, respectively which provide the required
exemption to U.S. persons involved in shipping operations, and the Company
believes it meets the Ultimate Owner Test due to its stock being primarily
and regularly traded on the NASDAQ National Market. The issue of residence
is, however, inherently factual and cannot be determined with certainty.
The Company is subject to U.S. income tax on its U.S. source income that is
not from the international operation of a ship.
However, because there are no regulations to date interpreting this
exemption and because satisfying the requirements under the exemption
depends upon meeting certain factual tests, there is no assurance that the
Company will continue to qualify for the tax exemption.
(continued)
F-25
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, 1997 AND 1996
NOTE J - INCOME TAXES - Continued
Based on the foregoing, the Company expects most of its income to remain
exempt from United States income taxes. Also, as the earnings from shipping
operations are derived from sources outside of Panama, such earnings are
not subject to Panamanian taxes. Bermuda imposes no income tax on
corporations.
NOTE K - LOSS ON FIRE
On July 27, 1996, the Universe Explorer had a fire on-board which resulted
in the death of five crew members and loss of revenue. The majority of the
losses by passenger and crew, damage to the hull and machinery of the
vessel and loss of hire is covered by the Company's insurance policies,
subject to applicable deductibles. As a result, the Company has an
insurance receivable balance of $0 and $305,038 at September 30, 1998 and
1997, respectively. In 1996, the Company incurred a loss after insurance of
$397,310 related to the fire.
NOTE L - SUMMARIZED QUARTERLY FINANCIAL DATA FOR
1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
----------- ----------- ---------- --------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
1998
Revenues $ 11,529 $ 13,857 $ 19,631 $ 18,111 $ 63,128
Operating income 403 840 3,267 1,615 6,125
Net earnings
available
for common
stockholders 111 563 2,410 939 4,023
Earnings per
share - diluted .02 .10 .36 .06 .54
1997
Revenues $ 12,234 $ 13,773 $ 14,218 $ 17,752 $ 57,977
Operating income 466 87 585 1,077 2,215
Net earnings
available
for common
stockholders 105 96 623 1,179 2,003
Earnings per
Share - diluted .04 .03 .11 .15 .33
</TABLE>
F-26
<PAGE>
NOTE M - SUBSEQUENT EVENT
In October 1998, in connection with the implementation of the Common Stock
Purchase Rights Plan, the Company issued warrants to purchase a total of
50,000 shares of the Company's common stock to certain nonemployees at an
exercise price of $5.45 per share. These warrants are exercisable
commencing on October 1, 1998 and expire on September 30, 2003.
In December 1998, in connection with entering into the new Loan and
Security Agreement, the Company issued warrants to purchase a total of
81,633 shares of the Company's common stock to certain nonemployees at an
exercise price of $6.13 per share. These warrants are exercisable
commencing on December 4, 1998 and expire on December 4, 2003.
F-27
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- -----------------------
4f Assignment and Assumption of Underwriter's Warrant Agreement
10u First Amendment to USD $24,500,000 Loan Facility Agreement dated
December 4, 1998 among the EffJohn Lender, Azure, Almira, New
Commodore and the Company
10v Modification Agreement dated December 4, 1998 among Sea-Comm,
Seawise, WEC, HCT, Azure, New Commodore and the Company
10w Extension of the Financing and Berthing Agreement between New
Commodore and the Port of New Orleans dated August 24, 1998
10x Restated Warrant Certificate for 520,455 Shares of Common Stock
of the Company dated October 15, 1998 in favor of Jeffrey I. and
Rosalie Binder
10y Restated Warrant Certificate for 545,455 Shares of Common Stock
of the Company dated April 15, 1998 in favor of JeMJ Financial
Services, Inc.
10z First Preferred Marine Mortgage dated December 4, 1998 executed
by Azure in favor of KeyCorp
10aa Assignment of Mortgage in respect of the Enchanted Isle
10ee Loan and Security Agreement dated December 4, 1998 between Azure
and KeyCorp
10ff Promissory Note dated December 4, 1998 between Azure and
KeyCorp
10gg ISDA Master Agreement dated December 4, 1998 between Azure and
KeyCorp, and the Schedule and Confirmation thereto
10hh Corporate Guaranty Agreement dated December 4, 1998 between the
Company and KeyCorp
21 Subsidiaries of the Company
27 Financial Data Schedule
EXHIBIT 4.f
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is
effective as of this 1st day of July, 1998 by and among Commodore Holdings
Limited, a Bermuda corporation ("Commodore"), American Stock Transfer & Trust
Company ("AST") and StockTrans, Inc. ("STI"). All capitalized terms which are
not defined herein shall have the meanings ascribed to them in the Warrant
Agreement (defined hereinbelow).
WHEREAS, Commodore and STI entered into an agreement dated as of July
19, 1996 pursuant to which STI agreed to act as Warrant Agent in connection with
the issuance, transfer and exchange of certificates representing the Warrants
and the exercise of the Warrants (the "Warrant Agreement");
WHEREAS, Commodore and STI desire that AST now act on behalf of
Commodore as Warrant Agent pursuant to the Warrant Agreement, and AST is willing
to so act.
NOW, THEREFORE, in consideration of the promises set forth herein and
for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. STI hereby (a) delegates its obligations as Warrant Agent under the
Warrant Agreement to AST, and (b) assigns, conveys and transfers to AST all of
its right, title and interest as Warrant Agent under or with respect to the
Warrant Agreement.
2. AST hereby (a) accepts such delegation of obligations under the
Warrant Agreement, (b) assumes and agrees to perform and discharge, all of the
obligations of STI in its capacity as Warrant Agent under the Warrant Agreement,
and (c) accepts the assignment of all right, title and interest of STI in its
capacity as Warrant Agent under or with respect to the Warrant Agreement.
3. Commodore hereby consents to (a) the delegation to and assumption by
AST of obligations under the Warrant Agreement and (b) the assignment,
conveyance and transfer to AST and acceptance by AST of all right, title and
interest of STI under the Warrant Agreement.
4. For purposes of the Warrant Agreement, the Corporate Office of AST
is currently located at 40 Wall Street, New York, New York 10005.
5. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns, for the uses and purposes above set forth.
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /S/ HERBERT J. LEMMER
--------------------------------------------
Herbert J. Lemmer
Vice-President
STOCKTRANS, INC.
By: /S/ JONATHAN MILLER
--------------------------------------------
Jonathan Miller
President
COMMODORE HOLDINGS LIMITED
By: /S/ JEFFREY I. BINDER
--------------------------------------------
Jeffrey I. Binder
Chairman of the Board
2
EXHIBIT 10.u
FIRST AMENDMENT TO LOAN FACILITY AGREEMENT
THIS FIRST AMENDMENT TO THE LOAN FACILITY AGREEMENT (the "First
Amendment") is made this 4th day of December, 1998, by and between ALMIRA
ENTERPRISES, INC. ("Almira"), AZURE INVESTMENTS, INC. ("Azure"), EFFJOHN
INTERNATIONAL CRUISE HOLDINGS, INC. ("EffJohn"), NEW COMMODORE CRUISE LINES
LIMITED ("New Commodore") and COMMODORE HOLDINGS LIMITED ("Commodore").
W I T N E S S E T H:
WHEREAS, Almira, Azure, EffJohn, New Commodore and Commodore entered
into a loan facility agreement dated July 14, 1995 (the "Loan Agreement");
WHEREAS, by the Loan Agreement, EffJohn made available to Almira and
Azure a loan facility in the amount of twenty-four million five hundred thousand
dollars (US$24,500,00) (the "Loan");
WHEREAS, as security for its obligation under the Loan Agreement, Azure
provided EffJohn a mortgage on the M/V Enchanted Seas (the "Vessel"), a Vessel
owned and registered to Azure;
WHEREAS, as further security for its obligations under the Loan
Agreement, Azure and New Commodore executed a First Priority Tripartite Deed in
respect of the M/V Enchanted Seas (the "Tripartite Deed");
WHEREAS, pursuant to the Tripartite Deed, Azure and New Commodore
assigned to EffJohn all of its right, title and interest in the bareboat charter
dated July 14, 1995 by and between Azure and New Commodore for the charter of
the Vessel (the "Bareboat Charter");
WHEREAS, as further security for its obligations as guarantor under the
Loan Agreement, New Commodore executed a First Priority Charge over the Shares
of Azure;
WHEREAS, as security for its obligation under the Loan Agreement Almira
provided EffJohn a mortgage on the M/V Enchanted Isle (the "Isle") (the "Isle
Mortgage"), a vessel owned and registered to Almira;
WHEREAS, by a Loan Agreement entered into on October 21, 1991, as
amended in March 1993, March 1994 and July 1995 (the "EffJohn Loan Agreement"),
Merita Bank, PLC ("Merita") made available to EffJohn thirty-two million dollars
(US$32,000,000);
WHEREAS, on July 14, 1995, as security for EffJohn's obligation under
the EffJohn Loan Agreement, EffJohn assigned its interest in the Isle Mortgage
to Merita;
<PAGE>
WHEREAS, pursuant to EffJohn's agreement with Azure, EffJohn has
entered into an agreement with Merita whereby EffJohn will remit the outstanding
indebtedness due under the EffJohn Loan Agreement, in exchange for Merita
agreeing to re-assign to EffJohn, all of Merita's interest in the Security
Documents, as defined in this First Amendment, including the Isle Mortgage;
WHEREAS, Azure and EffJohn have entered into an agreement whereby Azure
will remit US$8,052,758 to EffJohn (and another US$500,000 for the discharge of
New Commodore's obligations under Section 10.3 in the Loan Agreement), all in
prepayment of the Loan, and EffJohn will release all of its right, interest and
title in the Vessel, the shares of Azure and the Bareboat Charter, insurances,
earnings, requisition compensation and all earnings whatsoever in connection
with the Bareboat Charter, and release Azure from any further obligations under
the Loan Agreement.
NOW, THEREFORE, in consideration for the payment of US$8,552,758 by
Azure, the receipt of which is hereby acknowledged by EffJohn, the mutual
promises contained herein, and other good and valuable consideration, the
parties agree as follows:
1. With respect to paragraph 1 of the introductory paragraphs, the following
term will be deleted:
"Azure Investments, Inc. ("Azure)."
The term "Borrower" will refer only to Almira Enterprises, Inc.
2. DEFINTIONS:
(a) With respect to Section 1.2 of the Loan Agreement, the following
terms will be redefined as follows:
"Account Pledges" - together the first priority pledge over
the Operating Account and the Retention Account to be executed
by the Bareboat Charterer and the Borrower in favor of the
Lender and the second priority pledge over the FMC Account to
be executed by the Bareboat Charterer in favor of the Lender;
"Charter" - the Isle Charter;
"FMC Accounts" - together the FMC Collateral Account and the
Isle FMC Account;
"Mortgage" - the first preferred Panamanian mortgage over the
Vessel to be entered into by the Borrower in favor of Lender
in respect of its Vessel;
"Obligors" - the Borrower and the Guarantors;
2
<PAGE>
"Purchase Documents" - the Isle MOA and all documents,
contracts, agreements, bill of sale and other documents
whereby the Borrower has contracted to purchase and will
acquire title to the Vessel from the Vendor;
"Security Documents" - this Agreement, the Mortgage, the Isle
Tripartite Deed, the Pledge, the Account Pledge, the Trademark
Re-assignment and the Technical Manager's Subordination
Undertaking and where the context otherwise admits any other
securities, guarantees or undertakings whatsoever which the
Borrower has agreed to procure and/or which may be executed at
any time in respect of the Loan;
"Technical Management Agreement" - the agreement to be entered
into between Bareboat Charterer and the Technical Manager in
respect of the technical management of the Vessel;
"Vessel" - Isle.
(b) With respect to Section 1.2 of the Loan Agreement, and any
references therein, the following terms will be changed:
"Charters" to "Charter"
"Vessels" to "Vessel"
"Mortgages" to "Mortgage"
"Borrowers" to "Borrower"
"Pledges" to "Pledge"
"Technical Management Agreements" to "Technical Management
Agreement"
(c) With respect to Section 1.2 of the Loan Agreement and any
references therein, the following terms and definitions will be deleted:
"Lay-Up Charter"
"Lay-Up Charterer"
"Lay-Up Period"
"Lay-Up Tripartite Deed"
"Lender's Assignment"
"Seas"
3
<PAGE>
"Seas Charter"
"Seas FMC Account"
"Seas MOA"
"Seas Tripartite Deed"
"Tripartite Deeds"
3. Any reference in the Loan Agreement to the following terms shall be changed
as follows:
"each Vessel" or "either Vessel" to "the Vessel"
"each Borrower," "either Borrower" or "relevant Borrower" to
"the Borrower"
"Tripartite Deeds" to "Isle Tripartite Deed"
4. With respect to the second line in Section 7.1 starting with the word "over",
the entire text shall be deleted and the following language inserted:
"as provided for in the amortization schedule attached hereto
as Exhibit A."
5. With respect to the third line in Section 7.3 the word "first" shall be
deleted. With respect to the fourth line in Section 7.3 the parenthetical
information shall be deleted and the following language inserted:
"of the Outstanding Indebtedness."
With respect to the sixth line through the fifteenth line the entire
text shall be deleted.
6. With respect to the third line through the fourteenth line in Section 7.4
starting with the word "in", the entire text shall be deleted and the following
language inserted:
"of the Outstanding Indebtedness."
7. With respect to the fifth line through the ninth line in Section 8.1 starting
with the word "save", the entire text shall be deleted.
8. With respect to Section 10.3, it shall be deleted.
9. With respect to the sixth line of section 14.1(b), the word "relevant" shall
be deleted.
10. With respect to Section 15.1(l), it shall be deleted.
4
<PAGE>
11. The parties hereby agree that any fees (including those incurred by EffJohn
and Merita) incurred in connection with the preparation of this First Amendment
and the documents contemplated herein and consummation of the transactions
contemplated hereby, including any breakage costs (if any) as a consequence of
the prepayment made by EffJohn to Merita which costs presently amount to zero
(the amount being subject to change if the date of prepayment should change),
shall be paid by New Commodore.
12. In the event of conflict between this First Amendment and the Loan
Agreement, this First Amendment shall control to the extent of any such
conflict. Expect as expressly set forth in this First Amendment, the Loan
Agreement is hereby ratified and confirmed as written.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the day and year first above written.
THIS FIRST AMENDMENT may be execute in any number of counterparts, all
of which shall constitute one and the same instrument.
ALMIRA ENTERPRISES, INC.
By: /s/ Frederick A. Mayer
-----------------------------------
Name: Frederick A. Mayer
Title: Attorney-in-Fact
AZURE INVESTMENTS, INC.
By: /s/ Frederick A. Mayer
-----------------------------------
Name: Frederick A. Mayer
Title: Attorney-in-Fact
EFFJOHN INTERNATIONAL CRUISE HOLDINGS, INC.
By: /s/ Thomas Forss
-----------------------------------
Name: Thomas Forss
Title: Director
NEW COMMODORE CRUISE LINES LIMITED
By: /s/ Frederick A. Mayer
-----------------------------------
Name: Frederick A. Mayer
Title: Chairman of the Board
COMMODORE HOLDINGS LIMITED
By: /s/ Frederick A. Mayer
-----------------------------------
Name: Frederick A. Mayer
Title: Vice Chairman of the Board
6
<PAGE>
EXHIBIT A
BEG # OF PRINC
PRINC DAYS PMTS
1998 1-Dec-98 16,105,515 16 (8,552,758)
15-Dec-98 7,552,757 14 (171,654)
1999 15-Jan-99 7,381,103 31 (171,654)
15-Feb-99 7,209,449 31 (171,654)
15-Mar-99 7,037,795 28 (171,654)
15-Apr-99 6,866,141 31 (171,654)
15-May-99 6,694,487 30 (171,654)
15-Jun-99 6,522,833 31 (171,654)
15-Jul-99 6,351,179 30 (171,654)
15-Aug-99 6,179,525 31 (171,654)
15-Sep-99 6,007,871 31 (171,654)
15-Oct-99 5,836,217 30 (171,654)
15-Nov-99 5,664,563 31 (171,654)
15-Dec-99 5,492,909 30 (171,654)
2000 15-Jan-99 5,321,255 31 (171,654)
15-Feb-99 5,149,601 31 (171,654)
15-Mar-99 4,977,947 29 (171,654)
15-Apr-99 4,806,293 31 (171,654)
15-May-99 4,634,639 30 (171,654)
15-Jun-99 4,462,985 31 (171,654)
15-Jul-99 4,291,331 30 (171,654)
15-Aug-99 4,119,677 31 (171,654)
15-Sep-99 3,948,023 31 (171,654)
15-Oct-99 3,776,369 30 (171,654)
15-Nov-99 3,604,715 31 (171,654)
15-Dec-99 3,433,061 30 (171,654)
2001 15-Jan-99 3,261,407 31 (171,654)
15-Feb-99 3,089,753 31 (171,654)
15-Mar-99 2,918,099 28 (171,654)
15-Apr-99 2,746,445 31 (171,654)
15-May-99 2,574,791 30 (171,654)
15-Jun-99 2,403,137 31 (171,654)
15-Jul-99 2,231,483 30 (171,654)
15-Aug-99 2,059,829 31 (171,654)
15-Sep-99 1,888,175 31 (171,654)
15-Oct-99 1,716,521 30 (171,654)
15-Nov-99 1,544,867 31 (171,654)
15-Dec-99 1,373,213 30 (171,654)
2002 15-Jan-99 1,201,559 31 (171,654)
15-Feb-99 1,029,905 31 (171,654)
15-Mar-99 858,251 28 (171,654)
15-Apr-99 686,597 31 (171,654)
7
<PAGE>
15-May-99 514,943 30 (171,654)
15-Jun-99 343,289 31 (171,654)
15-Jul-99 171,635 30 (171,635)
15-Aug-99 0 31 -
8
EXHIBIT 10.v
MODIFICATION AGREEMENT
Modification Agreement made as of December 4th, 1998 by and among
Sea-Comm, Limited ("Sea-Comm"), a Liberian corporation, Commodore Holdings,
Limited ("CHL"), a Bermuda Company, Seawise Foundation, Inc. ("Seawise"), a
Liberian corporation, New Commodore Cruise Lines Limited ("NCCLL"), a Bermuda
corporation, World Explorer Cruises, Inc. (formerly, World Explorer Cruises and
Tours, Inc.) ("WEC"), a California corporation, and Hemisphere Cruises and
Tours, Inc. ("HCT"), a Liberian corporation, and Azure Investments, Inc.
("Azure"), a Panamanian corporation.
WHEREAS, CHL, Seawise and Sea-Comm entered into that certain Agreement
dated October 30, 1995 (the "Shareholders Agreement") pursuant to which CHL and
Seawise have agreed on arrangements for the charter and operation of the
Panamanian flag vessel UNIVERSE EXPLORER (the "Vessel").
WHEREAS, pursuant to the Shareholders Agreement, NCCLL and Sea-Comm
entered into that certain time charter dated October 30, 1995 (the "Time
Charter") providing for the time charter of the Vessel by Sea-Comm;
WHEREAS, pursuant to the Shareholders Agreement, Sea-Comm and Seawise
entered into that certain space charter dated October 30, 1995 (the "Space
Charter"), providing for the space chartering of passenger cabins and selected
cruise facilities by Seawise in connection with the Semester-at-Sea program (the
"SAS Program"), as more particularly described in the Space Charter, conducted
by the Institute for Shipboard Education ("ISE");
WHEREAS, pursuant to the Shareholders Agreement, WEC, HCT, Seawise and
Sea-Comm entered into an Assignment, Assumption and Substitution Agreement which
amends the Alaska Cruise Agreement dated January 1, 1986 (the "Alaska Cruise
Agreement") among WEC,
<PAGE>
HCT and Seawise to provide that Sea-Comm shall perform the obligations of
Seawise under the Alaska Cruise Agreement;
WHEREAS, the parties have from time to time entered into certain oral
and written agreements which in some instances call for the modification or
amendment of the Operative Documents.
WHEREAS, the parties desire to modify their arrangements under the
Shareholders Agreement, the Time Charter and the Space Charter (collectively
referred to herein as the "Operative Agreements"); and
WHEREAS, the parties have agreed to arrange for the financing and
completion of (i) the installation of a sprinkler system onboard the Vessel (the
"Sprinkler Installation") to be completed between the end of the SAS Program
1998 Fall Semester Voyage and the scheduled commencement of the 1999 Spring
Semester Voyage, i.e., between on or about December 20, 1998 and February 16,
1999 (the "Installation Period"); and (ii) for the funding and treatment of
certain off-hire and associated costs (the "Associated Costs") in connection
with the Sprinkler Installation and Installation Period as "Capital
Expenditures" as defined in the Shareholders Agreement and Seawise, Sea-Comm and
NCCLL have agreed to facilitate the foregoing; and
WHEREAS, Azure is the registered owner of the Vessel and desires to
facilitate the financing of the Sprinkler Installation and the Associated Costs.
NOW THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. All capitalized terms in this Modification Agreement, unless
otherwise indicated, shall have the same meaning as set out in the Operative
Agreements.
2
<PAGE>
2. During the Installation Period, NCCLL shall cause the Sprinkler
Installation to be completed on the Vessel in compliance with the International
Convention for the Safety of Life at Sea, 1974, as amended by the 1992
Amendments. The Installation Period shall be considered an "Off-hire Period" for
purposes of the payment of the Time Charter Hire under Clause 3(a) of the Time
Charter. However, during the Installation Period no "Advances" shall be payable
or accrue under such Clause 3(a).
3. Commencing with the expiration of V Ship's existing Management
Agreement with NCCLL, approximately one year hence, Seawise shall have the right
to nominate the manager of the hotel department, which manager may be Mariser,
subject to approval by KeyCorp. Seawise's right to nominate a manager shall be
subject however to the limitation that the hotel department budget under such
managers shall not exceed the budget agreed with NCCLL in the preceding year
plus any reasonable adjustments as shall be agreed between Seawise and NCCLL.
4. The parties have noted that the Berth Guarantee, as provided in
Article 4.7 of the Shareholders Agreement and as modified by certain
understandings among Seawise, Sea-Comm, and NCCLL will expire at the end of the
1998 Fall Semester Voyage. The parties desire to provide a new form of Berth
Guarantee for the remaining term commencing with the 1999 Spring Semester Voyage
and to accordingly provide for the utilization of the eighty-seven (87) adult
passenger cabins reserved to Sea-Comm on SAS Program Voyages ("Adult Cabins")
whereby the following would occur:
a. Seawise shall guaranty to Sea-Comm, by means of a lump sum
"Berth Guarantee" to arrange at Seawise's own cost, risk and expense, for
bookings of and the utilization of the Adult Cabins on SAS Program Voyages as
further herein provided;
3
<PAGE>
b. Seawise shall pay to the ISE, without recourse to Sea-Comm,
any commissions and fees for shipboard programs for which Sea-Comm is
responsible in respect of the Adult Cabins under Section 2b) of the Space
Charter;
c. Seawise shall have the sole right and discretion to
allocate the utilization of the Adult Cabins on SAS Program Voyages, any
provision of Section 2c) of the Space Charter notwithstanding; and
d. So long as Sea-Comm shall receive the Passenger Guarantee
Amount, Sea-Comm shall waive its right under Section 10(a) of the Space Charter
to receive a ten percent (10%) commission on all adult passengers.
In order to effectuate the foregoing, Article 4.7 of the Shareholders
Agreement shall be amended with effect from January 14, 1999, as follows:
4.7. BERTH GUARANTEE. Notwithstanding any other term of the
Space Charter to the contrary, Space Charterer (Seawise) shall
arrange, at its own cost, risk and expense, for bookings of
and the utilization of eighty-seven (87) cabins by adult
passengers ("Adult Cabins") on the SAS Program voyages for the
years 1999 through 2005. For years 1999 and 2000, Seawise
shall guaranty to Disponent Owner (Sea-Comm) a lump sum
payment ("Berth Guarantee") of $1,500,000 per semester of
which $80,000 shall be allocated toward the cost of procuring
food for adult passengers aboard the Vessel during SAS Program
voyages for each such semester. The Berth Guarantee, inclusive
of $80,000 per semester for food costs, shall be $1,650,000
per semester for years 2001 and 2002, and $1,732,500 per
semester for each of years 2003 through 2005. The Berth
Guarantee shall be payable by Space Charterer in advance in
semi-monthly installments together with payment of the Space
Charter Hire under the Space Charter. Nothing contained in
this Article 4.7 shall affect the continuing obligation of
Sea-Comm to bear twenty-four percent (24%) of the Daily
Operating Cost of the Vessel at any time that this Berth
Guarantee shall remain in effect. Irrespective of the revenue
received from the utilization of the Adult Cabins, the amount
of the Berth Guarantee shall not vary except as otherwise
provided in this Article 4.7.
5. As a condition of the performance of this Modification Agreement,
the parties shall enter into a subordination and non-disturbance agreement (the
"Non-Disturbance Agreement") with KeyCorp Leasing, a division of Key Corporate
Capital, Inc. ("KeyCorp").
4
<PAGE>
The Non-Disturbance Agreement provides that KeyCorp, as lender, will forbear
from taking certain actions with respect to the continued use of the Vessel by
Seawise, should there be a default under the "Loan Documents" as defined in the
Non-Disturbance Agreement, conditioned on Seawise's exercise of certain options
set out in Section 6 thereof ("Section 6 Options"). Within sixty (60) date
hereof, and in consideration of the execution and performance by Seawise of this
Modification Agreement and the Non-Disturbance Agreement, each of NCCLL,
Sea-Comm, and Azure shall execute and deliver to Seawise such documents,
instruments and waivers, within such sixty (60) day period and from time to time
thereafter, as may reasonably be required for Seawise to be able to exercise any
of the Section 6 Options and/or to enjoy the benefits of the Section 6 Options
including but not limited to Azure's agreement to transfer its ownership
interest in the Vessel to Seawise or its nominee upon Seawise's exercise of
Option 6(b). In order to accommodate the request of KeyCorp in connection with
the Non-Disturbance Agreement, Sea-Comm and NCCLL agree that Clause 2 of the
Time Charter shall be amended to delete the Bahamas as a place of redelivery of
the Vessel.
6. Except as provided for in this Modification Agreement, all other
terms and conditions of the Operative Agreements shall remain unchanged and
shall remain in full force and effect including but not limited to the amount of
the current "Hypothetical Mortgage" as defined in Annex A of the Time Charter
and Section 6(d) of the Space Charter. In the event that this Modification
Agreement is terminated for any reason, the Operative Agreements shall continue
to have full force and effect pursuant to their terms as originally drafted and
until terminated in accordance with such terms. This Modification Agreement may
be amended or modified only by written agreement duly executed by all of the
parties hereto. In the event of
5
<PAGE>
any conflict between any of the terms of this Modification Agreement and the
Operative Documents, the terms hereof shall govern.
7. Each of Sea-Comm, Seawise, CHL and NCCLL shall procure any and all
consents, waivers and accommodations required for each such party to enter into
and perform its obligations under this Modification Agreement.
8. This Modification Agreement constitutes the entire understanding and
agreement between the parties hereto with respect to the matters hereinabove set
forth.
9. This Modification Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of New York.
10. All notices, requests, demands and other communications under this
Modification Agreement shall be given to or made upon the parties by personal
delivery, courier, certified mail or telefax, or in any other manner agreed by
the parties hereto in writing at the following addresses:
If to Sea-Comm:
Sea-Comm, Ltd.
c/o Commodore Holdings, Limited
4000 Hollywood Blvd., Suite #385-S,
Hollywood, Florida 33021
Fax No.: (954) 967-2147
If to CHL:
Commodore Holdings, Limited
4000 Hollywood Blvd., Suite #385-S
Hollywood, FL 33021
Fax No.: (954) 967-2147
If to NCCLL:
New Commodore Cruise Lines Limited
c/o Commodore Holdings, Limited
6
<PAGE>
4000 Hollywood Blvd., Suite #385-S
Hollywood, FL 33021
Fax No.: (954) 967-2147
If to Seawise:
Seawise Foundation, Inc.
29th Floor, Harbour Centre
25 Harbour Road
Wanchai, Hong Kong
Fax No.: 011 852 2511 1550
With a copy to:
Mariser, Inc.
555 Montgomery Street, Suite 1412
San Francisco, CA 94111-2544
Fax No.: (415) 616-8982
If to WEC and/or HCT:
c/o World Explorer Cruises, Inc.
555 Montgomery Street
San Francisco, CA 94111
Fax No.: (415) 391-1145
If to Azure:
c/o Commodore Holdings Limited
4000 Hollywood Boulevard, Suite 385-S
Hollywood, FL 33021
Fax No.: (954) 967-2147
All such notices, requests, demands and other communications shall
become effective on the date received by the receiving party. Any party hereto
may change his or its address for the receipt of notice, by notice in writing
given as provided herein to the other parties hereto.
11. This Modification Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement, and any party may execute this
Modification Agreement by signing one or more counterparts. This instrument is
not intended to have any legal effect whatsoever, or to be a
7
<PAGE>
legally binding agreement, or any evidence thereof, until it has been signed by
all of the parties hereto.
12. The parties hereto shall execute such additional documents and take
such actions as may be necessary to carry out the terms of this Modification
Agreement and the transactions contemplated hereby.
13. If any provision of this Modification Agreement shall be invalid or
unenforceable for any reason, the remainder of this Modification Agreement shall
not be affected thereby, but rather shall be enforced to the greatest extent
permitted by law.
14. This Modification Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. No party
hereto may assign any of its rights or obligations hereunder to any person
without the prior written consent of the other parties hereto.
IN WITNESS WHEREOF, the parties have executed this Modification
Agreement as of the date and year first hereinabove written.
SEA-COMM, LTD. SEAWISE FOUNDATION, INC.
By:/S/ FREDERICK A. MAYER By: /S/ K.Y. TANG
------------------------------ -------------------------
Title: PRESIDENT Title: ATTORNEY-IN-FACT
COMMODORE HOLDINGS LIMITED NEW COMMODORE CRUISE
LINES LIMITED
By: /S/ FREDERICK A. MAYER By: /S/ FREDERICK A. MAYER
------------------------------ -------------------------
Title: VICE CHAIRMAN OF THE BOARD Title: CHAIRMAN OF THE BOARD
8
<PAGE>
WORLD EXPLORER CRUISES, INC. HEMISPHERE CRUISES AND
TOURS, INC.
By: /S/ K.Y. TANG By: /S/ K.Y. TANG
------------------------------ -------------------------
Title: ATTORNEY-IN-FACT Title: ATTORNEY-IN-FACT
AZURE INVESTMENTS, INC.
By: /S/ FREDERICK A. MAYER
------------------------------
Title: ATTORNEY-IN-FACT
9
EXHIBIT 10.w
[PORT OF NEW ORLEANS LOGO]
August 24, 1998
Mr. Alan Pritzker
Chief Financial Officer
New Commodore Cruise Line Limited
4000 Hollywood Boulevard
Suite 485, South
Hollywood, Florida 33021
Re: Extension of the Financing and Berthing Agreement between New
Commodore Cruise Lines Limited and this Board
Dear Mr. Pritzker:
This will acknowledge receipt of and respond to your June 9, 1998,
letter to Mr. James Reese, this Board's General Operations Officer for the Julia
Street Passenger Terminal. In that letter, you ask that the Board confirm that
your company New Commodore Cruise Line Limited (NCCLL) has met its financial
commitment to this Board under the captioned Financing and Berthing Agreement
and furthermore, you ask this Board to acknowledge NCCLL's exercise of its
option to extend this agreement for an additional three-year period. We confirm
that NCCLL has met its financial obligations to this Board under this agreement.
We acknowledge your exercise of your option to extend this agreement under its
same terms and conditions for an additional three-year period as provided in
Section 8 ("Option to Extend") of the agreement as amended. Accordingly, this
agreement as extended shall expire on April 9, 2002.
Should you have any questions about this letter, please contact Mr.
Reese at 504-528-3264.
Sincerely,
/s/ J. Ron Brinson
J. Ron Brinson
JRB/bg
EXHIBIT 10.x
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR FOREIGN
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-29 520,455 Warrants
WARRANT TO PURCHASE 520,455 SHARES OF
COMMODORE HOLDINGS LIMITED COMMON STOCK
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE is made and entered into as of the 15th day of
October, 1998 by and between Commodore Holdings Limited (the "Company") and
Jeffrey I. Binder and Rosalie Binder, as tenants by the entireties, (the
"Warrant Holder").
WHEREAS, the Company issued a warrant certificate on April 26, 1995,
granting Warrant Holder the right to purchase 250,000 shares of $.01 par value
common stock (the "Common Stock") of the Company (the "Original Warrant
Certificate") at the initial exercise price of $6.00 per share of Common Stock;
WHEREAS, the Company amended such Original Warrant Certificate on
November 4, 1997 to clarify certain ambiguities contained therein (the
"Amendment");
WHEREAS, as a result of certain anti-dilutive events, the Company was
required to adjust the number of Warrant Shares and Exercise Price contained in
the Original Warrant Certificate and issued a restated warrant (the "Restated
Warrant"), which reflected such adjustments on April 15, 1998;
<PAGE>
WHEREAS, the Warrant Holder has assigned their interest, in part, in
the Restated Warrant, as to the right to purchase 25,000 shares of Common Stock;
and
WHEREAS, the Company has determined that it is in its best interests to
cancel such Restated Warrant and issue a new Warrant Certificate (the "Warrant
Certificate"), which reflects the assignment of warrants.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the Company and the Warrant Holder hereby agree as follows:
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 520,455 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 520,455 fully paid and nonassessable shares of Common
Stock, of COMMODORE HOLDINGS LIMITED, a Bermuda corporation (the "Company"), at
the exercise price (the "Exercise Price") of $2.75 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.
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
not 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
Certificate(s) shall not in any way change, alter, or otherwise impair the
rights of the holder as set forth in EXHIBIT I.
2
<PAGE>
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
Warrant 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.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of October 15, 1998.
COMMODORE HOLDINGS LIMITED
By: /S/ FREDERICK A. 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 Holder)
________________________________________
Signature Guarantee
5
<PAGE>
EXHIBIT I
Section 1. EXERCISE OF WARRANT. The Warrants are exercisable at an
aggregate adjusted 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 $2.75 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.
1
<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 have not been
registered under applicable state and federal securities laws, and that such
Warrants 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 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. The
Holders of the Warrants further agree that they will not 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.
4.3 OPINION OF COUNSEL. In connection with any transfer of the
Warrants, 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 may be
effected without registration of the Warrants under the 1933 Act, the Holders
shall be entitled to transfer the Warrants 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 may
not be effected without registration of the Warrants under the Securities Act,
the holder of the Warrants shall not be entitled to transfer the Warrants 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 Company shall not be required to
issue all of any portion of the Warrants 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.
2
<PAGE>
4.5 SECURITIES ACT OF 1933 LEGEND. The Warrants have not been
registered under the Securities Act. Upon exercise of the Warrants, in part or
in whole, and until Holder sells the Warrant Shares, 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 OR FOREIGN
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 prior to 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;
(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
3
<PAGE>
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 written 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:
(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.
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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 (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
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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.
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
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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 transaction, 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
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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 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. If the Company shall at any time or from time to time hereafter:
(i) sell or issue any additional shares of its Common
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Stock (other than upon exercise of the Warrants) and any other warrant issued
upon exchange of the Warrants, for a consideration per share less than the
Exercise Price in effect immediately prior to such sale or issuance, or without
consideration; or (ii) sell or issue any rights or options to purchase Common
Stock of the Company or sell or issue any securities of any kind convertible
into shares of Common Stock of the Company in which the option, purchase,
exercise or conversion price (or consideration) per share, as the case may be,
is less than the Exercise Price in effect immediately prior to such sale or
issuance, then and in each such case, the Exercise Price in effect immediately
prior to such sale or issuance shall immediately and automatically be reduced to
the consideration per share received by the Company upon such sale or issuance
as specified in (i) above or to the option, purchase, exercise or conversion
price (or consideration) per share upon such sale or issuance as specified in
(ii) above, as the case may be.
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.
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
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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 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;
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(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 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.
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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
EXHIBIT 10.y
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-25 545,455 Warrants
WARRANT TO PURCHASE 545,455 SHARES OF
COMMODORE HOLDINGS LIMITED COMMON STOCK
RESTATED WARRANT CERTIFICATE
THIS RESTATED WARRANT CERTIFICATE is made and entered into as of the
15th day of April, 1998 by and between Commodore Holdings Limited (the
"Company") and JeMJ Financial Services, Inc. (the "Warrant Holder").
WHEREAS, the Company issued a Warrant Certificate on April 26, 1995,
granting Warrant Holder the right to purchase 250,000 shares of $.01 par value
common stock (the "Common Stock") of the Company (the "Warrant Certificate") at
the initial exercise price of $6.00 per share of Common Stock;
WHEREAS, the Company amended such Warrant Certificate on November 4,
1997 to clarify certain ambiguities contained therein (the "Amendment");
WHEREAS, as a result of certain anti-dilutive events, the Company is
required to adjust the number of Warrant Shares and Exercise Price contained in
the Warrant Certificate; and
WHEREAS, the Company has determined that it is in its best interests to
restate the terms of the Warrant Certificate by cancelling such Warrant
Certificate and re-issuing this Warrant Certificate (the "Restated Warrant
Certificate") which reflects both the Amendment to the Warrant Certificate and
the adjustment in the number of Warrant Shares and Exercise Price.
<PAGE>
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the Company and the Warrant Holder hereby agree as follows:
THIS RESTATED WARRANT CERTIFICATE certifies that JeMJ Financial
Services, Inc., or its registered assigns, are the registered holders of 545,455
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
545,455 fully paid and nonassessable shares of Common Stock, of COMMODORE
HOLDINGS LIMITED, a Bermuda corporation (the "Company"), at the exercise price
(the "Exercise Price") of $2.75 per share of Common Stock upon surrender of this
Restated 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.
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
not authorized to close.
The Warrants evidenced by this Restated 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 Restated
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 Restated
Warrant Certificate(s) 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 Restated
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 Restated Warrant Certificate or Restated 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 Restated 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.
<PAGE>
Upon the exercise of less than all of the Warrants evidenced by this
Restated Warrant Certificate, the Company shall forthwith issue to the holder
hereof a new Restated 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 Restated 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 Restated Warrant Certificate which are defined
in EXHIBIT I hereto shall have the meanings assigned to them in EXHIBIT I
hereto.
IN WITNESS WHEREOF, the Company has caused this Restated Warrant
Certificate to be duly executed under its corporate seal.
Dated as of April 15, 1998.
COMMODORE HOLDINGS LIMITED
By:/S/ FREDERICK MAYER
------------------------------------
Frederick Mayer,
Vice-Chairman of the Board
Attest:
/S/ BLANCA SANTOS
- ------------------------
Blanca Santos, Secretary
<PAGE>
FORM OF ELECTION TO PURCHASE
THE UNDERSIGNED hereby irrevocably elects to exercise the right,
represented by this Restated 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 Restated Warrant
Certificate.)
________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
________________________________________
Signature Guarantee
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Restated Warrant Certificate)
FOR VALUE RECEIVED ___________________ hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Restated Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint____________________
______________________ Attorney, to transfer the within
Restated 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 Restated Warrant
Certificate.)
________________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
________________________________________
Signature Guarantee
<PAGE>
EXHIBIT I
Section 1. EXERCISE OF WARRANT. The Warrants are exercisable at an
aggregate adjusted 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
Restated 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 Restated 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 Restated 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
Restated Warrant Certificate, the Company shall cancel said Restated Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Restated 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 Restated 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 $2.75 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.
Section 4. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
<PAGE>
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 Restated 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, 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
<PAGE>
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 prior to 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;
(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
<PAGE>
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 written
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:
(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.
<PAGE>
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 (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,
<PAGE>
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.
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
<PAGE>
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 transaction, 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.
<PAGE>
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 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. If the Company shall at any time or from time to time hereafter:
(i) sell or issue any additional shares of its Common Stock (other than upon
exercise of the Warrants) and any other warrant issued upon exchange of the
Warrants, for a consideration per share less than the Exercise Price in effect
immediately prior to such sale or issuance, or without consideration; or (ii)
sell or issue any rights or options to purchase Common Stock of the Company or
sell or issue any securities of any kind convertible into shares of Common Stock
of the Company in which the option, purchase, exercise or conversion price (or
consideration) per share, as the case may be, is less than the Exercise Price in
effect immediately prior to such sale or issuance, then and in each such case,
the Exercise Price in effect immediately prior to such sale or issuance shall
immediately and automatically be reduced to the consideration per share received
by the Company upon such sale or issuance as specified in (i) above or to the
option, purchase, exercise or conversion price (or consideration) per share upon
such sale or issuance as specified in (ii) above, as the case may be.
<PAGE>
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.
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 RESTATED WARRANT CERTIFICATES.
Each Restated 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 Restated 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.
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Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Restated 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 Restated
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 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;
(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
<PAGE>
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 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 Restated 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 Restated
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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 Restated
Warrant Certificates or Warrant Shares.
EXHIBIT 10.z
FIRST PREFERRED MARINE MORTGAGE
Vessel Name: UNIVERSE EXPLORER
Length: 173.74 meters
Breadth: 25.60 meters
Depth: 33.94 meters
Gross Tons: Approximately 22,162
Net Tons: Approximately 6,648
Registration Number: 14064-84-G
(Navigation Patent)
Radio Call Letters: 3FMF2
Name and Address of Azure Investments, Inc.
Mortgagor: c/o Galindo Lopez & Arias
Scotia Plaza
Federico Boyd Ave. No. 18 & 51 Street
P. 0. Box 8629
Panama 5, Rep. of Panama
Name and Address of KeyCorp Leasing, a Division of Key Corporate
Mortgagee: Capital Inc.
54 State Street
Albany, NY 12207
Date of Mortgage: December 4, 1998
Amount of Mortgage: U.S. $10,000,000.00
Repayment Schedule: Monthly payments set forth in Exhibit A
Interest Rate: Floating Prime Rate plus 80 basis points as
set forth in Exhibit A
This FIRST PREFERRED MARINE MORTGAGE (the "Mortgage") is executed as of
December 4, 1998, by AZURE INVESTMENTS, INC., a corporation organized under the
laws of the Republic of Panama (hereinafter "Shipowner" or "Mortgagor"), in
favor of KEYCORP LEASING, a Division of Key Corporate Capital Inc., a Michigan
corporation ("Mortgagee").
RECITALS
A. WHEREAS, Shipowner is the sole owner of 100% of the whole of the
vessel, UNIVERSE EXPLORER, Registration No. 14064-84-G, which is duly documented
in the name of Shipowner under the laws and flag of the Republic of Panama, of
which Mortgagee is the mortgagee of 100% of the interest hereunder;
B. WHEREAS, Shipowner has executed in favor of Mortgagee a Promissory
Note in the principal amount of $ 10,000,000 of even date herewith (the "Note"),
and a Loan and Security Agreement of even date herewith (the "Security
Agreement") (the Note and Security Agreement, as amended,
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renewed or otherwise modified from time to time, collectively the "Loan
Agreement"), pursuant to which Mortgagee has agreed to make certain loans to
Shipowner in the aggregate principal sum of Ten Million Dollars ($10,000,000.00)
in lawful money of the United States, on terms and conditions described therein
(the "Loan");
C. WHEREAS, the Loan plus accrued and accruing interest thereon and
other fees and expenses are evidenced by the Note, a true and complete copy of
the form of which is attached hereto and incorporated by reference herein as
EXHIBIT A;
D. WHEREAS, Shipowner and Mortgagee have entered into that certain ISDA
Master Agreement dated as of December 4, 1998 (as amended, renewed or otherwise
modified from time to time, the "SWAP Agreement") in which Mortgagee has agreed,
among other things, to provide Shipowner with interest rate swap contracts in
connection with interest rate fluctuations in the Note (the "Swap Contracts");
E. WHEREAS, in consideration of the Mortgagee having agreed to advance
the Loan and enter into the Swap Contracts, Shipowner has agreed to execute and
deliver this Mortgage to the Mortgagee for purposes of securing payment to the
Mortgagee of the sums payable by Shipowner under the Note and the performance by
Shipowner of its obligations under the Loan Agreement and the Swap Contracts
(collectively the "Debt") (the Note, Loan Agreement and Swap Contracts are
sometimes collectively referred to as, the "Loan Documents") in accordance with
the terms thereof and of this Mortgage;
NOW, THEREFORE, SHIPOWNER AND MORTGAGEE AGREE AS FOLLOWS:
That, in consideration of the provisions of this Mortgage, of the sums
loaned as above recited and Mortgagee's agreements with respect thereto, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Shipowner hereby mortgages and grants to Mortgagee a
security interest in the whole of the vessel described above, which includes,
without limitation (except to the extent owned by Space Charterer, as hereafter
defined): (a) all of its engines, boilers, masts, spars, spare parts, gear,
broached and unbroached consumable stores, provisions, unused rope, furniture,
fuel, pumps, cables, apparel, rigging, tackle, machinery, tools, boats, anchors,
chains, fittings, navigation equipment, and all other equipment, accessories and
appurtenances appertaining or belonging to such vessel, whether now owned or
hereafter acquired, whether on board or not, (b) all present and future
accessions to such vessel, equipment and appurtenances, and all other additions,
improvements, substitutions and replacements hereafter made in or to such
vessel, equipment and appurtenances, all of which are referred to in this
Mortgage as the "Vessel," and all books and records pertaining to the use,
operation and employment of the Vessel.
This Mortgage is granted in order to secure the payment of all sums
payable by Shipowner under the Loan Documents and the performance by Shipowner
of all obligations under the Loan Documents and the Swap Contracts in accordance
with the terms thereof and of this Mortgage, and the performance of any other
obligations of Shipowner to Mortgagee, whether now existing or hereafter
created. Anything herein to the contrary notwithstanding, the maximum amount of
the direct or contingent obligations that are or may be secured by this Mortgage
at any time is Ten Million Dollars ($ 10,000,000.00) excluding interest,
expenses, and fees, and other amounts which may be owed from time to time
pursuant to the SWAP Contracts.
TO HAVE AND TO HOLD, all and singular, the property subject hereto unto
Mortgagee, its successors and assigns, to its and its successors' and assigns'
use and benefit forever;
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PROVIDED, HOWEVER, that if Shipowner, its successors and permitted
assigns, shall fully perform and comply with, all of the terms, conditions,
representations, warranties, and covenants hereof, then this Mortgage shall
cease, otherwise to remain in full force and effect.
Shipowner further agrees, represents, and warrants as follows:
ARTICLE I.
COVENANTS, REPRESENTATIONS AND WARRANTIES OF SHIPOWNER
1. PAYMENT OF DEBT. Shipowner shall pay the Debt in accordance with the
provisions of the Loan Agreement and Swap Contracts, expressed or implied, on
its part to be observed, performed or complied with.
2. VALID MORTGAGE. Shipowner shall execute and deliver all other
documents and take all other actions Mortgagee deems necessary in order to
establish, perfect and maintain this Mortgage as a valid, enforceable, and duly
perfected first priority preferred mortgage lien on the Vessel.
3. VESSEL DOCUMENTATION. Shipowner shall not do, or suffer or permit to
be done, anything which can or may detrimentally affect the documentation of the
Vessel under the laws and regulations of the Republic of Panama ("Panama"), or
treaties to which it is a party. Shipowner satisfies and will continue to
satisfy the criteria required to document the Vessel under the laws of Panama.
The Vessel is eligible to be, is, and shall at all times remain duly documented
for the trades and registry applicable to the Vessel's current and future
operations and voyages. Shipowner shall not transfer or change the flag of
documentation or the name of the Vessel, including registering the Vessel under
a system of dual registry, without the prior written consent of Mortgagee (not
to be unreasonably withheld or delayed), and no such written consent to any one
change shall be construed to be a waiver of this provision with respect to any
subsequent proposed change.
4. OWNERSHIP AND LIENS. Shipowner lawfully owns and is lawfully
possessed of 100% of the whole of the Vessel free from all liens, claims, or
other encumbrances whatsoever, whether of a maritime or non-maritime nature,
including, without limitation, claims of or liability to possession, forfeiture
or penalty, except Permitted Maritime Liens, as defined in the Loan Agreement
("Liens"). Except as otherwise provided herein, Shipowner warrants and shall
defend title to and possession of the Vessel and to every part thereof for the
benefit of Mortgagee against the claims and demands of all persons whomsoever.
Without the prior written consent of Mortgagee, there shall not be granted or
incurred by any person any Lien thereon, and Shipowner shall not suffer the same
to be continued for any period of time whatsoever after they become due and
payable.
5. NOTICE OF MORTGAGE. Shipowner shall place and retain a properly
certified copy of this Mortgage on board the Vessel with its papers and shall
upon request cause such certified copy and such papers to be exhibited to all
persons having business with the Vessel which might give rise to any Lien
thereon, or the sale, mortgage, charter, or other transfer of the Vessel or any
interest therein, and to all representatives of Mortgagee on request. Shipowner
shall place and keep prominently displayed in the pilothouse on the Vessel a
conspicuous notice reading substantially as follows:
NOTICE OF MORTGAGE
This vessel is encumbered by a first preferred marine mortgage
dated December 4, 1998, in favor of KEYCORP LEASING, A
DIVISION OF
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<PAGE>
KEY CORPORATE CAPITAL INC. Under the provisions of said
mortgage none of the owner, any charterer, the master of this
vessel, or any other person has any right, power or authority
to create, incur or permit to be imposed upon this vessel any
lien, encumbrance, or other charge whatsoever other than for
crews' wages or salvage, and such other liens as may be
permitted under such preferred mortgage.
6. ARREST OF VESSEL. If a libel or complaint is filed against the
Vessel, or if the Vessel is attached or arrested, Shipowner shall promptly
notify Mortgagee by telephone, facsimile transmission, telex or telegraph,
confirmed by letter, and shall, if the Vessel is attached or arrested, forthwith
cause the Vessel to be released and all alleged Liens thereon (other than the
lien of this Mortgage and Permitted Maritime Liens), to be discharged or
adequate security to be posted therefor and shall promptly notify Mortgagee
concerning such release and discharge. In the event the Shipowner does not cause
the Vessel to be released within ten (10) business days, Shipowner authorizes
and empowers Mortgagee to appear in the name of Shipowner in any court of any
country or jurisdiction where a suit is pending against the Vessel because of or
on account of any alleged Lien thereon from which it has not been released, and
to take such actions as to it as Mortgagee may deem proper towards the defense
of such suit, the purchase or discharge of such alleged Lien, or the release of
the Vessel, including, without limitation, posting adequate security therefor.
All reasonable expenditures made or incurred by Mortgagee for the purpose of
such defense, purchase or discharge shall be a debt due from Shipowner to
Mortgagee, as the case may be, and shall be secured by the lien of this
Mortgage, and shall bear interest in the manner provided in Section 25 hereof.
7. MAINTENANCE. Shipowner shall at all times and without cost or
expense to Mortgagee maintain and preserve the Vessel in such running order and
repair as would be expected of a prudent Shipowner, and so that the Vessel will
be, insofar as reasonable due diligence can make it so, tight, staunch, strong
and well and sufficiently tackled, appareled, furnished, equipped and in every
respect seaworthy, fit for her intended service and in good operating condition,
ordinary wear and tear excepted. Shipowner shall not make or permit to be made
any change in the Vessel's gross or net tonnages, or any other material change
in its structure or rig, without first obtaining the written approval of
Mortgagee. Shipowner may remove equipment from the Vessel free and clear of the
lien of this Mortgage if it simultaneously replaces such equipment with
equipment of equal suitability and value when new and which is owned by
Shipowner free and clear of any Lien, provided, the Shipowner need not replace
any item of equipment that is worn-out, obsolete or no longer necessary to
Shipowner if the failure to replace such item of equipment is not
disadvantageous in any material respect for Shipowner to conduct its business in
the ordinary manner or for the Vessel to efficiently operate for its intended
purposes.
8. LEGAL COMPLIANCE. The Vessel and its operations shall at all times
comply in all material respects with (a) all laws, rules and regulations of
Panama applicable to the Vessel, as in effect from time to time, and (b) all
treaties, conventions, laws, rules, and regulations applicable to the Vessel and
its operation in all trades and locations in which it operates or is located
from time to time; and the Vessel shall have on board as and when required
thereby valid certificates of inspection and all other certificates evidencing
compliance therewith. The Vessel shall not otherwise engage in any unlawful
trade or violate or be operated in violation of any applicable law, regulation
or treaty, or carry any passenger, cargo, or other matter that will expose it to
penalty, forfeiture or capture. Shipowner shall obtain and file all certificates
of financial responsibility for liabilities imposed on Shipowner or the Vessel
as legally required in all jurisdictions in which the Vessel is located from
time to time, including, without limitation, the United States Water Pollution
Act, as amended by the Water Pollution Control Act Amendment of 1972, and as
further amended by the Oil Pollution Act of 1990 (as the same may be further
amended from time to time), and will maintain all certificates or other evidence
of financial responsibility as may
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be required by any law, regulation, proclamation or order. Shipowner shall
prepare and file all environmental pollution prevention and contingency plans
and other matters required under all applicable treaties, conventions, laws,
rules and regulations in effect from time to time concerning the prevention and
cleanup of environmental pollution, and the regulation of shipowners and vessels
with respect to environmental matters. Shipowner shall ensure that all
reasonable precautions are taken to ensure that no illegal drugs or drug
paraphernalia are used or kept on board the Vessel.
9. LOCATION OF VESSEL. The Vessel shall not be abandoned in any port or
place. Shipowner shall not operate the Vessel or suffer the Vessel to be
operated in any area excluded from any insurance required to be maintained
pursuant to Section 10 below. Shipowner shall upon request provide Mortgagee
with the Vessel's current location and itinerary.
10. INSURANCE.
a. When and so long as this Mortgage or any parts of the
obligations secured by this Mortgage are outstanding, Shipowner shall maintain
the following insurances with respect to the Vessel:
(i) Marine hull and machinery insurance and increased value
insurance in substantially the same form and coverage with substantially the
same warranties, deductibles and conditions as those contained in that policy
identified in SECTION I of EXHIBIT B attached hereto;
(ii) Marine protection and indemnity insurance in
substantially the same form and coverage with substantially the same warranties,
deductibles and conditions as those contained in that policy identified in
SECTION 2 of EXHIBIT B attached hereto;
(iii) War risk hull and machinery and war risk protection and
indemnity insurance in substantially the same form and coverage with
substantially the same warranties, deductibles and conditions as those contained
in that policy identified in SECTION 3 of EXHIBIT B attached hereto, provided,
however, that no such war risk insurance shall be required when the Vessel is
operating in the waters of the United States of America;
(iv) If and as required by law, workmen's compensation
insurance for each state in or from which the Vessel shall operate and United
States Longshore and Harbor Workers' Compensation Act insurance for statutory
third party pollution liability insurance and pollution clean-up insurance, in
the amount of $1,000,000.00 in the aggregate, or the minimum required by
domestic or international oil pollution protection laws applicable to the
Vessel, whichever is greater;
(v) Mortgagee's interest insurance (including breach of
warranty clauses) in substantially the same form and coverage with substantially
the same warranties, deductibles and conditions as those contained in that
policy identified in SECTION 4 of EXHIBIT B attached hereto; and
(vi) Marine increased value insurance, in substantially the
same form and coverage with substantially the same warranties, deductibles and
conditions as those contained in that policy identified in SECTION 5 of EXHIBIT
B attached hereto.
Shipowner shall obtain and maintain all such insurances at its own expense, and
shall timely pay all premiums, dues, calls, assessments and other amounts and
expenses thereunder, despite any undertaking by Mortgagee from time to time to
be responsible therefor.
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b. All policies of insurance shall be maintained in forms
available from underwriters reasonably acceptable to Mortgagee, effected by an
insurance broker reasonably acceptable to Mortgagee, and contain insuring
covenants, deductible or franchise clauses, mortgagee clauses, and other
provisions reasonably satisfactory to Mortgagee. No required policy of insurance
shall be amended or terminated without obtaining the prior written consent of
Mortgagee. Each policy, binder and interim contract of insurance required
hereunder shall provide for 30 days' (or such shorter period of time specified
by Mortgagee) prior received written notice to be given to Mortgagee by the
underwriters in the event of cancellation or any material amendment or
alteration. Within fifteen (15) days of the expiration of each policy required
hereunder, Mortgagor's broker shall furnish Mortgagee a Certificate of Insurance
evidencing that the coverages required hereunder are in full force and effect.
Mortgagor agrees to make available for inspection by Mortgagee, on reasonable
request, copies of the originals of all policies, amendments, endorsements,
certificates of entry, binders and other insurance contracts which are in its
possession. Evidence of renewal of all insurances shall be furnished to
Mortgagee as soon as it has been placed. At the option of Mortgagee, and without
waiver of any default with respect thereto, any policies of insurance required
herein and not timely obtained and properly maintained by Shipowner may be
obtained and maintained by Mortgagee, and the expenses therefor, if not paid for
or reimbursed by Shipowner within ten days after the same shall have become
owing or shall have been paid by Mortgagee, shall be added to the indebtedness
secured hereby and shall bear interest as provided in SECTION 25 herein.
Mortgagee's failure to object to the placement of insurance contrary to the
provisions of this Mortgage in one or more instances shall not establish a
consent or course of dealing with respect to such noncompliance in any other
instances. As used in this Mortgage, references to "policy" or "policies," or
"insurance" or "insurances" shall include entries in one or more hull and
machinery insurance funds, protection and indemnity associations, and the like,
or the coverages afforded thereby, and references to "underwriter" or
"underwriters" shall include one or more of such funds and associations.
c. All insurances shall name Mortgagee as an assured in
addition to Shipowner, and shall name Mortgagee as co-loss payee, and no other
loss payees shall be added to any policy without obtaining the advance written
consent of Mortgagee PROVIDED that Bareboat Charterer, Time Charterer, and Space
Charterer may be named as co-loss payees as their interests appear. Without
limiting Mortgagee's right herein to obtain insurance at Shipowner's expense or
relieving Shipowner from any default with respect thereto, to the extent
Shipowner does not have Mortgagee named on any required insurances as an assured
or sole loss payee, Shipowner shall execute and deliver to Mortgagee promptly on
request specific assignments and pay orders as it may require, and on any
failure to provide them promptly on request, Mortgagee is appointed Shipowner's
attorney-in-fact, coupled with an interest, to execute and deliver such
assignments and pay orders on behalf of Shipowner.
d. In the event of an actual total loss, a constructive total
loss, or a compromised, agreed, or arranged total loss of the Vessel as provided
under an applicable policy of insurance, Mortgagee shall receive and retain out
of the insurance payments received on account of such loss all sums then owing
on the Debt or otherwise owing under or secured by this Mortgage, whether or not
the same are then due and payable, and shall pay the balance to Shipowner or to
whomsoever may be entitled thereto. Mortgagee shall have the right to tender
abandonment of the Vessel to its underwriters on behalf of itself and Shipowner.
If there has not occurred and there is not continuing an Event of Default at the
time of tender of payment by the underwriters, in the event of any other loss
payable in an amount not in excess of $500,000 under any hull and machinery
insurance which provides partial and total loss coverage (excluding, without
limitation, increased value insurance coverage, and self-insurance), or for
salvage or other liabilities or expenses insured thereunder, Mortgagee shall
instruct the underwriters to pay directly for repairs, salvage or other
liabilities or expenses, or reimburse Shipowner therefor. In the event of any
loss payable under any hull and machinery insurance or increased value insurance
not
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described above in this subsection, and if an Event of Default has occurred and
in continuing, at its sole option, Mortgagee may instruct the underwriters to
pay directly for repairs, salvage or other liabilities, or expenses, or
reimburse Shipowner therefor, or Mortgagee may receive all such insurance
proceeds and apply them toward payment of the Loan and all sums otherwise owing
under or secured by this Mortgage, whether or not the same are then due and
payable, in which event the balance of the proceeds shall be paid to Shipowner
or to whomsoever may be entitled thereto.
e. In the event that insurance moneys become due under any
protection and indemnity insurance or other liability insurances, if there has
not occurred and there is not continuing an Event of Default at the time of
tender of payment by the underwriters, Mortgagee shall instruct the underwriters
to pay Shipowner such insurance proceeds as may be due to Shipowner on account
of any liability covered by such insurance if Shipowner has already paid the
liability, or to pay the party in respect of whom the liability was incurred, in
exchange for a complete release of liability with respect thereto. At such time
of tender of payment, if an Event of Default has occurred and is continuing, at
Mortgagee's sole option, and in lieu of the foregoing, Mortgagee shall be
entitled to receive such insurance proceeds and may apply the proceeds thereof
toward payment of any or all of the Loan and all sums otherwise owing under or
secured by this Mortgage, whether or not the same are then due and payable, in
which event the balance of the proceeds shall be paid to Shipowner or to
whomsoever may be entitled thereto.
f. In the event the Vessel is attached or arrested or is
threatened to be attached or arrested, Mortgagee, at the request of Shipowner,
may agree (and, with respect to any policies of liability insurance, does hereby
agree if no Default or Event of Default is then continuing, other than such
Default or Event of Default solely arising from the attachment or arrest of the
Vessel) with any surety executing a surety bond releasing the Vessel from such
attachment or arrest to assign to such surety any or all insurance proceeds
under the policies of insurance on the Vessel as collateral security to
indemnify such surety against liability under said bond.
g. Shipowner shall notify Mortgagee within forty-eight hours
after the occurrence of damage to the Vessel in excess of $500,000, or an
incident of salvage or general average with respect to the Vessel.
h. Shipowner shall not do any act or voluntarily suffer or
permit any act to be done whereby any insurance required herein shall or may be
canceled without simultaneously being renewed in accordance herewith. Shipowner
shall not suffer or permit the Vessel to engage in any voyage or to engage in
any trade or activity not permitted under the policies of insurance at the time
in effect without first covering the Vessel for such voyage, trade or activity
as otherwise required herein.
11. REQUISITION. Shipowner and Mortgagee agree that in the event of
the requisition of title to the Vessel, so long as there has not occurred and
there is not continuing an Event of Default, all amounts which are owed or
payable as compensation for the use of the Vessel shall be retained by
Shipowner; provided, however, if an Event of Default has occurred and is
continuing, all such amounts are hereby assigned to and shall be paid over to
Mortgagee to be applied as provided in the next sentence. Shipowner agrees that
in the event of the requisition of title to the Vessel, all amounts which are
owed or payable as compensation for the Vessel or for its use are hereby
assigned to and shall be paid over to Mortgagee to be applied toward payment of
the Debt and all sums otherwise owing under or secured by this Mortgage, whether
or not the same are then due and payable, in which event the balance shall be
applied as provided in Section 25 herein, and to that end Shipowner agrees to
execute and deliver all other and further instruments reasonably requested by
Mortgagee. Mortgagee is hereby irrevocably and individually appointed
Shipowner's attorney-in-fact coupled with an interest to execute all such
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instruments which Shipowner is required to execute and deliver in this Section
but fails to execute and deliver promptly on request.
12. SECURITY. Shipowner agrees to execute and deliver to Mortgagee as
requested all financing statements and other evidence of the security interest
of Mortgagee in the Vessel suitable for recording in the jurisdictions of
Mortgagee's choice, and other instruments, agreements, applications, and other
documents necessary to effect and perfect the security hereof, or to otherwise
effectuate the provisions hereof. Mortgagee is irrevocably and individually
appointed Shipowner's attorney-in-fact coupled with an interest to execute, file
and record the same in Shipowner's name. Shipowner further agrees that this
Mortgage may serve as the security agreement encumbering the collateral
described herein (including, without limitation, the Vessel and all of its
constituent parts) underlying such financing statements or evidence of
perfection.
13. TRANSFER OF VESSEL/ASSIGNMENT OF CHARTER. Shipowner shall not
sell, mortgage, bareboat or demise charter, or in any other manner transfer the
Vessel, possession thereof, or any interest in, or control over ("Transfer"),
and shall not agree to do any of the foregoing, without the prior written
consent of Mortgagee, which consent shall not be unreasonably withheld,
provided, however, that Mortgagee consents to (i) the charter of the Vessel to
New Commodore Cruise Lines Limited ("Bareboat Charterer") pursuant to a Bareboat
Charter Agreement between Mortgagor and Bareboat Charterer dated July 14, 1995,
as it relates to the Vessel ("Bareboat Charter"); (ii) the Time Charter of the
Vessel dated as of October 30, 1995 (the "Time Charter"), between Bareboat
Charterer and Sea-Comm, Ltd. (the "Time Charterer"); and (iii) the Space Charter
of the Vessel dated as of October 30, 1995 (the "Space Charter") between the
Time Charterer and Seawise Foundation, Inc. (the "Space Charterer"); PROVIDED,
however, that the Bareboat Charter, Time Charter, and Space Charter shall be
junior, inferior, and subordinate to the interests of Mortgagee in the Vessel. A
transfer or other change in ownership of a controlling interest in Shipowner
(where Shipowner is not the surviving entity) or any change in the citizenship
status of Shipowner, shall constitute a Transfer. Mortgagor shall not transfer
the Vessel to, or permit the Vessel to serve under any contract of affreightment
with, a person included within the definition of "designated foreign country" or
"national" of a "designated foreign country" as defined in the Foreign Assets
Control Regulations, Cuban or Iranian Assets Control Regulations, the Rhodesian,
Libyan, Yugoslavian or Iraqi Sanction Regulations, or the Haitian Transactions
Regulations of the United States Treasury Department, 31 C.F.R., Chapter V, as
amended, within the meaning of said regulations or of any regulation,
interpretation or ruling issued thereunder unless such service complies with
applicable permits and permissions obtained by Mortgagee for such service. No
written consent to any Transfer shall be construed to be a waiver of this
provision with respect to any subsequent proposed Transfer. Each such approved
Transfer shall be subject to the provisions of this Mortgage and to the lien it
creates.
14. ACCESS TO VESSEL. Shipowner at all reasonable times shall afford
Mortgagee and its representatives full and complete access to the Vessel for the
purposes of inspecting her cargoes and papers, and, upon request, Shipowner
shall deliver to it or them for inspection copies of all contracts, charter
parties, policies of insurance, evidence of club entries, and all other
documents relating to the Vessel and its operation, whether on board or not.
Shipowner shall maintain books of account and other customary and appropriate
records for the Vessel, its freights, hire, and other earnings, and shall duly
perform or cause to be performed all charter parties and other contracts for
carriage or other employment of the Vessel.
15. DRYDOCKING. If Mortgagee so requests, Shipowner shall give
Mortgagee 14 days advance notice of all occasions during which the Vessel shall
be placed in dry dock, and the location of such dry dock or, in the event of
emergencies, such notice as the circumstances permit, and Shipowner shall allow
reasonable access to the Vessel at such times to representatives of and
surveyors for Mortgagee.
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16. BONDS. Shipowner warrants that all surety bonds or other
undertakings or instruments required by any applicable law to secure the
payment of wages or the payment of any other sum in respect to the operation of
the Vessel shall be obtained, effective and filed in the required amounts and in
accordance with applicable law. In the event that any such bond, undertaking or
instrument has not been obtained or is at any time not in effect as required by
any applicable laws, then Mortgagee may obtain the same, and the expense thereof
shall be paid to Mortgagee forthwith, or shall be added to the sums secured
hereby as of the date such expense is incurred. Shipowner shall use its best
efforts to ensure that all such surety bonds and all parties liable on or in
respect of them, by guaranty or otherwise, waive the right to be subrogated to
the rights against the Vessel, if any, of those who receive funds or who are
paid out of the proceeds of such surety bonds or other undertakings.
17. RECOMMENDATIONS AND CONDITIONS. Shipowner warrants and represents
that the Vessel is and shall at all times remain free of all recommendations and
conditions affecting her class.
ARTICLE II.
EVENTS OF DEFAULT AND REMEDIES
18. DEFAULT AND REMEDIES. (a) The occurrence or existence of any one or
more of the following events, conditions or states of fact shall constitute,
individually, an "Event of Default" and, collectively, "Events of Default:"
(i) Shipowner fails to make any payment of principal or
interest constituting the Loan for a period of ten (10) business days after the
same shall be due;
(ii) Any representation or warranty made or deemed made by
Shipowner in connection with the Loan Agreement, the Swap Contracts or the other
Loan Documents shall prove to have been incorrect in any material respect when
made and shall not have been rectified to Mortgagee's satisfaction;
(iii) Shipowner shall fail to have complied, in all material
respects, with any provision of Article I of the Mortgage and such failure shall
remain unremedied for thirty (30) days after written notice thereof shall have
been given to Mortgagor by Mortgagee;
(iv) Shipowner shall fail to perform or observe any other
covenant, obligation or term of this Mortgage or the Loan Agreement and such
failure shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to Mortgagor by Mortgagee or fails to diligently
begin to cure any such failure that cannot be cured within thirty (30) days;
(v) An event of default as set forth in the Loan Agreement
exists or shall occur; or
(vi) An Event of Default under the Swap Contracts shall occur
and be continuing.
(b). Upon the occurrence or existence and during the continuance of any
Event of Default, to the extent not contrary to applicable law, Mortgagee,
without presentment, demand, protest, notice of nonpayment, or notice of
dishonor, all of which are hereby expressly waived by Shipowner, may exercise
all rights, powers, privileges and remedies hereunder, under the Loan Agreement
and Loan Documents,
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and otherwise existing or arising by agreement, at law, or in equity, in
admiralty, or otherwise, and without limiting the foregoing, Mortgagee may:
(i) Deem the Loan to be due and payable immediately, and
whereupon the entire unpaid principal and interest and all other amounts then
accrued under the Note or this Mortgage and under the Swap Contracts will become
and be immediately due and payable;
(ii) Bring suit at law, in equity, or in admiralty, as it may
be advised, to recover judgment for the Debt and any or all amounts otherwise
due under the Loan Documents, or this Mortgage, and collect the same;
(iii) Take the Vessel, wherever it may be, without legal
process, and remove it to any port or place selected by Mortgagee. To the extent
permitted by law, Shipowner or other person in possession shall, forthwith upon
demand of Mortgagee, and at Shipowner's expense, surrender possession of the
Vessel as demanded by Mortgagee, and Mortgagee may hold, lay up, charter,
operate, or otherwise use the Vessel for such time and upon such terms as it may
deem to be for its best advantage, accounting for the net profits, if any,
arising from such use and charging upon all receipts from such use or from the
sale of the Vessel by court proceedings or pursuant to Subsection (iv) next
following, all reasonable costs, charges, damages, losses or other expenses
incurred by reason of such use or sale. If at any time Mortgagee shall avail
itself of the right herein given it to take the Vessel, Mortgagee shall have the
right to dock it for a reasonable time at any dock, pier or other premises of
Shipowner without charge, or to dock it at any other place at the cost and
expense of Shipowner; and
(iv) Sell the Vessel in compliance with applicable law at a
privately conducted public sale at any place and at such time as Mortgagee may
reasonably specify, and in such manner as Mortgagee may reasonably deem
advisable, free from all claims by Shipowner, after first giving notice of the
time and place of sale with a general description of the property in the
following manner: (A) by publishing such notice for not less than ten (10) days
in a daily newspaper of general circulation published in Panama City, Panama;
(B) if the place of sale should not be Panama City, Panama, then by publication
of a similar notice in a daily newspaper of general circulation published at or
near the place of sale; (C) by mailing (and faxing or delivering) a similar
notice to Shipowner at least ten (10) days prior to the scheduled date of the
sale; and (D) by posting notice of sale on the Vessel to be sold; PROVIDE that
in the event of the filing of a petition by Shipowner or the commencement of any
other proceeding whereby Shipowner voluntarily or involuntarily seeks
liquidation, dissolution, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect, or seeks the appointment of a trustee, receiver, administrative
receiver, administrator, liquidator, custodian or other similar official of it
or any substantial part of its property, and such case or other proceeding shall
remain undismissed for a period of sixty (60) days, the entire, aggregate unpaid
principal balances evidenced by the Loan Documents, all accrued and unpaid
interest under the Note and all other amounts payable under this Mortgage, the
Loan Documents, and the Swap Contracts and the other documents, instruments,
agreements, and certificates delivered thereunder relating to the Loan ("Related
Documents"), automatically shall become and be due and payable, without
presentment, demand, protest, notice of nonpayment, notice of dishonor or any
notice of any kind, all of which are hereby expressly waived by Shipowner.
19. SALE OF VESSEL. A sale of the Vessel made pursuant to this
Mortgage, whether under the power of sale hereby granted or pursuant to any
judicial proceeding, shall operate to divest all right, title and interest of
any nature whatsoever of Shipowner therein and thereto. Nevertheless, the Vessel
shall not be sold to any parties who are not lawfully entitled to acquire it. No
purchaser shall be bound to inquire whether notice has been given, whether any
default has occurred, or as to the propriety of the sale or as to
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the application of the proceeds thereof. In case of such sale, and to the extent
permitted by law, any purchaser who is the holder of any of the Loan and the
other obligations secured by this Mortgage shall be entitled, for the purpose of
making settlement or payment for the property purchased, to use and apply any or
all of the Loan and other secured obligations it holds in order that there may
be credited against the amount remaining due and unpaid thereon the sums payable
out of the net proceeds of such sale to the holder after allowing for the
reasonable attorneys' fees, costs and other expenses related to the sale; and
thereupon such purchaser shall be credited, on account of such purchase price,
with the net proceeds that have been so credited upon the Debt and such
obligations. At such sale, such holder of all or part of the Loan and such other
obligations may purchase such property and upon compliance with the terms of
sale may hold, retain and dispose of such property without further
accountability therefor. Mortgagee shall not have any liability to Shipowner in
connection with any disposition of the Vessel hereunder, nor shall Shipowner be
entitled to any set-off, counterclaim, or recoupment with respect to any claim
of such a liability.
20. CONVEYANCE. Mortgagee is hereby irrevocably appointed Shipowner's
attorney-in-fact coupled with an interest to execute and deliver to any
purchaser aforesaid, and is hereby vested with full power and authority to make,
in the name and on behalf of Shipowner, a good conveyance of the title to the
Vessel sold pursuant hereto insofar as may be permitted by law. In the event of
a sale of the Vessel under any power herein contained, Shipowner shall, if and
when required by Mortgagee, execute such form of conveyance of the Vessel as
Mortgagee may direct, and Mortgagee is hereby irrevocably appointed Shipowner's
attorney-in-fact coupled with an interest to execute such form upon Shipowner's
failure to do so forthwith upon request.
21. PROCEEDS OF VESSEL. Mortgagee is hereby irrevocably and
individually appointed Shipowner's attorney-in-fact coupled with an interest to
demand, collect, receive, compromise and sue for, in the name of Shipowner or
otherwise, so far as may be permitted by law, all proceeds of insurance with
respect to, and all proceeds of the requisition of title to the Vessel.
Mortgagee may make, give, and execute in the name of Shipowner acquittances,
receipts, releases, and other discharges for the same, whether under seal or
otherwise, and endorse and accept in the name of Shipowner all checks, notes,
drafts, warrants, agreements and all other instruments in writing with respect
to the foregoing. Upon the occurrence of an Event of Default that is continuing,
(a) Mortgagee may demand and proceed to collect all charter parties and all
rights thereunder pertaining to the Vessel under any agreements between
Mortgagor and charter parties, (b) Mortgagor shall identify to Mortgagee all
charterers and shippers and consignees who owe it any amounts, or to whom the
Vessel is or is to be chartered, and (c) Mortgagor shall furnish to Mortgagee
copies of all charter parties, and booking notes, evidencing such charters and
amounts. Such identification shall include names, addresses, and telephone,
telecopier, telex and cable numbers.
22. RECEIVER. If any legal proceedings are taken to enforce any rights
under this Mortgage, Mortgagee shall be entitled as a matter of right, at its
option, to the appointment of a receiver of the Vessel, and Mortgagee shall be
so entitled with respect to its hire, or other earnings of the Vessel, and all
other sums due or to become due and arising from the receivership or operation
of the Vessel, subject to the prior rights of third parties, if any. All
liabilities, costs and other expenses reasonably incurred by such receiver shall
be for the account of Shipowner.
23. EXPENSES. Shipowner shall pay on demand all reasonable fees, costs
and other expenses (including, without limitation, reasonable attorneys' fees
and disbursements and travel and lodging expenses of officers and employees of
Mortgagee) incurred by Mortgagee in connection with the negotiation,
preparation, execution and delivery of this Mortgage, not to exceed $50,000 for
all closing costs ($25,000 of which has been paid). In addition, Shipowner shall
pay on demand all reasonable fees,
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costs and other expenses (including, without limitation, all taxes, fees, costs
and other expenses for the filing, recording, and registration of this Mortgage
and the Related Documents, all survey costs, all trustees' fees and
disbursements and all attorneys' fees and disbursements) incurred by Mortgagee
in connection with the maintenance, enforcement and preservation of any
collateral for the Loan or any rights, powers, privileges or remedies of
Mortgagee under this Mortgage, the Loan Agreement, or the Related Documents, and
otherwise available to Mortgagee by agreement, at law, in equity, in admiralty
or otherwise, provided, however, that to the extent such fees and disbursements
are incurred in connection with the closing of the Loan, they shall be subject
to the $50,000 limit mentioned above. The fees and disbursements of attorneys'
referred to in this Section shall be paid by Shipowner to Mortgagee, as the case
may be, whether or not any form of legal proceeding is commenced and shall
include any such fees and disbursements incurred in preparation for or
contemplation of, or during, or on any appeal from, any trial, mediation,
arbitration, interpleader, bankruptcy case or proceeding or other judicial or
similar proceeding. All fees, costs, and other expenses referred to in this
Section 23 shall be added to the indebtedness secured hereby and shall bear
interest at the rate as provided in Section 25 herein.
24. CUMULATIVE REMEDIES. Each and every right, power, privilege, and
remedy given herein or otherwise existing in connection therewith shall be
cumulative and shall be in addition to every other right, power, privilege, and
remedy now or hereafter existing by agreement, at law, in equity, or in
admiralty, and each and every such right, power, privilege, and remedy may be
exercised, wholly or in part, from time to time, and as often, and in any order,
as Mortgagee chooses, and the exercise or the beginning of the exercise of any
right, power, privilege, or remedy shall not be construed to be an election of
rights, powers, privileges, or remedies, or a waiver of the right to exercise at
the same time or thereafter any other right, power, privilege, or remedy. No
delay or omission by Mortgagee or the holders of the Loan in the exercise of any
right, power, privilege, or remedy accruing upon any Event of Default or event
which, with the passage of time, the giving of notice, or both, would constitute
an Event of Default, shall impair any such right, power, privilege, or remedy or
be construed to be a waiver of any right to take advantage of any such future
event or of any such past event or Event of Default.
25. APPLICATION OF PROCEEDS. The proceeds of a sale of the Vessel,
insurance pertaining to the Vessel, and all other sums received by Mortgagee
pursuant to or under the provisions of this Mortgage or in any proceedings
hereunder, the application of which has not otherwise been specifically provided
for, shall, except as otherwise provided by law, be applied as follows:
FIRST: To the payment of all reasonable expenses, including the
expenses of any sale, the expenses of any retaking, attorneys' fees, court
costs, and other expenses incurred by Mortgagee in the protection of their
rights, powers, and privileges or the pursuance of their remedies, with interest
thereon at a per annum rate equal to the lesser of the Prime Rate plus five
percent (5%) per annum or the maximum interest rate permitted by applicable law
(the "Default Interest Rate");
SECOND: To the payment of all amounts as required by law or otherwise
at Mortgagee's sole option, to the payment of or to provide adequate indemnity
against liens known to Mortgagee and having or claiming priority over the lien
of this Mortgage;
THIRD: To the payment of the Loan and all other sums evidenced by the
Note or evidenced or secured hereby from time to time and not already paid
pursuant to the foregoing Subsection, whether due or not, owed to Mortgagee
under the Note or hereunder, together with interest thereon at the Default
Interest Rate, but in no event in excess of the maximum rate permitted by
applicable law; and
FOURTH: To the payment of all amounts secured by means of the preferred
mortgage on the Vessel in favor of Mortgagee or any trustee therefor that is or
are junior in priority to this Mortgage,
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allocated amongst such secured obligations as Mortgagee may choose, in its sole
discretion, and, as required by law or otherwise at Mortgagee's sole option to
the payment of or to provide adequate indemnity against liens known to Mortgagee
and having or claiming priority over the lien of such junior preferred
mortgage(s); and
FIFTH: To the payment of any surplus thereafter remaining to Shipowner
or to whomsoever else may be entitled thereto.
26. POSSESSION OF VESSEL. Until some one or more of the Events of
Default shall occur and be continuing, Shipowner may retain actual possession
and use of the Vessel.
ARTICLE III.
SUNDRY PROVISIONS
27. AMENDMENT. No waiver, termination, amendment or other modification
of any provision of this Mortgage or the Note, and no consent to any departure
by Shipowner from any provision thereof, shall in any event be effective unless
the same shall be in writing and signed by Mortgagee, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it is given; provided that no such consent, waiver,
termination, amendment or other modification, unless in writing and signed by
Mortgagee shall affect the rights or duties of Mortgagee under this Mortgage or
the Note. Except as otherwise provided in this Mortgage, no notice or demand to
anyone shall entitle such recipient of such notice or demand to any other or
further notice or demand.
28. SUCCESSORS AND ASSIGNS. All the covenants, promises, stipulations
and agreements of Shipowner in this Mortgage contained shall apply to and bind
Shipowner, its successors and assigns, and all persons claiming by, through or
under them, and shall inure to the benefit of Mortgagee, its successors and
assigns, and all persons claiming by, through or under them. Shipowner
recognizes that Mortgagee may, as appropriate in accordance with applicable
agreements and law, assign, endorse, or otherwise transfer any or all of the
Note or this Mortgage, and any or all of its interests therein and rights,
powers, privileges, and remedies thereunder, whereupon the assignees or other
transferees shall become vested with all of the benefits that are granted or
otherwise available to Mortgagee thereunder or in respect thereof, as
appropriate.
29. REIMBURSEMENT. Shipowner shall reimburse Mortgagee on demand for
all reasonable attorneys' fees the payment of which is otherwise secured hereby,
and for all reasonable expenses and fees which Mortgagee may incur from time to
time in providing insurance coverage, in discharging the Vessel from arrest or
the like, or providing security therefor, salvage, general average and tort
claim expenses, for liens or other encumbrances, for mortgage recording and
duplication expenses and fees, in providing repairs, moving the Vessel and for
such other matters as Shipowner is obligated herein to provide, but fails to
provide. Such obligation of Shipowner to reimburse Mortgagee shall be an
additional indebtedness due from Shipowner and secured by this Mortgage, and
shall accrue interest from the date of the relevant expenditure at a per annum
rate equal to the Default Interest Rate, but in no event in excess of the
maximum rate permitted by applicable law. Mortgagee, though privileged to do so,
will not be under any obligation to Shipowner to make any such expenditures, nor
will the making thereof relieve Shipowner of any default in that respect.
30. NOTICES. Except as otherwise provided in this Mortgage, all
notices, requests, demands, directions, consents and other communications to any
party under or in connection with this Mortgage or any of the insurances
required hereunder shall be in writing (including telephone facsimile and telex
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communications) and shall be sent via certified or registered mail, return
receipt requested, via telephone facsimile or telex transmission, via personal
delivery or via express courier or delivery service, addressed to such party at
such party's address or telephone facsimile'set forth below or at such other
address or telephone facsimile number as shall be designated by such party in a
written notice given to each other party complying as to delivery with the
provisions of this Section:
if to Shipowner, at:
AZURE INVESTMENTS, INC.
c/o New Commodore Cruise Lines Limited
4000 Hollywood Boulevard South Tower, Suite 385-S
Hollywood, Florida 33021
Facsimile: (954) 967-2147
with a copy to:
Kathleen L. Deutsch, P.A.
Broad and Cassel
201 S. Biscayne Boulevard, Suite 3000
Miami, Florida 33131
Facsimile: (305) 373-9443
If to Mortgagee, at:
KeyCorp Leasing, A Division of Key Corporate Capital Inc.
54 State Street
Albany, NY 12207
Attn: Account Manager
Facsimile: (518) 486-8215
with a copy to:
Davis Wright Tremaine
2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101-1662
Attn: Richard J. Schroeder
Facsimile: (206) 628-7699
All such notices, requests, demands, directions, consents and other
communications shall be deemed given (a) when given and receipted for (or upon
the date of attempted delivery when delivery is refused), if sent via certified
or registered mail, return receipt requested, via personal delivery or via
express courier or delivery service or (b) when received, if sent via telephone
facsimile or telex transmission (confirmation of such receipt via confirmed
telephone facsimile or telex transmission being deemed receipt).
31. AGENT. Wherever and whenever herein or in the Loan Agreement any
right, power, or privilege is granted or given to Mortgagee, such right, power
or privilege may be exercised in all cases by Mortgagee, or such agents as it
may, qppoint, and the acts of such agent or agents when taken in their
capacities as agents shall constitute the acts of Mortgagee, respectively.
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32. DISCHARGE OF MORTGAGE. Upon payment in full of the Loan, and all
other amounts owing under the Loan Agreement or otherwise owing under or secured
by this Mortgage from time to time, this Mortgage shall be discharged, and all
insurance policies collaterally assigned to the Mortgagee shall be returned to
Shipowner.
33. SAVINGS CLAUSE. Anything herein which shall be deemed to create in
Mortgagee any interest in or control over the Vessel in contravention of the
laws of Panama, or an agreement to do the same, shall be severable from the
balance hereof. Anything herein to the contrary notwithstanding, all rights,
powers, privileges, and remedies provided for herein shall be limited to what is
permitted by applicable law from time to time. Other than as set forth above,
any provision of this Mortgage which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties waive
any provision of law which renders any express provision hereof or any of the
other Loan Documents prohibited or unenforceable in any respect.
34. MISCELLANEOUS. Nothing contained herein shall impair or shall be
construed as a waiver by Mortgagee of the preferred status of this Mortgage, and
each provision which would otherwise constitute such an impairment or waiver
shall to such extent be of no force or effect. As used herein, "Dollars" and '$'
refers to the legal tender of the United States.
35. EXHIBITS. All exhibits attached hereto are hereby incorporated
herein by reference.
36. GOVERNING LAW. This Mortgage shall be governed by, and construed in
all respects in accordance with, the general maritime law of the United States
and, where silent, the laws of the State of New York, without regard to the
conflicts of law principles of such state, except to the extent that the law of
Panama controls the registration, perfection or priority of this Mortgage.
37. ACTIONS AND PROCEEDINGS. Any legal action or proceeding against
Shipowner with respect to the Loan Documents or this Mortgage may be brought in
such of the courts of competent jurisdiction of the State of New York in the
City of Albany or in the United States District Court for the Northern District
of New York, as Mortgagee or its successors and assigns may elect, and by
execution and delivery of this Mortgage, Shipowner irrevocably submits to the
nonexclusive jurisdiction of such courts, and to appellate courts therefrom,
and, in the case of any such legal action or proceeding brought in the
above-named New York courts, Shipowner hereby irrevocably consents to the
service of process by the mailing of copies thereof by registered mail, postage
prepaid, to Shipowner at its address as provided in Section 30 hereof, or by any
other means permitted by Applicable Law. If it becomes necessary for the purpose
of service of process out of any such courts, Shipowner shall take all such
action as may be required to authorize a special agent to receive, for and on
behalf of it, service of process in any such legal action or proceeding, and
shall take all such action as may be necessary to continue said appointment in
full force and effect so that Shipowner will at all times have an agent for
service of process for the above purposes in New York, New York. To the extent
permitted by Applicable Law, a final, unappealable judgment (a certified copy of
which shall be conclusive evidence of the fact and of the amount of any
indebtedness of Shipowner to Mortgagee) against Shipowner in any such legal
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on an unsatisfied judgment. To the extent that Shipowner
has or hereafter may acquire any immunity from jurisdiction of any of the
above-named courts or from any Panama court or from any legal process therein,
Shipowner hereby irrevocably waives such immunity, and Shipowner hereby
irrevocably waives and agrees not to
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assert, by way of motion, as a defense or otherwise, in any legal action or
proceeding brought hereunder in any of the above-named courts or in any Panama
court: (i) the defense of sovereign immunity; (ii) any claim that it is not
personally subject to the jurisdiction of the above-named courts or any Panama
court by reason of sovereign immunity or otherwise; (iii) that it or any of its
property is immune from the above-described legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
or otherwise); (iv) that such action or proceeding is brought in an inconvenient
forum, that venue for the action or proceeding is improper or that this Mortgage
or any other document evidencing the Loan Agreement may not be enforced in or by
such courts; or (v) any defense that would hinder or delay the levy, execution
or collection of any amount to which any party hereto is entitled pursuant to a
final, unappealable judgment of any court having jurisdiction. Nothing in these
provisions shall limit any right of Mortgagee to bring actions, suits or
proceedings in the courts of any other jurisdiction.
38. JURY TRIAL WAIVER. Shipowner and Mortgagee hereby waive trial by
jury in any action or proceeding to which Shipowner or Mortgagee may be parties
arising out of or in any way pertaining to the Loan Documents or this Mortgage.
This waiver is made knowingly, willingly and voluntarily by Shipowner and
Mortgagee who each acknowledge that no representations have been made by any
individual to induce this waiver of trial by jury or in any way to modify or
nullify its effect.
39. CAPTIONS. The captions of the articles and sections and subsections
of this Mortgage and the Note are included for convenience of reference only,
and shall not constitute a part of this Mortgage or the Loan Documents for any
other purpose.
[The remainder of this page is intentionally blank. Signature page follows.]
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IN WITNESS WHEREOF, Shipowner has executed this Mortgage the day and
year first above written.
SHIPOWNER:
AZURE INVESTMENTS, INC.
By: /s/ FREDERICK A. MAYER
--------------------------------
Name: Frederick A. Mayer
Title: Attorney-in-fact
MORTGAGEE ACKNOWLEDGEMENT: THIS FIRST PREFERRED MARINE MORTGAGE IS HEREBY
ACCPETED BY:
MORTGAGEE:
KEYCORP LEASING, A DIVISION OF
KEY CORPORATE CAPITAL INC.
By: /s/ KELLY REALE
------------------------------
Name: Kelly Reale
Title: Assistant Team Leader
Counterpart No 1 of 4 serially numbered manually executed counterparts. To the
extent that this document constitutes chattel paper under the Uniform Commercial
Code, no security interest may be created through the transfer and possession of
any counterpart other than Counterpart No. 1.
17
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 4th day of December, 1998, before me, a Notary Public in and
for the State of New York, personally appeared Frederick A. Mayer, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person who executed this instrument, on oath stated that s/he was authorized to
execute the instrument, and acknowledged it as the Attorney in-fact of AZURE
INVESTMENTS, INC., a Panama corporation, to be the free and voluntary act and
deed of said corporation for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ LESLIE MAJER
------------------------------------------------------
Leslie Majer
NOTARY PUBLIC in and for the State of New
York, residing at_____________________________________
My appointment expires October 31, 1999
Print Name Leslie Majer
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 4th day of December, 1998, before me, a Notary Public in and
for the State of New York, personally appeared Kelly Reale, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person who
executed this instrument, on oath stated that s/he was authorized to execute the
instrument, and acknowledged it as the Assistant Team Leader of KEYCORP LEASING,
A DIVISION OF KEY CORPORATE CAPITAL INC., to be the free and voluntary act and
deed of said corporation for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ LESLIE MAJER
------------------------------------------------------
Leslie Majer
NOTARY PUBLIC in and for the State of New
York, residing at_____________________________________
My appointment expires October 31, 1999
Print Name Leslie Majer
18
<PAGE>
EXHIBIT "A"
(FORM OF NOTES)
19
<PAGE>
PROMISSORY NOTE
- --------------------------------------------------------------------------------
$10,000,000 Funding Date: December 4, 1998
FOR VALUE RECEIVED, AZURE INVESTMENTS, INC., a Panama corporation
("Maker"), promises to pay to the order of KEYCORP LEASING, A DIVISION OF KEY
CORPORATE CAPITAL INC. ("Holder"), the sum of Ten Million U.S. Dollars
($10,000,000 U.S.) in lawful money of the United States of America (the
"Principal"), with interest thereon as hereafter provided ("Interest"), to be
paid in the manner set forth herein. This Promissory Note ("Note") is executed
pursuant to that certain Loan and Security Agreement (the "Security Agreement")
and that certain First Preferred Marine Mortgage, each dated as of December 4,
1998, between Maker and Holder.
1. INTEREST RATE; PLACE OF PAYMENT. Interest on the balance of the Principal
outstanding on this Note shall accrue from the Funding Date of this Note and
shall be due and payable at a rate of the Prime Rate plus 80 basis points per
annum (the "Interest Rate"), which rate shall be immediately and correspondingly
adjusted (pursuant to paragraph 2(b) hereof) with each change in the Actual
Index (as hereinafter defined). Interest shall be calculated on the basis of a
360-day year consisting of twelve 30-day months. Payment of the Principal and
Interest hereunder shall be made to Holder at P.O. Box 1865, Albany, New York
12201-1865, or at such other place as Holder may designate from time to time in
writing. Holder reserves the right to require payment on this Note to be made by
wired federal funds or other immediately available funds.
2. REPAYMENT TERMS. (a) The Principal and Interest shall be due and payable in
ninety-six (96) consecutive monthly installments payable in arrears. Principal
and Interest shall be as set forth in the amortization schedule attached hereto
as SCHEDULE 1, which payments shall be adjusted pursuant to paragraph 2(b). Each
monthly payment shall also include accrued Interest on the outstanding Principal
balance. Monthly payments of Principal and Interest shall commence and be due
and payable on the date which is the first business day of the month after the
Funding Date and on the same day of each month thereafter (each, a "Note Payment
Date"). In addition, Maker will pay a late payment charge of five percent (5%)
of any payment due hereunder that is not paid within five (5) business days
after the date due hereunder.
(b) Maker and Holder agree that each Note payment hereunder shall be
increased or decreased (but not below zero), as the case may be, by the Rate
Differential (as hereinafter defined) as follows: if, as of any Note Payment
Date, (i) the Rate Differential is greater than zero, the amount due on such
Note Payment Date shall be increased by such Rate Differential, and (ii) the
Rate Differential is less than zero, the amount of the Note Payment due on such
Note Payment Date shall be decreased by such Rate Differential.
(c) As used herein, the following terms shall have the respective
meanings indicated below:
(1) "Assumed Index" shall mean eight and one half percent
(8.5%).
(2) "Actual Index" shall mean, as of the date of
determination, the "prime rate" announced in THE WALL STREET JOURNAL,
published on such day, or if THE WALL STREET JOURNAL is not published
on such day, then the "prime rate" announced in the most recently
published edition of THE WALL STREET JOURNAL. If the Actual Index is no
longer available, Holder will choose
1
<PAGE>
a new index which is based upon comparable information and will give
Maker notice of such new "Actual Index."
(3) "Daily Equivalent" shall mean, as of the date of
determination, the product of the following formula:
================================================================================
DAILY EQUIVALENT = ACTUAL INDEX - ASSUMED INDEX X NET INVESTMENT BALANCE
----------------------------
360
================================================================================
(4) "Net Investment Balance" shall mean, as of the date of
determination, the outstanding balance (initially calculated using the
Assumed Index plus 80 basis points) reflected on Holder's lease
accounting system (which assumes a 360-day year consisting of twelve
30-day months), for the Note Payment Date immediately preceding such
day or, if such day is a Note Payment Date, for such Note Payment Date.
(5) "Rate Differential" shall mean, with respect to any Note
Payment Date, the sum of all Daily Equivalents (calculated on the basis
of a 360-day year consisting of twelve 30-day months) for the 30-day
month to which such Note Payment Date relates.
3. SECURITY. Payment of the Principal and Interest hereunder, and the
performance and observance by Maker of all agreements, covenants and provisions
contained herein, are secured by a first priority security interest in the
Collateral.
4. PREPAYMENT. Maker may not prepay, in whole or in part, the Principal
outstanding hereunder; PROVIDED, HOWEVER that Maker may prepay, in whole but not
in part, the Principal outstanding hereunder by paying to Holder such
outstanding Principal, together with all accrued and unpaid interest thereon,
plus a prepayment premium ("Prepayment Premium") equal to five percent (5%) of
the amount prepaid if such prepayment shall occur during months one through
twelve (1-12); three percent (3%) if the prepayment occurs during months
thirteen through twenty-four (13-24); two percent (2%) if the prepayment occurs
during months twenty-five through thirty-six (25-36); one percent (1%) if the
prepayment occurs during months thirty-seven through forty-eight (37-48). There
shall be no Prepayment Premium for prepayment after the forty-eighth (48th)
month.
5. TRANSFER OR ASSIGNMENT. Holder may at any time assign or otherwise transfer
or negotiate this Note in whole or in part, without any notice to Maker. The
rights and obligations of Maker may not be assigned or delegated.
6. APPLICATION OF PAYMENTS. Prior to an Event of Default, each payment received
on this Note shall be applied first to all costs of collection, then to unpaid
late payment charges (if any) and Prepayment Premium (if any) hereunder, then to
Interest as of the payment due date and the balance, if any, to the outstanding
Principal as of the date received. Upon the occurrence, and during the
continuance, of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral when received by Holder in cash
or its equivalent, will be applied first to costs of collection and, thereafter,
in reduction of the Secured Obligations in such order and manner as Holder may
direct in its sole discretion, and Maker irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
Holder shall have the continuing and exclusive right to apply any and all such
payments and proceeds in the Holder's sole discretion, notwithstanding any entry
to the contrary upon any of its books and records.
2
<PAGE>
7. WITHHOLDING TAXES. Each payment to be made by Maker under this Note shall be
made free and clear of, and without deductions or withholding of, or on account
of, any present or future taxes, duties, assessments or charges of whatsoever
nature together with any liabilities (including penalties, interest and
expenses) in respect thereof imposed or levied on or on behalf of the government
of the Republic of Panama or any political subdivision thereof or any authority
or agency thereof having the power to tax ("Panama Withholding Taxes"). If the
payment of Panama Withholding Taxes is required, Maker shall either: (i) pay any
such additional amount to Holder as may be necessary to ensure that Holder
receive and retain a net sum after such deduction, withholding or payment of
Panama Withholding Taxes, equal to the sum that Holder would have received and
retained had no such deduction or withholding of Panama Withholding Taxes been
made or required to be made and promptly deliver to Holder the forms prescribed
by the relevant authority of such Panama Withholding Taxes; or (ii) pay the full
amount of Panama Withholding Taxes due to the relevant authority within the time
provided thereunder, or within ten (10) days of demand therefore by Holder, in
accordance with Applicable Law, without recourse against Holder, and deliver to
Holder proof of payment of such Panama Withholding Taxes within twenty (20) days
of demand therefor by Holder. Maker hereby agrees to indemnify and hold harmless
Holder on an after-tax basis, for any Panama Withholding Taxes that become
payable and/or are paid by Holder in respect of any payment made by Maker under
this Note. Holder shall promptly notify Maker of any Panama Withholding Taxes in
respect of which it has paid or received an assessment or reassessment from any
Panama taxing authority and for which Maker is required to indemnify Holder and
of the amount payable to Holder by Maker, and Maker shall indemnify Holder
within ten (10) days of the receipt of such notice. Holder shall reasonably
determine the amount payable to it.
8. EVENTS OF DEFAULT. (a) Maker shall be in default if any of the following
happens (each an "Event of Default"): (1) Maker fails to make any installment of
the Principal or Interest, or any other payment due and owing, under this Note
within ten (10) business days after the same becomes due and payable; or (2)
Maker fails to perform any other obligation required to be performed by Maker
under this Note, the Security Agreement or any of the other Loan Documents for
thirty (30) days after written notice from Holder of such failure; or (3) any
representation, warranty or other statement by Maker in this Note is false or
misleading in any material respect; (4) an Event of Default has occurred and is
continuing under the Security Agreement; or, (5) an Event of Default has
occurred and is continuing under the First Preferred Marine Mortgage.
(b) Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default: (i) Holder may declare the entire outstanding
balance of the Principal, together with all accrued and unpaid Interest thereon,
immediately due and payable without notice or demand, which amounts shall,
together with all other sums due hereunder, accrue interest from such
acceleration until the date of actual payment at the Default Rate (provided,
however, that should there occur an Event of Default, and if a voluntary
petition or involuntary petition (which is not dismissed within 60 days after
filing) under the United States Bankruptcy Code is filed by or against Maker
while such default remains uncured, the entire outstanding balance of the
Principal automatically shall be accelerated and due and payable with interest
thereon at the Default Rate), and Holder may exercise any and all of its
remedies hereunder, under the other Loan Documents and under Applicable Law. The
remedies of Holder provided herein, in the Security Agreement and under
Applicable Law shall be cumulative and concurrent and may be pursued singly,
successively or concurrently at the sole discretion of Holder and may be
exercised as often as occasion therefor shall occur. The failure to exercise, or
any delay in the exercise of, any right or remedy shall in no event be construed
as a waiver, release or exhaustion of any such remedies.
3
<PAGE>
9. COLLECTION COSTS. In addition to the Principal, Interest, Prepayment Premium
(if any), and late payment charges (if any), Maker shall pay Holder on demand,
and Holder shall be entitled to collect all costs and expenses of collection,
including, without limitation, reasonable attorneys' fees, incurred in
connection with enforcement of its rights and remedies hereunder and under the
other Loan Documents, the protection or realization of the Collateral or in
connection with Holder's collection efforts, or in connection with any
bankruptcy or other judicial proceeding, whether or not suit on this Note or any
foreclosure proceeding is filed. All such costs and expenses shall be payable on
demand and, until paid, shall be Secured Obligations secured by the security
interest granted under the Security Agreement and all other collateral, if any,
held by Holder as security for Maker's obligations under this Note.
10. GOVERNING LAW; BINDING AGREEMENT. The provisions of this Note shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns. THIS NOTE IS BEING EXECUTED AND DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT
OF LAWS PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
11. MORE THAN ONE SIGNER. If more than one person or entity signs this Note as a
Maker, the obligations contained herein shall be deemed joint and several and
all references to "Maker" shall apply both jointly and severally.
12. GENERAL. Maker represents and warrants that this Note evidences a loan for
business or commercial purposes. Prior to signing this Note, Maker read and
understood the provisions hereof, and agrees to all terms and conditions
contained herein.
13. WAIVER. MAKER AND ALL ENDORSERS, SURETIES, AND GUARANTORS HEREOF HEREBY
JOINTLY AND SEVERALLY WAIVE PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF
NONPAYMENT OR DISHONOR, NOTICE OF INTENTION TO ACCELERATE THE MATURITY, NOTICE
OF PROTEST AND PROTEST OF THIS NOTE. HOLDER AND MAKER HEREBY EACH WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF OR RELATED TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH HOLDER OR MAKER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY, OF THIS NOTE OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY
HOLDER AND THE MAKER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE
BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY
OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE AND THE OTHER LOAN
DOCUMENTS.
4
<PAGE>
14. USURY; PARTIAL INVALIDITY. (a) At no time shall the Interest Rate (or the
Default Rate or other amounts paid or collected hereunder) exceed the highest
rate allowed by applicable law for this type of loan. Should Holder ever collect
interest at a rate that exceeds such applicable legal limit, such excess will be
credited to the Principal.
(b) Whenever possible, each provision of this Note shall be interpreted
in such manner as to be effective and valid under Applicable Law, but if any
provision of this Note shall be prohibited by or invalid under the laws of any
applicable jurisdiction, such provision, as to such jurisdiction, shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note in any other jurisdiction.
15. ACTIONS AND PROCEEDINGS. Any legal action or proceeding against Maker with
respect to this Note may be brought in such of the courts of competent
jurisdiction of the State of New York in the City of Albany or in the United
States District Court for the Northern District of New York, as Holder or its
successors and assigns may elect, and by execution and delivery of this Note,
Maker irrevocably submits to the nonexclusive jurisdiction of such courts, and
to appellate courts therefrom, and, in the case of any such legal action or
proceeding brought in the above-named New York courts, Maker hereby irrevocably
consents to the services of process by the mailing of copies thereof by
registered mail, postage prepaid, to Maker at its address as provided in
Paragraph 16 hereof, or by any other means permitted by Applicable Law. If it
becomes necessary for the purpose of service of process out of any such courts,
Maker shall take all such action as may be required to authorize a special agent
to receive, for and on behalf of it, service of process in any such legal action
or proceeding, and shall take all such action as may be necessary to continue
said appointment in full force and effect so that Maker will at all times have
an agent for service of process for the above purposes in New York, New York. To
the extent permitted by Applicable Law, a final, unappealable judgment (a
certified copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness of Maker to Holder) against Maker in any such legal
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on an unsatisfied judgment. To the extent that Maker has
or hereafter may acquire any immunity from jurisdiction of any of the
above-named courts or from any Panama court or from any legal process therein,
Maker hereby irrevocably waives such immunity, and Maker hereby irrevocably
waives and agrees not to assert, by way of motion, as a defense or otherwise, in
any legal action or proceeding brought hereunder in any of the above-named
courts or in any Panama court: (i) the defense of sovereign immunity; (ii) any
claim that it is not personally subject to the jurisdiction of the above-named
courts or any Panama court by reason of sovereign immunity or otherwise; (iii)
that it or any of its property is immune from the above-described legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution, or otherwise), (iv) that such action or proceeding is brought
in an inconvenient forum, that venue for the action or proceeding is improper or
that this Note or any other document evidencing the Loan may not be enforced in
or by such courts; or (v) any defense that would hinder or delay the levy,
execution or collection of any amount to which any party hereto is entitled
pursuant to a final, unappealable judgment of any court having jurisdiction.
Nothing in these provisions shall limit any right of Holder to bring actions,
suits or proceedings in the courts of any other jurisdiction.
16. NOTICES. All notices and other communications under this Note shall be in
writing and shall be addressed: (i) if to Maker, c/o Commodore Holdings Limited,
4000 Hollywood Boulevard, Suite 385-S, South Tower, Hollywood, Florida 33021;
and (ii) if to Holder, KeyCorp Leasing, a Division of Key Corporate Capital
Inc., 54 State Street, Albany, New York 12207, Attention: Account Manager, or
such other address as either party hereto shall communicate to the other party
at its address specified above. All such notices and other communications shall
be deemed to have been duly given if delivered by hand,
5
<PAGE>
overnight courier or if sent by certified mail, return receipt requested, to the
party to whom such notice is intended to be given, and shall be effective upon
receipt.
17. FUNDING DATE. The Funding Date for this Note shall be the date on which
Holder disburses funds hereunder. TO THE EXTENT THE FUNDING DATE IS LEFT BLANK
ABOVE, OR DOES NOT REFLECT THE ACTUAL DATE THAT HOLDER DISBURSES FUNDS
HEREUNDER, MAKER HEREBY AUTHORIZES HOLDER TO WRITE IN THE CORRECT DATE AT THE
TIME OF DISBURSEMENT.
18. DEFINED TERMS. Unless otherwise defined herein, all capitalized terms shall
have the meanings assigned to them in the Security Agreement.
[The remainder of this page is intentionally blank. Signature page follows.]
6
<PAGE>
IN WITNESS WHEREOF, Maker, intending to be legally bound, has caused
this Note to be duly executed on the day and year first above written.
MAKER:
AZURE INVESTMENTS, INC.
By:
---------------------------------------------
Name: Frederick A. Mayer
Title: Attorney-in-fact
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 4th day of December, 1998, before me, a Notary Public in and
for the State of New York, personally appeared Frederick A. Mayer, personally
known to me (or provided to me on the basis of satisfactory evidence) to be the
person who executed this instrument, on oath stated that s/he was authorized to
execute the instrument, and acknowledged it as the Attorney-in-fact of AZURE
INVESTMENTS, INC., a Panama corporation, to be the free and voluntary act and
deed of said corporation for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
-----------------------------------------------
NOTARY PUBLIC in and for the State of New York,
My appointment expires October 31, 1999
Print Name Leslie Majer
7
<PAGE>
SCHEDULE 1
Prepare Dec-02-1998 15:22 by Ron Bruzdinski
Parameter filename azu01
Parameter path c:\ivory\prms\
Comment Azure
Average life 6,528 years
Average rate 8.550000000
<TABLE>
<CAPTION>
STARTING DEBT ENDING
DATE BALANCE TAKEDOWNS SERVICE INTEREST PRINCIPAL BALANCE
<S> <C> <C> <C> <C> <C> <C>
Dec-04-98 0.00 10,000,000.00 0.00 0.00 0.00 10,000,000.00
------------- ------------ ---------- ----------
10,000,000.00 0.00 0.00 0.00 10,000,000.00
Jan-04-99 10,000,000.00 0.00 112,916.67 71,250.00 41,666.67 9,958,333.33
Feb-04-99 9,958,333.33 0.00 112,619.79 70,953.12 41,666.67 9,916,666.66
Mar-04-99 9,916,666.66 0.00 112,322.92 70,656.25 41,666.67 9,874,999.99
Apr-04-99 9,874,999.99 0.00 112,026.04 70,359.37 41,666.67 9,833,333.32
May-04-99 9,833,333.32 0.00 111,729.17 70,062.50 41,666.67 9,791,666.65
Jun-04-99 9,791,666.65 0.00 111,432.29 69,765.62 41,666.67 9,749,999.98
Jul-04-99 9,749,999.98 0.00 111,135.42 69,468.75 41,666.67 9,708,333.31
Aug-04-99 9,708,333.31 0.00 110,838.54 69,171.87 41,666.67 9,666,666.64
Sep-04-99 9,666,666.64 0.00 110,541.67 68,875.00 41,666.67 9,624,999.97
Oct-04-99 9,624,999.97 0.00 110,244.79 68,578.12 41,666.67 9,583,333.30
Nov-04-99 9,583,333.30 0.00 109,947.92 68,281.25 41,666.67 9,541,666.63
Dec-04-99 9,541,666.63 0.00 109,651.04 67,984.37 41,666.67 9,499,999.96
------------- ------------ ---------- ----------
0.00 1,335,406.29 835,406.25 500,000.04
Jan-04-00 9,499,999.96 0.00 98,541.61 67,687.50 30,854.11 9,469,145.85
Feb-04-00 9,469,145.85 0.00 98,541.61 67,467.66 31,073.95 9,438,071.90
Mar-04-00 9,438,071.90 0.00 98,541.61 67,246.26 31,295.35 9,406,776.55
Apr-04-00 9,406,776.55 0.00 98,541.61 67,023.28 31,518.33 9,375,258.22
May-04-00 9,375,258.22 0.00 98,541.61 66,798.71 31,742.90 9,343,515.33
Jun-04-00 9,343,515.33 0.00 98,541.61 66,572.55 31,969.06 9,311,546.26
Jul-04-00 9,311,546.26 0.00 98,541.61 66,344.77 32,196.84 9,279,349.42
Aug-04-00 9,279,349.42 0.00 98,541.61 66,115.36 32,426.25 9,246,923.17
Sep-04-00 9,246,923.17 0.00 98,541.61 65,884.33 32,657.28 9,214,265.89
Oct-04-00 9,214,265.89 0.00 98,541.61 65,651.64 32,889.97 9,181,375.92
Nov-04-00 9,181,375.92 0.00 98,541.61 65,417.30 33,124.31 9,148,251.61
Dec-04-00 9,148,251.61 0.00 98,541.61 65,181.29 33,360.32 9,114,891.29
------------- ------------ ---------- ----------
1,182,499.34 797,390.65 385,108.67
Jan-04-01 9,114,891.29 0.00 98,541.61 64,943.60 33,598.01 9,081,293.28
Feb-04-01 9,081,293.28 0.00 98,541.61 64,704.21 33,837.40 9,047,455.89
Mar-04-01 9,047,455.89 0.00 98,541.61 64,463.12 34,078.49 9,013,377.40
Apr-04-01 9,013,377.40 0.00 98,541.61 64,220.31 34,321.30 8,979,056.10
May-04-01 8,979,056.10 0.00 98,541.61 63,975.77 34,565.84 8,944,490.26
Jun-04-01 8,944,490.26 0.00 98,541.61 63,729.49 34,812.12 8,909,678.15
Jul-04-01 8,909,678.15 0.00 98,541.61 63,481.46 35,060.15 8,874,617.99
Aug-04-01 8,874,617.99 0.00 98,541.61 63,231.65 35,309.96 8,839,308.03
Sep-04-01 8,839,308.03 0.00 98,541.61 62,980.07 35,561.54 8,803,746.49
Oct-04-01 8,803,746.49 0.00 98,541.61 62,726.69 35,814.92 8,767,931.57
Nov-04-01 8,767,931.57 0.00 98,541.61 62,471.51 36,070.10 8,731,861.48
Dec-04-01 8,731,861.48 0.00 98,541.61 62,214.51 36,327.10 8,695,534.38
------------- ------------ ---------- ----------
0.00 1,182,499.34 763,142.42 419,356.92
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
STARTING DEBT ENDING
DATE BALANCE TAKEDOWNS SERVICE INTEREST PRINCIPAL BALANCE
<S> <C> <C> <C> <C> <C> <C>
Jan-04-02 8,699,534.38 0.00 98,541.61 61,555.68 36,585.93 8,658,948.45
Feb-04-02 8,658,948.45 0.00 98,541.61 61,695.01 36,845.60 8,622,101.84
Mar-04-02 8,622,101.84 0.00 98,541.61 61,432.48 37,109.14 8,584,992.71
Apr-04-02 8,584,992.71 0.00 98,541.61 61,168.07 37,373.54 8,547,619.17
May-04-02 8,547,619.17 0.00 98,541.61 60,901.79 37,639.82 8,509,979.35
Jun-04-02 8,509,979.35 0.00 98,541.61 60,633.60 37,908.01 8,472,071.34
Jul-04-02 8,472,071.34 0.00 98,541.61 60,363.51 38,178.10 8,433,893.23
Aug-04-02 8,433,893.23 0.00 98,541.61 60,091.49 38,450.12 8,395,443.11
Sep-04-02 8,395,443.11 0.00 98,541.61 59,817.53 38,724.08 8,356,719.03
Oct-04-02 8,356,719.03 0.00 98,541.61 59,541.62 38,999.99 8,317,719.04
Nov-04-02 8,317,719.04 0.00 98,541.61 59,263.75 39,277.86 8,278,441.18
Dec-04-02 8,278,441.18 0.00 98,541.61 58,983.89 39,557.72 8,238,883.46
---- ------------ ---------- ----------
0.00 1,182,499.34 725,848.42 456,650.91
Jan-04-03 8,238,883.46 0.00 98,541.61 58,702.04 39,839.57 8,199,043.90
Feb-04-03 8,199,043.90 0.00 98,541.61 58,418.19 40,123.42 8,158,920.47
Mar-04-03 8,158,920.47 0.00 98,541.61 58,132.31 40,409.30 8,118,511.17
Apr-04-03 8,118,511.17 0.00 98,541.61 57,844.39 40,697.22 8,077,813.95
May-04-03 8,077,813.95 0.00 98,541.61 57,554.42 40,987.19 8,036,826.76
Jun-04-03 8,036,826.76 0.00 98,541.61 57,262.39 41,279.22 7,995,547.54
Jul-04-03 7,995,547.54 0.00 98,541.61 56,968.28 41,573.34 7,953,974.21
Aug-04-03 7,953,974.21 0.00 98,541.61 56,672.07 41,869.55 7,912,104.66
Sep-04-03 7,912,104.66 0.00 98,541.61 56,373.75 42,167.87 7,869,936.80
Oct-04-03 7,869,936.80 0.00 98,541.61 56,073.30 42,468.31 7,827,468.49
Nov-04-03 7,827,468.49 0.00 98,541.61 55,770.71 42,770.90 7,784,697.59
Dec-04-03 7,784,697.59 0.00 98,541.61 55,465.97 43,075.64 7,741,621.95
---- ------------ ---------- ----------
0.00 1,182,499.34 685,237.82 497,261.52
Jan-04-04 7,741,621.95 0.00 98,541.61 55,159.06 43,382.55 7,698,239.39
Feb-04-04 7,698,239.39 0.00 98,541.61 54,849.96 43,691.66 7,654,547.74
Mar-04-04 7,654,547.74 0.00 98,541.61 54,538.65 44,002.96 7,610,544.78
Apr-04-04 7,610,544.78 0.00 98,541.61 54,225.13 44,316.48 7,566,228.30
May-04-04 7,566,228.30 0.00 98,541.61 53,909.38 44,632.23 7,521,596.06
Jun-04-04 7,521,596.06 0.00 98,541.61 53,591.37 44,950.24 7,476,645.82
Jul-04-04 7,476,645.82 0.00 98,541.61 53,271.10 45,270.51 7,431,375.31
Aug-04-04 7,431,375.31 0.00 98,541.61 52,948.55 45,593.06 7,385,782.25
Sep-04-04 7,385,782.25 0.00 98,541.61 52,623.70 45,917.91 7,339,864.34
Oct-04-04 7,339,864.34 0.00 98,541.61 52,296.53 46,245.08 7,293,619.26
Nov-04-04 7,293,619.26 0.00 98,541.61 51,967.04 46,574.57 7,247,044.69
Dec-04-04 7,247,044.69 0.00 98,541.61 51,635.19 46,906.42 7,200,138.27
---- ------------ ---------- ----------
0.00 1,182,499.34 641,015.66 541,483.68
Jan-04-05 7,200,138.27 0.00 98,541.61 51,300.98 47,240.63 7,152,897.64
Feb-04-05 7,152,897.64 0.00 98,541.61 50,964.40 47,577.22 7,105,320.43
Mar-04-05 7,105,320.43 0.00 98,541.61 50,625.41 47,916.20 7,057,404.22
Apr-04-05 7,057,404.22 0.00 98,541.61 50,284.01 48,257.61 7,009,146.62
May-04-05 7,009,146.62 0.00 98,541.61 49,940.17 48,601.44 6,960,545.18
Jun-04-05 6,960,545.18 0.00 98,541.61 49,593.88 48,947.73 6,911,597.45
Jul-04-05 6,911,597.45 0.00 98,541.61 49,245.13 49,296.48 6,862,300.97
Aug-04-05 6,862,300.97 0.00 98,541.61 48,893.89 49,647.72 6,812,653.25
Sep-04-05 6,812,653.25 0.00 98,541.61 48,540.15 50,001.46 6,762,651.79
Oct-04-05 6,762,651.79 0.00 98,541.61 48,183.89 50,357.72 6,712,294.08
Nov-04-05 6,712,294.08 0.00 98,541.61 47,825.10 50,716.52 6,661,577.56
Dec-04-05 6,661,577.56 0.00 98,541.61 47,463.74 51,077.87 6,610,499.69
---- ------------ ---------- ----------
0.00 1,182,499.34 592,860.76 589,638.58
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
STARTING DEBT ENDING
DATE BALANCE TAKEDOWNS SERVICE INTEREST PRINCIPAL BALANCE
<S> <C> <C> <C> <C> <C> <C>
Jan-04-06 6,610,499.69 0.00 98,541.61 47,099.81 51,441.80 6,559,057.89
Feb-04-06 6,559,057.89 0.00 98,541.61 46,733.29 51,808.32 6,507,249.57
Mar-04-06 6,507,249.57 0.00 98,541.61 46,364.15 52,177.46 6,455,072.11
Apr-04-06 6,455,072.11 0.00 98,541.61 45,992.39 52,549.22 6,402,522.88
May-04-06 6,402,522.88 0.00 98,541.61 45,617.98 52,923.64 6,349,599.25
Jun-04-06 6,349,599.25 0.00 98,541.61 45,240.89 53,300.72 6,296,298.53
Jul-04-06 6,296,298.53 0.00 98,541.61 44,861.13 53,680.48 6,242,618.05
Aug-04-06 6,242,618.05 0.00 98,541.61 44,478.65 54,062.96 6,188,555.09
Sep-04-06 6,188,555.09 0.00 98,541.61 44,093.46 54,448.16 6,134,106.93
Oct-04-06 6,134,106.93 0.00 98,541.61 43,705.51 54,836.10 6,079,270.83
Nov-04-06 6,079,270.83 0.00 98,541.61 43,314.80 55,226.81 6,024,044.03
Dec-04-06 6,024,044.03 0.00 6,066,965.34 42,921.31 6,024,044.03 0.00
------------- ------------- ------------ -------------
0.00 7,150,923.07 540,423.38 6,610,499.69
TOTAL 10,000,000.00 15,581,325.37 5,581,325.37 10,000,000.00
============= ============= ============ =============
</TABLE>
10
<PAGE>
EXHIBIT "B"
(INSURANCE COVERAGE)
The coverage and conditions included within the following insurance
policies are incorporated herein by reference:
SECTION 1
MARINE HULL AND MACHINERY INSURANCE
PROVIDED BY: Houlder Insurance Brokers
DATE OF POLICY: July 15, 1998
COVERAGE AMOUNT: $13,400,000.00
COVERAGE AMOUNT: M-98-CHT-00492-00104
COVER NOTE NO.:
SECTION 2
MARINE PROTECTION AND INDEMNITY INSURANCE
PROVIDED BY: Houlder Insurance Brokers
DATE OF POLICY: Not Applicable
COVERAGE AMOUNT:
COVER NO.: M-98-CHT-00225-0
SECTION 3
WAR RISK HULL AND MACHINERY AND WAR RISK PROTECTION AND INDEMNITY
INSURANCE
PROVIDED BY: Houlder Insurance Brokers
DATE OF POLICY: July 15, 1998
COVERAGE AMOUNT: Hull and Machinery: $13,400,000.00
Hull Interest and/or Increased Value, etc:
$6,600,000.00
COVER NOTE NO.: M-98-CHT-00488-00104
SECTION 4
MORTGAGEE'S INTEREST INSURANCE
PROVIDED BY: Houlder Insurance Company
DATE OF POLICY: July 16, 1998
COVERAGE AMOUNT: $16,000,000.00
COVER NOTE NO.: M-98-CHT-00503-00
SECTION 5
MARINE INCREASED VALUE INSURANCE
PROVIDED BY: Houlder Insurance Company
DATE OF POLICY: July 15, 1998
COVERAGE AMOUNT: $6,000,000.00
COVER NOTE NO.: M-98-CHT-0049100-104
EXHIBIT 10.aa
ASSIGNMENT OF
FIRST PRIORITY MORTGAGE OVER M/V ENCHANTED ISLE
THIS ASSIGNMENT OF FIRST PRIORITY MORTGAGE OVER M/V ENCHANTED ISLE is
executed this 4th day of December, 1998 by MERITA BANK PLC, a Finland
corporation ("Merita"), in favor of EFFJOHN INTERNATIONAL CRUISE HOLDINGS, INC.,
a Cayman Islands corporation ("EffJohn").
RECITALS
WHEREAS, by a loan agreement entered into on October 21, 1991, as
amended in March 1993, March 1994 and July 1995 (the "EffJohn Loan Agreement"),
Merita made available to EffJohn thirty-two million dollars (US$32,000,000);
WHEREAS, by a loan agreement dated July 14, 1995 (the "Almira Loan
Agreement") by and between EffJohn, Azure Investments, Inc. ("Azure"), Almira
Enterprises, Inc. ("Almira"), New Commodore Cruises Lines Limited and Commodore
Holdings Limited, EffJohn made available to Azure and Almira twenty-four million
five hundred thousand dollars (US$24,500,000);
WHEREAS, on July 14, 1995, as security for its obligations under the
Almira Loan Agreement, Almira granted EffJohn a first priority Panamanian
mortgage in respect of the M/V Enchanted Isle (the "Mortgage");
WHEREAS, on July 14, 1995, as security for its obligations under the
EffJohn Loan Agreement, EffJohn assigned its interest in the Mortgage to Merita;
WHEREAS, EffJohn has entered into an agreement with Merita to remit
payment to Merita for the outstanding indebtedness due under the EffJohn Loan
Agreement; and
WHEREAS, EffJohn and Merita have agreed to re-assign Merita's interest
in the Mortgage to EffJohn by executing this Assignment of the First Priority
Mortgage.
NOW, THEREFORE, in consideration of EffJohn paying the unpaid balance
due under the EffJohn Loan Agreement to Merita, receipt of which is hereby
acknowledged, EffJohn and Merita agree as follows:
Merita assigns all of its right, title and interest in the Mortgage to
EffJohn. Merita agrees to execute such additional documents as may be required
by EffJohn to record such assignment in the Panamanian shipping records and
Merita and EffJohn hereby appoint the law firm of Galindo, Arias & Lopez to
attend to the protocolization and registration of this Assignment of the First
Priority Mortgage.
<PAGE>
IN WITNESS WHEREOF, EffJohn and Merita have executed this Assignment of
First Mortgage over M/V Enchanted Isle as of the date first above written.
THIS ASSIGNMENT may be executed in any number of counterparts, all of
which shall constitute one and the same instrument.
EFFJOHN INTERNATIONAL CRUISE
HOLDINGS, INC.
By:/S/ THOMAS FORSS
-------------------------------------------
Name: THOMAS FORSS
Title: DIRECTOR
MERITA BANK, PLC
By: /S/ KIRSTEN KAARE-JENSEN
-------------------------------------------
Name: KIRSTEN KAARE-JENSEN
Title: DEPUTY HEAD OF SHIP FINANCING
By: /S/ HENNY O'BRIEN
-------------------------------------------
Name: HENNY O'BRIEN
Title: HEAD OF SHIP FINANCING
<PAGE>
NOTARIZATION
I, John Saville, Notary Public, duly authorized, admitted and sworn,
and practicing in London, DO HEREBY CERTIFY that Kirsten Kaare-Jensen, did sign
the foregoing Assignment of First Priority Mortgage and the signature of said
Kirsten Kaare-Jensen, appearing thereon is the true and authentic signature of
said Kirsten Kaare-Jensen, AND I DO FURTHER CERTIFY that satisfactory and
sufficient proof has been produced to me that said Kirsten Kaare-Jensen, is the
Deputy Head of Ship Finance of MERITA BANK, PLC and duly authorized and
empowered by the said corporation to sign and execute the foregoing Assignment
of First Priority Mortgage for and on behalf of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my seal
of office this 4th day of December, 1998.
/S/ JOHN SAVILLE
---------------------------------------
Notary Public
<PAGE>
NOTARIZATION
I, John Saville, Notary Public, duly authorized, admitted and sworn,
and practicing in London, DO HEREBY CERTIFY that Henny O'Brien, did sign the
foregoing Assignment of First Priority Mortgage and the signature of said Henny
O'Brien, appearing thereon is the true and authentic signature of said Henny
O'Brien, AND I DO FURTHER CERTIFY that satisfactory and sufficient proof has
been produced to me that said Kirsten Kaare-Jensen, is the Head of Ship Finance
of MERITA BANK, PLC and duly authorized and empowered by the said corporation to
sign and execute the foregoing Assignment of First Priority Mortgage for and on
behalf of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my seal
of office this 4th day of December, 1998.
/S/ JOHN SAVILLE
---------------------------------------
Notary Public
<PAGE>
NOTARIZATION
I, Jukka Heikkila, Notary Public, duly authorized, admitted and sworn,
and practicing in Helsinki, Finland, DO HEREBY CERTIFY that Thomas Forss, did
sign the foregoing Assignment of First Priority Mortgage and the signature of
said Thomas Forss, appearing thereon is the true and authentic signature of said
Thomas Forss, AND I DO FURTHER CERTIFY that satisfactory and sufficient proof
has been produced to me that said Thomas Forss, is the Director of EFFJOHN
INTERNATIONAL CRUISE HOLDINGS, INC. and duly authorized and empowered by the
said corporation to sign and execute the foregoing Assignment of First Priority
Mortgage for and on behalf of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my seal
of office this 4th day of December, 1998.
/S/ JUKKA HEIKKILA
-----------------------------------------
Notary Public
EXHIBIT 10.ee
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement" or "Security
Agreement") dated effective as of December 4, 1998, is made by and between AZURE
INVESTMENTS, INC., a Panama corporation, having its registered office at c/o
Galindo Lopez & Arias, Scotia Plaza, Federico Boyd Ave., No. 18 & 51 Street,
P.O. Box 8629, Panama 5, Rep. of Panama, and its notice address at c/o New
Commodore Cruise Lines Limited, 4000 Hollywood Boulevard, Suite 385-S, South
Tower, Hollywood, Florida 33021 (the "Borrower"), and KEYCORP LEASING, A
DIVISION OF KEY CORPORATE CAPITAL INC. and assigns, having an office at 54 State
Street, Albany, New York 12207 ("KCL" or "Lender").
W I T N E S S E T H
1. DEFINITIONS. Unless the context otherwise requires, as used in this
Agreement, the following terms shall have the respective meanings indicated
below and shall be equally applicable to both the singular and the plural forms
thereof. Capitalized terms not otherwise defined herein shall have the meaning
given in the Loan Documents.
(a) "ALTERATION" shall have the meaning specified in Section 8
hereof.
(b) "APPLICABLE LAW" shall mean all applicable federal, state,
local and foreign laws, ordinances, judgments, decrees, injunctions, writs,
rules, regulations, orders, licenses and permits of any Governmental Authority.
(c) "AUTHORIZED SIGNER" shall mean any officer of Borrower,
set forth on an incumbency certificate (in form and substance satisfactory to
KCL) delivered by Borrower to KCL, who is authorized and empowered to execute
the Loan Documents.
(d) "BAREBOAT CHARTER" shall mean the Bareboat Charter dated
July 14, 1995 between Borrower and Bareboat Charterer.
(e) "BAREBOAT CHARTERER" shall mean New Commodore Cruise Lines
Limited.
(f) "COLLATERAL SCHEDULE" shall mean each collateral schedule
now or hereto and made a part hereof, in substantially the form of Schedule
1 hereto.
(g) "COLLATERAL" shall mean the Vessel and any and all
substitutions, replacements or exchanges therefor, and any and all proceeds
(both cash and non-cash) receivable or received from the sale, lease, license,
collection, use, exchange or other disposition of the Collateral, including
insurance proceeds, thereof (including, without limitation, claims of the
Borrower against third parties for Loss or Damage to any such collateral) and
any additional items set forth in the Collateral Schedule.
(h) "CURRENT ASSETS" shall mean the gross book value of all
assets that are expected to be realized in cash or sold or consumed during a
normal operating cycle or within one year, including, without limitation, cash,
cash equivalents, accounts and notes receivable, and inventories, but excluding
prepaid expenses.
(i) "CURRENT LIABILITIES" shall mean all debt and other
obligations that are to be paid by use of Current Assets during a normal
operating cycle or within one year, including, without limitation, deposits
received, advance payments, trade acceptances, accrued expenses, notes payable,
1
<PAGE>
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
short-term bank loans, current maturities of long term debt and capital leases,
accrued and deferred income taxes, and any reserves against assets.
(j) "DEBT SERVICE COVERAGE RATIO" shall mean the ratio of (1)
the sum of net income before taxes, interest expense, depreciation, amortization
and other non-cash expenses, excluding any extraordinary gains or losses, to (2)
the sum of interest expense, current maturities of long term debt and capital
lease obligations.
(k) "DEFAULT RATE" shall mean an annual interest rate equal to
the lesser of the Prime Rate plus five percent (5%) per annum or the maximum
interest rate permitted by Applicable Law.
(l) "DEFAULT" shall mean any event or condition that, with the
passage of time or the giving of notice, or both, would constitute an Event of
Default.
(m) "EVENT OF DEFAULT" shall have the meaning specified in
Section 18 hereof.
(n) "FEE" shall mean a loan fee equal to one and one-half
percent (1.5%) of the amount advanced by KCL to Borrower.
(o) "FIRST PREFERRED MARINE MORTGAGE" shall mean a preferred
marine mortgage executed by Borrower covering the Vessel, in form and substance
satisfactory to KCL.
(p) "GAAP" shall have the meaning specified in Section 24
hereof.
(q) "GOVERNMENTAL ACTION" shall mean all authorizations,
consents, approvals, waivers, filings and declarations of any Governmental
Authority, including, without limitation, those environmental and operating
permits required for the ownership, lease, use and operation of the Vessel.
(r) "GOVERNMENTAL AUTHORITY" shall mean any foreign, federal,
state, county, municipal or other governmental authority, agency, board or
court.
(s) "GUARANTOR" shall mean Commodore Holdings Limited and any
guarantor of the Secured Obligations.
(t) "GUARANTY" shall mean a guaranty agreement in favor of KCL
executed by Guarantor, in form and substance satisfactory to KCL.
(u) "INSTALLMENT(S)" shall mean the periodic payments due to
repay the Note, and, where the context hereof requires, all such additional
amounts as may from time to time be payable under any provision of the Loan
Documents.
(v) "LEVERAGE RATIO" shall mean the ratio of Total Liabilities
to Tangible Net Worth.
(w) "LIABILITY" shall have the meaning set forth in Section 20
hereof.
(x) "LIEN" shall mean all mortgages, pledges, security
interests, liens, encumbrances, claims or other charges of any kind whatsoever,
except the security interest of KCL created by this Agreement and Permitted
Maritime Liens.
2
<PAGE>
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
(y) "LOAN DOCUMENTS" shall mean, collectively, this Agreement,
the Note, the First Preferred Marine Mortgage, and all other documents prepared
by KCL and now or hereafter executed in connection herewith or therewith.
(z) "LOSS OR DAMAGE" shall mean any loss, theft, destruction,
disappearance or any condemnation, EXPROPRIATION or requisition of or damage to
the Vessel or any material part of the Vessel.
(aa) "MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the condition, financial or otherwise, or the earnings, position,
properties, business or results of operations of Borrower, Guarantor, and
affiliates of the Guarantor on a consolidated basis, taken as a whole.
(bb) "NOTE" shall mean that certain Promissory Note in the
original principal amount of Ten Million Dollars ($10,000,000) executed in
connection herewith, together with any extensions, modifications, renewals,
refinancings or other restructurings thereof.
(cc) "PERMITTED MARITIME LIENS" shall mean any seaman's wage
liens (including those of masters) for wages, maintenance and cure, salvage and
general average liens, stevedore's wages, tort liens (including personal injury
and death) and liens for necessaries, all of the foregoing liens which are
either unclaimed or covered by insurance (other than, and after giving effect
to, any deductibles that the Borrower may have on such insurance); PROVIDED,
THAT, once any such lien is claimed, the Borrower shall be permitted to contest
any such lien in good faith by appropriate action promptly initiated and
diligently conducted, if (i) such reserve as shall be required by GAAP shall be
made therefore, or (ii) the Borrower shall have arranged for a bond or insurance
(other than, and after giving effect to, any deductibles that the Borrower may
have on such insurance) related to such lien in a manner that is satisfactory to
KCL in accordance with law and it does not involve any risk of the sale of the
Vessel.
(dd) "PRIME RATE" shall mean as of the date of determination
the prime rate announced in THE WALL STREET JOURNAL, published on such date.
(ee) "SECURED OBLIGATIONS" means all of the following
obligations of Borrower, whether direct or indirect, absolute or contingent,
matured or unmatured, originally contracted with KCL or another party, and now
or hereafter owing to or acquired in any manner partially or totally by KCL or
in which KCL may have acquired a participation, contracted by Borrower alone or
jointly or severally: (1) any and all indebtedness, obligations, liabilities,
contracts, indentures, agreements, warranties, covenants, guaranties,
representations, provisions, terms, and conditions of whatever kind, now
existing or hereafter arising, and however evidenced, that are now or hereafter
owed, incurred or executed by Borrower to, in favor of, or with KCL (including,
without limitation, those as are set forth or contained in, referred to,
evidenced by, or executed with reference to the Loan Documents, any letter of
credit agreements, advance agreements, indemnity agreements, guaranties, lines
of credit, mortgage deeds, security agreements, assignments, pledge agreements,
hypothecation agreements, instruments, and acceptance financing agreements), and
including any partial or total extension, restatement, renewal, amendment, and
substitution thereof or therefor; (2) any and all claims of whatever kind of KCL
against Borrower, now existing of hereafter arising, including, without
limitation, any arising out of or in any way connected with warranties made by
Borrower to KCL in connection with any instrument purchased by KCL; (3) any and
all indebtedness of Borrower under the SWAP Agreement; and (4) any and all of
KCL's fees, costs and expenses related to the foregoing.
(ff) "SPACE CHARTER" shall mean the Space Charter dated
October 30, 1995 between Bareboat Charterer and Space Charterer.
3
<PAGE>
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
(gg) "SPACE CHARTERER" shall mean Seawise Foundation, Inc.
(hh) "SUBORDINATION AGREEMENT" shall mean the Subordination
and Non-Disturbance Agreement of even date herewith among KCL, Borrower,
Bareboat Charterer, Time Charterer and Space Charterer.
(ii) "SWAP AGREEMENT" shall mean that certain ISDA Master
Agreement dated as of December 4,1998 (as amended, renewed or otherwise modified
from time to time), in which Borrower and KCL have agreed, among other things,
to provide Borrower with interest rate swap contracts in connection with
interest rate fluctuations in the Note.
(jj) "TANGIBLE NET WORTH" shall mean (1) the gross book value
of all assets, excluding goodwill, patents, trademarks, licenses, trade names,
organizational expenses, treasury stock, unamortized debt discount and expense,
deferred research and developmental costs, and other like intangibles, less (2)
Total Liabilities.
(kk) "TERM" shall mean the term of the Note.
(ll) "TIME CHARTER" shall mean the Time Charter dated October
30, 1995 between Bareboat Charterer and Time Charterer.
(mm) "TIME CHARTERER" shall mean Sea-Comm, Ltd.
(nn) "TOTAL LIABILITIES" shall mean all debt and other
obligations, including, without limitation, Current Liabilities and long term
debt (including, without limitation, term loans, bond issuances, debentures or
notes, capital leases and deferred credit).
(oo) "UCC" shall have the meaning set forth in Section 18
hereof. Where applicable and except as otherwise defined herein, terms used in
this Agreement shall have the meaning assigned to them in the UCC.
(pp) "UPGRADE" shall have the meaning specified in Section 10
hereof.
(qq) "VESSEL" shall mean the vessel UNIVERSE EXPLORER,
Registration No. 14064-84-G registered under the laws of the Republic of Panama.
2. LOAN. Subject to the terms and conditions hereof and in reliance
upon each of Borrower's representations and warranties contained herein, KCL
agrees to lend to Borrower an amount not to exceed $10,000,000 U.S. Time is of
the essence.
(a) Subject to the terms and conditions hereof, KCL shall
advance the Loan to the Borrower on the Funding Date by paying the proceeds
thereof as follows:
(i) To KCL in payment of the Fee;
(ii) To holders of existing liens against the Vessel in
satisfaction of such liens and claims of lien;
(iii) The balance to Borrower; and
4
<PAGE>
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
(iv) Borrower unconditionally and irrevocably authorized
KCL to make such payments on its behalf.
(b) NOTE. The Loan shall be evidenced by the Note. Each
installment of principal and interest shall be due and payable in accordance
with the terms of the Note.
3. CONDITIONS TO BORROWING. In addition to any other requirements set
forth herein, the obligation of KCL to fund the Loan is subject to the prior
fulfillment (or waiver, in KCL's sole discretion) of each of the following
conditions precedent:
(a) KCL shall have received this Agreement executed by
Borrower;
(b) Borrower shall have executed and delivered to KCL the
Note in the original principal amount of $10,000,000;
(c) Borrower shall have executed and delivered to KCL the
First Preferred Marine Mortgage;
(d) KCL shall have received, in recordable form, an executed
satisfaction of the mortgage on the Vessel held by Merita Bank, PLC.
(e) The First Preferred Marine Mortgage shall have been
provisionally registered with the Panama Public Registry and shall be a first
priority maritime lien on the Vessel;
(f) KCL shall have received the Guaranty executed by
Guarantor;
(g) KCL shall have received the Subordination Agreement duly
executed by Bareboat Charterer, Time Charterer and Space Charterer in form and
substance acceptable to KCL;
(h) KCL shall have received the Fee;
(i) Borrower shall have paid KCL's fees and disbursements
("Costs") limited in the aggregate to $50,000;
(j) KCL shall have received the legal opinions of counsel of
Borrower and the Guarantor, in each case in form and substance satisfactory to
KCL; and
(k) KCL shall have received satisfactory evidence with respect
to insurances required to be maintained by Borrower with respect to the Vessel.
4. GRANT OF SECURITY INTEREST IN THE VESSEL. In consideration of one or
more loans, advances, interest rate swap agreements or other financial
accommodations at any time before, at or after the date hereof, made or extended
by KCL to or for the account of the Borrower, directly or indirectly, as
principal, guarantor or otherwise and to secure the prompt payment and
performance in full when due, whether by lapse of time, acceleration or
otherwise, of the Secured Obligations, the Borrower hereby pledges, assigns,
transfers, hypothecates to KCL and grants to KCL a security interest in, and
acknowledges and agrees that this Agreement shall create a continuing security
interest in, all of Borrower's right, title and interest in and to the
Collateral.
The Secured Obligations of the Borrower are absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall not be
subject to any right of set-off, counterclaim, deduction,
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LOAN AND SECURITY AGREEMENT
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defense or other right which the Borrower may have for any reason against any
vendor, supplier, manufacturer, KCL or any other party. All obligations of
Borrower hereunder shall survive the expiration, cancellation or other
termination of this Agreement.
5. RESERVED.
6. PAYMENTS. Borrower shall pay the Note on the terms set forth
therein. All Installments shall be payable when due whether or not Borrower has
received any additional notice that such Installments are due. All Installments
shall be paid to KCL at P.O. Box 1865, Albany, New York 12201-1865, or as
otherwise directed by KCL in writing.
7. INSPECTION. Borrower shall maintain possession and control of the
Vessel at all times, subject to the Bareboat Charter, the Time Charter and the
Space Charter. KCL shall have the right to inspect the Vessel at any reasonable
time. Borrower will promptly give written notice to KCL of any change in the
identity or flag the Vessel which might require new filings or other action to
assure continued perfection of the security interest of KCL granted hereby.
8. USE: ALTERATIONS. Borrower shall use the Vessel only in the course
of its business for commercial purposes (and shall not permanently discontinue
use of the Vessel), and in compliance with Applicable Law and the requirements
of any applicable insurance policies, and only in the manner for which it was
designed and intended and so as to subject it only to ordinary wear and tear.
Borrower shall comply with all Applicable Law with respect to the Vessel.
Borrower shall immediately notify KCL in writing of any existing, pending or
threatened investigation, inquiry, claim or action by any Governmental Authority
in connection with any Applicable Law or Governmental Action which could
adversely affect the value of the Vessel or the perfection or priority of the
security interest of KCL in the Collateral. Borrower shall not make any material
alterations, additions, modifications or improvements (each, an "Alteration") to
the Vessel without KCL's prior written consent, provided that Borrower, at its
own expense, shall make Alterations as may be required from time to time to meet
the requirements of Applicable Law or Governmental Action. All such Alterations
immediately, and without further act, shall be deemed to constitute the
Collateral and fully be subject to the security interest granted to KCL
hereunder.
9. REPAIRS AND MAINTENANCE. Borrower, at Borrower's own cost and
expense, shall (a) keep the Vessel in good repair, operating condition and
working order and in compliance with the Vessel's classification society's
requirements for a vessel of its class. Any replacement part shall be free and
clear of all Liens except Permitted Maritime Liens and upon installation,
attachment or incorporation in, on or into such Vessel, such replacement part
immediately, and without further act, shall be deemed to constitute the
Collateral and fully be subject to the security interest granted to KCL
hereunder. If KCL repossesses the Vessel pursuant to its rights under this
Agreement and/or the First Preferred Marine Mortgage and at that time, in the
opinion of KCL, the Vessel fails to meet the standards set forth above, Borrower
agrees to pay on demand all costs and expenses incurred in connection with
repairing or restoring the Vessel so as to meet such standards.
10. VESSEL UPGRADES/ATTACHMENTS. In addition to the requirements of
Section 9 hereof, Borrower, at its own expense, may from time to time add or
install upgrades or attachments (each, an "Upgrade") to the Vessel; provided,
that such Upgrades are readily removable without causing material damage to the
Vessel, and do not materially adversely affect the fair market value of the
Vessel. Any such Upgrades shall be owned by Borrower, shall become subject to
the security interest created by this Agreement and shall be kept free and clear
of all Liens so long as attached to the Vessel.
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11. CHARTER AND ASSIGNMENT.
(A) WITHOUT KCL'S PRIOR WRITTEN CONSENT, BORROWER SHALL NOT
(i) ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF, THE VESSEL OR
ANY INTEREST THEREIN, OR ASSIGN OR DELEGATE ITS RIGHTS OR OBLIGATIONS UNDER THE
LOAN DOCUMENTS, OR (ii) CHARTER, EXCEPT IN THE ORDINARY COURSE OF BUSINESS, OR
LEND THE VESSEL TO, OR PERMIT THE VESSEL TO BE USED BY, ANYONE OTHER THAN
BORROWER; PROVIDED, HOWEVER, THAT KCL CONSENTS TO USE BY, AND CHARTER TO, THE
BAREBOAT CHARTERER UNDER THE BAREBOAT CHARTER, AND THE TIME CHARTERER UNDER THE
TIME CHARTER, AND THE SPACE CHARTERER UNDER THE SPACE CHARTER.
(B) KCL, at any time with or without notice to Borrower, may
sell, transfer, grant participations in, assign and/or grant a security interest
in any or all of KCL's right, title and interest in and to the Loan Documents,
or in KCL's security interest in the Vessel. In any such event, any such
purchaser, transferee, assignee or secured party shall have and may exercise all
of KCL's rights hereunder or thereunder and BORROWER SHALL NOT ASSERT AGAINST
ANY SUCH PURCHASER, TRANSFEREE, ASSIGNEE OR SECURED PARTY ANY DEFENSE,
COUNTERCLAIM OR OFFSET THAT BORROWER MAY HAVE AGAINST KCL. Borrower agrees that
upon written notice to Borrower of any such sale, transfer, assignment and/or
security interest, Borrower shall acknowledge receipt thereof in writing and
shall comply with the reasonable directions and demands of such purchaser,
transferee, assignee or secured party.
(C) Subject to the foregoing, all covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, KCL and its
successors and assigns and Borrower and its successors and permitted assigns.
12. LOSS OF OR DAMAGE TO VESSEL. In the event of Loss of the Vessel or
loss or material Damage to a material part of the Vessel, Borrower shall
immediately notify KCL of same and, at the option of KCL, as specified in a
notice from KCL to Borrower, Borrower shall within thirty (30) days following
such Loss or Damage: (1) place the Vessel in good condition and repair, in
accordance with the terms hereof; (2) replace such part of the Vessel with a
replacement part in as good condition and repair, and remaining useful life as
the replacement part and with the same or better fair market value as such
replaced part immediately preceding the Loss or Damage (assuming that such
replaced part was in the condition required by this Agreement), which
replacement part shall immediately, and without further act, be deemed to
constitute Collateral and be fully subject to this Agreement as if originally
pledged as Collateral hereunder and shall be free and clear of all Liens except
for Permitted Maritime Liens; or (3) in the event of a loss of the Vessel or
damage to such an extent that makes repair uneconomical, or makes the Vessel
unfit for normal use without repairs that, in the reasonable judgement of KCL,
would not be commercially reasonable to make, pay to KCL all unpaid Installments
and other charges due, together with accrued interest on such amount.
Upon KCL's receipt of the payment required under clause (3) above, KCL
shall release its security interest in the Collateral. If Borrower replaces a
part of the Vessel pursuant to clause (2) above, such replacement shall be
deemed to constitute the Collateral and be fully subject to this Agreement and
the security interest granted to KCL hereunder, as if originally pledged
hereunder. If Borrower fails to either restore or replace the Vessel pursuant to
clauses (1) or (2) above, respectively, Borrower shall make the payment under
clause (3) above.
13. INSURANCE.
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(a) Borrower, at Borrower's own cost and expense, shall
maintain (1) hull and machinery and increased value insurance against all risks
of physical loss or damage to the Vessel in a combined amount not less than 120%
of the outstanding amount due under the Note and (2) protection and indemnity
insurance coverage with an insurer or club reasonably acceptable to KCL.
(b) All insurance policies required hereunder shall (1)
require 30 days' prior written notice to KCL of cancellation or material change
in coverage (any such cancellation or change, as applicable, not being effective
until the thirtieth (30th) day after the giving of such notice); (2) name
"KeyCorp and its subsidiaries and affiliated companies, including KeyCorp
Leasing, a Division of Key Corporate Capital Inc." as loss payee under the hull
and machinery and increased value insurance policies; (3) not require
contributions from other policies held by KCL; (4) waive any right of
subrogation against KCL; (5) in respect of any liability of KCL, except for the
insurers' salvage rights in the event of a Loss or Damage, waive the right of
such insurers to set-off, to counterclaim or to any other deduction, whether by
attachment or otherwise, to the extent of any monies due KCL under such
policies; (6) not require that KCL pay or be liable for any premiums with
respect to such insurance covered thereby; (7) be in full force and effect
throughout any geographical areas at any time traversed by the Vessel; and (8)
contain breach of warranty provisions providing that, in respect of the
interests of KCL in such policies, the insurance shall not be invalidated by any
action or inaction of Borrower or any other person (other than KCL) and shall
insure KCL regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by Borrower or by any other person (other
than KCL). Prior to funding the Note, and thereafter not less than 15 days prior
to the expiration dates of the expiring policies theretofore delivered pursuant
to this Section, Borrower shall deliver to KCL duplicate originals of all
policies (or in the case of blanket policies, certificates thereof issued by the
insurers thereunder) for the insurance maintained pursuant to this Section.
(c) Proceeds of insurance in excess of $500,000 with respect
to physical loss or damage to the Vessel shall be applied, at the option of KCL,
to repair or replace the Vessel or to reduce or satisfy (as applicable) the
Secured Obligations.
14. TAXES. Borrower shall pay when due any and all taxes, fees, levies,
imposts, duties, assessments and public and private charges levied or assessed
on or with respect to the Vessel, on the use thereof, or on this Agreement or
any of the other Loan Documents.
15. KCL'S RIGHT TO PERFORM FOR BORROWER. If Borrower fails to perform
any of its obligations contained in the Loan Documents, KCL may (but shall not
be obligated to) itself perform such obligations, and the amount of the
reasonable costs and expenses of KCL incurred in connection with such
performance, together with interest on such amount from the date paid by KCL
until the date repaid by Borrower to KCL, at the Default Rate, shall be payable
by Borrower to KCL upon demand. No such performance by KCL shall be deemed a
waiver of any rights or remedies of KCL, or be deemed to cure the default of
Borrower hereunder. All such sums and amounts so expended by KCL shall be
repayable by the Borrower immediately without notice or demand, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the Default Rate.
16. DELINQUENT PAYMENTS; INTEREST. If Borrower fails to pay any of the
Installments within five (5) business days after the date when the same becomes
due, Borrower shall pay to KCL a late charge equal to five percent (5%) of such
delinquent amount. Such late charge shall be payable by Borrower upon demand by
KCL and shall be deemed part of the Secured Obligations. In no event shall such
late charge exceed the maximum amounts permitted under Applicable Law.
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17. PERSONAL PROPERTY; LIENS; WARRANTY OF TITLE. The Borrower is, and
will continue to be, the sole owner of the Vessel, free from any Lien except
Permitted Maritime Liens, but subject to the rights of the Bareboat Charterer
pursuant to the Bareboat Charter, the Time Charterer pursuant to the Time
Charter and the Space Charterer pursuant to the Space Charter. Borrower shall at
all times keep the Vessel free and clear from all Liens except Permitted
Maritime Liens. Borrower shall (i) give KCL immediate written notice of any Lien
on the Collateral except Permitted Maritime Liens, (ii) promptly, at Borrower's
sole cost and expense, take such action as may be necessary to discharge any
such Lien except Permitted Maritime Liens, and (iii) indemnify and hold KCL, on
an after-tax basis, harmless from and against any loss or damage caused by any
such Lien except Permitted Maritime Liens. Borrower warrants that it has good,
valid and marketable title to the Vessel, and that (i) the security interest in
the Vessel granted to KCL hereunder, when properly perfected by filing, shall
constitute a valid and perfected first priority security interest in the Vessel
and, (ii) the Vessel is not subject to, and Borrower will not grant or permit to
exist, any Liens except Permitted Maritime Liens or claims on or against the
Collateral, whether senior, superior, junior, subordinate or equal to the
security interest granted to KCL hereby, or otherwise.
18. EVENTS OF DEFAULT; REMEDIES
(a) As used herein, the term "Event of Default" shall mean any
of the following events: (1) Borrower fails to pay any Installment within ten
(10) business days after the same becomes due and payable; (2) Borrower breaches
any of its other obligations under any of the Loan Documents and fails to cure
the same within thirty (30) days after written notice thereof, or fails to
diligently undertake to cure any such breach that cannot be cured within 30
days; (3) any dissolution, termination of existence, merger, consolidation,
change in controlling ownership of Borrower or Guarantor where Borrower or
Guarantor, as the case may be, is not the surviving entity, or if Borrower or
Guarantor is a natural person, the death or incompetence of Borrower or
Guarantor; (4) Borrower or any Guarantor fails to pay its debts generally as
they become due or becomes insolvent or makes an assignment for the benefit of
its creditors; (5) a receiver, trustee, conservator or liquidator of Borrower or
any Guarantor or of all or a substantial part of Borrower's or such Guarantor's
assets is appointed with or without the application or consent of Borrower or
such Guarantor, respectively; (6) a petition is filed by or against Borrower or
any Guarantor under any bankruptcy, insolvency or similar legislation, and in
the case of an involuntary petition, such petition is not dismissed within 60
days thereafter; (7) Borrower or any Guarantor materially violates or fails to
perform any provision of either the Loan Documents or any other material loan,
lease or credit agreement or any acquisition or purchase agreement with KCL or
any other party, which violation or failure results in a Material Adverse
Effect; (8) Borrower violates or fails to perform in any material respect any
covenant or representation made by Borrower in the Loan Documents; (9) any
representation or warranty made herein or in any of the Loan Documents,
certificates, financial statements or other statements furnished to KCL (or
KCL's parent, subsidiaries or affiliates) shall prove to be false or misleading
in any material respect as of the date on which the same was made; (10) there is
a Material Adverse Effect; (11) Borrower shall fail to satisfy any final
judgment rendered against the Borrower by any court of competent jurisdiction
where such failure results in a Material Adverse Effect; (12) the liens on the
Vessel created or granted hereby, or intended to be granted or created hereby,
to KCL shall fail to be valid, first priority perfected liens subject to no
prior or equal lien, except Permitted Maritime Liens; (13) Borrower shall be in
default of the Swap Agreement, or (14) an additional Lien other than a Permitted
Maritime Lien attaches to the Vessel or the Vessel becomes subject to imminent
risk of seizure or forfeiture.
(b) (i) Upon the occurrence of an Event of Default, KCL, at
its option, may declare any or all of the Secured Obligations, including,
without limitation, the Note, to be immediately due and payable, without demand
or notice to Borrower or any Guarantor. The obligations and liabilities
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accelerated thereby shall bear interest (both before and after any judgment)
until paid in full at the Default Rate. Should there occur a Default and if a
voluntary or involuntary petition (which has not been dismissed within 60 days
after filing) under the United States Bankruptcy Code is filed by or against
Borrower while such Default remains uncured, the Secured Obligations
automatically shall be accelerated and due and payable and interest thereon at
the Default Rate automatically shall apply as of the date of the first
occurrence of the Default, without any notice, demand or action of any type on
the part of KCL (including any action evidencing the acceleration or imposition
of the Default Rate). The fact that KCL has, prior to the filing of the
voluntary or involuntary petition under the United States Bankruptcy Code, acted
in a manner which is inconsistent with the acceleration and imposition of the
Default Rate shall not constitute a waiver of this provision or estop KCL from
asserting or enforcing KCL's rights hereunder.
(ii) Furthermore, upon the occurrence of an Event of Default,
KCL shall have the rights and remedies provided herein, in the other Loan
Documents and by law, the rights and remedies of a secured party under the
Uniform Commercial Code under the laws of the State of New York (the "UCC")
(regardless of whether the UCC is the law of the jurisdiction where the rights
and remedies are asserted and regardless of whether the UCC applies to the
affected Collateral), and further KCL may do any one or more of the following as
KCL in its sole discretion may elect, with or without judicial process or the
aid and assistance of others: (i) prepare for sale and sell or otherwise dispose
of the Vessel, (ii) require the Borrower to make available to KCL at Borrower's
expense the Vessel at any place and time reasonably designated by KCL, (iii)
arrest the Vessel at any port for the purpose of effecting sale or other
disposition thereof, (iv) without demand and without advertisement, notice,
hearing or process of law, all of which the Borrower hereby waives, at any place
and time or times, sell and deliver the Vessel and any of the Collateral held by
or for it at public or private sale, by one or more contracts, in one or more
parcels, for cash, upon credit or otherwise, at such prices and upon such terms
as KCL deems advisable, in its sole discretion, or (v) charter all or any
portion of the Vessel on such terms and conditions as KCL in its sole discretion
may determine. In addition to all other sums due KCL hereunder, the Borrower
shall pay KCL all reasonable costs and expenses incurred by KCL, including
reasonable attorneys' fees and court costs, in obtaining or liquidating the
Collateral, in enforcing payment of Secured Obligations, or in the prosecution
or defense of any action or proceeding by or against KCL or the Borrower
concerning any matter arising out of or connected with the Loan Documents, the
Collateral or the Secured Obligations, including without limitation any of the
foregoing arising in, arising under or related to a case under the United States
Bankruptcy Code.
(iii) BORROWER'S WAIVERS REGARDING DISPOSITION OF THE VESSEL.
IF AN EVENT OF DEFAULT OCCURS, BORROWER HEREBY WAIVES ANY DEFENSES, RIGHTS,
OFFSETS OR CLAIMS AGAINST KCL ARISING OUT OF THE REPOSSESSION, RETENTION, SALE,
MANNER OR METHOD OF SALE OR DISPOSITION OF ANY COLLATERAL. THE BORROWER AGREES
THAT ANY REQUIREMENT OF REASONABLE NOTICE SHALL BE MET IF SUCH NOTICE IS
PERSONALLY SERVED ON OR MAILED, POSTAGE PREPAID, TO THE BORROWER IN ACCORDANCE
WITH THE NOTICE PROVISIONS HEREOF AT LEAST 10 BUSINESS DAYS BEFORE THE TIME OF
SALE OR OTHER EVENT GIVING RISE TO THE REQUIREMENT OF SUCH NOTICE. KCL SHALL NOT
BE OBLIGATED TO MAKE ANY SALE OR OTHER DISPOSITION OF THE VESSEL REGARDLESS OF
NOTICE HAVING BEEN GIVEN. KCL MAY BE THE PURCHASER AT ANY SUCH SALE. THE
BORROWER HEREBY WAIVES ALL OF ITS RIGHTS OF REDEMPTION FROM ANY SUCH SALE. KCL
MAY POSTPONE OR CAUSE THE POSTPONEMENT OF THE SALE OF ALL OR ANY PORTION OF THE
COLLATERAL BY ANNOUNCEMENT AT THE TIME AND PLACE OF SUCH SALE, AND SUCH SALE
MAY, WITHOUT FURTHER NOTICE, BE MADE AT THE TIME AND PLACE TO WHICH THE SALE WAS
POSTPONED. NONE OF KCL'S RIGHTS OR REMEDIES HEREUNDER ARE INTENDED TO BE
EXCLUSIVE OF, BUT EACH SHALL BE CUMULATIVE AND IN ADDITION TO, ANY
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OTHER RIGHT OR REMEDY REFERRED TO HEREUNDER OR OTHERWISE AVAILABLE TO KCL OR ITS
ASSIGNS AT LAW OR IN EQUITY, AND MAY BE PURSUED SINGLY, SUCCESSIVELY OR
CONCURRENTLY AT THE SOLE DISCRETION OF KCL AND MAY BE EXERCISED AS OFTEN AS
OCCASION THEREFOR SHALL OCCUR. THE FAILURE TO EXERCISE, OR ANY DELAY IN THE
EXERCISE OF, ANY RIGHT OR REMEDY SHALL IN NO EVENT BE CONSTRUED AS A WAIVER,
RELEASE OR EXHAUSTION OF ANY SUCH REMEDIES. NO EXPRESS OR IMPLIED WAIVER BY KCL
OF ANY EVENT OF DEFAULT SHALL CONSTITUTE A WAIVER OF ANY OTHER EVENT OF DEFAULT
OR A WAIVER OF ANY OF KCL'S RIGHTS UPON THE REOCCURRENCE OF ANY SUCH EVENT OF
DEFAULT.
(c) The Borrower hereby authorizes KCL, upon the occurrence
and during the continuation of any Event of Default hereunder, at KCL's option
to adjust, compromise and settle any losses under any insurance afforded, and
the Borrower does hereby irrevocably constitute KCL and each of its designees,
as its attorneys-in-fact, with full power and authority, upon the occurrence and
during the continuation of any Event of Default hereunder, to effect such
adjustment, compromise and/or settlement and to endorse any drafts drawn by an
insurer of the Vessel or any part thereof and to do everything necessary to
carry out such purposes and to receive and receipt for any unearned premiums due
under policies of such insurance; but unless or until KCL elects to adjust,
compromise or settle losses as aforesaid, such insurance proceeds shall be
subject to the lien and security interest of KCL hereunder.
(d) Upon the occurrence, and during the continuance, of an
Event of Default hereunder, any payments in respect of the Secured Obligations
and any proceeds of the Collateral, when received by KCL in cash or its
equivalent, will be applied first to costs of collection and, thereafter, in
reduction of the Secured Obligations in such order and manner as KCL may direct
in its sole discretion, and the Borrower irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
KCL shall have the continuing and exclusive right to apply any and all such
payments and proceeds in KCL's sole discretion, notwithstanding any entry to the
contrary upon any of its books and records. The Borrower shall remain liable to
KCL for any deficiency. Any surplus remaining after the full payment and
satisfaction of the Secured Obligations shall be returned to the Borrower or to
whomsoever a court of competent jurisdiction shall determine to be entitled
thereto.
(e) To the extent that any of the Secured Obligations are now
or hereafter secured by property other than the Collateral, or by a guarantee,
endorsement or property of any other person, then KCL also shall have the right
to proceed against such other property, guarantee or endorsement upon the
occurrence of an Event of Default hereunder, and KCL shall have the right, in
its sole discretion, to determine which rights, liens, security interests or
remedies KCL shall at any time pursue, relinquish, subordinate or modify,
without in any way affecting the Secured Obligations or any of KCL's rights
under this Agreement.
19. NOTICES. All notices and other communications hereunder shall be in
writing and shall be transmitted by hand, overnight courier or certified mail
(return receipt requested), postage prepaid. Such notices and other
communications shall be addressed to the respective party at the address set
forth above or at such other address as any party may from time to time
designate by notice duly given in accordance with this Section. All such notices
and other communications shall be deemed to have been duly given if delivered by
hand, overnight courier or if sent by certified mail, return receipt requested,
to the party to whom such notice is intended to be given, and shall be effective
upon receipt.
20. GENERAL INDEMNIFICATION. Borrower shall pay, and shall indemnify
and hold KCL and its directors, officers, employees, counsel, agents and
advisors harmless on an after-tax basis from and against, any and all
liabilities, causes of action, claims, suits, penalties, damages, losses, costs
or expenses
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(including attorneys' fees), obligations, liabilities, demands and judgments,
and Liens, of any nature whatsoever (collectively, a "Liability") arising out of
or in any way related to: (a) the Loan Documents (b) a failure to comply fully
with Applicable Law and (c) Borrower's failure to perform any covenant, or
breach of any representation or warranty under the Loan Documents; provided,
that the foregoing indemnity shall not extend to the Liabilities to the extent
resulting solely from the gross negligence or willful misconduct of KCL.
Borrower shall promptly deliver to KCL (i) copies of any documents received from
the United States Coast Guard or health agency concerning the Vessel or its
operation and (ii) copies of any documents submitted by Borrower or any of its
subsidiaries to the United States Coast Guard or health agency concerning the
Vessel or its operation. Borrower further agrees to indemnify KCL against and
hold it harmless from all present and future stamp, transfer, documentary and
other such taxes, levies, fees, assessments or other charges made by any
jurisdiction by reason of the execution, delivery, performance and enforcement
of the Loan Documents.
21. SEVERABILITY; CAPTIONS. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law. If, however, any provision of this Agreement or any of the Loan
Documents shall be prohibited or unenforceable in any jurisdiction, it shall, as
to such jurisdiction, be deemed modified to conform to the minimum requirements
of such law, or if for any reason it is not deemed so modified, it shall be
ineffective only to the extent of such prohibition or unenforceability without
affecting the remaining provisions hereof, and any such prohibition or
unenforceability shall not invalidate or render unenforceable such provision in
any other jurisdiction. Captions are intended for convenience of reference only,
and shall not be construed to define, limit or describe the scope or intent of
any provisions hereof.
22. FINANCIAL AND OTHER DATA. During the Term hereof, Borrower shall
furnish KCL, as soon as available and in any event within 120 days after the
last day of each fiscal year, financial statements of Guarantor (on a
consolidated basis), in each case compiled, reviewed or audited by an
independent certified public accountant of national standing. Borrower shall
also furnish such other financial reports, information or data (including
federal and state income tax returns and quarterly or interim financial
statements compiled or reviewed by an independent certified public accountant of
national standing if required by KCL) as KCL may reasonably request from time to
time.
23. FINANCIAL COVENANTS. On a continuing basis, from the date of this
Agreement until the date on which Borrower's obligations hereunder are fully
paid and performed, Borrower shall cause Guarantor to comply with the following
financial covenants:
(a) TANGIBLE NET WORTH: its Tangible Net Worth shall not be
less than $20,000,000 as of September 30, 1998, $25,000,000 as of September 30,
1999 and thereafter, as measured on a quarterly basis.
(b) LEVERAGE RATIO: its Leverage Ratio shall not exceed 2.35
to 1.00, as of September 30,1998, 1.60 to 1.00 as of September 30, 1999 and
thereafter, as measured on a quarterly basis.
(c) DEBT SERVICE COVERAGE RATIO: its Debt Service Coverage
Ratio shall not be less than 1.50 to 1.00, at September 30, 1998, and 2.00 to
1.00 at September 30, 1999 and thereafter, as measured on a quarterly basis.
(d) Neither Guarantor nor Borrower shall borrow any money or
directly or indirectly, create, incur, assume, guarantee or otherwise become or
remain liable with respect to any indebtedness for borrowed money or advances in
excess of $1,000,000 without the prior written consent
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of KCL, other than (1) Borrower's or Guarantor's obligations to KCL and its
affiliates, (2) any indebtedness of Borrower and Guarantor existing on the date
hereof and not required by KCL to be repaid as a condition to the funding of
this Loan, and (3) secured and unsecured debt not to exceed an aggregate
principal amount of $25,000,000, where such debt is not secured by the Vessel.
(e) Any request by the Borrower or Guarantor to KCL for
consent to exceed the $1,000,000 debt restriction described in (d) above, shall
be in writing and delivered to KCL by certified mail, return receipt requested,
addressed to the attention of David M. Churchill, Senior Lender, KCL shall
respond to the request of the Borrower or Guarantor within five (5) business
days and shall not withhold consent to such request provided the Borrower and
Guarantor are in compliance with all loan terms and conditions. KCL's consent or
denial shall be conveyed to the Borrower or Guarantor in writing.
24. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and
warrants that: (a) Borrower is a corporation duly organized and validly existing
in good standing under the laws of the state and country of its incorporation;
(b) the execution, delivery and performance of this Agreement and all related
instruments and documents: (1) have been duly authorized by all necessary
corporate action on the part of Borrower, (2) do not require the approval of any
stockholder, partner, trustee, or holder of any obligations of Borrower except
such as have been duly obtained, and (3) do not and will not contravene any law,
governmental rule, regulation or order now binding on Borrower, or the charter
or by-laws of Borrower, or contravene the provisions of, or constitute a default
under, or result in the creation of any lien or encumbrance upon the property of
Borrower under, any indenture, mortgage, contract or other agreement to which
Borrower is a party or by which it or its property is bound; (c) the Loan
Documents, when entered into, will constitute legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with the
terms thereof, (d) there are no pending actions or proceedings to which Borrower
is a party, and there are no other pending or threatened actions or proceedings
of which Borrower has knowledge, before any court, arbitrator or administrative
agency, which, either individually or in the aggregate, would have a Material
Adverse Effect on the financial condition of Borrower or Guarantor, taken as a
whole, or the ability of Borrower to perform its obligations under the Loan
Documents; (e) Borrower is not in default under any obligation for the payment
of borrowed money, for the deferred purchase price of property or for the
payment of any installments under any lease agreement which, either individually
or in the aggregate, would have the same such effect, (f) [reserved]; (g) the
financial statements of Guarantor on a consolidated basis (copies of which have
been furnished to KCL) have been prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP"), and fairly present
Guarantor's financial condition and the results of its operations on a
consolidated basis as of the date of and for the period covered by such
statements, and since the date of such statements there has been no Material
Adverse Effect, (h) [reserved], (i) Borrower does not conduct business under a
trade, assumed or fictitious name; this Agreement creates a valid first
priority security interest in the Vessel securing payment and performance of the
Secured Obligations and all filings and other action necessary to perfect such
security interest have been taken or shall be promptly taken; (k) Borrower has
filed or has caused to have been filed all federal, state and local tax returns
which, to the knowledge of Borrower, are required to be filed, and has paid or
caused to have been paid all taxes as shown on such returns or on any assessment
received by it, to the extent that such taxes have become due, unless and to the
extent only that such taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by Borrower and adequate
reserves therefor have been established as required under GAAP and, to the
extent Borrower believes it advisable to do so, Borrower has set up reserves
which are believed by Borrower to be adequate for the payment of additional
taxes for years which have not been audited by the respective tax authorities;
(1) [reserved]; and (m) Borrower has conducted a comprehensive review and
assessment of the Borrower's computer applications and made inquiry of the
Borrower's key suppliers, vendors and customers with respect to the "year 2000
problem" (that is, the risk that computer applications may not be able to
properly perform date-sensitive functions after December 31, 1999) and based on
that review and inquiry, the Borrower
13
<PAGE>
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
does not believe the year 2000 problem will result in a Material Adverse Effect,
(n) Borrower is not in violation of any Applicable Law, the violation of which
would have a Material Adverse Effect, and Borrower has obtained any and all
licenses, permits, franchises or other governmental authorizations necessary for
the ownership of its properties and the conduct of its business; (o) Borrower
shall assure that not less than seventy-five percent (75%) of the outstanding
principal balance of the Note shall, at all times, be subject to an interest
rate swap agreement or other interest rate fluctuation protection program, in
either case, reasonably acceptable to KCL; and (p) none of the proceeds of the
loan made by KCL will be used, directly or indirectly, by Borrower for the
purpose of purchasing or carrying, or for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry any "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System (herein called "margin stock") or for
any other purpose which might make the transactions contemplated herein a
"purpose credit" within the meaning of Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any of
such statutes.
25. UCC FILINGS. BORROWER SHALL EXECUTE AND DELIVER TO KCL CONCURRENTLY
WITH THE EXECUTION OF THIS AGREEMENT, AND AT ANY TIME FROM TIME TO TIME
THEREAFTER, ALL FINANCING STATEMENTS, AMENDMENTS TO FINANCING STATEMENTS,
CHATTEL MORTGAGES, ASSIGNMENTS, AND ALL OTHER INSTRUMENTS, IN FORM SATISFACTORY
TO KCL, AND TAKE ALL OTHER ACTION AS KCL MAY REASONABLY REQUIRE, TO PERFECT AND
CONTINUE PERFECTED, MAINTAIN THE PRIORITY OF OR PROVIDE NOTICE OF KCL'S SECURITY
IN THE COLLATERAL. BORROWER HEREBY APPOINTS KCL, OR ITS ASSIGNEE, AND ANY OF
KCL'S OR ASSIGNEE'S OFFICERS OR EMPLOYEES AS ITS TRUE AND LAWFUL ATTORNEY IN
FACT, IRREVOCABLY AND COUPLED WITH AN INTEREST, TO EXECUTE AND FILE ON BEHALF OF
BORROWER ALL UCC FINANCING STATEMENTS WHICH IN KCUS SOLE DISCRETION ARE
NECESSARY OR PROPER TO SECURE KCL'S INTEREST IN THE COLLATERAL IN ALL APPLICABLE
JURISDICTIONS. Borrower hereby ratifies, to the extent permitted by law, all
that KCL shall lawfully and in good faith do or cause to be done by reason of
and in compliance with this paragraph. The Borrower further covenants and agrees
that it will not change its legal name, be a party to a merger, consolidation or
other change in structure (in which it is not the surviving entity) or use a
trade name in its business without at least 30 days' prior written notice to
KCL; and shall execute and deliver to KCL (to be filed at Borrower's expense)
all UCC statements as may be required by KCL in connection with such event.
26. MISCELLANEOUS. Time is of the essence with respect to this
Agreement. ANY FAILURE OF KCL TO REQUIRE STRICT PERFORMANCE BY BORROWER OR ANY
WAIVER BY KCL OF ANY PROVISION HEREIN SHALL NOT BE CONSTRUED AS A CONSENT OR
WAIVER OF ANY PROVISION OF THIS AGREEMENT. None of the Loan Documents may be
amended except by a writing signed by KCL and Borrower. This Agreement will be
binding upon KCL only if executed by a duly authorized officer or representative
of KCL at KCL's principal place of business as set forth above. This Agreement
and all other Loan Documents shall be executed on Borrower's behalf by
Authorized Signers of Borrower. The Borrower hereby waives presentment, notice
of dishonor and protest of all instruments included in or evidencing any Secured
Obligations, and all other notices and demands whatsoever (except as expressly
provided herein). THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR RULE
(WHETHER OF THE
14
<PAGE>
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
27. JURY TRIAL WAIVER. KCL AND BORROWER HEREBY EACH WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH KCL OR BORROWER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY, OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND
VOLUNTARILY BY KCL AND THE BORROWER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN
ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
28. MORE THAN ONE BORROWER. If more than one person or entity executes
this Agreement, each of the other Loan Documents, and all addenda or other
documents executed in connection herewith or therewith, as "Borrower," the
obligations of "Borrower" contained herein and therein shall be deemed joint and
several and all references to "Borrower" shall apply both individually and
jointly.
29. ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, collectively constitute the entire understanding or agreement between
KCL and Borrower with respect to the financing of the Vessel, and there is no
understanding or agreement, oral or written, which is not set forth herein or
therein. This Agreement shall not be modified except by the written agreement of
KCL and Borrower.
30. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same instrument.
31. JURISDICTION/ACTIONS AND PROCEEDINGS. The provisions of this
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns. Any legal action or
proceeding against Borrower with respect to this Agreement may be brought in
such of the courts of competent jurisdiction of the State of New York in the
City of Albany or in the United States District Court for the Northern District
of New York, as KCL or its successors and assigns may elect, and by execution
and delivery of this Agreement, Borrower irrevocably submits to the nonexclusive
jurisdiction of such courts, and to appellate courts therefrom, and, in the case
of any such legal action or proceeding brought in the above-named New York
courts, Borrower hereby irrevocably consents to the services of process by the
mailing of copies thereof by registered mail, postage prepaid, to Borrower at
its address as provided on the first page hereof, or by any other means
permitted by Applicable Law. If it becomes necessary for the purpose of service
of process out of any such courts, Borrower shall take all such action as may be
required to authorize a special agent to receive, for and on behalf of it,
service of process in any such legal action or proceeding, and shall take all
such action as may be necessary to continue said appointment in full force and
effect so that Borrower will at all times
15
<PAGE>
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
have an agent for service of process for the above purposes in New York, New
York. To the extent permitted by Applicable Law, a final, unappealable judgment
(a certified copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness of Borrower to KCL) against Borrower in any such
legal action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on an unsatisfied judgment. To the extent that Borrower
has or hereafter may acquire any immunity from jurisdiction of any of the
above-named courts or from any Panama court or from any legal process therein,
Borrower hereby irrevocably waives such immunity, and Borrower hereby
irrevocably waives and agrees not to assert, by way of motion, as a defense or
otherwise, in any legal action or proceeding brought hereunder in any of the
above-named courts or in any Panama court: (i) the defense of sovereign
immunity; (ii) any claim that it is not personally subject to the jurisdiction
of the above-named courts or any Panama court by reason of sovereign immunity or
otherwise; (iii) that it or any of its property is immune from the
above-described legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, or otherwise); (iv) that such
action or proceeding is brought in an inconvenient forum, that venue for the
action or proceeding is improper or that this Agreement or any other document
evidencing the Loan may not be enforced in or by such courts; or (v) any defense
that would hinder or delay the levy, execution or collection of any amount to
which any party hereto is entitled pursuant to a final, unappealable judgment of
any court having jurisdiction. Nothing in these provisions shall limit any right
of KCL to bring actions, suits or proceedings in the courts of any other
jurisdiction.
16
<PAGE>
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, Borrower and Lender have executed this Security
Agreement the date first above written.
LENDER BORROWER:
KEYCORP LEASING, A DIVISION OF KEY AZURE INVESTMENTS, INC.
CORPORATE CAPITAL, INC.
By: /s/ Kelly Reale By: /s/ Frederick A. Mayer
------------------------------- -----------------------------
Name: Kelly Reale Name: Frederick A. Mayer
Title: Assistant Team Leader Title: Attorney-in-fact
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 4th day of December, 1998, before me, a Notary Public in and
for the State of New York, personally appeared Frederick A. Mayer, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person who executed this instrument, on oath stated that s/he was authorized to
execute the instrument, and acknowledged it as the Attorney-in-fact of AZURE
INVESTMENTS, INC., a Panama corporation, to be the free and voluntary act and
deed of said corporation for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Leslie Majer
-----------------------------------------------
NOTARY PUBLIC in and for the State of New York,
My appointment expires October 31, 1999
Print Name Leslie Majer
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 4th day of December, 1998, before me, a Notary Public in and
for the State of New York, personally appeared Kelly Reale, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person who
executed this instrument, on oath stated that s/he was authorized to execute the
instrument, and acknowledged it as the Assistant Team Leader of KEYCORP LEASING,
A DIVISION OF KEY CORPORATE CAPITAL INC., to be the free and voluntary act and
deed of said corporation for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Leslie Majer
-----------------------------------------------
NOTARY PUBLIC in and for the State of New York,
My appointment expires October 31, 1999
Print Name Leslie Majer
17
<PAGE>
COLLATERAL SCHEDULE
Schedule 1
- --------------------------------------------------------------------------------
DESCRIPTION OF COLLATERAL.
FLAG OF VESSEL: Republic of Panama
VESSEL DESCRIPTION
Marine Vessel described as:
NAME UNIVERSE EXPLORE
LENGTH 173.74 meters
BREADTH 25.60 meters
DEPTH 33.94 meters
GROSS TONS Approximately 22,162
NET TONS Approximately (6,648)
NUMBER OF ENGINES TWO
BUILDER INGALS SHIPBUILDING CORPORATION (1958)
REGISTRATION NUMBER 14064-84-G
RADIO CALL LETTERS 3FMF2
and all equipment attached to the Vessel, parts, spare parts,
furnishings, supplies, fixtures, and replacements and proceeds thereof, and all
proceeds of the foregoing, except such items owned by Space Charterer.
18
EXHIBIT 10.ff
PROMISSORY NOTE
- --------------------------------------------------------------------------------
$10,000,000 Funding Date: December 4, 1998
FOR VALUE RECEIVED, AZURE INVESTMENTS, INC., a Panama corporation
("Maker"), promises to pay to the order of KEYCORP LEASING, A DIVISION OF KEY
CORPORATE CAPITAL INC. ("Holder"), the sum of Ten Million U.S. Dollars
($10,000,000 U.S.) in lawful money of the United States of America (the
"Principal"), with interest thereon as hereafter provided ("Interest"), to be
paid in the manner set forth herein. This Promissory Note ("Note") is executed
pursuant to that certain Loan and Security Agreement (the "Security Agreement")
and that certain First Preferred Marine Mortgage, each dated as of December 4,
1998, between Maker and Holder.
1. INTEREST RATE; PLACE OF PAYMENT. Interest on the balance of the Principal
outstanding on this Note shall accrue from the Funding Date of this Note and
shall be due and payable at a rate of the Prime Rate plus 80 basis points per
annum (the "Interest Rate"), which rate shall be immediately and correspondingly
adjusted (pursuant to paragraph 2(b) hereof) with each change in the Actual
Index (as hereinafter defined). Interest shall be calculated on the basis of a
360-day year consisting of twelve 30-day months. Payment of the Principal and
Interest hereunder shall be made to Holder at P.O. Box 1865, Albany, New York
12201-1865, or at such other place as Holder may designate from time to time in
writing. Holder reserves the right to require payment on this Note to be made by
wired federal funds or other immediately available funds.
2. REPAYMENT TERMS. (a) The Principal and Interest shall be due and payable in
ninety-six (96) consecutive monthly installments payable in arrears. Principal
and Interest shall be as set forth in the amortization schedule attached hereto
as SCHEDULE 1, which payments shall be adjusted pursuant to paragraph 2(b). Each
monthly payment shall also include accrued Interest on the outstanding Principal
balance. Monthly payments of Principal and Interest shall commence and be due
and payable on the date which is the first business day of the month after the
Funding Date and on the same day of each month thereafter (each, a "Note Payment
Date"). In addition, Maker will pay a late payment charge of five percent (5%)
of any payment due hereunder that is not paid within five (5) business days
after the date due hereunder.
(b) Maker and Holder agree that each Note payment hereunder shall be
increased or decreased (but not below zero), as the case may be, by the Rate
Differential (as hereinafter defined) as follows: if, as of any Note Payment
Date, (i) the Rate Differential is greater than zero, the amount due on such
Note Payment Date shall be increased by such Rate Differential, and (ii) the
Rate Differential is less than zero, the amount of the Note Payment due on such
Note Payment Date shall be decreased by such Rate Differential.
(c) As used herein, the following terms shall have the respective
meanings indicated below:
(1) "Assumed Index" shall mean eight and one half percent
(8.5%).
(2) "Actual Index" shall mean, as of the date of
determination, the "prime rate" announced in THE WALL STREET JOURNAL,
published on such day, or if THE WALL STREET JOURNAL is not published
on such day, then the "prime rate" announced in the most recently
published edition of THE WALL STREET JOURNAL. If the Actual Index is no
longer available, Holder will choose
1
<PAGE>
a new index which is based upon comparable information and will give
Maker notice of such new "Actual Index."
(3) "Daily Equivalent" shall mean, as of the date of
determination, the product of the following formula:
================================================================================
DAILY EQUIVALENT = ACTUAL INDEX - ASSUMED INDEX X NET INVESTMENT BALANCE
----------------------------
360
================================================================================
(4) "Net Investment Balance" shall mean, as of the date of
determination, the outstanding balance (initially calculated using the
Assumed Index plus 80 basis points) reflected on Holder's lease
accounting system (which assumes a 360-day year consisting of twelve
30-day months), for the Note Payment Date immediately preceding such
day or, if such day is a Note Payment Date, for such Note Payment Date.
(5) "Rate Differential" shall mean, with respect to any Note
Payment Date, the sum of all Daily Equivalents (calculated on the basis
of a 360-day year consisting of twelve 30-day months) for the 30-day
month to which such Note Payment Date relates.
3. SECURITY. Payment of the Principal and Interest hereunder, and the
performance and observance by Maker of all agreements, covenants and provisions
contained herein, are secured by a first priority security interest in the
Collateral.
4. PREPAYMENT. Maker may not prepay, in whole or in part, the Principal
outstanding hereunder; PROVIDED, HOWEVER that Maker may prepay, in whole but not
in part, the Principal outstanding hereunder by paying to Holder such
outstanding Principal, together with all accrued and unpaid interest thereon,
plus a prepayment premium ("Prepayment Premium") equal to five percent (5%) of
the amount prepaid if such prepayment shall occur during months one through
twelve (1-12); three percent (3%) if the prepayment occurs during months
thirteen through twenty-four (13-24); two percent (2%) if the prepayment occurs
during months twenty-five through thirty-six (25-36); one percent (1%) if the
prepayment occurs during months thirty-seven through forty-eight (37-48). There
shall be no Prepayment Premium for prepayment after the forty-eighth (48th)
month.
5. TRANSFER OR ASSIGNMENT. Holder may at any time assign or otherwise transfer
or negotiate this Note in whole or in part, without any notice to Maker. The
rights and obligations of Maker may not be assigned or delegated.
6. APPLICATION OF PAYMENTS. Prior to an Event of Default, each payment received
on this Note shall be applied first to all costs of collection, then to unpaid
late payment charges (if any) and Prepayment Premium (if any) hereunder, then to
Interest as of the payment due date and the balance, if any, to the outstanding
Principal as of the date received. Upon the occurrence, and during the
continuance, of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral when received by Holder in cash
or its equivalent, will be applied first to costs of collection and, thereafter,
in reduction of the Secured Obligations in such order and manner as Holder may
direct in its sole discretion, and Maker irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
Holder shall have the continuing and exclusive right to apply any and all such
payments and proceeds in the Holder's sole discretion, notwithstanding any entry
to the contrary upon any of its books and records.
2
<PAGE>
7. WITHHOLDING TAXES. Each payment to be made by Maker under this Note shall be
made free and clear of, and without deductions or withholding of, or on account
of, any present or future taxes, duties, assessments or charges of whatsoever
nature together with any liabilities (including penalties, interest and
expenses) in respect thereof imposed or levied on or on behalf of the government
of the Republic of Panama or any political subdivision thereof or any authority
or agency thereof having the power to tax ("Panama Withholding Taxes"). If the
payment of Panama Withholding Taxes is required, Maker shall either: (i) pay any
such additional amount to Holder as may be necessary to ensure that Holder
receive and retain a net sum after such deduction, withholding or payment of
Panama Withholding Taxes, equal to the sum that Holder would have received and
retained had no such deduction or withholding of Panama Withholding Taxes been
made or required to be made and promptly deliver to Holder the forms prescribed
by the relevant authority of such Panama Withholding Taxes; or (ii) pay the full
amount of Panama Withholding Taxes due to the relevant authority within the time
provided thereunder, or within ten (10) days of demand therefore by Holder, in
accordance with Applicable Law, without recourse against Holder, and deliver to
Holder proof of payment of such Panama Withholding Taxes within twenty (20) days
of demand therefor by Holder. Maker hereby agrees to indemnify and hold harmless
Holder on an after-tax basis, for any Panama Withholding Taxes that become
payable and/or are paid by Holder in respect of any payment made by Maker under
this Note. Holder shall promptly notify Maker of any Panama Withholding Taxes in
respect of which it has paid or received an assessment or reassessment from any
Panama taxing authority and for which Maker is required to indemnify Holder and
of the amount payable to Holder by Maker, and Maker shall indemnify Holder
within ten (10) days of the receipt of such notice. Holder shall reasonably
determine the amount payable to it.
8. EVENTS OF DEFAULT. (a) Maker shall be in default if any of the following
happens (each an "Event of Default"): (1) Maker fails to make any installment of
the Principal or Interest, or any other payment due and owing, under this Note
within ten (10) business days after the same becomes due and payable; or (2)
Maker fails to perform any other obligation required to be performed by Maker
under this Note, the Security Agreement or any of the other Loan Documents for
thirty (30) days after written notice from Holder of such failure; or (3) any
representation, warranty or other statement by Maker in this Note is false or
misleading in any material respect; (4) an Event of Default has occurred and is
continuing under the Security Agreement; or, (5) an Event of Default has
occurred and is continuing under the First Preferred Marine Mortgage.
(b) Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default: (i) Holder may declare the entire outstanding
balance of the Principal, together with all accrued and unpaid Interest thereon,
immediately due and payable without notice or demand, which amounts shall,
together with all other sums due hereunder, accrue interest from such
acceleration until the date of actual payment at the Default Rate (provided,
however, that should there occur an Event of Default, and if a voluntary
petition or involuntary petition (which is not dismissed within 60 days after
filing) under the United States Bankruptcy Code is filed by or against Maker
while such default remains uncured, the entire outstanding balance of the
Principal automatically shall be accelerated and due and payable with interest
thereon at the Default Rate), and Holder may exercise any and all of its
remedies hereunder, under the other Loan Documents and under Applicable Law. The
remedies of Holder provided herein, in the Security Agreement and under
Applicable Law shall be cumulative and concurrent and may be pursued singly,
successively or concurrently at the sole discretion of Holder and may be
exercised as often as occasion therefor shall occur. The failure to exercise, or
any delay in the exercise of, any right or remedy shall in no event be construed
as a waiver, release or exhaustion of any such remedies.
3
<PAGE>
9. COLLECTION COSTS. In addition to the Principal, Interest, Prepayment Premium
(if any), and late payment charges (if any), Maker shall pay Holder on demand,
and Holder shall be entitled to collect all costs and expenses of collection,
including, without limitation, reasonable attorneys' fees, incurred in
connection with enforcement of its rights and remedies hereunder and under the
other Loan Documents, the protection or realization of the Collateral or in
connection with Holder's collection efforts, or in connection with any
bankruptcy or other judicial proceeding, whether or not suit on this Note or any
foreclosure proceeding is filed. All such costs and expenses shall be payable on
demand and, until paid, shall be Secured Obligations secured by the security
interest granted under the Security Agreement and all other collateral, if any,
held by Holder as security for Maker's obligations under this Note.
10. GOVERNING LAW; BINDING AGREEMENT. The provisions of this Note shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns. THIS NOTE IS BEING EXECUTED AND DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT
OF LAWS PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
11. MORE THAN ONE SIGNER. If more than one person or entity signs this Note as a
Maker, the obligations contained herein shall be deemed joint and several and
all references to "Maker" shall apply both jointly and severally.
12. GENERAL. Maker represents and warrants that this Note evidences a loan for
business or commercial purposes. Prior to signing this Note, Maker read and
understood the provisions hereof, and agrees to all terms and conditions
contained herein.
13. WAIVER. MAKER AND ALL ENDORSERS, SURETIES, AND GUARANTORS HEREOF HEREBY
JOINTLY AND SEVERALLY WAIVE PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF
NONPAYMENT OR DISHONOR, NOTICE OF INTENTION TO ACCELERATE THE MATURITY, NOTICE
OF PROTEST AND PROTEST OF THIS NOTE. HOLDER AND MAKER HEREBY EACH WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF OR RELATED TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH HOLDER OR MAKER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY, OF THIS NOTE OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY
HOLDER AND THE MAKER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE
BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY
OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE AND THE OTHER LOAN
DOCUMENTS.
4
<PAGE>
14. USURY; PARTIAL INVALIDITY. (a) At no time shall the Interest Rate (or the
Default Rate or other amounts paid or collected hereunder) exceed the highest
rate allowed by applicable law for this type of loan. Should Holder ever collect
interest at a rate that exceeds such applicable legal limit, such excess will be
credited to the Principal.
(b) Whenever possible, each provision of this Note shall be interpreted
in such manner as to be effective and valid under Applicable Law, but if any
provision of this Note shall be prohibited by or invalid under the laws of any
applicable jurisdiction, such provision, as to such jurisdiction, shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note in any other jurisdiction.
15. ACTIONS AND PROCEEDINGS. Any legal action or proceeding against Maker with
respect to this Note may be brought in such of the courts of competent
jurisdiction of the State of New York in the City of Albany or in the United
States District Court for the Northern District of New York, as Holder or its
successors and assigns may elect, and by execution and delivery of this Note,
Maker irrevocably submits to the nonexclusive jurisdiction of such courts, and
to appellate courts therefrom, and, in the case of any such legal action or
proceeding brought in the above-named New York courts, Maker hereby irrevocably
consents to the services of process by the mailing of copies thereof by
registered mail, postage prepaid, to Maker at its address as provided in
Paragraph 16 hereof, or by any other means permitted by Applicable Law. If it
becomes necessary for the purpose of service of process out of any such courts,
Maker shall take all such action as may be required to authorize a special agent
to receive, for and on behalf of it, service of process in any such legal action
or proceeding, and shall take all such action as may be necessary to continue
said appointment in full force and effect so that Maker will at all times have
an agent for service of process for the above purposes in New York, New York. To
the extent permitted by Applicable Law, a final, unappealable judgment (a
certified copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness of Maker to Holder) against Maker in any such legal
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on an unsatisfied judgment. To the extent that Maker has
or hereafter may acquire any immunity from jurisdiction of any of the
above-named courts or from any Panama court or from any legal process therein,
Maker hereby irrevocably waives such immunity, and Maker hereby irrevocably
waives and agrees not to assert, by way of motion, as a defense or otherwise, in
any legal action or proceeding brought hereunder in any of the above-named
courts or in any Panama court: (i) the defense of sovereign immunity; (ii) any
claim that it is not personally subject to the jurisdiction of the above-named
courts or any Panama court by reason of sovereign immunity or otherwise; (iii)
that it or any of its property is immune from the above-described legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution, or otherwise), (iv) that such action or proceeding is brought
in an inconvenient forum, that venue for the action or proceeding is improper or
that this Note or any other document evidencing the Loan may not be enforced in
or by such courts; or (v) any defense that would hinder or delay the levy,
execution or collection of any amount to which any party hereto is entitled
pursuant to a final, unappealable judgment of any court having jurisdiction.
Nothing in these provisions shall limit any right of Holder to bring actions,
suits or proceedings in the courts of any other jurisdiction.
16. NOTICES. All notices and other communications under this Note shall be in
writing and shall be addressed: (i) if to Maker, c/o Commodore Holdings Limited,
4000 Hollywood Boulevard, Suite 385-S, South Tower, Hollywood, Florida 33021;
and (ii) if to Holder, KeyCorp Leasing, a Division of Key Corporate Capital
Inc., 54 State Street, Albany, New York 12207, Attention: Account Manager, or
such other address as either party hereto shall communicate to the other party
at its address specified above. All such notices and other communications shall
be deemed to have been duly given if delivered by hand,
5
<PAGE>
overnight courier or if sent by certified mail, return receipt requested, to the
party to whom such notice is intended to be given, and shall be effective upon
receipt.
17. FUNDING DATE. The Funding Date for this Note shall be the date on which
Holder disburses funds hereunder. TO THE EXTENT THE FUNDING DATE IS LEFT BLANK
ABOVE, OR DOES NOT REFLECT THE ACTUAL DATE THAT HOLDER DISBURSES FUNDS
HEREUNDER, MAKER HEREBY AUTHORIZES HOLDER TO WRITE IN THE CORRECT DATE AT THE
TIME OF DISBURSEMENT.
18. DEFINED TERMS. Unless otherwise defined herein, all capitalized terms shall
have the meanings assigned to them in the Security Agreement.
[The remainder of this page is intentionally blank. Signature page follows.]
6
<PAGE>
IN WITNESS WHEREOF, Maker, intending to be legally bound, has caused
this Note to be duly executed on the day and year first above written.
MAKER:
AZURE INVESTMENTS, INC.
By: /s/ Frederick A. Mayer
---------------------------------------------
Name: Frederick A. Mayer
Title: Attorney-in-fact
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 4th day of December, 1998, before me, a Notary Public in and
for the State of New York, personally appeared Frederick A. Mayer, personally
known to me (or provided to me on the basis of satisfactory evidence) to be the
person who executed this instrument, on oath stated that s/he was authorized to
execute the instrument, and acknowledged it as the Attorney-in-fact of AZURE
INVESTMENTS, INC., a Panama corporation, to be the free and voluntary act and
deed of said corporation for the uses and purposes mentioned in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/s/ Leslie Majer
-----------------------------------------------
NOTARY PUBLIC in and for the State of New York,
My appointment expires October 31, 1999
Print Name Leslie Majer
7
<PAGE>
SCHEDULE 1
Prepare Dec-02-1998 15:22 by Ron Bruzdinski
Parameter filename azu01
Parameter path c:\ivory\prms\
Comment Azure
Average life 6,528 years
Average rate 8.550000000
<TABLE>
<CAPTION>
STARTING DEBT ENDING
DATE BALANCE TAKEDOWNS SERVICE INTEREST PRINCIPAL BALANCE
<S> <C> <C> <C> <C> <C> <C>
Dec-04-98 0.00 10,000,000.00 0.00 0.00 0.00 10,000,000.00
------------- ------------ ---------- ----------
10,000,000.00 0.00 0.00 0.00 10,000,000.00
Jan-04-99 10,000,000.00 0.00 112,916.67 71,250.00 41,666.67 9,958,333.33
Feb-04-99 9,958,333.33 0.00 112,619.79 70,953.12 41,666.67 9,916,666.66
Mar-04-99 9,916,666.66 0.00 112,322.92 70,656.25 41,666.67 9,874,999.99
Apr-04-99 9,874,999.99 0.00 112,026.04 70,359.37 41,666.67 9,833,333.32
May-04-99 9,833,333.32 0.00 111,729.17 70,062.50 41,666.67 9,791,666.65
Jun-04-99 9,791,666.65 0.00 111,432.29 69,765.62 41,666.67 9,749,999.98
Jul-04-99 9,749,999.98 0.00 111,135.42 69,468.75 41,666.67 9,708,333.31
Aug-04-99 9,708,333.31 0.00 110,838.54 69,171.87 41,666.67 9,666,666.64
Sep-04-99 9,666,666.64 0.00 110,541.67 68,875.00 41,666.67 9,624,999.97
Oct-04-99 9,624,999.97 0.00 110,244.79 68,578.12 41,666.67 9,583,333.30
Nov-04-99 9,583,333.30 0.00 109,947.92 68,281.25 41,666.67 9,541,666.63
Dec-04-99 9,541,666.63 0.00 109,651.04 67,984.37 41,666.67 9,499,999.96
------------- ------------ ---------- ----------
0.00 1,335,406.29 835,406.25 500,000.04
Jan-04-00 9,499,999.96 0.00 98,541.61 67,687.50 30,854.11 9,469,145.85
Feb-04-00 9,469,145.85 0.00 98,541.61 67,467.66 31,073.95 9,438,071.90
Mar-04-00 9,438,071.90 0.00 98,541.61 67,246.26 31,295.35 9,406,776.55
Apr-04-00 9,406,776.55 0.00 98,541.61 67,023.28 31,518.33 9,375,258.22
May-04-00 9,375,258.22 0.00 98,541.61 66,798.71 31,742.90 9,343,515.33
Jun-04-00 9,343,515.33 0.00 98,541.61 66,572.55 31,969.06 9,311,546.26
Jul-04-00 9,311,546.26 0.00 98,541.61 66,344.77 32,196.84 9,279,349.42
Aug-04-00 9,279,349.42 0.00 98,541.61 66,115.36 32,426.25 9,246,923.17
Sep-04-00 9,246,923.17 0.00 98,541.61 65,884.33 32,657.28 9,214,265.89
Oct-04-00 9,214,265.89 0.00 98,541.61 65,651.64 32,889.97 9,181,375.92
Nov-04-00 9,181,375.92 0.00 98,541.61 65,417.30 33,124.31 9,148,251.61
Dec-04-00 9,148,251.61 0.00 98,541.61 65,181.29 33,360.32 9,114,891.29
------------- ------------ ---------- ----------
1,182,499.34 797,390.65 385,108.67
Jan-04-01 9,114,891.29 0.00 98,541.61 64,943.60 33,598.01 9,081,293.28
Feb-04-01 9,081,293.28 0.00 98,541.61 64,704.21 33,837.40 9,047,455.89
Mar-04-01 9,047,455.89 0.00 98,541.61 64,463.12 34,078.49 9,013,377.40
Apr-04-01 9,013,377.40 0.00 98,541.61 64,220.31 34,321.30 8,979,056.10
May-04-01 8,979,056.10 0.00 98,541.61 63,975.77 34,565.84 8,944,490.26
Jun-04-01 8,944,490.26 0.00 98,541.61 63,729.49 34,812.12 8,909,678.15
Jul-04-01 8,909,678.15 0.00 98,541.61 63,481.46 35,060.15 8,874,617.99
Aug-04-01 8,874,617.99 0.00 98,541.61 63,231.65 35,309.96 8,839,308.03
Sep-04-01 8,839,308.03 0.00 98,541.61 62,980.07 35,561.54 8,803,746.49
Oct-04-01 8,803,746.49 0.00 98,541.61 62,726.69 35,814.92 8,767,931.57
Nov-04-01 8,767,931.57 0.00 98,541.61 62,471.51 36,070.10 8,731,861.48
Dec-04-01 8,731,861.48 0.00 98,541.61 62,214.51 36,327.10 8,695,534.38
------------- ------------ ---------- ----------
0.00 1,182,499.34 763,142.42 419,356.92
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
STARTING DEBT ENDING
DATE BALANCE TAKEDOWNS SERVICE INTEREST PRINCIPAL BALANCE
<S> <C> <C> <C> <C> <C> <C>
Jan-04-02 8,699,534.38 0.00 98,541.61 61,555.68 36,585.93 8,658,948.45
Feb-04-02 8,658,948.45 0.00 98,541.61 61,695.01 36,845.60 8,622,101.84
Mar-04-02 8,622,101.84 0.00 98,541.61 61,432.48 37,109.14 8,584,992.71
Apr-04-02 8,584,992.71 0.00 98,541.61 61,168.07 37,373.54 8,547,619.17
May-04-02 8,547,619.17 0.00 98,541.61 60,901.79 37,639.82 8,509,979.35
Jun-04-02 8,509,979.35 0.00 98,541.61 60,633.60 37,908.01 8,472,071.34
Jul-04-02 8,472,071.34 0.00 98,541.61 60,363.51 38,178.10 8,433,893.23
Aug-04-02 8,433,893.23 0.00 98,541.61 60,091.49 38,450.12 8,395,443.11
Sep-04-02 8,395,443.11 0.00 98,541.61 59,817.53 38,724.08 8,356,719.03
Oct-04-02 8,356,719.03 0.00 98,541.61 59,541.62 38,999.99 8,317,719.04
Nov-04-02 8,317,719.04 0.00 98,541.61 59,263.75 39,277.86 8,278,441.18
Dec-04-02 8,278,441.18 0.00 98,541.61 58,983.89 39,557.72 8,238,883.46
---- ------------ ---------- ----------
0.00 1,182,499.34 725,848.42 456,650.91
Jan-04-03 8,238,883.46 0.00 98,541.61 58,702.04 39,839.57 8,199,043.90
Feb-04-03 8,199,043.90 0.00 98,541.61 58,418.19 40,123.42 8,158,920.47
Mar-04-03 8,158,920.47 0.00 98,541.61 58,132.31 40,409.30 8,118,511.17
Apr-04-03 8,118,511.17 0.00 98,541.61 57,844.39 40,697.22 8,077,813.95
May-04-03 8,077,813.95 0.00 98,541.61 57,554.42 40,987.19 8,036,826.76
Jun-04-03 8,036,826.76 0.00 98,541.61 57,262.39 41,279.22 7,995,547.54
Jul-04-03 7,995,547.54 0.00 98,541.61 56,968.28 41,573.34 7,953,974.21
Aug-04-03 7,953,974.21 0.00 98,541.61 56,672.07 41,869.55 7,912,104.66
Sep-04-03 7,912,104.66 0.00 98,541.61 56,373.75 42,167.87 7,869,936.80
Oct-04-03 7,869,936.80 0.00 98,541.61 56,073.30 42,468.31 7,827,468.49
Nov-04-03 7,827,468.49 0.00 98,541.61 55,770.71 42,770.90 7,784,697.59
Dec-04-03 7,784,697.59 0.00 98,541.61 55,465.97 43,075.64 7,741,621.95
---- ------------ ---------- ----------
0.00 1,182,499.34 685,237.82 497,261.52
Jan-04-04 7,741,621.95 0.00 98,541.61 55,159.06 43,382.55 7,698,239.39
Feb-04-04 7,698,239.39 0.00 98,541.61 54,849.96 43,691.66 7,654,547.74
Mar-04-04 7,654,547.74 0.00 98,541.61 54,538.65 44,002.96 7,610,544.78
Apr-04-04 7,610,544.78 0.00 98,541.61 54,225.13 44,316.48 7,566,228.30
May-04-04 7,566,228.30 0.00 98,541.61 53,909.38 44,632.23 7,521,596.06
Jun-04-04 7,521,596.06 0.00 98,541.61 53,591.37 44,950.24 7,476,645.82
Jul-04-04 7,476,645.82 0.00 98,541.61 53,271.10 45,270.51 7,431,375.31
Aug-04-04 7,431,375.31 0.00 98,541.61 52,948.55 45,593.06 7,385,782.25
Sep-04-04 7,385,782.25 0.00 98,541.61 52,623.70 45,917.91 7,339,864.34
Oct-04-04 7,339,864.34 0.00 98,541.61 52,296.53 46,245.08 7,293,619.26
Nov-04-04 7,293,619.26 0.00 98,541.61 51,967.04 46,574.57 7,247,044.69
Dec-04-04 7,247,044.69 0.00 98,541.61 51,635.19 46,906.42 7,200,138.27
---- ------------ ---------- ----------
0.00 1,182,499.34 641,015.66 541,483.68
Jan-04-05 7,200,138.27 0.00 98,541.61 51,300.98 47,240.63 7,152,897.64
Feb-04-05 7,152,897.64 0.00 98,541.61 50,964.40 47,577.22 7,105,320.43
Mar-04-05 7,105,320.43 0.00 98,541.61 50,625.41 47,916.20 7,057,404.22
Apr-04-05 7,057,404.22 0.00 98,541.61 50,284.01 48,257.61 7,009,146.62
May-04-05 7,009,146.62 0.00 98,541.61 49,940.17 48,601.44 6,960,545.18
Jun-04-05 6,960,545.18 0.00 98,541.61 49,593.88 48,947.73 6,911,597.45
Jul-04-05 6,911,597.45 0.00 98,541.61 49,245.13 49,296.48 6,862,300.97
Aug-04-05 6,862,300.97 0.00 98,541.61 48,893.89 49,647.72 6,812,653.25
Sep-04-05 6,812,653.25 0.00 98,541.61 48,540.15 50,001.46 6,762,651.79
Oct-04-05 6,762,651.79 0.00 98,541.61 48,183.89 50,357.72 6,712,294.08
Nov-04-05 6,712,294.08 0.00 98,541.61 47,825.10 50,716.52 6,661,577.56
Dec-04-05 6,661,577.56 0.00 98,541.61 47,463.74 51,077.87 6,610,499.69
---- ------------ ---------- ----------
0.00 1,182,499.34 592,860.76 589,638.58
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
STARTING DEBT ENDING
DATE BALANCE TAKEDOWNS SERVICE INTEREST PRINCIPAL BALANCE
<S> <C> <C> <C> <C> <C> <C>
Jan-04-06 6,610,499.69 0.00 98,541.61 47,099.81 51,441.80 6,559,057.89
Feb-04-06 6,559,057.89 0.00 98,541.61 46,733.29 51,808.32 6,507,249.57
Mar-04-06 6,507,249.57 0.00 98,541.61 46,364.15 52,177.46 6,455,072.11
Apr-04-06 6,455,072.11 0.00 98,541.61 45,992.39 52,549.22 6,402,522.88
May-04-06 6,402,522.88 0.00 98,541.61 45,617.98 52,923.64 6,349,599.25
Jun-04-06 6,349,599.25 0.00 98,541.61 45,240.89 53,300.72 6,296,298.53
Jul-04-06 6,296,298.53 0.00 98,541.61 44,861.13 53,680.48 6,242,618.05
Aug-04-06 6,242,618.05 0.00 98,541.61 44,478.65 54,062.96 6,188,555.09
Sep-04-06 6,188,555.09 0.00 98,541.61 44,093.46 54,448.16 6,134,106.93
Oct-04-06 6,134,106.93 0.00 98,541.61 43,705.51 54,836.10 6,079,270.83
Nov-04-06 6,079,270.83 0.00 98,541.61 43,314.80 55,226.81 6,024,044.03
Dec-04-06 6,024,044.03 0.00 6,066,965.34 42,921.31 6,024,044.03 0.00
------------- ------------- ------------ -------------
0.00 7,150,923.07 540,423.38 6,610,499.69
TOTAL 10,000,000.00 15,581,325.37 5,581,325.37 10,000,000.00
============= ============= ============ =============
</TABLE>
10
EXHIBIT 10.gg
(Local Currency-Single Jurisdiction)
ISDA
International Swap Dealers Association, Inc.
MASTER AGREEMENT
Dated as of: DECEMBER 4, 1998
KEY CORPORATE CAPITAL INC. and AZURE INVESTMENTS, INC.
- -------------------------- -----------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 12 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in
each Confirmation to be made by it, subject to the other
provisions of this Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in
the relevant Confirmation or otherwise pursuant to this
Agreement, in freely transferable funds and in the manner
customary for payments in the required currency. Where
settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise
specified in the relevant Confirmation or elsewhere in this
Agreement.
1
<PAGE>
(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default or
Potential Event of Default with respect to the other party has
occurred and is continuing, (2) the condition precedent that
no Early Termination Date in respect of the relevant
Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in
this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:
(i) in the same currency; and
(ii) in respect of the same Transaction
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of branches or offices through which the parties make
and receive payments or deliveries.
(d) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
2
<PAGE>
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organized and validly existing under the
laws of the jurisdiction of its organization or incorporation
and, if relevant under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any
other documentation relating to this Agreement to which it is
a party, to deliver this Agreement and any other documentation
relating to this Agreement that it is required by this
Agreement to deliver and to perform its obligations under this
Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary
action to authorize such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable
to it, any provision of its constitutional documents, any
order or judgment of any court or other agency of government
applicable to it or any of its assets or any contractual
restriction binding on or affecting it or any of its assets;
(iv) CONSENTS. All governmental and other consents that are
required to have been obtained by it with respect to this
Agreement or any Credit Support Document to which it is a
party have been obtained and are in full force and effect and
all conditions of any such consents have been complied with;
and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and
any Credit Support Document to which it is a party constitute
its legal, valid and binding obligations, enforceable in
accordance with their respective terms (subject to applicable-
bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding
in equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
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(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party any forms,
documents or certificates specified in the Schedule or any Confirmation by the
date specified in the Schedule or such Confirmation or, if none is specified, as
soon as reasonably practicable.
(b) MAINTAIN AUTHORIZATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when
due, any payment under this Agreement or delivery under
Section 2(a)(i) or 2(d) required to be made by it if such
failure is not remedied on or before the third Local Business
Day after notice of such failure is given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation
to make any payment under this Agreement or delivery under
Section 2(a)(i) or 2(d) or to give notice of a Termination
Event) to be complied with or performed by the party in
accordance with this Agreement if such failure is not remedied
on or before the thirtieth day after notice of such failure is
given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of
such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit
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Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit
Support Document to be in full force and effect for the
purpose of this Agreement (in either case other than in
accordance with its terms) prior to the satisfaction of
all obligations of such party under each Transaction to
which such Credit Support Document relates without the
written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part,
or challenges the validity of, such Credit Support
Document;
(iv) MISREPRESENTATION. A representation made or repeated or deemed
to have been made or repeated by the party or any Credit
Support Provider of such party in this Agreement or any Credit
Support Document proves to have been incorrect or misleading
in any material respect when made or repeated or deemed to
have been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit
Support Provider of such party or any applicable Specified
Entity of such party (1) defaults under a Specified
Transaction and, after giving effect to any applicable notice
requirement or grace period, there occurs a liquidation of, an
acceleration of obligations under, or an early termination of,
that Specified Transaction, (2) defaults, after giving effect
to any applicable notice requirement or grace period, in
making any payment or delivery due on the last payment,
delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default
continues for at least three Local Business Days if there is
no applicable notice requirement or grace period) or (3)
disaffirms, disclaims, repudiates or rejects, in whole or in
part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act
on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule
as applying to the party, the occurrence or existence of (1) a
default, event of default or other similar condition or event
(however described) in respect of such party, any Credit
Support Provider of such party or any applicable Specified
Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not
less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness
becoming, or becoming capable at such time of being declared,
due and payable under such agreements or instruments, before
it would otherwise have been due and payable or (2) a default
by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more
payments on the due date thereof in an aggregate amount of not
less than the applicable Threshold Amount under such
agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
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(vii) BANKRUPTCY. The party, any Credit Support Provider of such
party or any applicable Specified Entity of such party:
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is
unable to pay its debts or fails or admits in writing
its inability generally to pay its debts as they
become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of
its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under
any bankruptcy or insolvency law or other similar law
affecting creditors' rights, or a petition is
presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition
instituted or presented against it, such proceeding
or petition (A) results in a judgment of insolvency
or bankruptcy or the entry of an order for relief or
the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged,
stayed or restrained in each case within 30 days of
the institution or presentation thereof; (5) has a
resolution passed for its winding-up, official
management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or
becomes subject to the appointment of an
administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar
official for it or for all or substantially all its
assets; (7) has a secured party take possession of
all or substantially all its assets or has a
distress, execution, attachment, sequestration or
other legal process levied, enforced or sued on or
against all or substantially all its assets and such
secured party maintains possession, or any such
process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to
it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the
events specified in clauses (1) to (7) (inclusive);
or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or
merges with or into, or transfers all or substantially all its
assets to, another entity and, at the time of such
consolidation, amalgamation, merger or transfer:
(1) the resulting, surviving or transferee entity fails
to assume all the obligations of such party or such
Credit Support Provider under this Agreement or any
Credit Support Document to which it or its
predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to
the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to
extend (without the consent of the other party) to
the performance by such resulting, surviving or
transferee entity of its obligations under this
Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii) below:
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(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is
entered into, or due to the promulgation of, or any change in,
the interpretation by any court, tribunal or regulatory
authority with competent jurisdiction of any applicable law
after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):
(1) to perform any absolute or contingent obligation to
make a payment or delivery or to receive a payment or
delivery in respect of such Transaction or to comply
with any other material provision of this Agreement
relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of
such party to perform, any contingent or other
obligation which the party (or such Credit Support
Provider) has under any Credit Support Document
relating to such Transaction;
(ii) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party
("X"), any Credit Support Provider of X or any applicable
Specified Entity of X consolidates or amalgamates with, or
merges with or into, or transfers all or substantially all its
assets to, another entity and such action does not constitute
an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee
entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected
Party); or
(iii) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as
applying, the occurrence of such event (and, in such event,
the Affected Party or Affected Parties shall be as specified
for such Additional Termination Event in the Schedule or such
Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5 (a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
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(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party,
specifying the nature of that Termination Event and each
Affected Transaction and will also give such other information
about that Termination Event as the other party may reasonably
require.
(ii) TWO AFFECTED PARTIES. If an Illegality under Section
5(b)(i)(1) occurs and there are two Affected Parties, each
party will use all reasonable efforts to reach agreement
within 30 days after notice thereof is given under Section
6(b)(i) on action to avoid that Termination Event.
(iii) RIGHT TO TERMINATE. If:
(1) an agreement under Section 6(b)(ii) has not been
effected with respect to all Affected Transactions
within 30 days after an Affected Party gives notice
under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section
6(b)(ii), a Credit Event Upon Merger or an Additional
Termination Event occurs, either party in the case of
an Illegality, any Affected Party in the case of an
Additional Termination Event if there is more than
one Affected Party, or the party which is not the
Affected Party in the case of a Credit Event Upon
Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days
notice to the other party and provided that the
relevant Termination Event is then continuing,
designate a day not earlier than the day such notice
is effective as an Early Termination Date in respect
of all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on
the date so designated, whether or not the relevant Event of
Default or Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under
Section 2(a)(i) or 2(d) in respect of the Terminated
Transactions will be required to be made, but without
prejudice to the other provisions of this Agreement. The
amount, if any, payable in respect of an Early Termination
Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following
the occurrence of an Early Termination Date, each party will
make the calculations on its part, if any, contemplated by
Section 6(e) and will provide to the other party a statement
(1) showing, in reasonable detail, such calculations
(including all relevant quotations and specifying any amount
payable under Section 6(e)) and (2) giving details of the
relevant account to which any amount payable to it is to be
paid. In the absence of written confirmation from the source
of a quotation
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obtained in determining a Market Quotation, the records of the
party obtaining such quotation will be conclusive evidence of
the existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of
any Early Termination Date under Section 6(e) will be payable
on the day that notice of the amount payable is effective (in
the case of an Early Termination Date which is designated or
occurs as a result of an Event of Default) and on the day
which is two Local Business Days after the day on which notice
of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to
the extent permitted under applicable law) interest thereon
(before as well as after judgment), from (and including) the
relevant Early Termination Date to (but excluding) the date
such amount is paid, at the Applicable Rate. Such interest
will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination results from an
Event of Default:
(1) FIRST METHOD AND MARKET QUOTATION. If the First
Method and Market Quotation apply, the Defaulting
Party will pay to the Non-defaulting Party the
excess, if a positive number, of (A) the sum of the
Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and
the Unpaid Amounts owing to the Non-defaulting Party
over (B) the Unpaid Amounts owing to the Defaulting
Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss
apply, the Defaulting Party will pay to the
Non-defaulting Party, if a positive number, the
Non-defaulting Party's Loss in respect of this
Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second
Method and Market Quotation apply, an amount will be
payable equal to (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect
of the Terminated Transactions and the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Unpaid
Amounts owing to the Defaulting Party. If that amount
is a positive number, the Defaulting Party will pay
it to the Non-defaulting party; if it is a negative
number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting
Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss
apply, an amount will be payable equal to the
Non-defaulting Party's Loss in respect of this
Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the
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Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from
a Termination Event:
(1) ONE AFFECTED PARTY. If there is one Affected Party,
the amount payable will be determined in accordance
with Section 6(e)(i)(3), if Market Quotation applies,
or Section 6(e)(i)(4), if Loss applies, except that,
in either case, references to the Defaulting Party
and to the Non-defaulting Party will be deemed to be
references to the Affected Party and the party which
is not the Affected Party, respectively, and, if Loss
applies and fewer than all the Transactions are being
terminated, Loss shall be calculated in respect of
all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected
Parties:
(A) If Market Quotation applies, each party will
determine a Settlement Amount in respect of
the Terminated Transactions, and an amount
will be payable equal to (I) the sum of (a)
one-half of the difference between the
Settlement Amount of the party with the
higher Settlement Amount ("X") and the
Settlement Amount of the party with the
lower Settlement Amount ("Y") and (b) the
Unpaid Amounts owing to X less (II) the
Unpaid Amounts owing to Y; and
(B) If Loss applies, each party will determine
its Loss in respect of this Agreement (or,
if fewer than all the Transactions are being
terminated, in respect of all Terminated
Transactions) and an amount will be payable
equal to one-half of the difference between
the Loss of the party with the higher Loss
("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number,
Y will pay it to X; if it is a negative
number, X will pay the absolute value of
that amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination"
applies in respect of a party, the amount determined under
this Section 6(e) will be subject to such adjustments as are
appropriate and permitted by law to reflect any payments or
deliveries made by one party to the other under this Agreement
(and retained by such other party) during the period from the
relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation
applies an amount recoverable under this Section 6(e) is a
reasonable pre-estimate of loss and not a penalty. Such amount
is payable for the loss of bargain and the loss of protection
against future risks and
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except as otherwise provided in this Agreement neither party
will be entitled to recover any additional damages as a
consequence of such losses.
7. TRANSFER
Neither this Agreement nor any interest or obligation in or under this Agreement
may be transferred (whether by way of security or otherwise) by either party
without the prior written consent of the other party, except that:
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts
(including by facsimile transmission), each of which will be
deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms
(whether orally or otherwise). A Confirmation shall be entered
into as soon as practicable and may be executed and delivered
in counterparts (including by facsimile transmission) or be
created by an exchange of telexes or by
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an exchange of electronic messages on an electronic messaging
system, which in each case will be sufficient for all purposes
to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective
means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
9. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to which the
Defaulting Party is a party or by reason of the early termination of any
Transaction, including, but not limited to, costs of collection.
10. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:
(i) if in writing and delivered in person or by courier, on the
date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the
recipient in legible form (it being agreed that the burden of
proving receipt will be on the sender and will not be met by a
transmission report generated by the sender's facsimile
machine);
(iv) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), on the date that
mail is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
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unless the date of that delivery (or attempted delivery) or
that receipt, as applicable, is not a Local Business Day or
that communication is delivered (or attempted) or received, as
applicable, after the close of business on a Local Business
Day, in which case that communication shall be deemed given
and effective on the first following day that is a Local
Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to
the non-exclusive jurisdiction of the courts of the State of
New York and the United States District Court located in the
Borough of Manhattan in New York City, if this Agreement is
expressed to be governed by the laws of the State of New York;
and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object,
with respect to such Proceedings, that such court does not
have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
reenactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
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12. DEFINITIONS
AS USED IN THIS AGREEMENT:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all
Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii))by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"CONSENT" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
14
<PAGE>
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iii).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"LAW" includes any treaty, law, rule or regulation and "LAWFUL" and "UNLAWFUL"
will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section 2(b), in
the place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain resulting from any of them). Loss includes losses and costs (or
gains) in respect of any payment or delivery required to have been made
(assuming satisfaction of each applicable condition precedent) on or before the
relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does
not include a party's legal fees and out-of-pocket expenses referred to under
Section 9. A party will determine its Loss as of the relevant Early Termination
Date, or, if that is not reasonably practicable, as of the earliest date
thereafter as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from one or more
leading dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether
15
<PAGE>
the underlying obligation was absolute or contingent and assuming the
satisfaction of each applicable condition precedent) by the parties under
Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated
Transactions that would, but for the occurrence of the relevant Early
Termination Date, have been required after that date. For this purpose, Unpaid
Amounts in respect of the Terminated Transaction or group of Terminated
Transactions are to be excluded but, without limitation, any payment or delivery
that would, but for the relevant Early Termination Date, have been required
(assuming satisfaction of each applicable condition precedent) after that Early
Termination Date is to be included. The Replacement Transaction would be subject
to such documentation as such party and the Reference Market-maker may, in good
faith, agree. The party making the determination (or its agent) will request
each Reference Market-maker to provide its quotation to the extent reasonably
practicable as of the same day and time (without regard to different time zones)
on or as soon as reasonably practicable after the relevant Early Termination
Date. The day and time as of which those quotations are to be obtained will be
selected in good faith by the party obliged to make a determination under
Section 6(e), and, if each party is so obliged, after consultation with the
other. If more than three quotations are provided, the Market Quotation will be
the arithmetic mean of the quotations, without regard to the quotations having
the highest and lowest values. If exactly three such quotations are provided,
the Market Quotation will be the quotation remaining after disregarding the
highest and lowest quotations. For this purpose, if more than one quotation has
the same highest value or lowest value, then one of such quotations shall be
disregarded. If fewer than three quotations are provided, it will be deemed that
the Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:
16
<PAGE>
(a) the Market Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION EVENT" means Illegality or, if specified to be applicable, a Credit
Event Upon Merger or an Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at
17
<PAGE>
such Early Termination Date, an amount equal to the fair market value of that
which was (or would have been) required to be delivered as of the originally
scheduled date for delivery, in each case together with (to the extent permitted
under applicable law) interest, in the currency of such amounts, from (and
including) the date such amounts or obligations were or would have been required
to have been paid or performed to (but excluding) such Early Termination Date,
at the Applicable Rate. Such amounts of interest will be calculated on the basis
of daily compounding and the actual number of days elapsed. The fair market
value of any obligation referred to in clause (b) above shall be reasonably
determined by the party obliged to make the determination under Section 6(e) or,
if each party is so obliged, it shall be the average of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
KEY CORPORATE CAPITAL INC. AZURE INVESTMENTS, INC.
(Name of Party) (Name of Party)
By: /S/ LINDA KELLY By: /S/ FREDERICK A. MAYER
------------------------------ ----------------------------
Name:Linda Kelly Name: Frederick A. Mayer
Title:Designated Signer Title: Attorney-in-fact
Date:12/4/98 Date: 12/4/98
18
<PAGE>
SCHEDULE TO THE MASTER AGREEMENT
DATED AS OF DECEMBER 4, 1998
between KEY CORPORATE CAPITAL INC. and AZURE INVESTMENTS, INC.
("Party A") ("Party B")
PART 1. Termination Provisions.
(a) "SPECIFIED ENTITY" MEANS in relation to Party A for the purpose of:
Section 5(a)(v), NONE
Section 5(a)(vi), NONE
Section 5(a)(vii), NONE
Section 5(b)(ii), NONE
and in relation to Party B for the purpose of.
Section 5(a)(v), NONE
Section 5(a)(vi), NONE
Section 5(a)(vii), NONE
Section 5(b)(ii), NONE
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 12 of
this Agreement.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party B.
(d) "SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 12 of
this Agreement.
(e) "THRESHOLD AMOUNT" means $100,000.
(f) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(ii) will apply to
Party B.
(g) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will apply to
Party B.
(h) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this
Agreement: The Second Method and Market Quotation will apply.
(i) ADDITIONAL TERMINATION EVENT. For the purpose of Section 5(b) (iii) of this
Agreement, it shall be an "Additional Termination Event" with Party B being the
Affected Party if any Credit Support Document expires, terminates, or fails or
ceases to be in full force and effect for the purpose of this Agreement in
accordance with its terms prior to the satisfaction of all obligations of Party
B under each Transaction.
PART 2. Agreement to Deliver Documents.
<PAGE>
For the purpose of Section 4(a) of this Agreement, Party B agrees to deliver the
following documents:
(a) A certificate of an authorized officer of Party B evidencing the necessary
corporate authorizations, resolutions, and approvals with respect to the
execution, delivery and performance of this Agreement, and certifying the names,
true signatures, and authority of the officer(s) signing this Agreement and
executing Transactions hereunder.
(b) Quarterly and annual consolidated financial statements of its affiliate,
Commodore Holdings Limited when requested by Party A.
PART 2. Miscellaneous.
(a) ADDRESSES FOR NOTICES: For the purpose of Section 10(a) of this Agreement
Address for notices or communications to Party A:
Address: 127 PUBLIC SQUARE, OH-01-27-0405, CLEVELAND, OHIO
44114
Attention: INTEREST RATE RISK MANAGEMENT
Facsimile No.: (216) 689-4737 Telephone No: (216) 689-0516
Address for notices or communications to Party B:
Address: C/O COMMODORE HOLDINGS LIMITED, 4000 HOLLYWOOD BLVD,
SUITE 385, SOUTH TOWER, HOLLYWOOD, FLORIDA 33021
Attention: ALAN PRITZKER, CHIEF FINANCIAL OFFICER
Facsimile No.: (954) 967-2147 Telephone No: (954) 967-2103
(b) CALCULATION AGENT. The Calculation Agent is Party A.
(c) CREDIT SUPPORT DOCUMENT. Loan and Security Agreement between Party A and B
dated December 1, 1998; Corporate Guaranty Agreement given by Commodore Holdings
Limited for the benefit of Party A dated December 1, 1998.
(d) CREDIT SUPPORT PROVIDER. Commodore Holdings Limited.
(e) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine.
(f) DEFINITIONS. Section 12 is modified as follows:
(i) "Default Rate" means Prime +5%.
(g) PAYMENTS.
<PAGE>
Party A will make payments to Party B by transfer to the
account of Party B at KeyBank National Association (ACCOUNT NUMBER: ).
Party B will make payments to Party A by transfer from the
account of Party B at KeyBank National Association (ACCOUNT NUMBER: ), and Party
A is irrevocably authorized to debit such account for each such payment (it
being understood that Party B will at all times maintain sufficient balances in
such account for such purposes).
PART 4. Other Provisions.
ADDITIONAL REPRESENTATION. Party B represents to Party A (which representation
will be deemed to be repeated by Party B on each date on which a Transaction is
entered into) that it, or any Credit Support Provider, has either: (i) total
assets exceeding $10,000,000, or (ii) a net worth of $1,000,000, and is entering
into the Transaction in connection with the conduct of its business or to manage
the risk of an asset or liability owned or incurred, or reasonably likely to be
owned or incurred in the conduct of its business.
EVENT OF DEFAULT. Each Party agrees to notify the other party of the occurrence
of any Event of Default or Potential Event of Default immediately upon learning
of the occurrence thereof.
DISCLAIMER. In entering into this Agreement, Party B understands that there is
no assurance as to the direction in which interests rates in financial markets
may move in the future and that Party A makes no covenant, representation, or
warranty in this regard or in regard to the suitability of the terms of the
Agreement or any Transaction to the particular needs and financial situation of
Party B. Party B represents, which representation shall be deemed repeated with
respect to and at the time of each Transaction, that it has had the opportunity,
independently of Party A and Party A's affiliates, officers, employees, and
agents, to consult its own financial advisors and has determined that it is in
Party B's interest to enter into the Agreement and any Transaction.
KEY CORPORATE CAPITAL INC. AZURE INVESTMENTS, INC.
By:/s/ LINDA L. KELLY By: /s/ FREDERICK A. MAYER
--------------------------- --------------------------------
Name: Linda L. Kelly Name: Frederick A. Mayer
Title: Designated Signer Title: Attorney-in-Fact
<PAGE>
KEYBANK NATIONAL ASSOCIATION
AMENDED CONFIRMATION
To: AZURE INVESTMENTS, INC.
Attn: ALLEN PRITZKER
Fax: 954-967-2147
Duplicate
Confirm to:
Client ID:
From: KEYBANK NATIONAL ASSOCIATION
Date: 07-Dec-98
Our Ref: 31344
<PAGE>
THIS CONFIRMATION AMENDS, SUPERCEDES, AND REPLACES THE CERTAIN CONFIRMATION
BETWEEN US DATED 12/4/98 IN THE INITIAL NOTIONAL AMOUNT OF $10,000,000.00.
The purpose of this letter agreement is to set forth the terms and conditions of
the Swap Transactions entered into between KEYBANK NATIONAL ASSOCIATION and
AZURE INVESTMENTS, INC. on the Trade Date specified below (the "Swap
Transaction"). This letter agreement constitutes a "Confirmation" as referred to
in the Swap Agreement Specified below.
1. The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swap Dealers Association, Inc.)
(the "Definitions") are incorporated into this Confirmation.
If you and we are parties to a Master Agreement that sets forth the
general terms and conditions applicable to Swap Transactions between us (a "Swap
Agreement"), this confirmation supplements, forms a part of, and is subject to,
such Swap Agreement. If you and we are not yet parties to a Swap Agreement, this
Confirmation will supplement, form a part of, and be subject to, a Swap
Agreement upon its execution and delivery by you and us. All provisions
contained or incorporated by reference in such Swap Agreement shall govern this
Confirmation except as expressly modified below. In the event of any
inconsistency between this Confirmation and the Definitions or the Swap
Agreement, this Confirmation will govern. In addition, if a Swap Agreement has
not been executed, this Confirmation will itself evidence a complete binding
agreement between you and us as to the terms and conditions of the Swap
Transaction to which this Confirmation relates.
This Confirmation will be governed by and construed in accordance with
the laws of the State of New York, without reference to choice of law doctrine,
provided that this provision will be superseded by any choice of law provision
in the Swap Agreement.
2. This Confirmation constitutes a Rate Swap Transaction under the Swap
Agreement and the terms of the Rate Swap Transaction to which this Confirmation
relates are as follows:
<PAGE>
<TABLE>
<S> <C>
AZURE INVESTMENTS, INC.
Our Ref: 31344
Notional Amount: $10,000,000.00 USD Amortizing per Exhibit A
Trade Date. 04-Dec-98
Effective Date: 04-Dec-98
Termination Date: 04-Dec-06
Fixed Amounts:
Fixed Rate Payer: AZURE INVESTMENTS, INC.
Fixed Rate Player Commencing 04-Jan-99 and monthly thereafter on
Payment Dates: the 4th calendar day of the month up to and including the
Termination Date,
subject to adjustment in
accordance with
Following Business Day
Convention.
Fixed Rate: 9.1400 %
Fixed Rate Day
Count Fraction: 30/360
Floating Amounts:
Floating Rate payer: KEYBANK NATIONAL ASSOCIATION
Floating Rate Payer Commencing 04-Jan-99 and monthly thereafter on
Payment Dates: the 4th calendar day of the month up to and including the
Termination Date,
subject to adjustment in
accordance with
Following Business Day
Convention.
Floating Rate for Initial Calculation
Period: To Be Determined
Floating Rate Option: USD-PRIME-H.15 Weighted Average
Spread: 0.8000 %
Floating Rate Day
Count Fraction: 30/360
Reset Dates: Daily
Calculation Agent: KEYBANK NATIONAL ASSOCIATION
Other Terms
And Conditions: None
Payment Method. Please Provide
</TABLE>
<PAGE>
Please confirm the foregoing correctly sets forth the terms of our Agreement by
executing the copy of this Confirmation enclosed for that purpose and returning
it to us.
Regards,
KEYBANK NATIONAL ASSOCIATION
By:
/s/ Steven B. Marks
----------------------------------
Name: Steven B. Marks
Accepted and Confirmed as of the Trade Date:
AZURE INVESTMENTS, INC.
/s/ Frederick A. Mayer
- -----------------------
Name:Frederick A. Mayer
<PAGE>
AZURE INVESTMENTS, INC.
Our Ref: 31344
EXHIBIT A
Notional Amount: $10,000,000.00
PERIOD DATE AMMORTIZATION ACCREDITION REMAINING NOTIONAL
----------- ------------------------- ------------------
04-Jan-99 41,666.67 9,958,333.33
04-Feb-99 41,666.67 9,916,666.66
04-Mar-99 41,666.67 9,874,999.99
05-Apr-99 41,666.67 9,833,333.32
04-May-99 41,666.67 9,791,666.65
04-Jun-99 41,666.67 9,749,999.98
06-Jul-99 41,666.67 9,708,333.31
04-Aug-99 41,666.67 9,666,666.64
07-Sep-99 41,666.67 9,624,999.97
04-Oct-99 41,666.67 9,583,333.30
04-Nov-99 41,666.67 9,541,566.63
06-Dec-99 41,666.67 9,499,999.96
04-Jan-00 30,854.11 9,469,145.85
04-Feb-00 31,073.95 9,438,071.90
06-Mar-00 31,295.35 9,406,776.55
04-Apr-00 31,518.33 9,375,258.22
04-May-00 31,742.90 9,343,515.33
05-Jun-00 31,969.06 9,311,546.26
05-Jul-00 32,196.84 9,279,349.42
04-Aug-00 32,426.25 9,246,923.17
05-Sep-00 32,657.28 9,214,265.89
04-Oct-00 32,889.97 9,181,375.92
06-Nov-00 33,124.31 9,148,251.61
04-Dec-00 33,360.32 9,114,891.29
04-Jan-01 33,598.01 9,081,293.28
05-Feb-01 33,837.40 9,047,455.88
05-Mar-01 34,078.49 9,013,377.39
04-Apr-01 34,321.30 8,979,056.09
04-May-01 34,565.84 8,944,490.25
04-Jun-01 34,812.12 8,909,678.13
05-Jul-01 35,060.15 8,874,617.98
06-Aug-01 35,309.96 8,839,308.02
04-Sep-01 35,561.54 8,803,746.48
04-Oct-01 35,814.92 8,767,931.56
05-Nov-01 35,070.10 8,731,861.46
04-Dec-01 36,327.10 8,695,534.36
04-Jan-02 36,585.93 8,658,948.43
04-Feb-02 36,846.50 8,622,101.83
04-Mar-02 37,109.14 8,584,992.69
04-Apr-02 37,373.84 8,547,619.15
06-May-02 37,639.82 8,509,979.33
05-Aug-02 37,908.01 8,472,071.32
05-Jul-02 38,178.10 8,433,893.22
<PAGE>
05-Aug-02 38,450.12 8,395,443.10
04-Sep-02 38,724.08 8,356,719.02
04-Oct-02 38,999.99 8,317,719.03
04-Nov-02 39,277.86 8,278,441.17
04-Dec-02 39,557.72 8,238,883.45
06-Jan-03 39,839.57 8,199,043.88
04-Feb-03 40,123.42 8,158,920.46
04-Mar-03 40,409.30 8,118,511.16
04-Apr-03 40,697.22 8,077,813.94
05-May-03 40,987.19 8,036,826.75
04-Jun-03 41,279.22 7,995,547.53
07-Jul-03 41,573.34 7,953,974.19
04-Aug-03 41,859.55 7,912,104.64
04-Sep-03 43,167.87 7,869,936.77
06-Oct-03 42,468.31 7,827,468.46
04-Nov-03 42,770.90 7,784,697.56
04-Dec-03 43,075.64 7,741,621.92
05-Jan-04 43,382.55 7,698,239.37
04-Feb-04 43,691.66 7,654,547.71
04-Mar-04 44,002.96 7,610,544.75
05-Apr-04 44,316.48 7,566,238.27
04-May-04 44,632.23 7,521,596.04
04-Jun-04 44,950.24 7,476,645.80
06-Jul-04 45,270.51 7,431,375.29
04-Aug-04 45,593.06 7,385,782.23
07-Sep-04 45,917.91 7,339,864.32
04-Oct-04 46,245.08 7,293,619.24
04-Nov-04 46,574.57 7,247,044.67
06-Dec-04 46,905.42 7,200,138.25
04-Jan-05 47,240.63 7,152,897.62
04-Feb-05 47,577.22 7,105,330.40
04-Mar-05 47,916.20 7,057,404.20
04-Apr-05 48,257.61 7,009,146.59
04-May-05 48,601.44 6,960,545.15
06-Jun-05 49,947.73 6,911,597.42
05-Jul-05 49,296.48 6,862,300.94
04-Aug-05 49,647.72 6,812,653.22
05-Sep-05 50,001.49 6,762,651.76
04-Oct-05 50,357.72 6,713,294.04
04-Nov-05 50,716.52 6,661,577.52
05-Dec-05 51,077.67 6,610,499.65
04-Jan-06 51,441.80 6,559,057.85
06-Feb-06 51,808.32 6,507,249.53
06-Mar-06 52,177.46 6,455,073.07
04-Apr-06 52,549.22 6,402,522.85
04-May-06 52,923.64 6,349,599.21
05-Jun-06 53,300.72 6,296,296.49
05-Jul-06 53,580.48 6,242,618.01
04-Aug-06 54,062.96 6,138,555.05
05-Sep-06 54,448.16 6,134,106.89
04-Oct-06 54,836.10 6,079,270.79
06-Nov-06 55,236.81 6,024,043.98
EXHIBIT 10.hh
CORPORATE GUARANTY AGREEMENT
- --------------------------------------------------------------------------------
This CORPORATE GUARANTY AGREEMENT (this "Guaranty") is made as of
December 4,1998 by COMMODORE HOLDINGS LIMITED, a Bermuda company (the
"Guarantor"), in favor of KEY CORP LEASING, a Division of Key Corporate Capital
Inc., a Michigan corporation ("KCL") and assigns.
R E C I T A L S
1. AZURE INVESTMENTS, INC. (the "Borrower") has executed a
Promissory Note, First Preferred Marine Mortgage and Loan and
Security Agreement (the "Security Agreement"), ISD Master
Agreement ("Swap Contract") and related loan documents dated
December 4, 1998, under which KCL is lender (collectively the
"Loan" and the "Loan Documents"); and
2. Guarantor will derive substantial and direct benefits (which
benefits are hereby acknowledged) from the Loan and other
benefits provided to Borrower under the Loan; and
3. It is a condition precedent to KCL's obligation as lender that
this Guaranty be executed and delivered to KCL and be and
remain in full force and effect until the Loan is paid in
full.
A G R E E M E N T
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of, and in
order to induce KCL to participate in the transactions described above:
Section 1. GUARANTY. Guarantor hereby (i) unconditionally and
irrevocably guarantees to KCL the full and prompt performance by Borrower of all
obligations which Borrower currently or hereafter may have to KCL under the
Loan, including, without limitation, the payment when due of all payments
(including without limitation, principal and interest due on the indebtedness)
and all other sums currently or hereafter owing by Borrower to KCL thereunder,
and (ii) agrees to indemnify KCL against losses KCL may sustain and expenses KCL
may incur as a result of any breach, non-performance or default by Borrower
under the Loan and/or as a result of the enforcement or attempted enforcement by
KCL of any of its rights against Guarantor hereunder. Guarantor expressly waives
the right to assert defenses, setoffs and counterclaims, in any action or
proceeding, in any court, arising on, out of, under, by virtue of, or in any way
relating to the Loan, this Guaranty or the transactions contemplated thereby or
hereby, and agrees that this Guaranty shall be valid, enforceable and
unconditionally binding upon Guarantor regardless of: (a) the reorganization,
merger or consolidation of Borrower into or with another entity, corporate or
otherwise, or the sale or other disposition of all or substantially all of the
capital stock, business or assets of Borrower to any other person or party; (b)
the
<PAGE>
dissolution of Borrower, Guarantor or any Other Guarantor (as defined in
Section 6 herein); (c) the voluntary or involuntary bankruptcy (including a
reorganization in bankruptcy) of Borrower, Guarantor or any Other Guarantor; (d)
the granting by KCL of any indulgences or extensions to Borrower, Guarantor or
any Other Guarantor; (e) the assertion by KCL against Borrower, Guarantor or any
Other Guarantor of any of KCL's rights and remedies provided for under the Loan
or existing in its favor in law, equity or bankruptcy; (f) the release of
Borrower, Guarantor or any Other Guarantor from any obligations under the Loan,
this Guaranty or any Other Guarantees (as defined in Section 6 herein) by KCL or
by operation of law or other-wise; (g) any invalidity, irregularity, defect or
unenforceability of any provision of the Loan, this Guaranty or any Other
Guarantees; or (h) the destruction, sale, modification or alteration of the
Vessel. Guarantor confirms that the foregoing waiver is informed and voluntary.
Section 2. WAIVERS. Guarantor hereby waives notice of and consents to
(i) all of the provisions of the Loan, and any amendments, qualifications and
extensions thereof, and any actions taken thereunder, and (ii) execution by
Borrower of the foregoing documents and of any other agreements, documents and
instruments executed by Borrower in connection therewith. Guarantor further
waives notice of KCL's acceptance of this Guaranty, of any default and
non-payment and/or non-performance by Borrower under the Loan, of presentment,
protest and demand, and of an other matters to which Guarantor might otherwise
be entitled. Guarantor further agrees that this Guaranty shall remain and
continue in full force and effect notwithstanding any renewal, modification or
extension of the term of the Loan or of the terms and conditions of the Loan.
Guarantor hereby expressly waives all notice of and consents to any such
renewal, modification or extension, and to the execution by Borrower of any
documents pertaining to any such renewal, modification or extension. Guarantor
further agrees that Guarantor's liability under this Guaranty shall be absolute,
primary and direct, and that KCL shall not be required to pursue any right or
remedy it may have against Borrower under the Loan or otherwise (and shall not
be required first to commence any action or obtain any judgment against
Borrower) before enforcing this Guaranty against Guarantor. Guarantor hereby
agrees that the failure of KCL to insist in any one or more instances upon a
strict performance or observance of any of the terms, provisions or covenants of
the Loan, or to exercise any of its rights thereunder, shall not be construed or
deemed to be a waiver or relinquishment for the future of any such terms,
provisions, covenants or rights, but such terms, provisions, covenants and
rights shall continue and remain in full force and effect and shall be
enforceable under this Guaranty. No delay or failure by KCL to exercise any
right or remedy against any Other Guarantor will be construed as a waiver of
that right or remedy or as a waiver of any right or remedy against Guarantor.
All remedies of KCL against the Borrower, Guarantor and the Other Guarantors are
cumulative. Receipt by KCL of any payments or other sums payable under the Loan
with knowledge that Borrower has breached any of the terms, provisions or
covenants of the Loan shall not be deemed to be a waiver by KCL of such breach,
or a release or relinquishment of any claim for future performance under the
Loan or this Guaranty.
Section 3. REPRESENTATIONS. Guarantor warrants and represents to KCL
that the execution, delivery and performance of this Guaranty will not result in
a breach of, or constitute a default under, or result in the creation of any
security interest, lien, charge or encumbrance
2
<PAGE>
upon any property or assets of Guarantor pursuant to any loan agreement,
indenture or contract to which Guarantor is a party or by or under which it is
bound.
Section 4. ASSIGNMENT. No assignment or other transfer by KCL or
Borrower of any interest, right or obligation under the Loan, or assumption by
any third party of the obligations of Borrower under the Loan, shall extinguish
or diminish the unconditional, irrevocable, absolute, primary and direct
liability of Guarantor under this Guaranty, Guarantor hereby consenting to and
waiving all notice of any such assignment, transfer or assumption.
Section 5. SUBROGATION. Guarantor specifically waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution or
any other claim which the Guarantor may now or hereafter have against the
Borrower or any other person or entity directly or contingently liable for the
payments and other obligations guaranteed hereunder, or against or with respect
to the Borrower's property (including, without limitation, property
collateralizing the Loan), arising from the existence or performance of this
Guaranty.
Section 6. UNCONDITIONAL GUARANTY. The liability of Guarantor under
this Guaranty, and of any other guarantors (the "Other Guarantors"), if any,
under guarantees (the "Other Guarantees") given in favor of KCL in connection
with the Loan, shall be joint and several and shall be irrevocable,
unconditional and absolute, continuing in full force and effect according to its
terms, until all of the obligations hereby guaranteed have been fully satisfied.
The release or modification of any or all of the Other Guarantees shall in no
way modify, release, or affect Guarantor under this Guaranty. Guarantor
covenants and agrees that any indebtedness of Borrower to Guarantor is hereby
subordinated to the obligations of Borrower to KCL, and that after any Event of
Default under the Loan Documents, Guarantor shall hold any funds received from
Borrower in trust for KCL to satisfy the obligations of Borrower to KCL. This
subordination of the indebtedness and other obligations shall continue until all
of the Loan obligations have been paid, performed and satisfied in full.
Section 7. ASSIGNMENT BY KCL. This Guaranty is assignable by KCL
without notice to Guarantor and Guarantor consents thereto. Guarantor's
obligations under this Guaranty may not be delegated to any other person or
entity without the prior written consent of KCL. Any assignee of KCL shall have
all of the rights of KCL hereunder and may enforce this Guaranty against
Guarantor with the same force and effect as if this Guaranty were given to such
assignee in the first instance. This Guaranty shall inure to the benefit of KCL,
and its successors and assigns, and shall be binding upon Guarantor and its
heirs, administrators, successors and assigns.
Section 8. SEVERABILITY. If any provision of this Guaranty is found by
a court of competent jurisdiction to be prohibited or unenforceable, it shall be
ineffective only to the extent of such prohibition or unenforceability, and such
prohibition or unenforceability shall not invalidate the balance of such
provision to the extent that it is not prohibited or unenforceable, nor
invalidate the other provisions hereof, all of which shall be construed
liberally in favor of KCL in order to effect the provisions hereof.
3
<PAGE>
Section 9. PAYMENT IN DOLLARS; JUDGMENT CURRENCY. This Guaranty is made
by the Guarantor in connection with the Loan in which the specification of U.S.
Dollars and payment at the designated place of payment is of the essence, and
U.S. Dollars shall be the currency of accounting in all events. The payment
obligations of the Guarantor under this Guaranty shall not be discharged by an
amount paid in another currency or in another place, whether pursuant to a
judgment or otherwise, to the extent that the amount so paid on conversion to
U.S. Dollars and transferred to the designated place of payment under normal
banking procedures does not yield the amount of U.S. Dollars due hereunder. If
for the purpose of obtaining judgment in any court it is necessary to convert a
sum due hereunder in U.S. Dollars into another currency (the "Judgment
Currency"), the rate of exchange which shall be applied shall be that at which,
in accordance with normal banking procedures, the party entitled thereto could
purchase U.S. Dollars with the Judgment Currency at a bank located in the City
of New York on the business day on which such payment is received. The
obligation of the Guarantor in respect of any such sum due from it to any party
hereunder shall, notwithstanding the rate of exchange actually applied in
rendering such judgment, be discharged only to the extent that on the business
day of receipt by such party of any sum adjudged to be due hereunder in the
Judgement Currency such party may, in accordance with normal banking procedures,
purchase and transfer to a bank in the City of New York U.S. Dollars with the
amount of the Judgement Currency so adjudged to be due. Guarantor hereby agrees,
as a separate obligation and notwithstanding any such judgement, to indemnify
KCL against, and to pay KCL on demand, U.S. Dollars, in the amount equal to any
difference between the sum originally due to KCL in U.S. Dollars and the amount
of U.S. Dollars so purchased and transferred.
Section 10. CONSENTS AND REGISTRATIONS. Until payment and performance
in full of all of the obligations hereunder, the Guarantor will obtain at any
time and from time to time all exchange control authorizations and all other
authorizations, licenses, consents, registrations and approvals as shall now or
hereafter be necessary under or in connection with its making and performance of
this Guaranty.
Section 11. WITHHOLDING TAXES. Each payment to be made by the Guarantor
under this Guaranty shall be made free and clear of, and without deductions or
withholding of, or on account of, any present or future taxes, duties,
assessments or charges of whatsoever nature together with any liabilities
(including penalties, interest and expenses) in respect thereof imposed or
levied on or on behalf of the government of Bermuda or any political subdivision
thereof or any authority or agency thereof having the power to tax ("Bermuda
Withholding Taxes") unless such deduction or withholding is required by the laws
of Bermuda or any province or political subdivision. If the payment of Bermuda
Withholding Taxes is required, the Guarantor shall either: (i) pay any such
additional amount to KCL as may be necessary to ensure that KCL receive and
retain a net sum after such deduction, withholding or payment of Bermuda
Withholding Taxes, equal to the sum that KCL would have received and retained
had no such deduction or withholding of Bermuda Withholding Taxes been made or
required to be made and promptly deliver to KCL the forms prescribed by the
relevant authority of such Bermuda Withholding Taxes; or (ii) pay the full
amount of Bermuda Withholding Taxes due to the relevant authority within the
time provided thereunder, or within ten (10) days of demand therefore by KCL, in
accordance with Applicable Law, without recourse against KCL, and
4
<PAGE>
deliver to KCL proof of payment of such Bermuda Withholding Taxes within twenty
(20) days of demand therefore by KCL. Guarantor hereby agrees to indemnify and
hold harmless KCL on an after-tax basis, for any Bermuda Withholding Taxes that
become payable and/or are paid by KCL in respect of any payment made by
Guarantor under this Guaranty, KCL shall promptly notify the Guarantor of any
Bermuda Withholding Taxes in respect of which it has paid or received an
assessment or reassessment from any Bermuda taxing authority and for which the
Guarantor is required to indemnify KCL and of the amount payable to KCL by the
Guarantor, and the Guarantor shall indemnify KCL within ten (10) days of the
receipt of such notice. KCL shall reasonably determine the amount payable to it.
In the event KCL contests the assessment of any Bermuda Withholding
Taxes for which it has received indemnification or reimbursement from the
Guarantor under this Section 11, and such Bermuda Withholding Taxes are refunded
to KCL by any Bermuda taxing authority, KCL shall repay, to the extent of such
refund received by it, as determined after taking into account any tax
detriments and benefits reasonably expected to be realized by KCL by reason of
such refund and repayment, any amounts paid by the Guarantor under this Section
11. The Guarantor shall not be liable for and shall not reimburse or indemnify
KCL for any present or future taxes, duties, assessments or charges of
whatsoever nature together with any liabilities (including penalties, interest
and expenses) in respect thereof imposed or levied by or on behalf of the
government of Bermuda or any political subdivision thereof or any authority or
agency therein or thereof having the power to tax to the extent that any such
item is imposed or levied as a result of KCL (i) being organized under the laws
of, being a resident in or being connected with Bermuda otherwise than by reason
of the transactions contemplated by the Loan; or (ii) being a person who is not
dealing at arm's length with the Guarantor. The Guarantor's obligations under
this Section 11 shall survive the termination of this Guaranty and the payment
of all amounts payable under the other provisions of this Guaranty.
Section 12. TERM OF AGREEMENT. This Guaranty and all guarantees,
covenants and agreements of the Guarantor contained herein shall continue in
full force and effect and shall not be discharged until such time as all of
Borrower's obligations under the Loan shall be paid in full and all of the
agreements of the Borrower in respect of the Loan shall be duly performed or
complied with, after which this Guaranty shall terminate and be of no force and
effect against the Guarantor, except as otherwise expressly provided herein.
Section 13. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Guaranty may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
(b) GOVERNING LAW. THIS GUARANTY SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION,
5
<PAGE>
VALIDITY AND PERFORMANCE. THE GUARANTY HAS BEEN EXECUTED AND DELIVERED IN THE
STATE OF NEW YORK.
(c) SUCCESSORS AND ASSIGN. This Guaranty shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof. Except as expressly provided herein or in the
Loan, no party hereto may otherwise assign their interests without the consent
of the parties hereto.
(d) HEADINGS. The headings of the sections of this Guaranty
are inserted for purposes of convenience only and shall not be construed to
affect the meaning or construction of any of the provisions hereof.
(e) NOTICES. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein shall be
in writing or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (i) upon personal delivery
thereof, including, without limitation, by overnight mail and courier service,
(ii) in the case of notice by United States mail, certified or registered,
postage prepaid, return receipt requested, upon receipt thereof, or (iii) in the
case of notice by such a telecommunications device, upon transmission thereof,
provided such transmission is promptly confirmed by either of the methods set
forth in clauses (i) or (ii) above, in each case addressed to:
Guarantor at
Commodore Holdings Limited
4000 Hollywood Boulevard
Suite 385-S, South Tower
Hollywood, Florida 33021
with a copy to
Kathleen L. Deutsch, P.A.
Broad and Cassel
201 South Biscayne Boulevard, Suite 3000
Miami, Florida 33131
lender at
KeyCorp Leasing, a Division of Key Corporate Capital Inc.
Attention: Account Manager
54 State Street, 9th Floor
Albany, New York 12207
6
<PAGE>
With a copy to
Richard J. Schroeder
Davis Wright Tremaine LLP
1501 Fourth Avenue, 26th Floor
Seattle, Washington 98101
or at such other address as either party may from time to time designate by
written notice to the other party.
(f) WAIVER. No waiver of any of the terms and conditions of
this Guaranty and no notice to or demand on the Guarantor in any case shall
entitle the Guarantor to any other or further notice or demand in similar or
other circumstances or constitute the waiver of any rights of the parties
hereto. No failure, delay in or partial exercise of any right, power or
privilege hereunder shall operate as a waiver thereof or preclude any other or
further exercise of any other right, power or privilege hereunder.
(g) ENFORCEMENT. The Guarantor agrees to pay all reasonable
out-of-pocket costs and expenses incurred by or on behalf of KCL or its
successors or assigns in connection with the enforcement hereof against the
Guarantor (including, without limitation, the reasonable fees and disbursements
of counsel). The Guarantor agrees that the parties hereto may bring suit against
the Guarantor without joining the Borrower.
(h) ACTIONS AND PROCEEDINGS. Any legal action or proceeding
against the Guarantor with respect to this Guaranty may be brought in such of
the courts of competent jurisdiction of the State of New York in the City of
Albany or in the United States District Court for the Northern District of New
York as KCL or its successors and assigns may elect, and by execution and
delivery of this Guaranty, Guarantor irrevocably submits to the nonexclusive
jurisdiction of such courts, and to appellate courts therefrom, and, in the case
of any such legal action or proceeding brought in the above-named New York
courts, Guarantor hereby irrevocably consents to the service of process by the
mailing of copies thereof by registered mail, postage prepaid, to the Guarantor
at its address as provided in Section 13(e) hereof, or by any other means
permitted by Applicable Law. If it becomes necessary for the purpose of service
of process out of any such courts, Guarantor shall take all such action as may
be required to authorize a special agent to receive, for and on behalf of
Guarantor, service of process in any such legal action or proceeding, and shall
take all such action as may be necessary to continue said appointment in full
force and effect so that Guarantor will at all times have an agent for service
of process for the above purposes in New York, New York. To the extent permitted
by Applicable Law, a final, unappealable judgment (a certified copy of which
shall be conclusive evidence of the fact and of the amount of any indebtedness
of the Guarantor to KCL) against the Guarantor in any such legal action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on an unsatisfied judgment. To the extent that the Guarantor has or
hereafter may acquire any immunity from jurisdiction of any of the above-named
courts or from any Bermuda court or from any legal process therein, the
Guarantor hereby irrevocably waives such immunity, and the Guarantor hereby
irrevocably waives and agrees not to assert, by way of
7
<PAGE>
motion, as a defense or otherwise, in any legal action or proceeding brought
hereunder in any of the above-named courts or in any Bermuda court: (i) the
defense of sovereign immunity; (ii) any claim that it is not personally subject
to the jurisdiction of the above-named courts or any Bermuda court by reason of
sovereign immunity or otherwise; (iii) that it or any of its property is immune
from the above-described legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, or otherwise),
(iv) that such action or proceeding is brought in an inconvenient forum, that
venue for the action or proceeding is improper or that this Guaranty or any
other document evidencing the Loan may not be enforced in or by such courts; or
(v) any defense that would hinder or delay the levy, execution or collection of
any amount to which any party hereto is entitled pursuant to a final,
unappealable judgment of any court having jurisdiction. Nothing in these
provisions shall limit any right of KCL to bring actions, suits or proceedings
in the courts of any other jurisdiction. The Guarantor expressly acknowledges
that the foregoing waiver is intended to be irrevocable under the laws of the
State of New York and of the United States of America and of Bermuda and in
particular under the United States Foreign Sovereign Immunities Act of 1976, and
that the provisions of this Section 13(h) constitute, inter alia, a special
arrangement for service between the parties hereto under said Act.
(i) CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meaning given them in the Security Agreement,
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the 4th
day of December, 1998.
COMMODORE HOLDINGS LIMITED
By: /S/ FREDERICK A. MAYER
------------------------------------
Name: Frederick A. Mayer
Title: Vice Chairman of the Board & CEO
STATE OF NEW YORK
ss.
COUNTY OF NEW YORK
On this 4th day of December, 1998, before me, a Notary Public in and
for the State of New York, personally appeared Frederick A. Mayer personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person who executed this instrument, on oath stated that s/he was authorized to
execute the instrument, and acknowledged it as the Vice Chairman of the Board &
CEO of COMMODORE HOLDINGS LIMITED, to be the free and voluntary act and deed of
said company for the uses and purposes mentioned in the instrument.
8
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the
day and year first above written.
/S/ LESLIE MAJER
----------------------------------------
NOTARY PUBLIC in and for the State of
New York, residing at __________________
My appointment expires OCTOBER 31, 1999
Print Name LESLIE MAJER
9
EXHIBIT 21
SUBSIDIARIES OF COMMODORE HOLDINGS LIMITED
1. Almira Enterprises, Inc., a Panamanian corporation
2. Azure Investments, Inc., a Panamanian corporation
3. Capri Cruises, a partially-owned Florida general partnership
4. Commodore Cruise Limited, a Bermudan corporation
5. New Commodore Cruise Lines Limited, a Bermudan corporation
6. Sea-Comm, Ltd., a partially-owned Liberian corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,172,022
<SECURITIES> 0
<RECEIVABLES> 481,623
<ALLOWANCES> 0
<INVENTORY> 1,465,593
<CURRENT-ASSETS> 11,448,606
<PP&E> 44,318,693
<DEPRECIATION> 6,022,325
<TOTAL-ASSETS> 59,136,757
<CURRENT-LIABILITIES> 21,874,833
<BONDS> 12,445,175
0
0
<COMMON> 72,648
<OTHER-SE> 24,516,479
<TOTAL-LIABILITY-AND-EQUITY> 59,136,757
<SALES> 0
<TOTAL-REVENUES> 63,366,443
<CGS> 0
<TOTAL-COSTS> 57,241,245
<OTHER-EXPENSES> 1,932,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,193,170
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,193,170
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,193,170
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.54
</TABLE>
