FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Quarter Ended June 30, 1998
Commission File Number: 0-20961
COMMODORE HOLDINGS LIMITED
(Exact Name of Registrant as Specified in its Charter)
BERMUDA
(State or other Jurisdiction of incorporation or organization)
N/A
(IRS Employer Identification Number)
4000 HOLLYWOOD BOULEVARD, SUITE 385, SOUTH TOWER, HOLLYWOOD, FL 33021
(Address of Principal Offices)
(954) 967-2100
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Common Stock $.01 par value
(Class)
7,261,488 Shares of Common Stock outstanding at August 12, 1998
<PAGE>
Commodore Holdings Limited
Table of Contents
PAGE NO.
--------
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Earnings 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. A - Exhibits 11
B - Reports on Form 8-K 11
<PAGE>
Part I: Financial Information
Item 1: Financial Statements
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
---------------------- -----------------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,445,634 $ 3,530,563
Restricted cash 3,279,982 191,273
Trade and other receivables, net 487,375 321,191
Insurance claim receivable - 305,038
Due from affiliate - 471,294
Inventories 933,436 1,870,128
Prepaid expenses 3,159,994 3,050,353
Other current assets 76,290 76,290
--------------------- ----------------------
Total current assets 13,382,711 9,816,130
Property and equipment, net 39,208,318 37,193,102
Long-term receivable - affiliate 1,190,049 1,117,913
Investments - restricted 4,629,000 4,629,000
Investment in unconsolidated joint venture 1,994,516 -
Other assets 357,530 361,667
--------------------- ----------------------
$ 60,762,124 $ 53,117,812
===================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 4,392,408 $ 4,392,408
Accounts payable 5,636,114 5,512,270
Accrued liabilities 2,256,147 1,576,504
Due to affiliates 575,152 574,873
Customer deposits 10,294,052 5,674,811
Accrued interest 72,934 72,934
--------------------- ----------------------
Total current liabilities 23,226,807 17,803,800
Long-term debt 13,543,277 16,837,582
Minority interest in subsidiary 329,492 135,037
Stockholders' equity
Preferred stock - authorized 10,000,000 shares
of $.01 par value; issued and outstanding, 0 in
1998 and 1,027,230 in 1997 - 10,272
Common stock - authorized 100,000,000 shares
of $.01 par value; issued and outstanding
7,261,488 shares in 1998 and 5,581,933 in 1997 72,614 55,819
Paid-in capital 16,360,426 14,012,051
Retained earnings 7,229,508 4,263,251
--------------------- ----------------------
Total stockholders' equity 23,662,548 18,341,393
--------------------- ----------------------
$ 60,762,124 $ 53,117,812
===================== ======================
</TABLE>
The accompanying notes are an integral part of these statements Page 2
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS AND FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Revenues $ 19,630,582 $ 14,218,470 $ 45,016,230 $ 40,126,197
Expenses
Operating 12,755,888 11,038,562 31,807,691 31,739,046
Marketing, selling and administrative 3,097,121 2,123,908 7,087,706 5,866,816
Depreciation and amortization 510,756 470,797 1,566,739 1,381,697
------------------------------- ------------------------------
16,363,765 13,633,267 40,462,136 38,987,559
------------------------------- ------------------------------
Operating income 3,266,817 585,203 4,554,094 1,138,638
Other income (expense)
Interest income 114,601 135,651 373,891 336,432
Interest expense (437,583) (456,720) (1,323,622) (1,412,557)
Equity in net loss of unconsolidated
joint venture (255,484) - (255,484) -
Minority interest in (earnings) loss of
consolidated joint venture (249,941) 429,198 (94,998) 971,246
------------------------------- ------------------------------
(828,407) 108,129 (1,300,213) (104,879)
------------------------------- ------------------------------
Earnings before provision for
income taxes 2,438,410 693,332 3,253,881 1,033,759
Provision for income taxes - - - -
------------------------------- ------------------------------
Provision for preferred stock dividend 28,000 70,000 170,000 210,000
------------------------------- ------------------------------
Net earnings available for
common stockholders $ 2,410,410 $ 623,332 $ 3,083,881 $ 823,759
=============================== ==============================
Earnings per share available for common
stockholders - Basic $ 0.36 $ 0.11 $ 0.52 $ 0.15
=============================== ==============================
Weighted average number of common stock
outstanding - Basic 6,717,900 5,581,933 5,969,563 5,581,933
=============================== ==============================
Earnings per share available for common
stockholders - Diluted $ 0.29 $ 0.10 $ 0.42 $ 0.15
=============================== ==============================
Weighted average number of common stock
outstanding - Diluted 8,367,063 6,799,339 7,955,616 6,889,437
=============================== ==============================
</TABLE>
The accompanying notes are an integral part of these statements Page 3
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------------------------------------ ADDITIONAL
NUMBER OF PAR NUMBER OF PAR PAID-IN RETAINED
SHARES VALUE SHARES VALUE CAPITAL EARNINGS TOTAL
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
September 30, 1997 1,027,230 $10,272 5,581,933 $55,819 $14,012,051 4,263,251 $18,341,393
Fair value of options to
nonemployees - - - - 211,135 - 211,135
Preferred stock dividend 14,825 148 - - 59,151 (287,624) (228,325)
Conversion of preferred
stock to common stock (1,042,055) (10,420) 1,042,055 10,420 - - -
Conversion of subordinated
debentures to common
stock - - 537,500 5,375 1,479,089 - 1,484,464
Issuance of common stock - - 100,000 1,000 599,000 - 600,000
Net earnings - - - - - 3,253,881 3,253,881
---------------------------------------------------------------------------------------------
Balances at
June 30, 1998 - $ - 7,261,488 $72,614 $16,360,426 7,229,508 $23,662,548
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements Page 4
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 3,253,881 $ 1,033,759
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation of property and equipment 1,566,739 1,381,697
Amortization of deferred drydock 1,363,524 892,919
Fair value of options to nonemployees 211,135 39,600
(Increase) decrease in operating assets
Restricted cash (3,088,709) 1,236,950
Trade and other receivables (166,184) (436,733)
Insurance claim receivable 305,038 1,551,549
Due from affiliate 471,294 (1,220)
Inventories 936,692 710,009
Prepaid expenses and other current assets (1,473,165) (894,311)
Other assets 4,137 8,750
Increase (decrease) in operating liabilities
Accounts payable 123,844 (1,802,670)
Accrued liabilities 679,643 590,329
Due to affiliates 279 300,469
Customer deposits 4,619,241 584,842
Accrued interest - (3,650)
--------------- ---------------
Net cash provided by operating activities 8,807,389 5,192,289
Cash Flows from investing activities
Capital expenditures (3,581,955) (2,126,614)
Long-term receivable - affiliate (72,136) -
Investment in unconsolidated joint venture (1,994,516) -
Minority interest in subsidiary 194,455 28,654
--------------- ---------------
Net cash used in investing activities (5,454,152) (2,097,960)
Cash flows from financing activities
Principal payments of long-term debt (3,294,305) (1,902,246)
Proceeds from sale of convertible subordinated debentures 1,484,464 -
Proceeds from issuance of common stock 600,000 -
Preferred stock dividends paid (228,325) (200,948)
--------------- ---------------
Net cash used in financing activities (1,438,166) (2,103,194)
--------------- ---------------
Net increase in cash and cash equivalents 1,915,071 991,135
Cash and cash equivalents at beginning of period 3,530,563 3,476,165
--------------- ---------------
Cash and cash equivalents at end of period $ 5,445,634 $ 4,467,300
=============== ===============
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 1,259,905 $ 1,423,190
=============== ===============
Cash paid during the period for taxes $ - $ -
=============== ===============
</TABLE>
The accompanying notes are an integral part of these statements Page 5
<PAGE>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Financial Statements for the nine months ended June 30, 1998 and 1997,
included herein have been prepared by Commodore Holdings Limited (the "Company")
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. All adjustments which are, in the opinion of management,
necessary for a fair statement for the results of the three and nine months are
included. Certain information and footnote disclosure normally included in
Financial Statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
financial statements for the year ended September 30, 1997, contained in the
Company's annual report on Form 10-K.
2. Fair value of options to nonemployees. During the first nine months of fiscal
1998, the Company issued warrants to purchase 429,952 shares of common stock to
nonemployees providing primarily a variety of consulting services to the
Company. Under the application of FASB #123 the Company has valued these
warrants at approximately $453,000. Accordingly, this amount is being recognized
over the various vesting periods of the warrants.
3. Earnings Per Share. The Company's basic earnings per share is calculated by
dividing net earnings available for common stockholders by the weighted average
shares outstanding during the period. The computation of diluted earnings per
share includes all dilutive common stock equivalents in the weighted average
shares outstanding. Financial Accounting Standards Board (FASB) Statement No.
128 "Earnings Per Share" requires the dual presentation of basic and diluted
earnings per share on the face of the statement of earnings. The reconciliation
between the computation is as follows:
<TABLE>
<CAPTION>
THREE NET NET
MONTHS ENDED EARNINGS- BASIC BASIC EARNINGS- DILUTED DILUTED
JUNE 30, BASIC SHARES EPS DILUTED SHARES EPS
- ------------ --------- ------ ----- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1998 $2,410,410 6,717,900 $0.36 $2,457,387 8,367,063 $0.29
1997 $ 623,332 5,581,933 $0.11 $693,332 6,799,339 $0.10
<CAPTION>
THREE NET NET
MONTHS ENDED EARNINGS- BASIC BASIC EARNINGS- DILUTED DILUTED
JUNE 30, BASIC SHARES EPS DILUTED SHARES EPS
- ------------ --------- ------ ----- --------- ------- -------
1998 $3,083,881 5,969,563 $0.52 $3,317,055 7,955,616 $0.42
1997 $ 823,759 5,581,933 $0.15 $1,033,759 6,889,437 $0.15
</TABLE>
Included in diluted shares are common stock equivalents relating to options,
warrants, convertible debt and preferred stock of 1,648,163 and 1,217,406 for
the three months ended June 30, 1998 and 1997, respectively and 1,986,053 and
1,307,504 for the nine months ended June 30, 1998 and 1997, respectively. Net
earnings were adjusted to calculate the diluted earnings per share by adding
back $46,977 and $233,174 of provision for preferred stock dividend and interest
expense, relating to the convertible debentures, for the three and nine months
ending June 30, 1998, respectively. Net earnings were adjusted to calculate the
diluted earnings per share by adding back $70,000 and $210,000 of provision for
preferred stock dividend for the three and nine months ending June 30, 1997,
respectively.
Page 6
<PAGE>
4. Debt offering. 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 common stock at
$4.00 per share. The net proceeds to the Company were approximately $1,425,848
after deducting brokers' commissions and expenses of the offering. The company
had charged $58,616 of the discount and expenses of the offering to interest
expense and added $1,484,464 to Stockholders' equity after the conversion.
5. 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 an agreement for a joint venture ("Capri Cruises")
with Casino America 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. Each company owns 50% of the joint venture. Pursuant
to the agreement Casino America and the Company will jointly operate cruises in
strategic markets. The Enchanted Capri is the first ship operated by Capri
Cruises and began service in June 1998 operating a series of two- and five-day
cruises, from New Orleans. 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:
AS OF
JUNE 30, 1998
-------------
(UNAUDITED)
Current assets $ 3,109,036
Property and equipment 2,881,799
ther assets 979,351
-----------
6,970,186
-----------
Current liabilities 2,735,468
Other liabilities 245,685
-----------
2,981,153
Partners' capital accounts 3,989,033
-----------
$ 6,970,186
-----------
THREE MONTHS ENDED
JUNE 30, 1998
-------------
(UNAUDITED)
Revenues $ 989,446
Expenses 1,500,413
----------
Net loss $ (510,967)
----------
6. On April 22, 1998 the Company borrowed $1,500,000, on an unsecured basis,
from an unrelated third party. The Company paid interest of $40,000 (8%) at the
time of the loan and the loan is due in full on August 20, 1998.
7. The Company issued 100,000 shares of its common stock to an unrelated third
party for a brokerage commission due in connection with the Company's charter of
the M/V Enchanted Capri (formerly M/V Island Holiday). The number of shares of
Common Stock issued to the broker was based on the fair market value of the
Common Stock on the date of issuance thereof. The shares were valued at the
market price on the day of delivery of the ship.
Page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following is an analysis of the Company's results of operations, 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.
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED JUNE 30, 1998 AND 1997
Three Months Ended June 30, 1998, Compared to Three Months Ended June 30, 1997
Revenues increased by $5,412,112, or 38.1%, for the quarter ended June 30, 1998
compared to the quarter ended June 30, 1997 primarily due to higher passenger
yields and an eight day charter on the Company's New Orleans program, improved
passenger counts on the Universe Explorer during the Alaska season as well as an
increase in the amount paid by Seawise for the adult spaces utilized by the
Semester-at-Sea program. This increase was also attributable to the additional
sailings operated by the Universe Explorer in 1998 compared to 1997 when the
Universe Explorer was out of service for 24 days in May and June of 1997 for
SOLAS modifications.
The Company's operating expenses increased by $1,717,326, or 15.6%, primarily
due to additional sailings operated by the Universe Explorer during 1998. The
increase was partially offset by lower worldwide fuel costs as well as lower
food costs, on the Enchanted Isle, achieved through better purchasing policies.
The Company's marketing, selling and administrative expenses increased by
$973,213, or 45.8%, for the three months ended June 30, 1998 compared to the
three months ended June 30, 1997, primarily due to additional sailings operated
by the Universe Explorer during 1998 and the recognition of marketing, selling
and administrative expenses for World Explorer Cruises.
Depreciation expense for the quarter ended June 30, 1998 increased by $39,959 or
8.5%, primarily due to the additional capital expenditures incurred by the
Company in conjunction with meeting its SOLAS requirements on the two vessels.
"Equity in loss of unconsolidated joint venture" during 1998 represents initial
losses associated with the Company's start-up of the Capri Cruises joint venture
in June 1998. Capri Cruises presently operates one vessel on two- and five-day
cruises from New Orleans.
Seawise's interest in the Company's Sea-Comm joint venture is reflected in the
($249,941) and $429,198 line item for "Minority interest in loss of consolidated
joint venture" for the three months ended June 30, 1998 and 1997, respectively.
Sea-Comm earned $500,382 during the three months ended June 30, 1998 versus the
$201,429 loss during the three months ended June 30, 1997. The improvement in
earnings was due primarily to improved passenger counts on the Universe Explorer
during the Alaska season as well as an increase in the amount paid by Seawise
for the adult spaces utilized by the Semester-at-Sea program.
Page 8
<PAGE>
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1997
Nine months Ended June 30, 1998, Compared to Nine months Ended June 30, 1997
Revenues increased by $4,890,033, or 12.2%, for the nine months ended June 30,
1998 compared to the nine months ended June 30, 1997 primarily due to higher
passenger yields and an eight day charter on the Company's New Orleans program,
improved passenger counts on the Universe Explorer during the Alaska season as
well as an increase in the amount paid by Seawise for the adult spaces utilized
by the Semester-at-Sea program. This increase was partially offset by three
fewer sailings aboard the Enchanted Isle during October 1998 when the Enchanted
Isle was in drydock to effect the necessary repairs and modifications to comply
with the SOLAS requirements for that vessel. The Universe Explorer operated only
21 days for its Caribbean program in January 1998 versus 28 days in January
1997, which also adversely affected revenues.
The Company's operating expenses increased by $68,645, or .2%, primarily due to
more operating days on the two ships in the first nine months of fiscal 1998
than during the same period in 1997. This increase was partially offset by lower
fuel expense due to lower worldwide prices. The Company's marketing, selling and
administrative expenses increased by $1,220,890, or 20.8%, for the nine months
ended June 30, 1998 compared to the nine months ended June 30, 1997, due to
increased marketing efforts related to the Universe Explorer Alaska program.
"Equity in loss of unconsolidated joint venture" during 1998 represents initial
losses associated with the Company's start-up of the Capri Cruises joint venture
in June 1998. Capri Cruises presently operates one vessel on two- and five-day
cruises from New Orleans.
Seawise's interest in the Company's Sea-Comm joint venture is reflected in the
($94,998) and $971,246, line item for "Minority interest in loss of consolidated
joint venture" for the nine months ended June 30, 1998 and 1997, respectively.
Sea-Comm earned $190,186 during the nine months ended June 30, 1998 versus the
$1,944,436 loss during the nine months ended June 30, 1997. The improvement in
earnings was due primarily to improved passenger counts on the Universe Explorer
during the Alaska season as well as an increase in the amount paid by Seawise
for the adult spaces utilized by the Semester-at-Sea program.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficiency was $9,844,096, and $7,987,670, for
June 30, 1998 and September 30, 1997, respectively. The Company's working
capital deficiency was primarily due to the inclusion, in non-current assets, of
a $4,629,000 deposit securing the Company's FMC bond. The corresponding
liability, customer deposits, is included in current liabilities. The other
increases in the Company's working capital deficit were the result of cash flow
used in investing activities, primarily capital expenditures to the Enchanted
Isle and the Universe Explorer for SOLAS modifications as well an increase in
customer deposits due to increased demand for the Company's cruises in the
Caribbean and Alaska and the addition of the Enchanted Capri.
Cash flows from operations provided $8,807,389 and $5,192,289 for the first nine
months of fiscal 1998 and 1997, respectively. The improvement in cash flows for
fiscal 1998 is primarily attributable to the improvement in net earnings and the
increase in customer deposits due to the addition of the Enchanted Capri, which
was partially offset by increases in restricted cash as the passenger payments
for that vessel are placed in the Company's FMC escrow account until the
sailings are completed. The lower cash flows for fiscal 1997 primarily represent
a decrease in restricted cash which resulted from a more favorable credit card
processing agreement entered into by the Company in November 1996, which was
partially offset by increases in accounts payable.
Cash flows from investing activities used $5,454,152 and $2,097,960 for the nine
months ended June 30, 1998 and 1997, respectively. During the nine months ended
June 30, 1998 the
Page 9
<PAGE>
Company invested $3,581,955 in capital expenditures for SOLAS work on both of
the Company's vessels as well as an investment of $1,994,516 in the Company's
Capri Cruises joint venture.
Cash flows from financing activities used $1,438,166 during the nine months
ended June 30, 1998 compared to $2,103,194 during the nine months ended June 30,
1997. This decrease was primarily due to the receipt of $1,484,464 in proceeds
from the Company's private offering described below, which was partially offset
by an increase in principal payments on the Company's long-term debt pursuant to
the terms of the Company's loan agreement.
At June 30, 1998, the Company owed $17,935,685 to the Company's lender. The loan
is secured by substantially all the assets of the Company and bears interest at
LIBOR plus 2%.
In December 1997, the Company completed a private offering (the "Private
Offering") of $2,150,000 in principal amount of 7% convertible debentures (the
"Debentures"). The Company sold the Debentures at a 20% discount. The Debentures
are convertible into shares of Common Stock of the Company at the option of the
holder thereof based on the average closing sale price of the Common Stock for
the five trading days immediately prior to conversion, but in no event less than
$3.131 or more than $4.00 per share. The Debentures are also convertible at the
option of the Company, provided the Common Stock trades above a certain price
for a specified period. The Company registered the shares of Common Stock
issuable upon conversion of the Debentures, under the Securities Act of 1933, as
amended (the "Securities Act"). The Company generated $1,484,464 in proceeds
after deducting brokerage commissions and expenses of the Private Offering. In
May 1998 the Company exercised its right to demand conversion of the debentures
into common stock at $4.00 per share.
The Company used the proceeds from the Private Offering primarily to enter into
a contract with Cruise Charter, Ltd. for the charter of the M/V Enchanted Capri
(ex-Island Holiday).
On April 22, 1998 the Company borrowed $1,500,000 from an unrelated third party.
The Company paid interest of $40,000 at the time of the loan and the loan is due
in full on August 22, 1998. The Company expects to repay the loan from its
working capital.
In June 1997, the FASB 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 has not assessed the effect that these new standards will have on
its consolidated financial statements and/or disclosures.
The Company's computerized reservation system and accounting system have already
been reprogrammed to be Year 2000 compliant. The Company has additional
computerized systems onboard its vessels that will require some reprogramming
which is expected to be carried out during the current fiscal year. The cost of
the reprogramming, which is being done by an outside vendor is not expected to
exceed $5,000 per vessel.
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.
Page 10
<PAGE>
Part II: OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
(c) On April 22, 1998, the Company granted warrants to purchase an aggregate
of 50,000 shares of common stock to an unaffiliated third party as additional
compensation for a $1,500,000 loan such person made to the Company. The warrants
are exercisable at $5.00 per share and expire on April 21, 2003. The grant of
warrants was exempt from registration pursuant to section 4(2) of the
Securities Act.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.1 Joint venture agreement of Capri Cruises dated April
17, 1998 between Commodore Cruises Limited and Isle
of Capri Corporation
10.2 Charter agreement dated March 9, 1998 between Cruise
Charter, Ltd. and Commodore Cruises Limited, as
amended*
10.3 Promissory note dated April 22, 1998*
27 Financial Data Schedule
- ------------
* Portions of documents omitted pursuant to an application for an order for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934, as amended.
B. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1998.
Page 11
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
COMMODORE HOLDINGS LIMITED
(Registrant)
/S/ ALAN PRITZKER
---------------------------------
Alan Pritzker
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
August 12, 1998
Page 12
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.1 Joint venture agreement of Capri Cruises dated April 17, 1998 between
Commodore Cruises Limited and Isle of Capri Corporation
10.2 Charter agreement dated March 9, 1998 between Cruise Charter, Ltd. and
Commodore Cruises Limited, as amended*
10.3 Promissory note dated April 22, 1998*
27 Financial Data Schedule
- ------------
* Portions of documents omitted pursuant to an application for an order for
confidential treatment pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934, as amended.
EXHIBIT 10.1
JOINT VENTURE AGREEMENT
OF
CAPRI CRUISES
BETWEEN
COMMODORE CRUISES LIMITED
AND
ISLE OF CAPRI CORPORATION
DATED APRIL 17, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE 1 .............................................................1
ARTICLE 2 .............................................................5
2.1 Principal Executive Office...................................5
2.2 Other Offices................................................5
ARTICLE 3 .............................................................5
3.1 Establishment of the Joint Venture...........................5
3.2 Organization as a General Partnership........................5
3.3 Name.........................................................5
3.4 Charter of Vessel............................................5
3.5 Operations...................................................5
3.6 Reservations.................................................6
3.7 Corporate Overhead...........................................6
3.8 Intellectual Property Assets.................................6
3.9 Representations and Warranties of the Partners...............6
3.10 Covenants of Partners........................................7
3.11 Concession Aboard Enchanted Isle.............................7
ARTICLE 4 .............................................................8
4.1 Partners.....................................................8
4.2 Management Committee.........................................8
4.3 Management Committee Meetings................................9
4.4 Voting......................................................10
4.5 Procedures in the Event of a Deadlock.......................11
4.6 Chief Executive Officer.....................................12
4.7 Executive Officers..........................................13
4.8 Business Plan...............................................13
4.9 Budget Approval.............................................13
4.10 Employees and Employee Benefits.............................14
4.11 Arrangements with Partners or Affiliates....................15
4.12 Access to Books of Account..................................15
4.13 Duty of Partners to Cooperate...............................15
4.14 Insurance and Risk Management...............................16
4.15 Limitations on Partner's Authority..........................16
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ARTICLE 5 ............................................................16
5.1 Initial Capital Contributions...............................16
5.2 Adjustments to Capital Accounts.............................16
5.3 Additional Capital Contributions............................17
5.4 Procedure for Making Capital Calls by the Management
Committee..................................................18
5.5 Failure of Partner to Contribute Capital....................18
5.6 No Third Party Beneficiaries................................19
5.7 No Withdrawal of, or Payment of Interest on, Capitals
Accounts..................................................19
5.8 Obligation to Restore.......................................19
ARTICLE 6 ............................................................19
6.1 Allocations.................................................19
6.2 Distributions and Reserves..................................19
6.3 Accounting Matters..........................................21
6.4 Tax Status and Returns......................................21
6.5 Tax Matters Partner.........................................21
6.6 754 Election................................................22
6.7 Partnership Classification..................................22
ARTICLE 7 ............................................................22
7.1 Transfer of Interests.......................................22
7.2 Right of First Refusal......................................23
7.3 Exempt Transfers............................................24
7.4 Legend......................................................24
7.5 Admission of New Partners...................................25
7.6 Resignation of Partners.....................................25
7.7 Sale Due to Objection of Governmental Body..................25
ARTICLE 8 ............................................................26
8.1 No Default Dissolution......................................26
8.2 Default Dissolution.........................................26
8.3 Mandatory Sale..............................................28
8.4 Notice......................................................28
8.5 Dissolution Procedures......................................28
8.6 Settling of Accounts........................................29
8.7 Distribution of Proceeds....................................29
8.8 Certified Liquidation Statement.............................30
8.9 Mandatory Sale Procedures...................................30
ARTICLE 9 ............................................................32
9.1 Outside Activities..........................................32
9.2 Duties of Partners..........................................33
9.3 Confidential Information....................................33
9.4 Duty of Partners to Cooperate...............................34
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ARTICLE 10 ............................................................34
10.1 Limitation of Liability.....................................34
10.2 Indemnification: Proceeding other than by Joint Venture....35
10.3 Indemnification: Proceeding by Joint Venture...............35
10.4 Mandatory Indemnification...................................35
10.5 Authorization of Indemnification............................36
10.6 Mandatory Advancement of Expenses...........................36
10.7 Effect and Continuation.....................................36
10.8 Insurance and Other Financial Arrangements..................36
10.9 Notice of Indemnification and Advancement...................36
10.10 Repeal or Modification......................................36
ARTICLE 11 ............................................................37
11.1 Records to be Kept..........................................37
11.2 Inspection of Joint Venture Records.........................37
11.3 Financial Reports...........................................37
11.4 Joint Venture Auditors......................................37
ARTICLE 12 ............................................................38
12.1 Defaults....................................................38
12.2 Remedies....................................................38
12.3 No Waiver...................................................38
ARTICLE 13 ............................................................38
13.1 Disputes....................................................38
13.2 Arbitration.................................................38
ARTICLE 14 ............................................................42
14.1 Term........................................................42
14.2 Amendments..................................................42
14.3 Nature of Partnership Interest; Agreement Is Binding Upon
Successors................................................42
14.4 Title to Property...........................................42
14.5 Attorney Fees...............................................42
14.6 Seal........................................................42
14.7 Entire Agreement............................................42
14.8 Third Parties...............................................43
14.9 Governing Law...............................................43
14.10 Counterparts................................................43
14.11 Titles and Subtitles; Form of Pronouns; Construction and
Definitions...............................................43
14.12 Severability................................................43
14.13 Costs.......................................................43
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JOINT VENTURE AGREEMENT
OF
CAPRI CRUISES
THIS JOINT VENTURE AGREEMENT (this "Agreement") is made and entered
into as of the 17th day of April, 1998 by and between COMMODORE CRUISES LIMITED,
a Bermuda corporation ("Commodore"), and ISLE OF CAPRI CORPORATION, a
Mississippi corporation ("Casino").
W I T N E S S E T H
WHEREAS, the parties hereto wish to form and become Partners of a
general partnership, to be called Capri Cruises (the "Joint Venture"), under and
pursuant to Chapter 620 of the Florida Statutes (the Florida Revised Uniform
Partnership Act), for the purpose of operating a cruise ship from New Orleans,
Louisiana, and such other business activities as shall be approved by the
Partners from time to time; and
WHEREAS, the parties agree that their respective rights, powers, duties
and obligations as Partners of the Joint Venture, and the management, operations
and activities of the Joint Venture, shall be governed by this Agreement.
NOW, THEREFORE, in consideration of the mutual terms, covenants, and
conditions contained herein, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement without other definition
shall, unless expressly stated otherwise, have the meanings specified in this
Article 1.
"ACT" means Chapter 620 of the Florida Statutes (the Florida Revised
Uniform Partnership Act), as from time to time in effect in the State of
Florida, or any corresponding provision or provisions of any succeeding or
successor law of such State; provided, however, that in the event that any
amendment to the Act, or any succeeding or successor law, is applicable to the
Joint Venture only if the Joint Venture has elected to be governed by the Act as
so amended or by such succeeding or successor law, as the case may be, the term
"Act" shall refer to the Act as so amended or to such succeeding or successor
law only after the appropriate election by the Joint Venture has been made and
has become effective.
"AFFILIATE" means any other Person directly or indirectly controlling,
controlled by, or under common control with, such Person; provided, however,
except that no party to this Agreement shall be considered an affiliate of any
other party solely by reason of its investment in the Joint Venture.
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"AGREEMENT" means this Joint Venture Agreement, as originally executed
and as amended, modified or supplemented from time to time. Words such as
"herein," "hereafter," "hereof," "hereto," "hereby" and "hereunder," when used
with reference to this Agreement, refer to this Agreement as a whole, unless the
context otherwise requires.
"BUSINESS" means the operation of a cruise ship in "blue waters" from
New Orleans, Louisiana, and such other business activities as shall be approved
by the Partners from time to time.
"BUSINESS PLAN" means the business plan of the Joint Venture described
in Section 4.8.
"CAPITAL ACCOUNT" means a Partner's account, calculated in accordance
with, and intended to comply with, Treasury Regulations section 1.704-1(b),
pursuant to Article 5 hereof.
"CAPITAL CONTRIBUTIONS" means the contributions made by the Partners to
the Joint Venture pursuant to Article 5 hereof and, in the case of all the
Partners, the aggregate of all such Capital Contributions.
"CODE" means the United States Internal Revenue Code of 1986, as
amended, or any corresponding provision or provisions of any succeeding law.
"CONFIDENTIAL INFORMATION" means all confidential documents and
information (including, without limitation, confidential commercial information
and information with respect to customers and proprietary processes and the
design and development of new services) concerning the Joint Venture or the
Joint Venture Business, any Partner, or any Affiliate of a Partner furnished to
a Partner, an Affiliate of a Partner or the Joint Venture in connection with the
transactions leading up to and contemplated by this Agreement and the operation
of the Joint Venture or its business, except to the extent that such information
can be shown to have been (a) generally available to the public other than as a
result of a breach of the provisions of Section 9.3 of this Agreement; (b)
already in the possession of the receiving Person (as defined below in this
Section) or its Representatives (as such term defined in Section 9.3 hereof)
without restriction (including restrictions contained in any confidentiality
agreement or other nondisclosure obligation entered into by the Partner) and
prior to any disclosure in connection with the Joint Venture or pursuant to any
of the terms of this Agreement; (c) lawfully disclosed to the receiving Person
or its Representatives by a third party who is free lawfully to disclose the
same; or (d) independently developed by the receiving Person without use of any
Confidentiality Information obtained in connection with the transactions leading
up to and contemplated by this Agreement and the operation of the Joint Venture
or its business.
"DEFAULT LOAN" means loans described in Section 5.5(d).
"DEFAULT RATE" means the rate announced from time to time by
NationsBank N.A. as its prime rate plus 5%.
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the balance sheet and the
other financial statements preceding the ones with respect to which such term is
used were prepared.
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"GOVERNMENTAL BODY" means any: (a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign, or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal); (d)
multi-national organization or body; or (e) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"GUARANTEE" means the Guaranty executed by each of Commodore Holdings
Limited and Casino America, Inc., in the form of EXHIBIT "A" hereto.
"INTELLECTUAL PROPERTY ASSETS" means:
(a) all patents, patent applications and inventions and discoveries
that may be patentable;
(b) all copyrights in both published and unpublished works;
(c) all know-how, trade secrets, confidential information, customer
lists, software, programs, prototypes, designs, technical information, data,
process technology, engineering and manufacturing information, procedures,
specifications, plans, drawings and blue prints; and
(d) all trademarks (whether registered or unregistered) and trademark
applications owned, used, or licensed by the Person with respect to whom the
term is used either as licensee or licensor.
"INTEREST" means the entire ownership interest of a Partner in the
Joint Venture at any particular time, including, without limitation, the right
of such Partner to participate in the Joint Venture's income or losses and its
Net Cash Flow, and any and all other benefits to which a Partner may be entitled
as provided in this Agreement and the Act, subject to the obligations of such
Partner to comply with all the terms and provisions of this Agreement.
"IRC" means the United States Internal Revenue Code of 1986, as
amended, or any corresponding provision or provisions of any succeeding law.
"NET CASH FLOW" means, with respect to any fiscal period, the excess of
operating revenues and receipts over operating expenses and other expenditures
for such fiscal period, (a) decreased by any amounts added to Reserves during
such fiscal period, and (b) increased by the amount (if any) of all allowances
for cost recovery, amortization or depreciation with respect to property of the
Joint Venture for such fiscal period, and (c) increased by any amounts withdrawn
from Reserves during such fiscal period. The foregoing computation shall be
performed in accordance with GAAP, consistently applied.
"OPERATIONS" means all transactions in the ordinary course of the Joint
Venture's business, but does not include the making of Capital Contributions to
the Joint Venture.
"PARENT ENTITY" means, as to any Person, an Affiliate of which such
Person is a wholly or majority owned subsidiary.
"PARTNER LOANS" means the loans described in Section 6.2(a)(i).
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"PARTNER" shall mean each of the parties to this Agreement and any
Person (as defined below) who is admitted as a Partner of the Joint Venture
pursuant to the Act and the terms of this Agreement provided that such party or
Person has not disposed of its entire interest in the Joint Venture pursuant to
Article 7 hereof.
"PERCENTAGE INTEREST" means the allocable interest of each Partner in
the income, gain, losses, deductions or credits of the Joint Venture. The
Percentage Interests of the Partners are as set forth in Schedule 2 hereto.
"PERSON" means any partnership, joint venture, association,
corporation, limited liability company, trust or other entity, or, where the
contexts so permits or requires, natural Person.
"PRESENT OPERATIONS" means the Operations of the Joint Venture as
described in the Business Plan for its present fiscal year.
"REFERENCE RATE" means the rate announced from time to time by
NationsBank N.A. as its prime rate.
"RESERVES" means the reserves established and maintained from time to
time by the Management Committee for the purposes set forth in Section 6.2(b).
"SEAWORTHINESS" means that the Vessel complies with all requirements of
its classification society, country of registry, United States Public Health
Service, United States Coast Guard, the International Convention of Safety of
Life at Sea, and that all equipment aboard the Vessel, including air
conditioning systems, water pumps and desalinization systems, are operational.
"TREASURY REGULATIONS" means the regulations issued by the Treasury
Department under the Code, as such regulations may be amended form time to time,
including any successor regulations.
"VESSEL" means the M/V Island Holiday (to be renamed the "M/V Enchanted
Capri") and/or such other ships as may be operated by the Joint Venture in the
future.
"VESSEL RULES" means the Vessel's operating manual and such rules and
regulations concerning safety, discipline, shipboard conduct and compliance with
applicable laws as may be promulgated by Commodore and the Vessel's Captain from
time to time.
"WHOLLY OWNED SUBSIDIARY" means, as to any Person, a corporation or
other entity of which all of the capital stock or other equity interest is
owned, directly or indirectly, through one or more intermediaries, or both, by
such Person.
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ARTICLE 2
OFFICES AND STATUTORY AGENT
2.1 PRINCIPAL EXECUTIVE OFFICE. The principal executive office for the
transaction of the business of the Joint Venture shall initially be at 4000
Hollywood Boulevard, Suite 385-S, South Tower, Hollywood, Florida 33021, and may
be changed from time to time by the Partners within or without the State of
Florida.
2.2 OTHER OFFICES. The Partners may at any time and from time to time
establish other business offices within or without the State of Florida.
ARTICLE 3
ESTABLISHMENT OF THE JOINT VENTURE
3.1 ESTABLISHMENT OF THE JOINT VENTURE. Upon execution of this
Agreement and contribution of the first installment of the Initial Capital
Contributions due by each Partner as set forth on Schedule 1 hereto, the Joint
Venture shall commence its existence. The purpose of the Joint Venture shall be
for each of the Partners to provide its unique expertise and experience to the
joint project of operating a cruise ship from New Orleans, Louisiana, and such
other business activities as shall be approved by the Partners from time to
time.
3.2 ORGANIZATION AS A GENERAL PARTNERSHIP. Notwithstanding the referral
to the Joint Venture as a "Joint Venture," the Joint Venture shall operate as a
Florida general partnership. The Joint Venture will be managed by a Management
Committee and none of the Partners shall have the authority to bind the Joint
Venture by virtue of their status as Partners of the Joint Venture. The purpose
of the Joint Venture shall be as described in Section 3.1.
3.3 NAME. The name of the Joint Venture shall be Capri Cruises and the
Joint Venture shall make such filings and take such other actions as shall be
necessary to conduct the business of the Joint Venture under such name.
3.4 CHARTER OF VESSEL. Upon execution of this Agreement, Commodore
shall assign to the Joint Venture its interest as charterer under the charter
dated March 9, 1998, as amended, between Commodore and Cruise Charter Ltd. (the
"Joint Venture Charter"), which assignment and charter are attached hereto as
EXHIBIT "B". Pursuant to the assignment of the Joint Venture Charter, each of
Commodore Holdings Limited and Casino America, Inc. shall execute a guaranty in
the form of EXHIBIT "A" attached hereto whereby each of them shall guarantee
half of the charter hire and other obligations (severally and not jointly) due
under the Joint Venture Charter.
3.5 OPERATIONS. The Partners shall operate the Joint Venture so as to
take advantage of their particular areas of expertise and experience. In this
connection, Commodore will operate the Vessel and Casino will operate the casino
aboard the Vessel as an "Isle of Capri" casino, including setting up the
internal controls for the casino. In addition, the marketing for the Joint
Venture will
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be shared between the Partners, with Commodore marketing the base cruise product
and Casino marketing the gaming product. The Management Committee of the Joint
Venture will agree upon the marketing and pricing schedule and upon the
predetermined percentage of the published cruise fare to be discounted for
database casino customers as a marketing tool, which plans will be included in
the proposed Business Plan and Budget submitted to the Management Committee of
the Joint Venture on an annual basis by the CEO of the Joint Venture pursuant to
Section 4.9. Such marketing will be conducted so as not to disrupt the fare
structure Commodore has in place with its travel agents.
3.6 RESERVATIONS. Reservations for the Joint Venture's Vessel will be
made through Commodore's reservations office with a special Joint Venture
telephone manned by employees of an Affiliate of Commodore who will be trained
regarding the Joint Venture.
3.7 CORPORATE OVERHEAD. In order to best take advantage of the
experience, expertise and economies of scale which each of the Partners can
provide to the Joint Venture, the Partners may, where necessary and appropriate,
utilize the services of employees of each of the Partners to provide services to
the Joint Venture instead of hiring new employees specifically for the Joint
Venture. As such, a portion of each of Commodore's and Casino's overhead related
to the services it provides to the Joint Venture will be charged to the Joint
Venture, at cost, with the amounts proposed to be charged set forth in the
proposed Budget submitted to the Management Committee by the CEO each year and
as may be approved by such Management Committee. In addition, each Partner will
be reimbursed by the Joint Venture for all out-of-pocket monies expended on
behalf of the Joint Venture, to be budgeted and approved by the Joint Venture's
Management Committee in advance. The Partners anticipate that these costs will
relate primarily to marketing costs and management staff, and reimbursement for
advances made in connection with formation and operation of the Joint Venture.
Without limitation of the foregoing, Casino shall be reimbursed by the Joint
Venture for a portion of the salary and benefits of a senior Person who will be
assigned to oversee and coordinate the operations and marketing of the Joint
Venture's casino.
3.8 INTELLECTUAL PROPERTY ASSETS. Each of the Partners shall license
certain of its Intellectual Property Assets to the Joint Venture for a fee equal
to $1 per year for as long as such Partner owns an Interest in the Joint Venture
and the Vessel is operating. Specifically, Casino shall license its Intellectual
Property Assets related to its "Isle of Capri" casino products and services and
Commodore shall license its Intellectual Property Assets related to its
"Commodore Cruise Lines" products and services to the Joint Venture. The Joint
Venture shall enter into license agreements with each of Casino and Commodore on
terms substantially similar to the those contained in EXHIBIT "C" hereto.
3.9 REPRESENTATIONS AND WARRANTIES OF THE PARTNERS. Each Partner
represents and warrants to each other Partner and the Joint Venture as follows
(except as to the matters in clause (d) below, which Commodore represents and
warrants to Casino and the Joint Venture):
(a) Each Partner is a corporation duly incorporated, validly existing,
and in good standing under the laws of its state or country of incorporation,
with full corporate power and authority to own, lease, and operate its
properties and to carry on its business as it is now being conducted. Each such
corporation is in good standing as a foreign corporation in each jurisdiction in
which the ownership of its property or the conduct of its business makes such
qualification
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necessary. Each such corporation has taken all action necessary to authorize the
execution, delivery, and performance of this Agreement.
(b) Neither the execution or the delivery of this Agreement or any
document or instrument contemplated hereby to be executed and delivered by any
Partner or its Affiliate, nor the fulfillment of or compliance with the terms
and provisions of this Agreement and such other documents and instruments, will
conflict with or will result in a breach of, the terms, conditions, or
provisions of, or constitute a default under, or result in any violation of, any
judgment, decree, or any order of any court or any arbitration authority, or any
statute, law, rule, or regulation by which any such Partner, or its Affiliate,
or its respective assets are affected or bound.
(c) There are no oral or written contracts, agreements, or undertakings
binding upon or affecting any Partner or its Affiliate, or its respective assets
that would alter or impair the ability of such Partner or Affiliate to enter
into and perform its obligations under this Agreement or any document or
instrument contemplated hereby to be executed and delivered by any Partner or
its Affiliate.
(d) As of the date of this Agreement, (i) the Joint Venture Charter is
in full force and effect, (ii) to Commodore's knowledge, there is no actual or
alleged breach, default or event of default of or under such Joint Venture
Charter or matter or occurrence which, with or without the passage of time,
would constitute, cause or result in any such breach, default or event of
default, (iii) attached to this Agreement as EXHIBIT B is a true, accurate and
complete copy of the Joint Venture Charter and all amendments or modifications
to it, and except as contained in EXHIBIT B, there are no modifications,
amendments or changes to the Joint Venture Charter.
3.10 COVENANTS OF PARTNERS. Each Partner covenants to each other
Partner as follows:
(a) Commodore will use its reasonable best efforts to operate the
Vessel in accordance with industry practices and to cause the Joint Venture to
remain in compliance with the terms of the Joint Venture Charter (and to notify
the Management Committee promptly if it appears that the Joint Venture may fail
to comply with the terms of the Joint Venture Charter in any material respect).
(b) Casino will use its reasonable best efforts to operate the casino
aboard the Vessel in accordance with industry standards and to implement and
maintain internal controls with respect to the casino as customarily implemented
in the industry.
3.11 CONCESSION ABOARD ENCHANTED ISLE. If during any three-month period
commencing on or after May 1, 1998, Casino or its Affiliates book passengers
aboard the Vessel who occupy an average of one-third or more of the occupied
cabins on the Vessel, then, at the election of Casino, Commodore shall cause its
Affiliate to enter into the Casino Management Agreement, in the form attached
hereto as EXHIBIT "F" with Casino America, Inc. with respect to Commodore's
vessel, the M/V Enchanted Isle or, if Commodore or its Affiliates cease to
operate the M/V Enchanted Isle, any replacement vessel on similar itineraries
(the "Enchanted Isle"). Such option shall expire six months after Casino or its
Affiliates first meets such target. Notwithstanding the foregoing, commencing on
the date hereof, Commodore or its Affiliates shall grant Casino and its
Affiliates certain rights with respect to the sale of cabins aboard the
Enchanted Isle described on SCHEDULE 5.
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ARTICLE 4
PARTNERS; MANAGEMENT; VOTING RIGHTS; MEETINGS OF DIRECTORS
4.1 PARTNERS. Each of the parties to this Agreement, and each Person
admitted as a Partner of the Joint Venture pursuant to the Act and Article 7 of
this Agreement, shall be a Partner of the Joint Venture until ceasing to be a
Partner as a result of the provisions of the Act or this Agreement. The names of
the initial Partners are set forth on SCHEDULE 1 hereto.
4.2 MANAGEMENT COMMITTEE.
(a) Except as otherwise provided in this Agreement, complete and
exclusive power to direct and control the business affairs of the Joint Venture
is delegated to a Management Committee (the "Management Committee"), which will
consist of four members. Each Partner shall appoint two members of the
Management Committee (the "Directors").
(b) Effective upon the giving of written notice to the other Partner, a
Partner may, at any time in its sole discretion, remove, replace or fill a
vacancy relating to any or all of its appointed Directors with other individuals
and may designate one or more alternates for any or all of its Directors. Each
Director must be an officer or employee of a Partner or an Affiliate thereof.
Each Director shall serve on the Management Committee until his successor is
appointed or until his earlier death, resignation or removal.
(c) Except as otherwise provided in this Agreement, the Management
Committee shall have the exclusive authority and power to act on behalf of the
Joint Venture on all matters, including without limitation on the matters set
forth in Section 4.4 or elsewhere herein and including without limitation the
following matters:
(i) The approval of the Business Plan and Budget (as defined
in Section 4.9) or any material change to it and the determination to
require any Additional Capital Contributions; and
(ii) any other matters coming before the Management Committee.
Each Partner, by execution of this Agreement, agrees to, consents to and
acknowledges the delegation of powers and authority to such Management
Committee.
(d) Any member of the Management Committee may receive all reports and
information from the CEO and the Executive Officers as he shall request, in his
sole discretion.
(e) The Management Committee may delegate any portion of its authority
(other than with respect to the matters set forth in Section 4.4(b)) to the CEO
or to any other Executive Officer.
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4.3 MANAGEMENT COMMITTEE MEETINGS.
(a) The Management Committee shall hold regular meetings (at least
quarterly) as such time and place as shall be determined by the Management
Committee (or by the Chairman). Special meetings of the Management Committee may
be called at any time by any Director by delivering the notice as provided in
Sub-section (g) below.
(b) The Chairman of the Management Committee shall be a Director who is
appointed by the Management Committee from time to time. The Chairman shall
establish the agendas for, and regulate the proceedings, of the Management
Committee, but must include on such agendas matters requested by any Director in
writing received at least two business days prior to the meeting.
(c) Directors may participate in a meeting of the Management Committee
by conference telephone or similar communications equipment by means of which
all Persons participating in the meetings can hear each other, and such
participation shall constitute presence in person or at such a meeting.
(d) Any action required or permitted to be taken at any meeting of the
Management Committee may be taken without a meeting upon the written consent of
the number of Directors required to approve the actions contained in such
consent (in accordance with Section 4.4). Such written consent or consents shall
be filed with the minutes of the proceedings of the Management Committee and
shall have the same force and effect as a vote of the Directors required to
approve the actions contained in such consent (in accordance with Section 4.4).
(e) The Management Committee shall appoint a Secretary from time to
time. The Secretary shall keep written minutes of all Management Committee
meetings and written consents, a copy of which meetings shall be provided to
each Director.
(f) The Directors shall have the right to designate an alternate to
attend meetings of the Management Committee, instead and in place of such
Director, and to exercise all of the functions of such Director. Any such
alternate shall be an officer or employee of a Partner or of an Affiliate
thereof. Any such alternate shall be deemed to be a Director for all purposes
hereunder until such designation is revoked.
(g) Notice of each regular meeting and each special meeting of the
Management Committee shall be given to each Director at least three business
days before such meeting. Notices of special meetings shall contain a
description, in reasonable detail, of the items of business to be conducted at
such meeting and no business other than those items (unless expressly agreed to
by the Director representing the Partner who did not call that special meeting)
may be conducted at such special meeting. Notice of a meeting need not be given
to any Director who signs a waiver of notice or a consent to holding the meeting
or an approval of the minutes thereof, whether before or after the meeting, or
who attends the meeting without protesting prior thereto or at its commencement.
All such waivers, consents and approvals shall be filed with the Joint Venture's
records and made a part of the minutes of the meeting.
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4.4 VOTING.
(a) On any matter on which a vote is taken, each of the Directors shall
have one vote. That number of Directors which is one less than the number of
Directors on the Management Committee shall constitute a quorum for the
transaction of business; provided that all of the Directors of the Management
Committee are required in order to have a quorum for transaction of business
that requires an affirmative vote of all of the Directors. All actions by the
Management Committee shall require the affirmative vote of a majority of the
Directors on the Management Committee, except for the actions set forth in
Sub-section (b) below, which shall require the affirmative vote of all the
Directors of the Management Committee, and the actions set forth in Subsection
(c) below, which shall require the affirmative vote of two of the Directors of
the Management Committee.
(b) Except as otherwise expressly provided in this Agreement, the Joint
Venture shall not take any of the following actions unless such action has been
approved by the affirmative vote of all the Directors of the Management
Committee:
(i) Any amendment of this Agreement;
(ii) Any determination to change the nature of the Joint
Venture's Business;
(iii) The admission of any additional Partners to the Joint
Venture or the issuance of any additional Interests in the Partnership
(other than pursuant to Section 5.5 hereof);
(iv) The voluntary dissolution or liquidation of the Joint
Venture;
(v) The agreement to continue the Business of the Joint
Venture after an event of dissolution specified in Section 8.1;
(vi) Any merger or consolidation of the Joint Venture with or
into another Person or sale, assignment, lease or other transfer of
substantially all of the Joint Venture's assets;
(vii) A determination to require an Additional Capital
Contribution in accordance with Section 5.3, other than an Additional
Capital Contribution required to maintain the Seaworthiness of the
Vessel or for items of necessity to continue the Present Operations of
the Joint Venture;
(viii) The authorization or the incurrence by the Joint
Venture of indebtedness for borrowed money in excess of $100,000 in the
aggregate at anytime outstanding;
(ix) The determination to make any capital expenditures or
commitments therefor that aggregate in excess of $250,000 in budget in
any one transaction or series of related transactions;
(x) The making of any loans or advances to, or guarantees for
the benefit of, any Partner or Affiliate;
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(xi) The execution of any leases or other arrangements
involving the rental, use or occupancy of any property by or on behalf
of the Joint Venture (other than dock space for the Vessel), which
involve an aggregate annual expenditure in excess of $100,000;
(xii) The authorization of any transaction between the Joint
Venture and any Partner or Affiliate of a Partner;
(xiii) The taking of any action which may cause the Joint
Venture to become an entity other than a general partnership; and
(xiv) Any other matter which the Management Committee
determines, pursuant to its unanimous vote, shall require the unanimous
approval of the Directors of the Management Committee.
(c) The Joint Venture may act to require an Additional Capital
Contribution from the Partners to be used solely for the purposes of maintaining
the Seaworthiness of the Vessel or for items of necessity to continue the
Present Operations of the Joint Venture if at least two of the Directors of the
Management Committee determine that such Additional Capital Contribution is
required for such purpose. In the event that at least two but less than all of
the Directors of the Management Committee vote to require such Additional
Capital Contribution, the Director or Directors who vote against such action
(the "Opposed Directors") may require that such decision be submitted to
arbitration pursuant to Article 13 if the Opposed Directors dispute whether the
Additional Capital Contribution is required (or the amount that is required) to
maintain the Seaworthiness of the Vessel or for items of necessity to continue
the Present Operations of the Joint Venture. If the arbitrators find that the
Additional Capital Contribution is required for either Seaworthiness or for
items of necessity to continue Present Operations, the Partner represented by
the Opposed Directors shall have a period of 120 days to remit such Additional
Capital Contribution to the Joint Venture together with interest at the Default
Rate or to be treated as a Defaulting Partner. In the event such party fails to
make such Additional Capital Contribution within the 120-day period, the
non-defaulting Partner may elect any of the options under Section 5.5 with
respect to the Defaulting Partner's Additional Capital Contribution, may
purchase the Defaulting Partner's Interest pursuant to Section 8.3 or dissolve
the Joint Venture pursuant to Section 8.2. During the period between the date
such Additional Capital Contribution is demanded and the expiration of the
120-day period, the Partner who does not dispute the Additional Capital
Contribution may, but shall not be required to, make a Partner Loan to the Joint
Venture in the amount of the other Partner's Additional Capital Contribution,
which Partner Loan shall bear interest at the Reference Rate until the decision
of the arbitrators is released, and if such decision supports such Additional
Capital Contribution, the interest rate shall increase on such day the decision
is released to the Default Rate.
4.5 PROCEDURES IN THE EVENT OF A DEADLOCK. In cases where a majority of
the Directors fail to agree on any matter submitted to a vote of the Management
Committee (a "Dispute"), the Dispute shall be resolved in the following manner:
(a) First, any Director may refer the Dispute to the executive at the
parent (if applicable) of each Partner to whom the respective Director reports
(each, a "Senior Executive"), in an attempt to reach a resolution;
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(b) If the Senior Executives of the Partners are unable to resolve a
Dispute within five business days after the referral to them of a Dispute (or
such longer period of time as to which the Senior Executives mutually agree in
writing), except as set forth in Section 4.5(d), the Partners shall submit the
Dispute to arbitration pursuant to the procedures set forth in Article 13.
(c) Except as set forth in Section 4.5(d), during the pendency of any
Dispute, the operations of the Joint Venture in dispute shall be operated as
follows: If the Dispute relates to the operations or marketing of the Vessel
(excluding the casino), Commodore's decision shall control, and if the Dispute
relates to the operation or marketing of the casino, Casino's decision shall
control. If the Dispute relates to a matter other than the operation of the
Vessel or the casino, no action shall be taken respecting the matter pending the
determination of the arbitrators and the matter shall be STATUS QUO.
(d) Notwithstanding the provisions of this Section 4.5, a deadlock with
respect to any matter set forth in Section 4.4(b) shall not be subject to
arbitration pursuant to Article 13. Instead, the Joint Venture shall continue to
operate without taking any action with respect to such matter unless and until
the Management Committee unanimously agrees to take such action.
4.6 CHIEF EXECUTIVE OFFICER.
(a) Except as limited by Sections 4.7 and 4.10(c), the Chief Executive
Officer (the "CEO") shall have such authority and power as shall be delegated to
him by the Management Committee, including management of the Joint Venture's
day-to-day operations, in a manner consistent with the Business Plan and then
current Budget.
(b) The CEO shall be appointed by Commodore with Casino's reasonable
approval, and serve at the pleasure of the Management Committee. The CEO also
may serve as an executive officer or employee of one of the Partners or an
Affiliate thereof.
(c) Subject to Sections 4.2, 4.4, 4.7 and 4.10(c), the CEO will be
responsible for and have the authority, discretion, and primary responsibility
in managing the staff and the day-to-day operations of the Joint Venture,
including:
(i) Implementing the Business Plan and Budget of the Joint
Venture as approved by the Management Committee;
(ii) Making any immaterial changes to or taking actions which
would constitute an immaterial deviation from, an approved Business
Plan or approved Budget;
(iii) Operating and managing the business of the Joint Venture
(other than the casino);
(iv) Preparing, on an annual basis, proposed revisions to the
Business Plan and Budget for submission to the Management Committee for
approval;
(v) Authorizing the Joint Venture to enter into transactions
up to $100,000 for any transaction or series of related transactions;
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(vi) The delegation of powers and authorities to the Executive
Officers consistent with the other provisions of this Agreement; and
(vii) Ensuring that the Joint Venture complies with all
applicable legal requirements.
4.7 EXECUTIVE OFFICERS.
(a) The executive officers of the Joint Venture shall consist of the
CEO, a Chief Financial Officer/Financial Manager (the "CFO"), a Vice President
Casino Operations (the "Casino VP"), Vice President Cruise Operations (the
"Cruise VP") and such other officers as the Management Committee may appoint
(collectively, the "Executive Officers"). An Executive Officer may also be an
officer or employee of one of the Partners or an Affiliate.
(b) Commodore shall have the right to appoint, remove (and replace) one
of its employees or employees of an Affiliate to the positions of CFO and Cruise
VP (with Casino's reasonable approval), and Casino shall have the right to
appoint, remove (and replace) one of its employees or an employee of an
Affiliate to the position of Casino VP (with Commodore's reasonable approval).
(c) The Casino VP shall report to the Directors of the Management
Committee appointed by Casino, and shall report, on an advisory basis, to the
CEO. The CFO and Cruise VP shall report to the CEO and shall report, on an
advisory basis, to the Directors of the Management Committee.
(d) Notwithstanding Section 4.7(c), while on board the Vessel, all
Executive Officers shall report to the captain of the Vessel (the "Captain") as
to matters relating to Vessel Rules.
4.8 BUSINESS PLAN. Attached hereto as EXHIBIT "D" is the Joint
Venture's Initial Business Plan for the 16 months ending September 30, 1999,
which has been approved by the Partners. The CEO shall submit to the Management
Committee proposed revisions to the Business Plan for the Joint Venture not less
frequently than annually, at least 60 days prior to the start of the first
fiscal year covered by such Business Plan. Each such Business Plan shall be
considered at the first meeting of the Management Committee following its
submissions and shall be subject to the approval of a majority of the Directors
on the Management Committee.
4.9 BUDGET APPROVAL.
(a) Attached hereto as EXHIBIT "E" is the Joint Venture's Initial
Budget (including the items of corporate overhead to be charged to the Joint
Venture) for the 16 months ending September 30, 1999, which has been approved by
the Partners.
(b) The CEO shall include a proposed budget (the "Budget") for the
Joint Venture for the next fiscal year in his submission of the revised Business
Plan, with the assistance of the Cruise VP, Casino VP, and the CFO. The Budget
shall include an income statement, balance sheet, and capital budget prepared
consistently with the Joint Venture's method of accounting, for the
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forthcoming fiscal year and a cash flow statement which shall show in reasonable
detail the anticipated receipts and disbursements (including anticipated
distributions) projected for the Joint Venture for the forthcoming fiscal year
and the amount of any corresponding cash deficiency or surplus, and the amount
and due dates of any proposed Additional Capital Contributions. The Budget shall
be prepared on a basis consistent with the Joint Venture's financial statements
and shall be prepared in accordance with the provisions of this Agreement.
(c) Each Budget shall be considered at the first meeting of the
Management Committee following its submission and shall be subject to the
approval of a majority of the Directors on the Management Committee.
(d) Each Budget shall also include a detailed explanation of the
proposed related party charges for corporate overhead or services proposed to be
charged by any Partner in connection with services to be provided by such
Partner and/or its Affiliates to the Joint Venture.
(e) Without the unanimous approval of the Directors, a Budget shall not
include a requirement for Additional Capital Contributions.
(f) If for any fiscal year no new Budget is agreed upon and approved,
then the Joint Venture will be managed in a manner consistent with the
Operations for the prior fiscal year, as adjusted by the CEO to reflect the
Joint Venture's contractual obligations for the year and other items of
necessity for the Joint Venture to conduct its Present Operations.
Notwithstanding anything to the contrary in this Agreement, a failure by the
Management Committee to approve any Budget shall not be subject to arbitration
under Article 13 hereof.
4.10 EMPLOYEES AND EMPLOYEE BENEFITS.
(a) GENERALLY. The CEO shall determine, or shall delegate authority to
others to determine, how many people will be required for the operation of the
Joint Venture (other than casino operations) and which personnel shall be hired
by the Joint Venture, in accordance with the Business Plan and Budget and
subject to arrangements under Section 4.11. Except for personnel who are
employees of a Partner and who are appointed by such Partner to work for the
Joint Venture and for Executive Officers who also are employees of a Partner or
an Affiliate thereof, unless other agreed all Joint Venture personnel will be
employees of the Joint Venture and not of either Partner. In the event that the
Joint Venture hires an employee of a Partner, each Partner shall indemnify the
Joint Venture against any claims that the transfer of that employee amounted to
a termination of employment.
(b) EMPLOYEE BENEFITS. Joint Venture personnel who are employees of a
Partner may continue to participate in the employee benefit programs of the
Partner by which they are employed to the extent allowed by law or permitted by
the employee benefit plans of the respective Partners.
(c) CASINO EMPLOYEES. The Casino VP shall determine, as approved by the
Directors of the Management Committee appointed by Casino, the number of casino
employees (as long as such number meets Budget requirements) and the identity of
such employees. The Casino VP shall also have sole authority to appoint the
casino manager (who shall work aboard the Vessel) and to determine together with
such casino manager when and if to hire or fire casino employees. It is
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understood that certain of the casino employees may also be employees of Casino
or its Affiliates. The Casino VP and casino manager shall set all policies for
the casino (subject to the approval of the Directors of the Management Committee
appointed by Casino), including the salaries of casino employees (as long as
such salaries are within the Budget), and shall manage all aspects of the casino
aboard the Vessel.
(d) CASINO MANAGER. The casino manager selected by the Casino VP shall
be treated as a senior officer aboard the Vessel for purposes of determining his
or her cabin assignment and other perquisites provided to shipboard personnel.
The casino manager shall be treated as shipboard personnel and shall be invited
to events for ship's officers and otherwise treated as a part of the captain's
staff.
(e) Notwithstanding anything contained in this Section 4.10, while on
board the Vessel all personnel (including casino employees) shall report to the
Captain of the Vessel as to matters relating to Vessel Rules.
4.11 ARRANGEMENTS WITH PARTNERS OR AFFILIATES.
(a) If the Management Committee decides that any services should be
provided by contract rather than by the Joint Venture, the Management Committee
shall request from one or more Partners a bona fide written offer for such a
contract. Unless otherwise provided in the Agreement, if any Partner or any
Affiliate of a Partner elects to bid for any such contract, the Management
Committee may award a contract to the bidding Partner of Affiliate of a Partner
if that bid is in the Joint Venture's best economic interest. In making the
determination of services to be provided by contract and/or by the Partners, the
Management Committee shall be guided by Article 3 hereof and shall not award a
contract for any type of services already being provided to the Joint Venture by
a Partner pursuant to a corporate overhead allocation.
(b) Subject to Section 4.11(a), the Joint Venture may enter into
contracts with a Partner or any of its Affiliates provided that any such
transaction shall be on terms no more favorable than those afforded to unrelated
third parties. The validity of any transaction, agreement of payment involving
the Joint Venture and a Partner or any Affiliate of Partner shall not be
affected by reason of the relationship between the Joint Venture and a Partner
or such Affiliate of Partner.
4.12 ACCESS TO BOOKS OF ACCOUNT. Notwithstanding any other provision of
this Agreement, each Partner shall have the right at all reasonable times during
usual business hours to audit, examine, and make copies or extracts of or from
the complete books of account of the Joint Venture, including the books and
records maintained in accordance with Article 11 and all other books and records
of the Joint Venture. Such right may be exercised through any agent or employee
of such Partner designated by it or by independent certified public accountants
or counsel designated by such Partner. Each Partner shall bear all expenses
incurred in all examination made for such Partner's account.
4.13 DUTY OF PARTNERS TO COOPERATE. Each member will, to the extent
permitted by applicable law, furnish such information, execute such applications
and similar documents as are required by governmental authorities, and take such
other actions as may be reasonably requested
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by the Management Committee and as may be necessary or reasonably desirable in
connection with the Business of the Joint Venture.
4.14 INSURANCE AND RISK MANAGEMENT. As long as the premiums and other
terms remain advantageous to the Joint Venture, the property and casualty
insurance program for the Joint Venture (including the insurance for the Vessel)
shall be integrated into the insurance program of Commodore. Each Partner hereby
consents and agrees that the Joint Venture shall compensate Commodore for a
mutually agreed upon budgeted amount for insurance premiums and related
expenses. Said insurance shall comply with the requirements of the Joint Venture
Charter, including, Clauses 12 and 53 thereof. The Joint Venture and each
Partner shall be named as additional assureds under that program.
4.15 LIMITATIONS ON PARTNER'S AUTHORITY. No Partner shall have the
right to bind the Joint Venture or act on behalf of the Joint Venture by virtue
of such Partner's ownership of an Interest, it being the intention of the
Partners that the Joint Venture be managed by the Management Committee and the
Executive Officers, including the CEO, appointed by such Management Committee.
ARTICLE 5
CAPITAL CONTRIBUTIONS
5.1 INITIAL CAPITAL CONTRIBUTIONS. Each Partner shall make Capital
Contributions to the Joint Venture in cash, in installments pursuant to the
funding schedule, as set forth on SCHEDULE 1 hereto. Upon receipt of each such
Capital Contribution, the Joint Venture shall credit each Partner's Capital
Account with the amount of such Partner's Capital Contribution. In addition,
each Partner shall set aside an additional $500,000 as a potential supplemental
capital contribution to the Joint Venture (the "Supplemental Capital"). In the
event either Partner determines that the Joint Venture requires the Supplemental
Capital for any purpose, such Partner shall notify the other Partner of such
determination and both Partners shall contribute the Supplemental Capital to the
Joint Venture within ten days after receipt of such notice. Upon receipt of the
Supplemental Capital, each Partner's Capital Account shall be credited
accordingly. Such Supplemental Capital shall not be treated as an Additional
Capital Contribution for purposes of this Agreement except that any Partner who
fails to pay Supplemental Capital when due shall be considered a Defaulting
Partner, and the Non-Defaulting Partner shall have all rights related thereto
including the rights set forth in Section 5.5. Any dispute regarding
Supplemental Capital shall not be subject to Article 13.
5.2 ADJUSTMENTS TO CAPITAL ACCOUNTS.
(a) GENERALLY. Subject to Section 5.1, each Partner's Capital Account
shall be increased by:
(i) the amount of money contributed by it or on its behalf to
the Joint Venture;
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(ii) the fair market value of any property contributed by it
to the Joint Venture (net of any liabilities secured by such
contributed property that the Joint Venture is considered to assume or
take subject to under IRC [ ] 752); and
(iii) allocations to it of profit and other items of book
income and gain, including income and gain exempt from tax and income
and gain described in Treas. Reg. 1.704-1(b)(2)(iv)(g), but excluding
income and gain described in of Treas. Reg. 1.704-1 (b)(4)(i);
and shall be decreased by:
(iv) the amount of money distributed to it by the Joint
Venture;
(v) the fair market value of property distributed to it by the
Joint Venture (net of liabilities secured by such distributed property
that such Partner is considered to assume or take subject to under IRC
ss.752); and
(vi) allocations of loss and other items of book loss,
including items of loss and deduction described in IRC ss.705(a)(2)(B)
and Treas. Reg. ss.1.7041(b)(2)(iv)(g), but excluding items described
in of Treas. Reg. ss.ss.1.704-1 (b)(4)(i) or (b)(4)(iii), and shall
otherwise be adjusted in accordance with the additional rules set forth
in Treas. Reg. ss.1.704-1(b)(2)(iv).
(b) CERTAIN ADJUSTMENTS TO CAPITAL ACCOUNTS. If the book values of
Joint Venture assets are adjusted pursuant to Treas. Reg. ss.1.704-1(b), the
Capital Accounts of all the Partners shall be adjusted simultaneously to reflect
the allocations of gain or loss that would be Partners if there were a taxable
disposition of the Joint Venture's property for its fair market value. If any
assets of the Joint Venture are to be distributed in kind, such assets shall be
distributed on the basis of their fair market values after the Partners' Capital
Accounts have been adjusted to reflect the manner in which any unrealized gain
and loss with respect to such assets (that has not been reflected in the Capital
Accounts previously) would be allocated between the Partners if there were a
taxable disposition of the property for its fair market value.
(c) DEFINITION OF ADJUSTED CAPITAL ACCOUNT. As used in this Agreement,
"Adjusted Capital Account" means, with respect to each Partner, such Partner's
Capital Account as determined under the preceding provisions of this Section
5.2, increased by such Partner's share of Joint Venture minimum gain and minimum
gain attributable to partnership nonrecourse debt as determined under Treas.
Reg. ss. 1.704-2.
5.3 ADDITIONAL CAPITAL CONTRIBUTIONS. Subject to Section 4.4(c), if all
of the Directors on the Management Committee determine from time to time that
additional cash is needed by the Joint Venture for the payment of the debts and
obligations of the Joint Venture relating to the Vessel or otherwise for the
carrying on of the Business of the Joint Venture, then upon such call of the
Management Committee, each Partner shall contribute as additional capital to the
Joint Venture ("Additional Capital Contributions"), in accordance with its
Percentage Interest, the amount of cash determined by the Management Committee
to be needed by the Joint Venture for such purposes.
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5.4 PROCEDURE FOR MAKING CAPITAL CALLS BY THE MANAGEMENT COMMITTEE.
Subject to Section 4.4(c), all calls for Additional Capital Contributions
pursuant to Section 5.3: (a) shall have been unanimously approved by the
Management Committee, (b) shall be in writing delivered to each Partner, (c)
shall state the aggregate amount of funds needed by the Joint Venture, the
expected use or uses of such funds, and the amount of each Partner's
proportionate share of such capital contribution, and (d) shall specify the date
on which the capital contribution is to be made, which shall in no event be
sooner than 60 days following the Partner's receipt of the written call.
5.5 FAILURE OF PARTNER TO CONTRIBUTE CAPITAL. If a Partner (the
"Defaulting Partner") fails to make an Additional Capital Contribution to the
Joint Venture within 30 days after such contribution is due under the procedures
set forth in Section 5.4, the other Partner (the "Non-Defaulting Partner") may
exercise one or more of the following remedies:
(a) SET-OFFS. Cause the Joint Venture to set-off against any
distributions otherwise due from the Joint Venture to the Defaulting Partner the
amount of capital due to the Joint Venture from the Defaulting Partner, and
apply such amount to such capital contribution required to be made by the
Defaulting Partner.
(b) MAKE THE DEFAULTING PARTNER'S CONTRIBUTION. Make the capital
contribution required to be made to the Joint Venture by the Defaulting Partner,
in which case the Non-Defaulting Partner's Percentage Interest will be
increased, and the Defaulting Partner's Percentage Interest correspondingly
decreased, by adding to or subtracting from such percentage, as the case may be,
an amount, expressed as a percentage, equal to the amount of such capital
contribution in default, divided by (x) the total of all capital contributions
theretofore made to the Joint Venture by both Partners, plus (y) the amount of
the Additional Capital Contribution of both Partners.
(c) LOAN BY THIRD PARTY. In lieu of an Additional Capital Contribution
by either Partner, cause the Joint Venture to borrow from a third party the
amount otherwise due from both Partners without the requirement for the consent
of the Defaulting Partner or its representative Directors.
(d) LOAN BY NON-DEFAULTING PARTNER. In lieu of an Additional Capital
Contribution by either Partner, cause the Joint Venture to borrow from the
Non-Defaulting Partner the amount otherwise due from both Partners (a "Default
Loan"), in which case the Defaulting Partner, with respect to that portion of
the Default Loan reflecting the amount of capital due to the Joint Venture from
the Defaulting Partner (the "Defaulting Partner Portion"), shall be liable to
the Non-Defaulting Partner for the Defaulting Partner's Portion plus interest at
the Default Rate (plus interest) in the event the Joint Venture fails to repay
such Default Loan to the Non-Defaulting Partner (the "Default Lender"). Loans
made to the Joint Venture by the Non-Defaulting Partner pursuant to this Section
5.5(d) shall bear interest at the Default Rate. No Partner shall make loans to
the Joint Venture unless such loans are approved by the Joint Venture pursuant
to Section 4.4 or are made with respect to a default pursuant to this Section
5.5(d).
(e) REFUSE TO MAKE CAPITAL CONTRIBUTION. Refuse to make any Additional
Capital Contributions without being in default of any provision of this
Agreement.
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(f) CAUSE A MANDATORY SALE OR TERMINATE THE JOINT VENTURE. Cause a
mandatory sale or terminate the Joint Venture by reason of a breach by the
Defaulting Partner of its obligations hereunder as provided in Sections 8.2 and
8.3.
(g) EFFECT OF SET-OFF. In the event the Joint Venture exercises any
right to set-off any amount against any distribution otherwise payable to any
Partner, the amount set-off shall be deemed to have been distributed to the
Partner and contributed by the Partner to the Capital of the Joint Venture.
5.6 NO THIRD PARTY BENEFICIARIES. The rights of the Joint Venture, or
either Partner, to require Additional Capital Contributions under the terms of
this Agreement are not intended to, and do not, confer any rights or benefits to
or upon any Person who is not a party to this Agreement other than the Joint
Venture itself.
5.7 NO WITHDRAWAL OF, OR PAYMENT OF INTEREST ON, CAPITALS ACCOUNTS. No
Partner shall have any right to withdraw or make a demand for withdrawal of all
or any portion of such Partner's capital (or the amount, if any, reflected in
such Partner's Capital Account). No interest or additional share of profits
shall be paid or credited to the Partners on their Capital Accounts, or on any
undistributed profits or funds left on deposit with the Joint Venture; provided,
however, that nothing contained in this Agreement shall be construed to prevent
or prohibit the payment of interest on account of loans by Partners. Any loans
by Partners shall not increase a Partner's Capital Account or interest in the
profits, losses, or distributions, but shall be a debt due from the Joint
Venture.
5.8 OBLIGATION TO RESTORE. Upon liquidation of the Joint Venture (or
any Partner's interest in the Joint Venture), a Partner which has a deficit
balance in its book Capital Account following the liquidation of its interest in
the Joint Venture after taking into account all capital account adjustments for
the Joint Venture taxable year during which such liquidation occurs need not,
except as otherwise provided by law, restore the amount of such deficit balance
to the Joint Venture or to any other Partner.
ARTICLE 6
ALLOCATIONS, DISTRIBUTIONS, ACCOUNTING AND TAX MATTERS
6.1 ALLOCATIONS. The allocations of profits and losses shall be as set
forth in SCHEDULE 4 hereto.
6.2 DISTRIBUTIONS AND RESERVES.
(a) CASH DISTRIBUTIONS. Unless otherwise determined by the Management
Committee and except as reserved against in accordance with Subsection (b)
below, the Net Cash Flow realized in any fiscal quarter shall be distributed
promptly after the end of such quarter, as follows:
(i) REPAY PARTNER LOANS. to repay any principal and interest
on loans to the Joint Venture by Partners ("Partner Loans"), including
Default Loans; and
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(ii) THE BALANCE. to the Partners in accordance with their
respective Percentage Interests.
(b) RESERVES. The Joint Venture shall establish reserves for:
(i) federal income taxes (the "Tax Reserve") to be
held by the Joint Venture and distributed in accordance with
Section 6.2(d). The Tax Reserve for any fiscal period shall be
determined by multiplying the reasonably estimated federal
taxable income of the Joint Venture as an entity by 40%. In
determining such federal taxable income, the fact that any
Partner may not be taxable on that Partner's share of such
income (e.g., because that Partner may be exempt from tax on
such income under Section 883(a) of the Code, or because that
Partner has losses from other sources to offset such income),
shall not be taken into account. The Tax Reserve shall be paid
to the Partners in accordance with their respective Percentage
Interests (even if different from their respective percentage
of Joint Venture taxable income); and
(ii) Contingent or unforeseen obligations, debts or
liabilities of the Joint Venture which may be deemed
reasonably necessary in the opinion of the Management
Committee;
(iii) Amounts required by any contracts or agreements
of the Joint Venture; and
(iv) Such other purposes as the Management Committee
may decide.
(c) Intentionally omitted.
(d) PRIORITY AND DISTRIBUTION OF PROPERTY. Except as expressly provided
in this Agreement, no Partner shall have priority over any other Partner as to
the return of capital, allocation of income or losses, or distributions of cash
or any other distributions. No Partner shall have the right to demand or receive
property other than cash for its Capital Contributions to the Joint Venture or
in payment of its share of cash or other distributions.
(e) DISTRIBUTION OF TAX RESERVE. Within 60 days after the end of each
Joint Venture fiscal year during which a Tax Reserve has been created, the Joint
Venture shall distribute such Tax Reserve (less any amounts withheld pursuant to
Sections 1441, 1442, 1445 or 1446 of the Code, unless otherwise provided in
Section 6.2(g)) to the Partners, such distribution to be allocated among the
Partners based on each Partner's Percentage Interest.
(f) ADDITIONAL DISTRIBUTION PROVISIONS. Upon liquidation of any
Partner's interest in the Joint Venture, liquidating distributions are required
in all cases to be made in accordance with Section 8.7.
(g) FOREIGN PARTNERS. If the Joint Venture withholds any income tax
with respect to any foreign Partner pursuant to Sections 1441, 1442, 1445 or
1446 of the Code, the Joint Venture will, at its option, either (x) require the
foreign Partner to repay such amount to the Joint Venture within
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45 days thereafter; or (y) offset any distributions otherwise payable to the
foreign Partner by the amount of such payments.
6.3 ACCOUNTING MATTERS. The Partners shall cause to be maintained
complete books and records accurately reflecting the accounts, business and
transactions of the Joint Venture, on a September 30th fiscal-year basis and in
accordance with GAAP; provided, however, that books and records with respect to
the Joint Venture's Capital Accounts and allocations of income, gain, loss,
deduction or credit (or item thereof) shall also be kept under U.S. federal
income tax accounting principles as applied to partnerships on the same fiscal
year as Casino's. Commodore shall perform such services for the Joint Venture
and charge the Joint Venture for such services pursuant to the overhead
allocation in the Budget.
6.4 TAX STATUS AND RETURNS.
(a) Any provision hereof to the contrary notwithstanding, solely for
United States federal income tax purposes, each of the Partners hereby
recognizes that the Joint Venture will be subject to all provisions of
Subchapter K of Chapter 1 of Subtitle A of the Code; provided, however, the
filing of U.S. Partnership Returns of Income shall not be construed to extend
the purposes of the Joint Venture or expand the obligations or liabilities of
the Partners.
(b) The Partners shall prepare or shall direct such other Person to
prepare or cause to be prepared all tax returns and statements, if any, that
must be filed on behalf of the Joint Venture with any taxing authority and shall
make timely filing thereof. Further, the Partners shall prepare or shall direct
such other Person to prepare or cause to be prepared all tax statements, if any,
that must, by law, be provided to any Partner, employee or other Person and
shall timely deliver such statements to such Persons. Within 90 days after the
end of each fiscal year, the Partners or such other Person as the Partners may
direct shall prepare or cause to be prepared and delivered to each Partner a
report setting forth in reasonable detail the information with respect to the
Joint Venture during such calendar year reasonably required to enable each
Partner to prepare its federal, state and local income tax returns in accordance
with applicable law then prevailing.
6.5 TAX MATTERS PARTNER.
(a) The Tax Matters Partner of the Joint Venture within the meaning of
Section 6231(a)(7) of the Code shall be Casino. Unless otherwise expressly
provided herein or in the Code and the regulations issued thereunder (or the
laws of other relevant taxing jurisdictions), the Tax Matters Partner is
authorized to take any action for or on behalf of the Joint Venture that it
determines to be necessary or appropriate with respect to all tax matters.
Notwithstanding the foregoing, the Tax Matters Partner shall take no action for
or on behalf of the Joint Venture, except as emergency situations may dictate,
without the prior agreement of all the Partners.
(b) The Tax Matters Partner shall promptly advise the other Partners of
all audits or other actions by the Internal Revenue Service and shall furnish to
the Joint Venture and to each Partner a copy of each notice or other
communication received by the Tax Matters Partner from the Internal Revenue
Service except such notice or communication sent directly to the Partners by the
Internal Revenue Service. All reasonable expenses incurred by the Tax Matters
Partner in its
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capacity as such shall be expenses of the Joint Venture and shall be paid by the
Joint Venture. Such fees must be approved in advance by Casino, which consent
shall not be unreasonably withheld.
(c) To the fullest extent permitted by law, the Joint Venture shall
indemnify the Partners on an after-tax basis against any liabilities incurred
while acting as the Tax Matters Partner of the Joint Venture but only to the
extent such Partner acts within the scope of its authority as Tax Matters
Partner under this Agreement. The Tax Matters Partner shall not be indemnified
against any liability regarding Joint Venture tax matters arising by reason of
the willful misconduct, bad faith, gross negligence or reckless disregard of the
duties of the Tax Matters Partner.
(d) No Partner shall file a notice with the Internal Revenue Service
under Section 6222(b) of the Code in connection with such Partner's intention to
treat an item on such Partner's federal income tax return in a manner that is
inconsistent with the treatment of such item on the Joint Venture's federal
income tax return unless such Partner has, not less than 30 days prior to the
filing of such notice, provided the other Partner with a copy of the notice and
thereafter in a timely manner provides such other information related thereto as
the other Partner shall reasonably request.
6.6 754 ELECTION. In the event of a distribution of property to a
Partner or a transfer of any interest in the Joint Venture permitted under the
Act or this Agreement, the Joint Venture, upon the written request of the
transferor or transferee, shall file a timely election under Section 754 of the
Code and the Income Tax Regulations thereunder to adjust the basis of the Joint
Venture's assets under Section 734(b) or 743(b) of the Code and a corresponding
election under the applicable provisions of state and local law, and the Person
making such request shall pay all costs incurred by the Joint Venture in
connection therewith, including reasonable attorneys' and accountants' fees.
6.7 PARTNERSHIP CLASSIFICATION. The Joint Venture shall be treated as a
partnership for federal tax purposes and shall not elect, under Section
301.7701-3 of the Income Tax Regulations, to be taxed as an association.
ARTICLE 7
TRANSFER OF INTERESTS; ADMISSION AND RESIGNATION OF PARTNERS
7.1 TRANSFER OF INTERESTS. Except as set forth in this Article 7, no
Partner may transfer, nor suffer or sustain any involuntary transfer or transfer
by operation of law of, all or any portion of its Interest in the Joint Venture
to any Person or another Partner, unless all Partners approve the transfer in
writing. For all purposes of this Article 7, a transfer of a Partner's Interest
in the Joint Venture shall be deemed to occur upon any change in control of such
Partner. Any transfer of all or any portion of a Partner's Interest in the Joint
Venture, in violation of this Section (other than a transfer by operation of
Law), shall be null, void and of no effect. In the event that all or any portion
of a Partner's Interest is transferred by operation of law, the transferee of
such Interest shall not be a Partner unless and until admitted to Partnership in
accordance with the provisions of Section 7.5 and shall, until such time, be
considered merely an assignee of Economic Interests (as hereafter defined).
Notwithstanding the foregoing, any pledge, hypothecation or grant of a security
interest in any Interest shall not require the consent of any Partners and shall
not violate this Article 7. The pledge or granting of a security interest, lien
or other encumbrance in or against all or any
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part of a Partner's Interest shall not cause the Partner to cease to be a
Partner. Upon foreclosure or sale in lieu of foreclosure of any such security
interest, the secured party will be entitled to receive allocations and
distributions from the Joint Venture as to which a security interest has been
granted by such Partner ("Economic Interests"). In no event will any secured
party be entitled to exercise any rights under this Agreement, and such secured
party may look only to such Partner for the enforcement of any of its rights as
a creditor. In no event will the Joint Venture have any liability or obligation
to any Person by reason of the Joint Venture's payment of a distribution to any
secured party as long as the Joint Venture makes such payment in reliance upon
written instructions from the Partner to whom such distributions would be
payable. Any secured party will be entitled, with respect to the security
interest granted, only to the distributions to which the assigning Partner would
be entitled under this Agreement, and only if, as and when such distributions
are made by the Joint Venture. Neither the Company nor any Partner will owe any
fiduciary duty of any nature to a secured party. Reference to any secured party
includes any assignee or successor-in-interest of such Person.
7.2 RIGHT OF FIRST REFUSAL.
(a) If any Partner proposes to sell or transfer to any Person all or
any portion of its Interest in one or more related transactions (the "Proposed
Sale"), then, at least 45 days prior to the proposed closing (the "Sale
Closing") of such sale or transfer, such Partner (the "Seller") shall promptly
give written notice (the "Notice") to the Joint Venture and to each of the other
Partners (the "Other Holders") of such proposed sale or transfer. The Notice
shall describe in reasonable detail the Proposed Sale, including, without
limitation, the Percentage Interest to be sold, transferred or issued (the
"Percentage Interest To Be Sold"), the nature of such sale, transfer or
issuance, the consideration to be paid, and the name and address of each
prospective purchaser or transferee.
(b) Each of the Other Holders shall have the right, exercisable upon
written notice to the Seller within thirty (30) days after receipt of the
Notice, to purchase, in proportion to its interest in the Joint Venture
(excluding for this purpose the Seller's Interest), the Percentage Interest To
Be Sold on the same terms and conditions of the Proposed Sale.
(c) If any of the Other Holders declines to exercise its right of first
refusal pursuant to Section 7.2(b), the Seller shall give notice of such
decision and of the number of Percentage Interest To Be Sold yet unpurchased
(the "Unpurchased Portion") to the Partners who did not so decline (the
"Purchasers"). Such notice may be made by telephone if confirmed in writing
within two days.
(d) The Purchasers shall each have the right, exercisable upon written
notice to the Seller within three business days after receipt of notice of such
decision, to purchase their Pro Rata Share of the Unpurchased Portion. For
purposes of this Section 7.2, the Pro Rata Share of the Unpurchased Portion
shall be the ratio of the Unpurchased Portion to the number of Purchasers.
(e) The Seller shall then give notice, in the manner specified in
Section 7.2(c), to all the Purchasers of any Purchaser that declines to exercise
its right to purchase its Pro Rata Share. All the Purchasers excluding
Purchasers who decline to exercise their rights to purchase their Pro Rata
Shares (the "Remaining Purchasers"), shall have the right to purchase any
Percentage Interest remaining of the Unpurchased Portion in the manner specified
in Section 7.2(d).
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(f) The Seller shall comply with Sections 7.2(d) and 7.2(e) until there
are no remaining Percentage Interests in the Unpurchased Portion or there are no
Remaining Purchasers who elect to purchase remaining Percentage Interests in the
Unpurchased Portion. Thereafter, if Percentage Interests remain in the
Unpurchased Portion, the Seller may consummate the Proposed Sale upon the terms
set forth in the Notice or cancel the Proposed Sale. If the other Holders have
elected to purchase all of the Percentage Interests to be sold, the Proposed
Seller shall consummate the sale of the Percentage Interest to be sold with the
other Holders on the Sale Closing date.
(g) Notwithstanding anything to the contrary herein, the Seller may not
consummate a Proposed Sale to a Person if any of the Other Holders object to
such Person and the objection is based on a reasonable concern.
7.3 EXEMPT TRANSFERS. Notwithstanding the foregoing, the first refusal
rights of the Partners shall not apply to (i) any pledge of Percentage Interests
made pursuant to a bona fide loan transaction that creates a mere security
interest (as described in Section 7.1); (ii) transfers of a Partner's entire
Interest to an Affiliate, provided such transferring Partner has provided prior
written notice to the other parties hereto of such transfer, and such transferee
has agreed to be bound by the terms hereof; (iii) the Joint Venture; (iv) to a
Person approved by all of the Partners; or (v) to another Person as part of a
merger, reorganization, consolidation or sale of all or substantially all of the
assets of Casino America, Inc. or Commodore Holdings Limited, provided that such
Person is not objectionable as provided in Section 7.2(g) above. Such
transferred Percentage Interests shall remain "Percentage Interests" hereunder,
and such pledgee shall be treated as a "Seller" for purposes of this Agreement.
7.4 LEGEND.
(a) Each certificate representing Percentage Interests now or hereafter
owned by the Partners or issued to any Person in connection with a transfer
pursuant to Section 7.3 hereof shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN AGREEMENT AMONG THE INITIAL
HOLDER OF THE SECURITIES, THE JOINT VENTURE AND CERTAIN
PARTNERS OF THE JOINT VENTURE. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE JOINT
VENTURE."
(b) Under no circumstances shall any transfer of any Interests subject
hereto be valid until the proposed transferee thereof shall have executed and
become a party to this Agreement and thereby shall have become subject to all of
the provisions hereof; and notwithstanding any other provisions of this
Agreement, no such transfer of any kind shall in any event result in the
non-applicability of the provisions hereof at any time to any of the Percentage
Interests subject hereto.
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(c) Each Partner agrees that the Joint Venture may instruct its
transfer agent to impose transfer restrictions on the Percentage Interests
represented by certificates bearing the legend referred to in Section 7.4(a)
above to enforce the provisions of this Agreement and the Joint Venture agrees
to promptly do so. The legend shall be removed upon termination of this
Agreement.
7.5 ADMISSION OF NEW PARTNERS.
(a) Subject to this Section and to the Act, no Person shall be admitted
as a Partner of the Joint Venture unless all the Partners shall have approved
the admission of such Person as a new Partner and shall have agreed in writing
upon the amendments, if any, to be made to this Agreement as a result of such
admission.
(b) Upon the admission of a new Partner in accordance with the Act and
this Agreement, there shall be a special closing of the books solely for the
purpose of determining the value of the Joint Venture's investments on such date
by whatever method the existing Partners, in their sole and absolute discretion,
consider reasonable, and the Capital Accounts of the existing Partners shall be
adjusted accordingly. After such adjustment, the Joint Venture shall establish a
Capital Account which shall be credited with the Capital Contribution of the new
Partner, and Schedules 1 and 2 shall be adjusted accordingly.
7.6 RESIGNATION OF PARTNERS. No Partner may resign or withdraw from the
Joint Venture without the prior express written consent of all the other
Partners.
7.7 SALE DUE TO OBJECTION OF GOVERNMENTAL BODY.
(a) Commodore acknowledges that as a result of the transactions
contemplated by this Agreement, Commodore and its Affiliates may be subject to
regulatory review by any Governmental Body which is authorized or empowered to
regulate the gaming operations of Casino and its Affiliates in the jurisdictions
in which Casino and its Affiliates conduct or propose to conduct gaming
activities including, without limitation, Colorado, Mississippi, Louisiana and
Florida. Commodore agrees to use its reasonable best efforts to cooperate fully
and to cause its Affiliates to cooperate fully with the representatives of all
such Governmental Bodies in making applications, supplying information,
providing reports and otherwise cooperating with and complying with the
requirements of all such Governmental Bodies so as not to interfere with the
ability of Casino or its Affiliates to develop new business (other than the
Business in contravention of Section 9.1(b) hereof) or to continue to conduct
its existing business. Casino and Commodore and their respective Affiliates will
use their reasonable best efforts to overcome any objection raised by any
Governmental Body relating to the transactions contemplated by this Agreement;
provided that in the event the Board of Directors of Casino reasonably
determines based on communications with a Governmental Body that despite such
efforts (i) Commodore or any of its Affiliates is likely to be determined
unsuitable by such Governmental Body and as a result Casino or its Affiliates
may not be permitted to engage or to continue to engage in a gaming activity, or
(ii) Casino's participation in the Joint Venture could jeopardize its ability to
engage or continue to engage in a gaming activity (a "Casino Determination"),
then, upon written notice from Casino of its Board's determination, Commodore
shall purchase Casino's Interest in the Joint Venture pursuant to Section 8.9.
Because the Partners believe that the market value of an Interest will be very
difficult, if not
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impossible to assess, they have adopted the valuation method described in
Section 8.9(a) as the method to determine the Purchase Price for Casino's
Interest.
(b) Casino acknowledges that as a result of the transactions
contemplated by this Agreement, certain actions by Casino or its Affiliates or
regulatory determinations adverse to Casino or its Affiliates, which actions or
regulatory determinations result in Casino or its Affiliates being prohibited
from conducting gaming activities in a specific state (a "Materially Adverse
Event") could impair Commodore's ability to operate or sell securities in a
jurisdiction where such Materially Adverse Event occurred. Casino and Commodore
and their respective Affiliates will use their reasonable best efforts to
overcome any objection raised by any Governmental Body related to the
transactions contemplated by this Agreement (including making any disclosure
required to cure such objection), provided that in the event any Governmental
Body that regulates Commodore's cruise business, any state, federal or foreign
securities regulator or Nasdaq advises Commodore in writing that Casino's
participation in the Joint Venture will jeopardize Commodore's ability to raise
capital because of such Materially Adverse Event (a "Governmental Body
Determination") then, upon written notice from Commodore of such Governmental
Body Determination, Commodore shall purchase Casino's Interest in the Joint
Venture pursuant to Section 8.9. Because the Partners believe that the market
value of an Interest will be very difficult, if not impossible to assess, they
have adopted the valuation method described in Section 8.9(a) as the method to
determine the Purchase Price for Casino's Interest.
ARTICLE 8
DISSOLUTION/MANDATORY SALE
8.1 NO DEFAULT DISSOLUTION. The Joint Venture shall be dissolved and
its affairs wound up in accordance with Section 8.5 hereof upon the first to
occur of the following:
(a) Upon the expiration of the term specified in Section 14.1 of this
Agreement;
(b) Issuance of an order by a court of competent jurisdiction,
requiring the dissolution of the Joint Venture; or
(c) The written consent of all the Partners.
8.2 DEFAULT DISSOLUTION. A Non-Defaulting Partner may give notice to a
Defaulting Partner dissolving the Joint Venture upon the occurrence of any one
of the following events with respect to the Defaulting Partner or its Parent
Entity, as the case may be, (unless there is a Dispute with respect to whether a
Default has occurred and such Dispute has not yet been resolved pursuant to the
terms of this Agreement):
(a) any action or proceeding is commenced by the Defaulting Partner or
its Parent Entity to wind up, dissolve, cancel its incorporation or otherwise
terminate its corporate existence; or
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(b) any action or proceeding is commenced against the Defaulting
Partner or its Parent Entity which seeks or requires the winding up,
dissolution, revocation or cancellation of its incorporation or other
termination of its corporate existence unless the action or proceeding is
defended or contested in good faith by the Defaulting Partner or its Parent
Entity within 30 days of the commencement of the action or proceeding in a
manner that stays the winding up, dissolution, revocation or cancellation of its
incorporation or other termination of its corporate existence and is pursued
diligently thereafter; or
(c) the agreement of the Defaulting Partner or its Parent Entity to
sell, assign, transfer or otherwise dispose of the whole or any part of its
Interest in the Joint Venture in contravention of the terms of this Agreement;
or
(d) any Event of Default by the Defaulting Partner or its Parent Entity
pursuant to Section 12.1, which has not been cured within the applicable cure
period; or
(e) the Defaulting Partner or its Parent Entity becomes bankrupt or
seeks relief by any proceedings of any nature under any laws of the United
States or any state for the relief of debtors; or
(f) the appointment of a receiver, receiver-manager, trustee, custodian
or like officer for all or a substantial part of the business or assets of the
Defaulting Partner or its Parent Entity unless the appointment is defended or
contested in good faith by the Defaulting Partner or its Parent Entity within 30
days of the commencement of the appointment in a manner that stays the
appointment and is pursued diligently thereafter; or
(g) the institution against the Defaulting Partner or its Parent Entity
of a proceeding under the Bankruptcy Reform Act of 1978, or any law of the
United States now in existence or hereafter enacted having the same general
purpose unless the proceeding is defended or contested in good faith by the
Defaulting Partner or its Parent Entity within 30 days of the commencement of
the proceeding in a manner that stays the proceedings and is pursued diligently
thereafter; or
(h) the Defaulting Partner or its Parent Entity makes an assignment for
the benefit of its creditors; or
(i) if any execution, attachment, distress or other process of any
court is made or attached to the Interest of the Defaulting Partner or its
Parent Entity in the Joint Venture unless the execution, attachment, distress or
other process of any court is stayed within 30 days of the commencement of the
proceedings in a manner that stays attachment, distress or other proceedings and
is pursued diligently thereafter;
(j) a breach by Casino America, Inc. or Commodore Holdings Limited of
the Guaranty, which breach is not cured within 10 days of receipt of written
notice from the non-breaching party describing in reasonable detail the facts
giving rise to the breach (in which event the Defaulting Partner shall be the
Affiliate of the breaching Parent Entity);
(k) any failure by the Defaulting Member to make any Additional Capital
Contribution pursuant to Section 4.4(c) within 120 days after the final decision
of the arbitrators pursuant to
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Article 13 that such Additional Capital Contribution is required for
Seaworthiness or for items of necessity to continue the Present Operations or
pursuant to Section 5.5 within the period specified therein; or
(l) the failure of Commodore to purchase Casino's Interest pursuant to
Section 7.7 where Commodore and Casino have followed the procedures in Section
7.7 and either Casino's Board or a Governmental Body has made a Casino
Determination or a Governmental Body Determination, respectively.
8.3 MANDATORY SALE. Upon the occurrence of any of the events set out in
Section 8.2(a) through (l) with respect to a Partner, as an alternative to
giving notice dissolving the Joint Venture, the Partner entitled to dissolve the
Joint Venture (in this Article 8 referred to as the "purchasing Partner") may
give notice to the other Partner (in this Article 8 referred to as the "selling
Partner") requiring the selling Partner to sell its Interest in the Joint
Venture to the purchasing Partner for the Purchase Price (as defined in Section
8.9) and on the terms and conditions hereinafter provided.
8.4 NOTICE.
(a) NOTICE OF ELECTION TO DISSOLVE. A Partner electing to dissolve the
Joint Venture, pursuant to Section 8.2, must give notice of dissolution to the
other Partner within 60 days of first acquiring actual knowledge of the event or
circumstances giving rise to the right of dissolution. Following any such notice
pursuant to Section 8.2 (unless there is a Dispute as to the right to dissolve),
the Partner who has received notice of dissolution shall not be entitled to vote
(or to have its Directors vote) with respect to any matter relating to the
affairs of the Joint Venture and shall be deemed to have given its proxy to the
Partner giving the notice for all matters requiring the vote of the Partners
with respect to the Joint Venture.
(b) NOTICE OF INTENTION TO BUY. The purchasing Partner under Section
8.3 must give notice of its intention to buy the interest of the selling Partner
in the Joint Venture (the "Purchase Notice") within 60 days of the date upon
which the purchasing Partner first acquires actual knowledge of the occurrence
of the event or circumstances giving rise to the right to purchase. Following
such notice (unless there is a Dispute as to the existence of a right to
purchase), the selling Partner shall not be entitled to vote (or to have its
Directors vote) with respect to any matter relating to the affairs of the Joint
Venture and the selling Partner shall be deemed to have given its proxy to the
purchasing Partner for all matters requiring the vote of the Partners with
respect to the Joint Venture.
8.5 DISSOLUTION PROCEDURES.
(a) GENERALLY. Unless there is a Dispute as to whether an event causing
a dissolution has occurred, promptly following the giving of notice of
dissolution of the Joint Venture:
(i) NO DEFAULT DISSOLUTION. Pursuant to Section 8.1, the
Partners shall proceed to wind up the affairs of the Joint Venture in
the manner hereinafter provided; or
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(ii) DEFAULT DISSOLUTION. Pursuant to Section 8.2, the Partner
giving notice of dissolution shall wind up the affairs of the Joint
Venture in the manner hereinafter provided on behalf of the Partners.
(b) USE OF BUSINESS OR SHIP BROKER. If the Business of the Joint
Venture is in operation, the parties shall consider retaining a business or ship
broker, and the Business of the Joint Venture shall be listed for sale as a
going concern. If an offer acceptable to the Partners or the Non-Defaulting
Partner, as the case may be, acting reasonably, has not been received within 120
days of listing the business for sale, then the assets of the Joint Venture
shall be sold and the Vessel subchartered in a piecemeal manner. The liquidation
of assets and the discharge of liabilities of the Joint Venture shall occur over
a reasonable time to attempt to minimize the losses which may otherwise be
attendant upon an immediate liquidation.
(c) PAYMENTS OWED BY PARTNERS. Each Partner shall immediately pay to
the Joint Venture all amounts owing to the Joint Venture, less any amounts owed
by the Joint Venture to the Partner.
(d) DISTRIBUTIONS. During the course of liquidation, the Partners shall
continue to share profits and losses as provided in Article 6 of this Agreement,
but there shall be no cash distributions to the Partners until the distribution
pursuant to Section 8.7(d).
8.6 SETTLING OF ACCOUNTS. Subject to Section 18-804 of the Act, upon
the dissolution and liquidation of the Joint Venture, the proceeds of
liquidation shall be applied as follows: (a) first, to pay all expenses of
liquidation and winding up; (b) second, to pay all debts, obligations and
liabilities of the Joint Venture, in the order of priority as provided by law,
other than debts owing to the Partners or on account of Partners' contributions;
(c) third, to pay all debts of the Joint Venture owing to a Partner; and (d) to
establish reasonable reserves for any remaining contingent or unforeseen
liabilities of the Joint Venture not otherwise provided for, which reserves
shall be maintained by the liquidator on behalf of the Joint Venture in a
regular interest-bearing trust account for a reasonable period of time as
determined by the liquidator. If any excess funds remain in such reserves at the
end of such reasonable time, then such remaining funds shall be distributed by
the Joint Venture to the Partners pursuant to Section 8.7 hereof.
8.7 DISTRIBUTION OF PROCEEDS. Subject to Section 18-804 of the Act,
upon final liquidation of the Joint Venture, the net proceeds of liquidation
shall be distributed to the Partners in the following order of priority:
(a) to creditors, including Partners who are owed Partner Loans or
Default Loans, to the extent of any unpaid expenses or any outstanding loan or
advance;
(b) to the Partners in respect of the costs of winding up the affairs
of the Joint Venture, discharging the liabilities of the Joint Venture,
distributing the assets of the Joint Venture and dissolving the Joint Venture in
accordance with this Article 8;
(c) to the Partners in the proportion of their respective positive
Capital Accounts as those accounts are determined after all adjustments to such
accounts for the taxable year of the Joint Venture during which the liquidation
occurs as are required by this Agreement and Treasury
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Regulations ss. 1.704-1(b), such adjustments to be made within the time
specified in such Treasury Regulations; and
(d) after each Partner has received the amount in its Capital Account,
to the Partners in proportion to their respective Percentage Interests.
8.8 CERTIFIED LIQUIDATION STATEMENT. The Partners, in the event of a
liquidation of the Joint Venture following dissolution pursuant to Section 8.1,
or the Non-Defaulting Partner, in the event of a liquidation of the Joint
Venture following dissolution pursuant to Section 8.2, shall cause the
independent auditors of the Joint Venture to prepare a certified liquidation
statement of the Joint Venture which shall contain:
(i) a summarized statement of receipts and disbursements;
(ii) a statement of the debts and liabilities of the Joint
Venture owing to each Partner;
(iii) a determination of the Capital Account of each Partner;
(iv) an allocation between the Partners of all gains or losses
realized on the liquidation of the property and assets of the Joint
Venture; and
(v) an allocation of any tax benefits between the Partners.
Each Partner agrees to prepare its financial statements and to prepare and file
all tax returns required to be filed by it in accordance with the liquidation
statement prepared by the independent auditors of the Joint Venture.
8.9 MANDATORY SALE PROCEDURES.
(a) AMOUNT. Except with respect to a Mandatory Sale under Section 7.7,
the Purchase Price payable by the purchasing Partner for the interest of the
selling Partner in the Joint Venture (the "Purchase Price") shall be an amount
equal to 100% of the net book value of the selling Partner's Interest in the
Joint Venture as determined pursuant to GAAP as of the date of the Purchase
Notice ("Book Value") and paid in equal quarterly installments over a period of
five years commencing on the Closing Date, plus interest on such amount from the
Closing date at the Reference Rate. With respect to a Mandatory Sale based on
Section 7.7, if the Purchase Notice is received within one year of the date of
this Agreement, the Purchase Price shall be the amount of Casino's Initial
Capital Contribution as set forth on SCHEDULE 1 plus interest from the Closing
Date at the Reference Rate plus 2%, paid in equal semi-annual installments over
a period of two years commencing six months after the Closing Date (as evidenced
by a promissory note and secured by a pledge of Casino's Interest). If the
Purchase Notice for a Mandatory Sale under Section 7.7 is received thereafter,
the Purchase Price shall be the greater of Book Value or five times the earnings
(determined under GAAP but excluding pre-opening expenses) of the Joint Venture
allocable to Casino's Interest for the Applicable Fiscal Year (as hereafter
defined) preceding delivery of the Purchase Notice, paid in equal quarterly
installments over a period of five years commencing on the Closing Date, plus
interest on such amount from the Closing Date at the Reference Rate (as
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evidenced by a promissory note and secured by a pledge of Casino's Interest).
The Applicable Fiscal Year shall be the Joint Venture's fiscal year immediately
preceding the Closing or, in the event the Joint Venture is more than six months
into its next fiscal year, the period beginning six months before the end of the
Joint Venture's last fiscal year and ending six months into its current fiscal
year.
(b) CLOSING -- GENERALLY. The purchase and sale of the selling
Partner's interest in the Joint Venture shall be consummated (the "Closing") at
the office of the purchasing Partner's counsel, on the date which is 30 days
following the receipt by the selling Partner of the Purchaser Notice.
(c) CLOSING -- SELLING PARTNER DELIVERIES. At the Closing, the selling
Partner shall deliver to the purchasing Partner the following duly executed
documentation, in form acceptable to the purchasing Partner acting reasonably:
(i) an assignment of its Interest in the Joint Venture;
(ii) the resignation of each of its designees as Directors of
the Management Committee and as Executive Officers of the Joint
Venture;
(iii) a representation and warranty by the selling Partner
that its Interest in the Joint Venture is free and clear of all liens,
mortgages, pledges, charges, security interests, restrictions or
encumbrances whatsoever, which representation and warranty shall
survive Closing and shall continue forever;
(iv) a general release of all claims against the Joint Venture
or the purchasing Partner by the selling Partner in respect of the
Joint Venture except for claims arising from the unauthorized actions
of the purchasing Partner in respect of the Joint Venture which have
not been disclosed to the selling Partner; and
(v) such other documentation as the attorneys for the
purchasing Partner may require, acting reasonably, in order to vest in
the purchasing Partner full right, title and interest in and to the
Interest of the selling Partner in the Joint Venture and to reflect the
assignment and transfer of the interest of the selling Partner in all
of the underlying assets of the Joint Venture, including, without
limitation, the interest in the Vessel.
(d) CLOSING -- PURCHASING PARTNER DELIVERIES. At the Closing, the
purchasing Partner shall pay the selling Partner the Purchase Price for the
Interest of the selling Partner in the Joint Venture by means of immediately
available funds for the cash portion of the Purchase Price and by means of a
promissory note with respect to the deferred portion of the Purchase Price and
the purchasing Partner shall deliver to the selling Partner the following duly
executed documentation in a form acceptable to the selling Partner, acting
reasonably:
(i) an indemnity of the Joint Venture and the purchasing
Partner indemnifying the selling Partner against any claims arising
from the conduct of the business of the Joint Venture from and after
the time of Closing;
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(ii) a general release of all claims against the selling
Partner by the Joint Venture or the purchasing Partner in respect of
the Joint Venture except for claims arising from the unauthorized
actions of the selling Partner in respect of the Joint Venture which
have not been disclosed to the purchasing Partner; and
(iii) in the case of a Mandatory Sale under Section 7.7, a
promissory note payable to the order of the selling Partner and a
pledge or security agreement, in form and content reasonably
satisfactory to the selling Partner.
(e) At the Closing, the selling Partner shall repay to the Joint
Venture or the purchasing Partner, as the case may be, any amounts owing to such
parties, and the Joint Venture or the purchasing Partner, as the case may be,
shall repay to the selling Partner any amounts owing to it, which repayments may
occur as a set off of the respective amounts. If the amounts owed to the
purchasing Partner by the selling Partner and the Joint Venture exceed the
amount owed by the purchasing Partner to such parties, the purchasing Partner
may reduce the amount of the Purchase Price by such excess amount.
ARTICLE 9
OUTSIDE ACTIVITIES; CONFIDENTIALITY
9.1 OUTSIDE ACTIVITIES.
(a) Except as otherwise expressly provided in this Article 9, any
Partner or Affiliate thereof may engage in or possess any interest in any
business, and may do so through itself or through any other business venture of
any nature independently or with others, and neither the Joint Venture nor any
other Partner shall have any right by virtue of this Agreement in or to such
Partner's business or its other ventures or in or to any income or profits
derived therefrom.
(b) For as long as the Joint Venture exists, and except as described
herein, no Partner or Affiliate thereof may, directly or indirectly (except
through the Joint Venture), engage (or possess any interest in any business or
venture that engages), in the Business. Notwithstanding the foregoing, Commodore
may continue to operate a cruise vessel(s) in the New Orleans, Louisiana market
that conducts cruises equal to or greater than seven days in duration during the
term of the Joint Venture, as long as it appoints Casino as the casino gaming
concessionaire aboard such vessels on terms substantially the same as those in
the Casino Management Agreement attached hereto as EXHIBIT "F." With respect to
cruise vessel(s) operated by Commodore in the New Orleans, Louisiana market that
conduct cruises of less than seven days duration, Casino shall have a right of
first refusal during the term of this Joint Venture, at Casino's election, to
operate such vessel(s) as a 50/50 joint venture with Commodore or to manage the
casino aboard such vessel(s) pursuant to the terms of the Casino Management
Agreement, attached hereto as EXHIBIT "F." Casino shall not operate or manage a
casino, directly or indirectly, aboard any vessel that operates in "blue water"
in the New Orleans, Louisiana market during the term of the Joint Venture.
Vessels operating in "blue water" shall specifically exclude barges, riverboats
and other vessels which offer gaming in the New Orleans, Louisiana market
subject to state regulations.
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(c) This Agreement shall not be deemed to create any duties other than
as expressly provided for herein or imposed by applicable law, nor shall its
existence be deemed to alter the legal duties and obligations that any Partner
or any Affiliate has to the other Partners or their Affiliates as to matters
outside the scope of this Agreement.
9.2 DUTIES OF PARTNERS. The fiduciary duties of Partners shall not
restrict any Partner or Affiliate from:
(a) engaging in conduct not expressly prohibited by Article 9; or
(b) acting to prevent the Joint Venture from engaging in an activity
that is outside the scope of the Business;
whether or not such Partner or Affiliate is motivated in whole or in part by a
desire to further the interests of a Person other than the Joint Venture.
9.3 CONFIDENTIAL INFORMATION.
(a) Each Partner shall, and shall cause each of its Affiliates, and its
and their respective partners, shareholders, directors, officers, employees and
agents (collectively, "Representatives") to keep secret and retain in strictest
confidence, except as provided in subsection (c) hereof, any and all
Confidential Information and shall not distribute, disseminate or disclose such
Confidential Information, and shall cause its Representatives not to distribute,
disseminate or disclose such Confidential Information, except to (i) the Joint
Venture and its respective agents on a need-to-know basis or (ii) any Partner or
any of their respective Affiliates or other Representatives on a "need-to-know"
basis in connection with the transactions leading up to and contemplated by this
Agreement and the operation of the Joint Venture, or (iii) any other Person on a
"need to know" basis in connection with this Agreement or the operation of the
Joint Venture that agrees in writing to keep in confidence such Confidential
Information in accordance with the terms of this Section 9.3; and such Partner
disclosing Confidential Information pursuant to this Section 9.3 shall use, and
shall cause its Affiliates and other Representatives or Persons to use, such
Confidential Information only for the benefit of the Joint Venture in conducting
the Business or for any other specific purposes for which it was disclosed to
such party; provided that the disclosure of financial statements of, or other
information relating to, the Joint Venture shall not be deemed to be the
disclosure of Confidential Information (A) to the extent that any Partner is
required by law, GAAP or a Governmental Body that regulates the operations of
Casino or its Affiliates to disclose such financial statements or other
information or (B) to the extent that in order to sustain a position taken for
tax purposes, any Partner deems it necessary and appropriate to disclose such
financial statements or other information. All Confidential Information
disclosed in connection with the Joint Venture or pursuant to this Agreement
shall remain the property of the Person whose property it was prior to such
disclosure.
(b) No Confidential Information regarding the plans or operations of
any Partner or any Affiliate thereof received or acquired by or disclosed to any
other Partner or Affiliate thereof in the course of the conduct of Business, or
otherwise as a result of the existence of the Joint Venture, may be used by such
other Partner or Affiliate thereof for any purpose other than for the benefit of
the Joint Venture in conducting the Business.
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(c) In the event that a Partner or anyone to whom a Partner transmits
any Confidential information becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoena, investigative
demand, similar process or request) to disclose any of the Confidential
information, such Partner will use its best efforts to provide the other Partner
and the Joint Venture with prompt written notice prior to disclosure (not less
than 24 hours) so that the other Partner and the Joint Venture may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement in the event that such protective order or other
remedy is not obtained, or that the Joint Venture and the other Partner waive
compliance with the provisions of this Section 9.3, the Partner or Person who is
compelled to disclose such Confidential Information will furnish only that
portion of the Confidential Information which (based on the advice of counsel)
it is legally required to disclose and will exercise its best efforts to obtain
reliable assurance that protective treatment will be accorded the Confidential
Information.
(d) Each Partner who ceases to be such will, and will cause its
Affiliates and Representatives to, maintain the confidentiality required by this
Section 9.3 and to destroy or return upon request, all documents and other
materials, and all copies thereof, obtained by such Partner or on its behalf
from either the Joint Venture or the other Partners or any of their Affiliates
in connection with the transactions leading up to and contemplated by this Joint
Venture. The obligations under this Section 9.3 shall survive the termination of
the Joint Venture for a period of ten years or, if shorter, the maximum period
permitted by applicable law.
(e) To the fullest extent permitted by law, if a Partner or any of its
Affiliates or Representatives breaches, or threatens to commit a breach of, this
Section 9.3, the other Partner and the Joint Venture shall have the right and
remedy to have this Section 9.3 specifically enforced, it being acknowledged and
agreed that money damages will not provide an adequate remedy to such other
Partner or the Joint Venture. Nothing in this Section 9.3 shall be construed to
limit the right of any Partner or the Joint Venture to collect money damages in
the event of breach of this Section 9.3.
9.4 DUTY OF PARTNERS TO COOPERATE. Each Partner will, to the extent
permitted by applicable law and consistent with this Agreement, furnish such
information, execute such applications and similar documents as are required by
governmental authorities, and take such other action reasonably requested by the
Joint Venture or the other Partners and as may be necessary or reasonably
desirable in connection with the Business.
ARTICLE 10
INDEMNIFICATION
10.1 LIMITATION OF LIABILITY. A Director, CEO or Executive Officer of
the Joint Venture shall perform his duties as such in good faith, in a manner he
reasonably believes to be in the best interest of the Joint Venture and the
Partners, and with such care as an ordinarily prudent person in a like position
would use under similar circumstances. A Director, CEO or Executive Officer who
so performs his duties shall not have any liability by reason of being or having
been a Director, CEO or Executive Officer of the Joint Venture. The Directors,
CEO and Executive Officers shall not be liable, responsible or accountable in
damages or otherwise to the Joint Venture or any Partner for any action taken or
failure to act on behalf of the Joint Venture within the scope of authority
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conferred on the Directors, CEO and Executive Officers under this Agreement or
the Act, except where the claim at issue is based on the fraud, gross negligence
or bad faith of the Directors, CEO or Executive Officers.
10.2 INDEMNIFICATION: PROCEEDING OTHER THAN BY JOINT VENTURE. The Joint
Venture shall indemnify any Partner, Affiliate of a Partner, member of the
Management Committee or Executive Officer and may indemnify any other Person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the Joint Venture, by
reason of the fact that he is or was a Partner, officer, employee or agent of
the Joint Venture, or is or was serving at the request of the Joint Venture as a
manager, member, director, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Joint Venture, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plead of nolo contendere or its equivalent, does not, of itself, create a
presumption that the Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Joint
Venture, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
10.3 INDEMNIFICATION: PROCEEDING BY JOINT VENTURE. The Joint Venture
may indemnify any Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Joint Venture to procure a judgment in its favor by reason of the fact
that he is or was a Partner, officer, employee or agent of the Joint Venture, or
is or was serving at the request of the Joint Venture as a manager, Partner,
director, officer, employee or agent of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Joint Venture.
Indemnification may not be made for any claim, issue or matters as to which such
a Person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the Joint Venture or for
amounts paid in settlement to the Joint Venture, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the Person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
10.4 MANDATORY INDEMNIFICATION. To the extent that a Partner, officer,
employee or agent of the Joint Venture requests indemnification pursuant to
Section 10.2 or has been successful on the merits or otherwise in defense of any
action, suit or proceeding described in Sections 10.2 and 10.3, or in defense of
any claim, issue or matter therein, he must be indemnified by the Joint Venture
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
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10.5 AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
Section 10.3, unless ordered by a court or advanced pursuant to Section 10.4,
may be made by the Joint Venture only as authorized in the specific case upon a
determination that indemnification of the Partner, officer, employee or agent is
proper in the circumstances.
10.6 MANDATORY ADVANCEMENT OF EXPENSES. The expenses of Partners and
officers incurred in defending a civil or criminal action, suit or proceeding
must be paid by the Joint Venture as they are incurred and in advance of the
final disposition of the action, suit or proceeding, if such indemnification is
being provided pursuant to Section 10.2 or upon receipt of an undertaking by or
on behalf of the Partner or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the Joint Venture. The provisions of this Section 10.6 do not
affect any rights to advancement of expenses to which personnel of the Joint
Venture other than Partners or officers may be entitled under any contract or
otherwise.
10.7 EFFECT AND CONTINUATION. The indemnification and advancement of
expenses authorized in or ordered by a court pursuant to this Article 10:
(a) Does not exclude any other rights to which a Person seeking
indemnification or advancement of expenses may be entitled under any limited
liability company agreement, vote of Partners, or otherwise, for either an
action in his official capacity or an action in another capacity while holding
his office, except that indemnification, unless ordered by a court pursuant to
Section 10.4 for the advancement of expenses made pursuant to Section 10.6, may
not be made to or on behalf of any Partner or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and was material to the cause of action.
(b) Continues for a Person who has ceased to be a Partner, officer,
employee or agent and inures to the benefit of his heirs, executors and
administrators.
10.8 INSURANCE AND OTHER FINANCIAL ARRANGEMENTS. The Joint Venture may
purchase and maintain insurance or make other financial arrangements on behalf
of any Person who is or was a member, officer, employee or agent of the Joint
Venture, or is or was serving at the request of the Joint Venture as a manager,
Partner, director, officer, employee or Agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise for
any liability asserted against him and liability and expenses incurred by him in
his capacity as a Partner, director, officer, employee or agent, or arising out
of his status as such, whether or not the Joint Venture has the authority to
indemnify him against such liability and expenses.
10.9 NOTICE OF INDEMNIFICATION AND ADVANCEMENT. Any indemnification of,
or advancement of expenses to, a Partner or officer in accordance with this
Article 10, if arising out of a proceeding by or on behalf of the Joint Venture,
shall be reported in writing to the Partners with or before the notice of the
next Partners' meeting.
10.10 REPEAL OR MODIFICATION. An repeal or modification of this Article
10 by the Partners of the Joint Venture shall not adversely affect any right of
a Partner or officer of the Joint Venture existing hereunder at the time of such
repeal or modification.
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ARTICLE 11
INSPECTION OF JOINT VENTURE RECORDS; ANNUAL AND OTHER REPORTS
11.1 RECORDS TO BE KEPT. The Joint Venture shall keep at its registered
office:
(a) A current list of the full name and last known business, resident
or mailing address of each Partner and its designated Directors separately
identifying the Partners in alphabetical order and the Directors in alphabetical
order;
(b) Copies of this Agreement, and all amendments hereto;
(c) Copies of the Joint Venture's federal income tax returns and
reports, if any, for the three (3) most recent years; and
(d) Copies of any financial statements of the Joint Venture for the
three (3) most recent years.
11.2 INSPECTION OF JOINT VENTURE RECORDS. The accounting books and
records, the records of the Management Committee, and any other records
maintained by the Joint Venture shall be open to inspection upon the request of
any Partner at any reasonable time during usual business hours. Such inspection
by a Partner may be made in person or by agent or attorney, and the right of
inspection includes the right to copy and make extracts.
11.3 FINANCIAL REPORTS. The Joint Venture shall within 30 days after
the close of each fiscal quarter and within 60 days after the close of each
fiscal year, deliver or mail to the Partners the quarterly financial statements
and annual financial statements, respectively, of the Joint Venture. The CFO
shall also prepare abbreviated monthly financial reports with respect to the
Joint Venture and provide such reports to the Partners within 15 days after the
end of each month. A copy of any such statements shall be kept on file in the
principal executive office of the Joint Venture and shall be exhibited at all
reasonable times to any Partner demanding an examination of them or a copy shall
be mailed to such Partner. The quarterly income statements and balance sheets
referred to in this Section shall be accompanied by the report thereon, if any,
of any independent accountants engaged by the Joint Venture and the certificate
of the CFO of the Joint Venture that such financial statements were prepared in
accordance with GAAP without audit from the books and records of the Joint
Venture except that such financial statements may lack footnotes and other
presentation items required by GAAP and shall be subject to normal year-end
adjustments. The annual financial statements of the Joint Venture shall be
audited and shall be accompanied by a report from the independent auditors.
11.4 JOINT VENTURE AUDITORS. The auditors for the Joint Venture shall
be Grant Thornton, LLP, or such other independent public accounting firm of
national standing selected by Commodore, with Casino's reasonable approval.
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ARTICLE 12
DEFAULTS AND REMEDIES
12.1 DEFAULTS. An Event of Default shall occur if a Partner (or its
Affiliate) commits an act described in Section 8.2 as being an act of a
Defaulting Partner or materially defaults in the performance of its obligations,
covenants or representations and warranties under this Agreement, and such
default is not cured within 30 days after notice of such default is given by a
Partner to the Defaulting Partner, or action has not been taken to begin curing
such Default within such 30-day period and such cure is being diligently
pursued, if the Default is not reasonably capable of being cured within 30 days.
12.2 REMEDIES. Upon the occurrence of an Event of Default, the
non-defaulting Partner shall have the right, in addition to all other rights and
remedies provided herein (including rights under Section 8.3), to pursue any and
all available legal and equitable remedies on behalf of itself or the Joint
Venture or elect to dissolve the Joint Venture pursuant to Section 8.2, or both.
12.3 NO WAIVER. No consent or waiver, express or implied, by a Partner
to or of any breach or default by another Partner in the performance by such
other Partner of its obligations under this Agreement shall constitute a consent
to or waiver of any similar breach or default by such Partner. Failure by a
Partner to complain of any act or omission to act by another Partner, or to
declare such other Partner in default, irrespective of how long such failure
continues, shall not constitute a waiver by such Partner of its rights under
this Agreement.
ARTICLE 13
DISPUTE RESOLUTION
13.1 DISPUTES. Except for actions described in Section 4.4(b) or as
expressly otherwise provided in this Agreement, any and all claims, disputes,
controversies, and other matters in question (whether contractual or
non-contractual) arising out of or relating to this Agreement, or the formation,
validity, binding effect, applicability, scope, interpretation, construction,
modification, performance, breach, termination, or enforcement thereof
(including all such issues pertaining to this subsection) (singly, the "Dispute"
and collectively, the "Disputes") shall be resolved by alternative dispute
resolution in accordance with this Article 13.
13.2 ARBITRATION.
(a) COMPULSORY ARBITRATION. All Disputes not resolved by the parties
under other dispute resolutions provisions of this Agreement shall be settled
exclusively by final and binding arbitration in accordance with this Section
13.2 (Arbitration). Judgment upon the award may be entered in any court
specified by the parties in this Agreement or in one of the Related Agreements,
or in the absence of any such designation, in any court having jurisdiction, or
application may be made to the appropriate court for judicial recognition of the
award or for an order of enforcement thereof.
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(b) ARBITRATION TRIBUNAL, RULES, AND ADMINISTRATION. The sole
arbitrator or the panel of arbitrators constituted for the resolution of the
Dispute will be called the Arbitration Tribunal. Except as otherwise provided in
this Section, the arbitration proceeding (the "Arbitration Case") will be
administered by the American Arbitration Association (the "Case Administrator")
and conducted by the Arbitration Tribunal in substantial accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
effect (the "Procedural Rules"). In the event of any conflict between the
Procedural Rules and this Section 13.2 (Arbitration), the provisions of this
Section 13.2 (Arbitration) will control.
(c) CONDITIONS PRECEDENT TO ARBITRATION. A party may initiate
arbitration at any time after the utilization and completion of the dispute
resolution procedures set forth in Section 4.5.
(d) INITIATION OF ARBITRATION CASE. The Arbitration Case must be
initiated by the initiating party (the "Petitioner") in accordance with the
Procedural Rules by giving to the other party (the "Respondent") in a demand for
arbitration ("Petitioner's Demand") written notice of the Dispute and
Petitioner's claim.
(e) APPOINTMENT OF ARBITRATION TRIBUNAL BY PARTIES OR APPOINTING
AUTHORITY. In Petitioner's Demand, the Petitioner shall select one (1) neutral
arbitrator from the panel or roster of arbitrators established and maintained by
the Appointing Authority. Within ten (10) of receipt of Petitioner's Demand, the
Respondent shall mail or deliver to the Petitioner and the Appointing Authority
an answering statement to Petitioner's Demand in which the Respondent answers
Petitioner's Demand and selects one (1) neutral arbitrator from the panel or
roster of arbitrators established and maintained by the Appointing Authority. If
no answering statement is mailed or delivered within the stated time, the claim
set forth in Petitioner's Demand is deemed denied by the Respondent and the
Appointing Authority shall select the second neutral arbitrator. Within ten days
of receipt of notice of their selection as arbitrators, the two (2) arbitrators
shall select a third neutral arbitrator. If the two (2) arbitrators do not agree
upon the third arbitrator within the stated time, the Appointing Authority shall
select the third neutral arbitrator. The three (3) neutral arbitrators so
selected will constitute the Arbitration Tribunal. Unless the parties otherwise
mutually agree, if Petitioner's Demand names two (2) or more parties as
Petitioner or two (2) or more parties as Respondent, the Appointing Authority
shall appoint all three (3) members of the Arbitration Tribunal. The Appointing
Authority has the exclusive right and power to resolve any Dispute arising out
of or related to the appointment of the Arbitration Tribunal. In this regard, in
addition to any other action it deems just and equitable in order to resolve any
such Dispute, the Appointing Authority may appoint an arbitrator or arbitrators
to serve in place of any arbitrator or arbitrators selected by the Petitioner or
the Respondent. The American Arbitration Association is designated as the
Appointing Authority.
(f) QUALIFICATIONS OF ARBITRATORS. Each member of the Arbitration
Tribunal must be an independent, impartial, neutral and have experience in the
subject matter of the Dispute. At least one member of the Arbitration Tribunal
must be actively engaged in the practice of law, or a retired member of the
state or federal judiciary, and must have at least ten years' experience in
resolving disputes in the area of law directly related to the subject matter of
the Dispute. The Arbitration Tribunal will be the judge of its own
qualifications and jurisdiction.
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(g) INTERIM MEASURES. The Arbitration Tribunal may grant and order such
interim, provisional, ancillary, and special remedies and relief as it deems
just and equitable and necessary or desirable under the circumstances including,
without limitation, protective orders, sanctions for abuse or frustration of the
arbitration process, temporary restraining orders, preliminary injunctions,
attachment, sequestration, specific performance, and the appointment of a
receiver. Such interim measures may be taken in the form of an interim award.
The Arbitration Tribunal may require security for the payment of costs and
damages. A request for interim measures by a party to a court shall not be
deemed incompatible with this Article 13 or a waiver of that party's right to
arbitrate. Without limiting the generality of the foregoing provisions, a party
may seek interim relief from the Arbitration Tribunal or from the appropriate
court having jurisdiction for a breach or threatened breach of Section 9.3
(Confidential Information).
(h) PRE-HEARING CONFERENCE. A pre-hearing conference will be held and
conducted by the Arbitration Tribunal within 30 days of its appointment for the
purpose of expediting the Arbitration Case, directing and controlling the
exchange of information, and setting the date for the opening of the hearing.
(i) EXCHANGE OF INFORMATION. Consistent with the expedited nature of
arbitration, the Arbitration Tribunal will direct and control the scope and
timing of the exchange of information between the parties and will take such
steps as it deems necessary or desirable to avoid delay and achieve a just,
speedy, and cost-effective resolution of the Dispute. The Arbitration Tribunal
may order (i) the production of documents and other information and the entry
upon designated land or other property, and (ii) the identification of witnesses
to be called. When the demands of justice require such extraordinary measures
and upon good cause shown, the Arbitration Tribunal may order the taking of the
testimony of any Person, including a party, by deposition upon oral examination
or upon written questions, or the propounding of interrogatories, but no party
is entitled to conduct discovery of this nature as a matter of right. At least
ten days prior to the hearing, the parties shall exchange copies of all exhibits
they intend to submit at the hearing and final witness lists. The Arbitration
Tribunal has the exclusive right and power to resolve all Disputes related to
the exchange of information.
(j) LANGUAGE AND LOCALE. The Arbitration Case will be conducted in the
English language at a location selected by the Arbitration Tribunal that is
within fifty (50) miles of Broward County, Florida.
(k) OPENING AND CLOSING OF HEARING; TIME OF AWARD. The hearing will be
opened within 60 days of the initial pre-hearing conference and will be closed
within 60 days of the opening of the hearing. To secure a just, speedy, and
cost-effective resolution of the Dispute and for good cause, the Arbitration
Tribunal may shorten or lengthen the time for opening or closing the hearing.
Unless the parties otherwise agree, the Arbitration Tribunal shall render the
award within 30 days from the date of closing of the hearing. The failure of the
Arbitration Tribunal to render the award within that time will not deprive the
Arbitration Tribunal of its jurisdiction or authority to render the award.
(l) FORM OF AWARD. The award will be written in the English language
and signed by a majority of the members of the Arbitration Tribunal. The
Arbitration Tribunal will provide a concise, written breakdown of the award. If
requested in writing by the parties prior to the opening
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of the hearing, or if the Arbitration Tribunal believes it is appropriate to do
so, the Arbitration Tribunal will also provide a concise, written explanation of
the award not exceeding five (5) pages in length. Detailed findings of fact and
conclusions of law and a reasoned opinion in the form of a judicial opinion are
not required and will not be provided.
(m) GOVERNING LAW. The Arbitration Case shall be governed by the United
States Arbitration Act, 9 U.S.C. ss. 1 - 16 and the substantive governing law
designated by the parties in this Agreement without regard to conflicts of laws
principles. In the absence of any such designation, the Arbitration Tribunal may
apply such law or laws as it considers appropriate.
(n) SCOPE OF AWARD; PUNITIVE DAMAGES. The Arbitration Tribunal may
grant any remedy or relief that it deems just and equitable and not outside of
the scope of this Agreement or the Related Agreements, including, but not
limited to, specific performance and other equitable relief. The Arbitration
Tribunal is not empowered to and may not award punitive damages.
(o) ASSESSMENT OF FEES, COMPENSATION, AND EXPENSES. Unless the parties
have otherwise agreed to bear such costs equally or in some other manner, the
Arbitration Tribunal, in the award, will allocate and assess against the parties
in such manner as it deems just and equitable the fees, compensation, and
expenses of the Arbitration Tribunal, the Case Administrator, and the Appointing
Authority. Except as otherwise provided in this subsection or the following
subsection, all other costs and expenses incurred in connection with resolution
of the Dispute or Disputes shall be borne by the party that incurs such costs
and expenses.
(p) ATTORNEYS' FEES. The Arbitration Tribunal may provide in the award
for the recovery of all or part of a prevailing party's reasonable attorneys'
fees incurred in connection with resolution of the Dispute from the date of
inception thereof through enforcement and collection of the award. In addition,
the Arbitration Tribunal may award reasonable attorneys' fees to a party
(whether or not the party prevails on the merits of the Dispute) if the
Arbitration Tribunal finds and concludes that the party participated in good
faith in the manner contemplated by this Agreement in the Arbitration Case and
other alternative dispute resolution procedures described in this Article 13 and
that the other party materially breached its obligations under this Article 13.
(q) INTEREST. The Arbitration Tribunal may provide in the award for the
recovery of pre-award interest and post-award interest on such principal amounts
and at such rates and from such date or dates as the Arbitration Tribunal may
deem just and equitable. Interest on any judgment entered upon the award will
accrue from the date of entry of judgment at the judgment rate prescribed by
applicable law.
(r) FINALITY OF AWARD. The award shall be final and binding on the
parties. The award may be vacated, modified, or corrected and an appeal may be
taken only as provided in the Procedural Rules and the United States Arbitration
Act, 9 U.S.C. ss. 1 - 16.
(s) CONFIDENTIALITY. The parties, the Arbitration Tribunal, the
Appointing Authority, and the Case Administrator shall treat the proceedings of
the Arbitration Case including, without limitation, the award and decisions of
the tribunal, the testimony of witnesses, the documentary evidence exchanged,
offered, or introduced, and other papers and data related thereto, as
confidential. Upon request of any party, each party agrees to execute prior to
the exchange of any
41
<PAGE>
information a confidentiality agreement in form and substance satisfactory to
the Arbitration Tribunal that restricts disclosure of confidential information
during and after the conclusion of the Arbitration Case, subject to disclosure
required by the federal securities laws.
ARTICLE 14
MISCELLANEOUS
14.1 TERM. The existence of the Joint Venture shall be for a period of
50 years from the date of the filing of its certificate of formation with the
Delaware Secretary of State.
14.2 AMENDMENTS. This Agreement may be amended only by the affirmative
vote of all the Partners. Any such amendment shall be in writing, duly executed
by all the Partners.
14.3 NATURE OF PARTNERSHIP INTEREST; AGREEMENT IS BINDING UPON
SUCCESSORS. A membership interest is personal property. A Partner shall have no
interest in any specific property of the Joint Venture except to the extent such
interest is evidenced by a separate agreement between such Partner and the Joint
Venture. The successor of any Partner shall be bound by the provisions of this
Agreement, including without limitation, Article 7.
14.4 TITLE TO PROPERTY. Title to all Joint Venture property shall be
held in the name of the Joint Venture. Except as otherwise permitted by this
Agreement, no Partner shall have the right, and each Partner does hereby agree
that it shall not seek, to cause a partition of the Joint Venture's property
whether by court action or otherwise.
14.5 ATTORNEY FEES. In the event that any dispute between the Joint
Venture and the Partners or among the Partners should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys' fees and expenses, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action is
prosecuted to judgment as long as the recipient is a prevailing party as defined
herein. Any judgment or order entered in such action shall contain a specific
provision providing for the recovery of attorney fees and costs incurred in
enforcing such judgment and an award of prejudgment interest from the date of
the breach at the maximum rate of interest allowed by law. For the purposes of
this Section: (a) attorney fees shall include, without limitation, fees incurred
in the following: (i) post-judgment motions; (ii) contempt proceedings; (iii)
garnishment, levy, and debtor and third party examinations; (iv) discovery; and
(v) bankruptcy litigation and (b) prevailing party shall mean the party who is
determined in the proceeding to have prevailed or who prevailed by dismissal,
default or otherwise.
14.6 SEAL. The Partners may adopt a seal of the Joint Venture in such
form as the Partners shall decide.
14.7 ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto, constitutes the entire agreement between the Partners with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, representations, and understandings of the
42
<PAGE>
parties. No party hereto shall be liable or bound to the other in any manner by
any warranties, representations or covenants with respect to the subject matter
hereof except as specifically set forth herein.
14.8 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein or in the Exhibits hereto.
14.9 GOVERNING LAW. This Agreement shall be governed by and construed
under the substantive laws of the State of Florida, without regard to Florida
choice of law provisions.
14.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and shall become
effective when there exist copies hereof which, when taken together, bear the
authorized signatures of each of the parties hereto. Only one such counterpart
signed by the party against whom enforceability is sought needs to be produced
to evidence the existence of this Agreement.
14.11 TITLES AND SUBTITLES; FORM OF PRONOUNS; CONSTRUCTION AND
DEFINITIONS. The titles of the sections and paragraphs of this Agreement are for
convenience only and are not to be considered in construing this Agreement. All
pronouns used in this Agreement shall be deemed to include masculine, feminine
and neuter forms, the singular number includes the plural and the plural number
includes the singular. Unless otherwise specified, references to Sections or
Articles are to the Sections or Articles in this Agreement. Unless the context
otherwise requires, the term "including" shall mean "including, without
limitation."
14.12 SEVERABILITY. If one or more provisions of this Agreement are
held by a proper court to be unenforceable under applicable law, portions of
such provisions, or such provisions in their entirety, to the extent necessary
and permitted by law, shall be severed herefrom, and the balance of this
Agreement shall be enforceable in accordance with its terms.
14.13 COSTS. Each Partner, and its respective Affiliates, shall bear
its own costs (including legal and accounting fees) in connection with the
transactions leading up to, and the negotiating and entering into, this
Agreement.
43
<PAGE>
IN WITNESS WHEREOF, the Partners of CAPRI CRUISES hereby execute this
Joint Venture Agreement as of the 17th day of April, 1998.
COMMODORE CRUISES LIMITED, a
Bermuda corporation
By: /s/ FREDERICK A. MAYER
----------------------------------------
Title: President
-------------------------------------
ISLE OF CAPRI CORPORATION, a
Mississippi corporation
By: /s/ JOHN M. GALLAWAY
----------------------------------------
Title:
-------------------------------------
The undersigned agree to be bound by the provisions contained in
Article 9 of this Joint Venture Agreement.
COMMODORE HOLDINGS LIMITED
By: /s/ FREDERICK A. MAYER
----------------------------------------
Title: Chief Executive Officer
-------------------------------------
CASINO AMERICA, INC.
By: /s/ JOHN M. GALLAWAY
----------------------------------------
Title:
-------------------------------------
44
EXHIBIT 10.2
<TABLE>
<CAPTION>
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED PURSUANT TO AN APPLICATION FOR AN
ORDER FOR CONFIDENTIAL TREATMENT REQUESTED BY COMMODORE HOLDINGS LIMITED
<S> <C>
- ----------------------------------------------------------- --------------------------------------------------------
1. Shipbroker THE BALTIC AND INTERNATIONAL
MARITIME COUNCIL (BIMCO)
Paxships Ltd. STANDARD BAREBOAT CHARTER
CODE NAME: "BARECON 89'
PART I
--------------------------------------------------------
2. Place and date
Miami, March 9, 1998
- ----------------------------------------------------------- --------------------------------------------------------
3. Owners/Place of business 4. Bareboat charterers (Charterers)/Place of business
Cruise Charter Ltd. Commodore Cruises Limited
c/o Bostwick & Bostwick 4000 Hollywood Blvd., Suite 385-S
50 George Street South Tower
P. O. Box "N" 1605 Hollywood, Florida 33021
Nassau, Bahamas
- --------------------------------------------------------------------------------------------------------------------
5. Vessel's name, Call Sign and Flag (Cl. 9(c))
M/V Island Holiday, __________ Ukranian (being changed to Bahamian)
- ----------------------------------------------------------- --------------------------------------------------------
6. Type of Vessel 7. GRT/NRT
Passenger 15,410/6401
- ----------------------------------------------------------- --------------------------------------------------------
8. When/Where built 9. Total DWT (abt.) in metric tons on summer freeboard
2250
1975 Finland
- ----------------------------------------------------------- --------------------------------------------------------
10. Class 11. Date of last special survey by the Vessel's
classification society
KM (*)A3(2)
April 1996
- --------------------------------------------------------------------------------------------------------------------
12. Further particulars of Vessel (also indicate minimum number of month's
validity of class certificates agreed acc. To Cl.14)
Length 140.42 m. Breadth 21.83 m. Depth 16.30 m
Main Engines: Diesel 2 x 6620 Kw
Minimum Three Months Validity of Class Certificate
- ----------------------------------------------------------- --------------------------- ----------------------------
13. Port or Place of delivery (Cl. 2) 14. Time for delivery 15. Canceling date
(Cl. 3) (Cl. 4)
Freeport, Grand Bahama
May 1, 1998 May 8, 1998
--------------------------------------------------------
16. Port or Place or redelivery (Cl. 14)
Freeport, Grand Bahama
- ----------------------------------------------------------- --------------------------------------------------------
<PAGE>
- ----------------------------------------------------------- --------------------------------------------------------
17. Running days' notice if other than stated in Cl. 3 18. Frequency of dry-docking if other than stated in
C. 9(f)
Drydock and/or classification repair every 12
months or as necessary to keep in Class
- --------------------------------------------------------------------------------------------------------------------
19. Trading Limits (Cl. 5)
Lawful Trades Worldwide. Vessel not to compete with SeaEscape in New
York or Port Everglades as gaming vessel. See Clause 58 of Addendum.
- ----------------------------------------------------------- --------------------------------------------------------
20. Charter period 21. Charter hire (Cl. 10)
56 months with rights of first offer as per Clause $ [*] per day, as per Cl. 63 of Addendum
43 of Addendum
- ----------------------------------------------------------- --------------------------------------------------------
22. Rate of interest payable acc. to C.10(f) and, if 23. Currency and method of payment (Cl. 10)
applicable, acc. to PART IV
U.S. dollars
15% per annum
- ----------------------------------------------------------- --------------------------------------------------------
24. Place of payment, also state beneficiary and bank 25. Bank guarantee/bond (sum and place) (optional)
account (Cl. 10)
Address of Owner in Box 3, or as agreed NONE
- ----------------------------------------------------------- --------------------------------------------------------
26. Mortgage(s), if any (Cl. 11) 27. Insurance (marine and war risks)
None As per Clause 53 of Addendum
- ----------------------------------------------------------- --------------------------------------------------------
28. Additional insurance cover, if any, for 29. Additional insurance cover, if any, for
Owners' account limited to (C1. 12(b)) or, if Charterers' account limited to (C1. 12(b)) or,
applicable, (C1. 13(g)) if applicable, (C1. 13(g))
None See Clause 53 of Addendum
- ----------------------------------------------------------- --------------------------------------------------------
30. Latent defects (only to be filled in if 31. War cancellation (indicate countries
period other than stated in C1. 2) agreed) (C1. 24)
See Clause 44 of Addendum
- --------------------------------------------------------------------------------------------------------------------
32. Brokerage commission and to whom payable (Cl. 25)
100,000 shares of common stock of Commodore Holdings
Limited, to Paxships Ltd.
- --------------------------------------------------------------------------------------------------------------------
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMMODORE HOLDINGS LIMITED
2
<PAGE>
- ----------------------------------------------------------- --------------------------------------------------------
33. Law and arbitration 34. Number of additional clauses
covering special provisions, if agreed
See Clause 79 of Addendum See Addendum
- ----------------------------------------------------------- --------------------------------------------------------
35. Newbuilding Vessel (indicate with "yes" 36. Name and place of Builders (only to be
or "no" filled in whether Part III applies) (OPTIONAL) filed in if Part III applies)
N/A N/A
- ----------------------------------------------------------- --------------------------------------------------------
37. Vessel's Yard Building No. (only to be filled in 38. Date of Building Contract (only to be filled in
Part III applies) if Part III applies)
N/A N/A
- ----------------------------------------------------------- --------------------------------------------------------
39. Hire/Purchase agreement (indicate with "yes" or "no" 40. Bareboat Charter Registry (indicate with
whether Part IV applies) (OPTIONAL) "yes" or "no" whether Part V applies) (OPTIONAL)
N/A N/A
- ----------------------------------------------------------- --------------------------------------------------------
41. Flag and Country of the Bareboat Charter Registry 42. Country of the Underlying Registry (only to be
(only to be filled in if Part V applies) filled in if Part V applies)
N/A N/A
- ----------------------------------------------------------- --------------------------------------------------------
</TABLE>
3
<PAGE>
PREAMBLE - It is mutually agreed that this Contract shall be performed subject
to the conditions contained in this Charter which shall include PART I and PART
II, in the event of a conflict of conditions, the provisions of PART I shall
prevail over those of PART II to the extent of such conflict but no further. It
is further mutually agreed that PART III and/or PART IV and/or PART V shall only
apply and shall only form part of this Charter if expressly agreed and stated in
the Boxes 35, 39, 40. If PART III and/or PART IV and/or PART V apply, it is
further mutually agreed that in the event of a conflict of conditions, the
provisions of PART I and PART II shall prevail over those of PART III and/or
PART IV and/or PART V to the extent of such conflict but no further.
Signature (Owners) Signature (Charterers)
CRUISE CHARTER, LTD., a Bahamian COMMODORE CRUISES LIMITED, a
corporation Bermudan corporation
By: /S/ DOUGLAS BAETZ By: /S/ JEFFREY BINDER
--------------------------- --------------------------
Douglas Baetz, President Jeffrey Binder, President
4
<PAGE>
ISLAND HOLIDAY CHARTER
PART II AND ADDENDUM
PART II
1. DEFINITIONS. In this Charter, the following terms shall have the meanings
thereby assigned to them:
"THE OWNERS" shall mean the person or company which has this Vessel
under sub-bareboat charter (the "First Sub-Charter") from Silvercone Holdings
Limited ("Silvercone"), a Cypriot corporation, a copy of which is appended as
Exhibit "A." Silvercone has consented to this charter and has executed a
non-disturbance agreement appended hereto as Exhibit "B."
"The Charterers" shall mean the Bareboat charterers and shall not be
construed to mean a time charterer or a voyage charterer.
2. DELIVERY (not applicable to new building vessels.) The Vessel shall be
delivered and taken over by the Charterers at the port or place indicated in Box
13, in such ready berth as the Charterers may direct.
The Owners shall before and at the time of delivery exercise due
diligence to make the Vessel seaworthy and in every respect ready in hull,
machinery and equipment for service under this Charter. The Vessel shall be
properly documented at time of delivery.
The delivery to the Charterers of the Vessel and the taking over of the
Vessel by the Charterers shall constitute a full performance by the Owners of
all the Owners' obligations under Clause 2, and thereafter the Charterers shall
not be entitled to make or assert any claim against the Owners on account of any
conditions, representations or warranties expressed or implied with respect to
the Vessel but the Owners shall be responsible for repairs or renewals
occasioned by latent defects in the Vessel, her machinery or appurtenances,
existing at the time of delivery under the Charter, provided such defects have
manifested themselves within 18 months after delivery unless otherwise provided
in Box 30.
3. TIME FOR DELIVERY (not applicable to new building vessels). The Vessel to be
delivered not before the date indicated in Box 14 unless with the Charterers'
consent. Delivery to take place after inspection and completion of Condition
Report.
Unless otherwise agreed in Box 17, the Owners to give the Charterers
not less than 30 running days' preliminary and not less than 14 days' definite
notice of the date on which the Vessel is expected to be ready for delivery.
<PAGE>
The Owners to keep the Charterers closely advised of possible changes
in the Vessel's position.
4. CANCELING (not applicable to new building vessels). Should the Vessel not be
delivered latest by the canceling date indicated in Box 15, the Charterers to
have the option of canceling this Charter without prejudice to any claim the
Charterers may otherwise have on the Owners under the Charter.
If it appears that the Vessel will be delayed beyond the canceling
date, the Owners shall, as soon as they are in a position to state with
reasonable certainty the day on which the Vessel should be ready, give notice
thereof to the Charterers asking whether they will exercise their option of
canceling, and the option must then be declared within one hundred and
sixty-eight (168) hours of the receipt by the Charterers of such notice. If the
Charterers do not then exercise their option of canceling, the seventh day after
the readiness date stated in the Owners' notice shall be regarded as a new
canceling date for the purpose of this Clause.
5. TRADING LIMITS. The Vessel shall be employed in lawful trades for the
carriage of suitable lawful merchandise within the trading limits indicated in
Box 19.
The Charterers undertake not to employ the Vessel or suffer the Vessel
to be employed otherwise than in conformity with the terms of the instruments of
insurance (including any warranties expressed or implied therein) without first
obtaining the consent to such employment of the insurers and complying with such
requirements as to extra premium or otherwise as the insurers may prescribe. If
required, the Charterers shall keep the Owners and the Mortgagees advised of the
intended employment of the Vessel.
The Charterers also undertake not to employ the Vessel or suffer her
employment in any trade or business which is forbidden by the law of any country
to which the Vessel may sail or is otherwise illicit or in carrying illicit or
prohibited goods or in any manner whatsoever which may render her liable to
condemnation, destruction, seizure or confiscation.
Notwithstanding any other provisions contained in this Charter it is
agreed that nuclear fuels or radioactive products or waste are specifically
excluded from the cargo permitted to be loaded or carried under this Charter.
This exclusion does not apply to radio-isotopes used or intended to be used for
any industrial, commercial, agricultural, medical or scientific purposes
provided the Owners prior approval has been obtained to loading thereof.
2
<PAGE>
6. SURVEYS (not applicable to new building vessels). Survey on Delivery and
Redelivery. - The Owners and Charterers shall each appoint surveyors for the
purpose of determining and agreeing in writing the condition of the Vessel at
the time of delivery and redelivery hereunder. The Owners shall bear all
expenses of the On-Survey including loss of time, if any, and the Charterers
shall bear all expenses of the Off-Survey including loss of time, if any, at the
rate of hire per day or pro rata, also including in each case the cost of any
docking and undocking, if required, in connection herewith.
7. INSPECTION. Inspection. - The Owners shall have the right at any time to
inspect or survey the Vessel or instruct a duly authorized surveyor to carry out
such survey on their behalf to ascertain the condition of the Vessel and satisfy
themselves that the Vessel is being properly repaired and maintained. Inspection
or survey in drydock shall be made only when the Vessel shall be in drydock for
the Charterers' purpose. However, the owners shall have the right to require the
Vessel to be drydocked for inspection if the Charterers are not docking her at
normal classification intervals. The fees for such inspection or survey shall,
in the event of the Vessel being found to be in the condition provided in Clause
9 of this Charter, be payable by the Owners and shall be paid by the Charterers
only in the event of the Vessel being found to require repairs or maintenance in
order to achieve the condition so provided. All time taken in respect of
inspection, survey or repairs shall count as time on hire and shall form part of
the Charter period.
The Charterers shall also permit the Owners to inspect the Vessel's log
books whenever requested and shall, whenever required by the Owners, furnish
them with full information regarding any casualties or other accidents or damage
to the Vessel. For the purpose of this Clause, the Charterers shall keep the
Owner advised of the intended employment of the Vessel.
8. INVENTORIES AND CONSUMABLE OIL AND STORES. A complete inventory of Vessel's
entire equipment, outfit, appliances and of all consumable stores on board the
Vessel shall be made by the Charterers in conjunction with the Owners on
delivery and again on redelivery of the Vessel. The Charterers and the Owners,
respectively, shall at the time of delivery and redelivery take over and pay for
all bunkers, lubricating oil, water and unbroached provisions, paints, oils,
ropes and other consumable stores in the said Vessel at the then current market
prices at the ports of delivery and redelivery, respectively.
9. MAINTENANCE AND OPERATION.
(a) The Vessel shall, during the Charter period, be in the full
possession and at the absolute disposal for all purposes of the Charterers and
under their complete control in every respect. The Charterers shall maintain the
Vessel, her machinery, boilers, appurtenances and spare parts in a good state of
repair, in efficient operation condition, and in accordance with good commercial
maintenance practice, wear and tear always excepted and, except as provided for
in Clause 13(1), they shall keep the Vessel with unexpired classification of the
3
<PAGE>
class indicated in Box 10 (or such other class as may be assigned to the Vessel
by any subsequent classification society) and with other required certificates
in force at all times.
The Charterers to take immediate steps to have material, necessary
repairs done within a reasonable time failing which, after written notice and a
reasonable opportunity to cure, the Owners shall have the right of withdrawing
the Vessel from the service of the Charterers without noting any protest and
without prejudice to any claim the Owners may otherwise have against the
Charterers under the Charter.
Unless otherwise agreed, in the event of any improvement, structural
changes, or expensive new equipment becoming necessary for the continued
operation of the Vessel by reason of the Vessel's marine insurance value as
stated in Box 27, then the extent, if any, to which the rate of hire shall be
varied and the ratio in which the cost of compliance shall be shared between the
parties concerned in order to achieve a reasonable distribution thereof as
between the Owners and the Charterers having regard, inter ail, to the length of
the period remaining under the Charter, shall in the absence of agreement, be
referred to arbitration according to Clause 79.
The Charterers are required to establish and maintain financial
security or responsibility in respect of oil or other pollution damage as
required by any government, including federal, state or municipal or other
division or authority thereof, to enable the Vessel, without penalty or charge,
lawfully to enter, remain at, or leave any port, place, territorial or
contiguous waters of any country, state or municipality in performance of this
Charter without any delay. This obligation shall apply whether or not such
requirements have been lawfully imposed by such government or division or
authority thereof. The Charterers shall make and maintain all arrangements by
bond or otherwise as may be necessary to satisfy such requirements at the
Charterers' sole expense and the Charterers shall indemnify the Owners against
all consequences whatsoever (including loss of time) for any failure or
inability to do so.
TOVALOP SCHEME. (Applicable to oil tank vessels only). - The Charterers
are required to enter the Vessel under the TOVALOP SCHEME or under any similar
compulsory scheme upon delivery under this Charter and to maintain her so during
the currency of this Charter.
(b) The Charterers shall at their own expense and by their own
procurement man, navigate, operate, supply, fuel and repair the Vessel whenever
required during the Charter period and they shall pay all charges and expenses
of every kind and nature whatsoever incidental to their use and operation of the
Vessel under this Charter, including any foreign general municipality and/or
state taxes. The Master, officers and crew of the Vessel shall be the servants
of the Charterers for all purposes whatsoever, even if for any reason appointed
by the Owners, Charterers shall comply with the regulations regarding officers
and crew in force in the country of the Vessel's flag or any other applicable
law.
(c) During the currency of this Charter, the Vessel shall retain her
present name as indicated in Box D and shall remain under and fly the flag as
indicated in Box 5 (or the flag of
4
<PAGE>
the Bahamas). Provided, however, that the Charterers shall have the liberty to
paint the Vessel in their own colors, install and display their funnel insignia
and fly their own house flag. Painting and re-painting, installment and
re-installment to be for the Charterers account and time used thereby to count
as time on hire.
(d) The Charterers shall make no structural changes in the Vessel or
changes in the machinery, boilers, appurtenances or spare parts thereof without
in each instance first securing the Owners' approval thereof. If the Owners so
agree, the Charterers shall, if the Owners so require, restore the Vessel to its
former condition before the termination of the Charter.
(e) The Charterers shall have the use of all outfit equipment and
appliances on-board the Vessel at the time of delivery, provided the same or
their substantial equivalent shall be returned to the Owners on redelivery in
the same good order and condition as when received, ordinary wear and tear
excepted. The Charterers shall from time to time during the Charter period
replace such items of equipment as shall be so damaged or worn as to be unfit
for use. The Charterers are to procure that all repairs to or replacement of any
damaged, worn or lost parts or equipment be effected in such manner (both as
regards workmanship and quality of materials) as not to diminish the value of
the Vessel. The Charterers have the right to fit additional equipment at their
expense and risk but the Charterers shall remove such equipment at the end of
the period if requested by the Owners.
Any equipment including radio equipment on hire on the Vessel at time
of delivery shall be kept and maintained by the Charterers and the Charterers
shall assume the obligations and liabilities of the Owners under any lease
contracts in connection therewith and shall reimburse the Owners for all
expenses incurred in connection therewith, also for any new equipment required
in order to comply with radio regulations.
(f) The Charterers shall drydock the Vessel and clean and paint her
underwater parts whenever the same may be necessary, but not less than once in
every eighteen calendar months after delivery unless otherwise agreed in Box 18.
10. HIRE.
(a) The Charterers shall pay to the Owners for the hire of the Vessel
at the lump sum per calendar month as indicated in Box 21 commencing on and from
the date and hour of her delivery to the Charterers and at and after the agreed
lump sum for any part of the month. Hire to continue until the date and hour
when the Vessel is redelivered by the Charterers to her Owners.
5
<PAGE>
(b) Payment of Hire, except for the first and last month's Hire, if
subclass (c) of this Clause is applicable, shall be made in cash without
discount in the currency and in the manner indicated in Box 23 and at the place
mentioned in Box 24.
(c) Payment of Hire for the first and last month's Hire if less than a
full month shall be calculated proportionally according to the number of days in
the particular calendar month and advance payment to be effected accordingly.
(d) Should the Vessel be lost or missing, Hire to cease from the date
and time when she was lost or last heard of. Any Hire paid in advance to be
adjusted accordingly.
(e) Time shall be of the essence in relation to payment of Hire
hereunder. In default of payment beyond a period of ten running days after
notice is delivered to Charterer, the Owners shall have the right to withdraw
the Vessel from the service of the Charterers without noting any protest and
without interference by any court or any other formality whatsoever and shall
without prejudice to any other claim the Owners may otherwise have against the
Charterers under the Charter, be entitled to damages in respect of all costs and
losses incurred as a result of the Charterers' default and the ensuing
withdrawal of the Vessel.
(f) Any delay in payment of Hire shall entitle the Owners to an
interest at the rate per annum as agreed in Box 22. If Box 22 has not been
filled in the current market rate in the country where the Owners have their
Principal Place of Business shall apply.
11. MORTGAGE.
(a) Owners warrant that they have not effected any mortgage of the
Vessel.
(b) Deleted.
(c) Deleted.
12. INSURANCE AND REPAIRS.
(a) During the Charter period the Vessel shall be kept insured by the
Charterers at their expense against marine, war and Protection, and Indemnity
risks in such form as the Owners shall in writing approve, which approval shall
not be unreasonably withheld. Such marine, war and P. and I. Insurances shall be
arranged by the Charterers to protect the interests of both the Owners and the
Charterers and mortgagees (if any), and the Charterers shall be at liberty to
protect under such insurances the interests of any managers they may appoint.
All insurance policies shall be in the joint names of the Owners and the
Charterers as their interests may appear.
If the Charterers fail to arrange and keep any of the insurances
provided for under the provisions of sub-clause (a) above in the manner
described therein, the Owners shall notify
6
<PAGE>
the Charterers whereupon the Charterers shall rectify the position within seven
running days, failing which Owners shall have the right to withdraw the Vessel
from the service of the Charterers without prejudice to any claim the Owners
may otherwise have against the Charterers.
The Charterers shall, subject to the approval of the Owners and the
Underwriters, effect all insured repairs and shall undertake settlement of all
costs in connection with such repairs as well as insured charges, expenses and
liabilities (reimbursement to be secured by the Charterers from the
Underwriters) to the extent of coverage under the insurances herein provided
for.
The Charterers are also to remain responsible for and to effect repairs
and settlement of costs and expenses and expenses incurred thereby in respect of
all other repairs not covered by the insurances and/or not exceeding any
possible franchise(s) or deductibles provided for in the insurances.
All time used for repairs under the provisions of sub-clause (a) of
this Clause and for repairs of latent defects according to Clause 2 above
including any deviation shall count as time on hire and shall form part of the
Charter period.
(b) If the conditions of the above insurances permit additional
insurance to be placed by the parties, such cover shall be limited to the amount
for each party set out in Box 28 and Box 29, respectively. The Owners or the
Charterers, as the case may be, shall immediately furnish the other party with
particulars of any additional insurance effected, including copies of any cover
notes or policies and the written consent of the insurers of any such required
insurance in any case where the consent of such insurers is necessary.
(c) Should the Vessel become an actual, constructive, compromised or
agreed total loss under the insurances required under sub-clause (a) of Clause
12, all insurance payments for such loss shall be paid to the Mortgagee, if any,
in the manner described in the Deed(s) of Covenant, who shall distribute the
moneys between themselves, the Owners and the Charterers according to their
respective interests. The Charterers undertake to notify the Owners and the
Mortgagee, if any, of any occurrences in consequence of which the Vessel is
likely to become a Total Loss as defined in this Clause.
(d) If the Vessel becomes an actual, constructive, compromised or
agreed total loss under the insurances arranged by the Charterers in accordance
with sub-clause (a) of this Clause, this Charter shall terminate as of the date
of such loss.
(e) The Owners shall upon the request of the Charterers, promptly
execute such documents as may be required to enable the Charterers to abandon
the Vessel to insurers and claim a constructive total loss.
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(f) For the purpose of insurance coverage against marine and war risks
under the provisions of sub-clause (a) of this Clause, the value of the Vessel
is the sum indicated in Box 27.
13. Deleted
14. REDELIVERY. The Charterers shall at the expiration of the Charter period
Redeliver the Vessel at a safe and ice-free port or place as indicated in Box
16. The Charterers shall give the Owners not less than 30 running days'
preliminary and not less than 14 days' definite notice of expected date, range
of ports of redelivery or port or place of redelivery. Any changes thereafter in
Vessel's position shall be notified immediately to the Owners.
Should the vessel be ordered on a voyage by which the Charter period
may be exceeded the Charterers to have the use of the Vessel to enable them to
complete the voyage, provided it could be reasonably calculated that the voyage
would allow redelivery about the time fixed for the termination of the Charter.
The Vessel shall be redelivered to the Owners in the same or as good
structure, state, condition and class as that in which she was delivered, fair
wear and tear not affecting class excepted.
The Vessel upon redelivery shall have her survey cycles up to date and
class certificates valid for at least the number of months agreed in Box 12.
15. NON-LIEN AND INDEMNITY. The Charterers will not suffer, nor permit to be
continued, any lien or encumbrance incurred by them or their agents, which might
have priority over the title and interest of the Owners in the Vessel.
The Charterers further agree to fasten to the Vessel in a conspicuous
place and to keep so fastened during the Charter period a notice reading as
follows:
"This Vessel is the property of (name of Owners). It is under charter
to (name of Charterers) and by the terms of the Charter Party neither the
charterers nor the Master have any right, power or authority to create, incur or
permit to be imposed on the Vessel any lien whatsoever."
The Charterers shall indemnify and hold the Owners harmless against any
lien of whatsoever nature arising upon the Vessel during the Charter period
while she is under the control of the Charterers, and against any claims against
the Owners arising out of or in relation to the operation of the Vessel by the
Charterers. Should the Vessel be arrested by reason of claims or liens arising
out of her operation hereunder by the Charterers, the Charterers shall at their
own expense take all reasonable steps to secure that within a
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reasonable time the Vessel is released and at their own expense put up bail to
secure release of the Vessel.
16. LIEN. The Owners to have a lien upon all cargoes and sub-freights belonging
to the Charterers and any Bill of Lading freight for all claims under this
Charter, and the Charterers to have a lien on the Vessel for all moneys paid in
advance and not earned, and for any breach of Charter by Owners.
17. SALVAGE. All salvage and towage performed by the Vessel shall be for the
Charterers' benefit and the cost of repairing damage occasioned thereby shall be
borne by the Charterers.
18. WRECK REMOVAL. In the event of the Vessel becoming a wreck or obstruction to
navigation the charterers shall indemnify the Owners against any sums whatsoever
which the Owners shall become Liable to pay and shall pay in consequence of the
Vessel becoming a wreck or obstruction to navigation.
19. GENERAL AVERAGE. General Average, if any, shall be adjusted according to the
York-Antwerp Rules 1974 or any subsequent modification thereof current at the
time of the casualty.
The Charter Hire not to contribute to General Average.
20. ASSIGNMENT AND SUB DEMISE. The Charterers shall not assign this Charter nor
subdemise the Vessel except to an affiliate or with the prior consent in writing
of the Owners which shall not be unreasonably withheld and subject to such terms
and conditions as the Owners shall approve.
21. BILLS OF LADING. The Charterers are to procure that all Bills of Lading
issued for carriage of goods under this Charter shall contain a Paramount Clause
incorporating any legislation relating to Carrier's liability for cargo
compulsorily applicable in the trade; if no such legislation exists, the Bills
of Lading shall incorporate the U.S. Carriage of Goods by Sea Act. The Bills of
Lading shall also contain the amended New Jason Clause and the Both-to-Blame
Collision Clause.
22. BANK GUARANTEE. The Charterers undertake to furnish, before delivery of the
Vessel, a first class bank guarantee or bond in the sum and at the place as
indicated in Box 25 as guarantee for full performance of their obligations under
this Charter. (Optional, only to apply if Box 25 filled in).
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23. REQUISITION/ACQUISITION.
(a) In the event of the Requisition for Hire of the Vessel by any
governmental or other competent authority (hereinafter referred to as
"Requisition for Hire"), irrespective of the date during the Charter period when
"Requisition for Hire" may occur and irrespective of the length thereof and
whether or not it be for an indefinite or a limited period of time and
irrespective of whether it may or will remain in force for the remainder of the
Charter period, the Charterers shall have the option to terminate the Charter or
to continue to pay the stipulated hire in the manner provided by this Charter
until the time when the Charter would have terminated pursuant to any of the
provisions hereof, provided that the requisition continues for four
uninterrupted weeks, and always provided however that in the event of
"Requisition for Hire" any "Requisition Hire" or compensation received or
receivable by the Owners shall be payable to the Charterers during the remainder
of the Charter period or the period of the "Requisition for Hire," whichever be
the shorter.
The Hire under this Charter shall be payable to the Owners from the
same time as the Requisition Hire is payable to the Charterers.
(b) In the event of the Owners being deprived of their ownership in the
Vessel by any Compulsory Acquisition of the Vessel or requisition for title by
any governmental or other competent authority (hereinafter referred to as
"Compulsory Acquisition"), then, irrespective of the date during the Charter
Period when "Compulsory Acquisition" may occur, this Charter shall be deemed
terminated as of the date of such Compulsory Acquisition. In such event Charter
Hire to be considered as earned and to be paid up to the date and time of such
"Compulsory Acquisition."
24. WAR.
(a) The Vessel unless the consent of the Owners be first obtained not
to be ordered nor continue to any place or on any voyage, nor be used on any
service which will bring her within a zone which is dangerous as the result of
any actual or threatened act of war, hostilities, warlike operations, acts of
piracy or of hostility or malicious damage against this or any other vessel or
its cargo by any person, body or State whatsoever, revolution, civil war, civil
commotion or the operation of the international law, nor be exposed in any way
to any risks or penalties whatsoever consequent upon the imposition of
Sanctions, nor carry any goods that may in any way expose her to any risks of
seizure, capture, penalties or any other interference of any kind whatsoever by
the belligerent or fighting powers or parties or by any Government or Ruler.
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(b) The Vessel to have liberty to comply with any orders or directions
as to departure, arrival, routes, ports of call, stoppages, destination,
delivery or in any other wise whatsoever given by the Government of the nation
under whose flag the Vessel sails or any other Government or any person (or
body) acting or purporting to act with the authority of such Government or by
any committee or person having under the terms of the war risks insurance on the
Vessel the right to give any such orders or directions.
(c) In the event of outbreak of war (whether there be a declaration of
war or not) between any two or more of the countries as stated in Box 31, both
the Owners and the Charterers shall have the right to cancel this Charter,
whereupon the Charterers shall redeliver the Vessel to the Owners in accordance
with Clause 14, if she has cargo on board after discharge thereof at
destination, or if debarred under this Clause from reaching or entering it at a
near open and safe port as directed by the Owners, or if she has no cargo on
board, at the port at which she then is or if at sea at a near open and safe
port as directed by the Owners. In all cases hire shall continue to be paid in
accordance with Clause 10 except as aforesaid all other provisions of this
charter shall apply until redelivery.
25. COMMISSION. The Charterer to pay the commission indicated in Box 32 to the
Brokers named in Box 32. The commission shall be fully earned and payable on
delivery of the Vessel.
Should the parties agree to cancel the Charter, the Owners to indemnify the
Brokers against any loss of commission but in such case the commission not to
exceed the brokerage on one year's hire.
CHARTERERS: OWNER:
COMMODORE CRUISES LIMITED, CRUISE CHARTER, LTD., a
a Bermudan corporation Bahamian corporation
By: /S/ JEFFREY I. BINDER By: /S/ DOUBLAS BAETZ
------------------------------- ----------------------------
Jeffrey I. Binder, Chairman Douglas Baetz, President
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ADDENDUM TO BARECON '89
BAREBOAT CHARTER DATED MARCH 9, 1998
BETWEEN CRUISE CHARTER, LTD.,
A BAHAMIAN CORPORATION, AS "OWNER,"
AND, COMMODORE CRUISES LIMITED,
A BERMUDAN CORPORATION
AS "CHARTERER"
43. PERIOD/EXTENSIONS.
Subject to the right of termination as is hereinafter set forth and
further subject to the terms and conditions as are provided herein, the Owner
shall let and the Charterer shall hire the Vessel for a period of (56) months
from delivery (the "Initial Period"). Subsequent to the Initial Period, the
Charterer shall have a right of first offer with respect to extending this
Charter for three (3) additional periods of twenty-four (24) months each (the
"Subsequent Periods"). Accordingly, should the Charterer desire to exercise its
right of first offer relative to the subsequent Periods, it shall, within six
(6) months prior to the expiration of the Initial Period and within (6) months
prior to the expiration of any Subsequent Period, notify the Owner of
Charterer's intention to exercise its right of first offer and shall,
simultaneously with such notice, prepare a written proposal for the then pending
Subsequent Period. Should said offer not be accepted by the Owner, then the
parties shall be obligated to negotiate in good faith and if, within thirty (30)
days following the date of the notice, no agreement has been reached, no further
obligations to negotiate shall continue to exist and the Charter will expire
upon termination of the Initial Period or upon termination of any Subsequent
Period, as the case may be.
44. DELIVERY/SURVEY AND CONDITION ON DELIVERY.
(a) Owner shall deliver the Vessel to Charterer at 12 Noon on May 1,
1998 at Freeport, Grand Bahama, as agreed fully found and in class without
comments, in a condition in accordance with the Condition Report described
below, and in compliance with current SOLAS and USPH regulations. Subject to the
terms and conditions hereof, including without limitation the requirement that
the Vessel be delivered in class and without comments and in compliance with
current SOLAS regulations, Charterers will accept delivery of the Vessel on May
1, 1998, at Freeport, Grand Bahamas, and such delivery shall constitute full and
proper delivery to the Charterer under the Charter.
Should the Vessel be delivered in a condition not, in some material
aspect, in accordance with the Condition Report or in compliance with current
SOLAS or USPH regulations, then Charterer will have the option to reject the
Vessel or to make the repairs required for the Vessel to meet the conditions set
forth herein at Owner's expense.
(b) Prior to March 14, 1998, designated surveyors of the Owner and
Charterer shall jointly inspect the Vessel and prepare a written report
regarding the condition of the
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Vessel (the "Condition Report") for the mutual benefit of both parties.
Charterer will accept the Vessel in the state of repair and maintenance
described in the Condition Report. The Condition Report shall be a basis for
evaluating the condition of the Vessel upon its re-delivery and, therefore, at
the expiration of the Charter Period, the Vessel shall be redelivered in the
same condition as is set forth in the Condition Report, reasonable wear
excepted. The cost of the survey shall be for the account of the Owner and the
Charterer to the extent of 50% each. A copy of the Condition Report is appended
hereto and made a part hereof as Exhibit "C."
(c) After the survey of the Vessel and before delivery on May 1, 1998,
Charterer shall execute a written inventory confirmation to which there shall be
attached a description of the personal property comprising the Vessel's
equipment, furniture, furnishings and gear and the Charterer shall be
responsible for the care, maintenance and replacement of such inventory during
the Charter Period and shall be further responsible to return the same inventory
to the Owner upon re-delivery of the vessel at the termination of the Charter.
(d) If the Owner has not delivered the Vessel at Freeport, Grand Bahama
on or before May 1, 1998, by reason of Owner's willful default, the Owner shall
pay to the Charterer the sum of [*] Dollars [*] per day for each day after May
1, 1998, that the Vessel has not been delivered as aforesaid. If the Vessel is
not delivered at Freeport, Grand Bahama on or before May 8, 1998, Charterer, at
its option, may elect to terminate this Bareboat Charter or seek either damages
for its losses and/or specific performance. Owner represents and warrants that
it has the full right and authority to deliver the Vessel as agreed.
45. MODIFICATIONS.
Charterer shall not make any structural alterations or modifications to
the Vessel, to her passenger and public spaces, to her furniture, furnishings,
passenger and other facilities and equipment without first securing approval of
the Owner. Any such alterations will be at the sole expense of the Charterer.
Owner shall not unreasonably refuse such modifications and alterations if:
(i) they do not affect classification requirements or the Vessel's
compliance with SOLAS, class or other regulations; and
(ii) they do not, in the opinion of the Owner, materially and adversely
affect the resale value or the marketability of the Vessel upon expiration of
the Charter period.
46. OWNER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) STATUS OF FIRST SUB-CHARTER. Owner hereby acknowledges and agrees
that, as of the date hereof, (i) Owner has complied with all of the terms and
conditions of the First Sub-Charter, Silvercone Holdings Limited has no rights
to any credit, claim, cause of action, offset or similar charge against Owner,
Charterer or the Vessel; (ii) Owner has fully performed all of its obligations
under the First Sub-Charter to be performed prior to the date
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMMODORE HOLDINGS LIMITED
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hereof, and (iii) there are no assignees, time charters, space charters or
transferees of the First Sub-Charter, or any part thereof, or any person or firm
(other than Owner) occupying or having the right in the future to occupy the
Vessel, or any part thereof.
(b) The Owner represents and warrants and covenants to the Charterer as
follows:
i. That it is and will be the lawful Charterer of said Vessel
and the equipment thereon during the term of this Charter, that it will warrant
and defend the title to the same against the lawful claims and demands of all
persons, and that the Vessel will be free of all liens and encumbrances as of
the date of delivery to Charterer. The casino equipment on board is leased by
Owner as Lessee; Charterers to have the option of continuing the lease or of
installing Charterer's equipment;
ii. That Owner shall indemnify and hold harmless the Charterer
from any damages Charterer may incur during the term of this Charter caused by a
breach of this Charter by Owner or caused by a breach of any agreement between
the Owner and any third party;
iii. That Owner will notify and obtain the consent of the
owner of the Vessel or any other person whose consent to this Charter is
required. Owner further agrees to make all charter payments on the Vessel in a
timely manner and promptly notify Charterer of any "monetary default" by Owner
in the monetary terms of any charter (or related loans) on the Vessel and allow
Charterer an opportunity to cure such "monetary default" and offset payments
from amounts due to Owner. The Owner shall indemnify and hold harmless the
Charterer from any damages Charterer may incur caused by a monetary default by
Owner in the payment of charter hire (or related loans) on the Vessel; and
iv. That Owner will comply with all laws applicable to the
Vessel during the term of this Charter.
In the event of a seizure of the Vessel during the term of this Charter
caused by a breach of this Charter by Owner or caused by a breach of any
agreement between the Owner and a third party, the Charterer shall have the
option of curing said breach and obtaining a release of the Vessel, in which
event any payments made by the Charterer to obtain a release of the Vessel from
seizure shall be credited toward any payments due the Owner pursuant to this
Charter. Nothing herein shall limit Charterer's rights or remedies against Owner
as a result of any seizure of the Vessel.
47. FLAG AND REGISTRY.
The Vessel will become registered under the Bahamian flag with
Freeport, Bahamas as its port of registry, prior to delivery. However, the Owner
shall have the right, subject to Charterers' approval which shall not be
unreasonably withheld, to change the flag and port of registry of the Vessel at
its own discretion, during the Charter Period. Charterer may withhold approval
unless Owner agrees to pay any and all initial and continuing extra expenses and
costs of whatever kind caused by the change of flag.
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48. MAINTENANCE/DRYDOCKING AND CLASS REPAIRS.
The Charterer shall maintain the Vessel in class and its hull and
machinery in such state as is consistent with usual and customary practice in
the operation of cruise passenger ships of the same type and age as the Vessel,
including (but without limiting the generality of the foregoing) compliance with
SOLAS, USPH, class and the requirements of all applicable laws, reasonable wear
excepted.
Except as otherwise provided herein, the Charterer shall, at his sole
expense, repair and maintain the Vessel to a standard at least as good as at
delivery of same. Charterer shall remain solely responsible for all other
repairs and maintenance of the Vessel required by all applicable laws, SOLAS,
USPH and class rules, including without limitation, the hull, engines and
machinery and attendant spaces, the fire fighting and fire prevention systems,
plumbing, electrical wiring, air conditioning equipment and lifeboats which
shall remain the sole responsibility of the Charterer during the Charter Period.
Notwithstanding the provisions of Clause 9(f), nevertheless, the
Charterer shall bring the Vessel to drydock every twelve (12) months or as
necessary to keep the Vessel in Class. Drydock and vessel classification
repairs, whether scheduled or unscheduled, continuing through Charter Period,
shall be for the account of the Charterer.
49. CHARTERER'S ADDITIONAL UNDERTAKING.
During the Charter Period, the Charterer to ensure that the Vessel
visits a non-US port at least once every twenty-eight (28) days or as required
by US regulatory authorities for US immigration law purposes. For the avoidance
of doubt, the Vessel to remain on hire during such visits.
50. MASTER'S RIGHTS TO PUT ASHORE.
The Master always to be entitled to put any person ashore in the
interests of the Vessel whether a member of the crew, or staff retained by the
Charterer or a concessionaire or a passenger or otherwise, but not the Owner's
representatives.
51. CHARTERER BOND.
Prior to commencing passenger service from any U.S. port, the Charterer
shall post and maintain a surety bond in an amount as required by the Federal
Maritime Commission's regulations with a good and sufficient surety and the same
shall be posted with the Federal Maritime Commission to comply with its rules
and regulations with respect to Vessel performance and shall be continually kept
in good standing. Failure to post a surety bond as herein required or to keep
the surety bond in continuous good standing shall be and constitute a material
default under this charter. The Charterer shall name as entities covered under
the bond the Owner, Silvercone and Joint Stock Company Tranship ("Tranship").
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52. NAME.
Charterer shall have the right to change the name of the Vessel with
the approval of the Owner which shall not be unreasonably withheld provided that
charterer shall bear all costs and expenses of changing the name and returning
to the original name.
53. INSURANCE.
The Charterer warrants that on delivery of the Vessel the following
insurance and Financial Responsibility Certificates shall be in effect at the
sole responsibility and for the account of the Charterer:
(a) Hull and Machinery Policy acceptable to Owner;
(b) P&I Passenger Casualty Policy acceptable to Owner;
(c) P&I International Crew Policy acceptable to Owner;
(d) Federal Maritime Commission Certificate re: liability for death or
injury to passengers or other persons; and
(e) United States Coast Guard Vessel Certificate re: financial
responsibility water pollution.
The Charterer shall provide the Owner with copies of all insurance
policies and certificates of financial responsibility, together with
certificates of good standing as to each, and copies of proofs of payment of
premiums or receipted premium payments indicating all premium liability is
maintained current. Such proofs shall be provided annually or more frequently if
more frequent premium payments are involved.
54. INDEMNIFICATION.
Charterer shall indemnify Owner of and from any and all claims which
may be asserted by or on behalf of any passenger or any member of the public or
any member of the crew arising out of injury to persons or property, including
damages for death sustained during any cruise or during any loading or unloading
of the Vessel during the Charter Period except any such claims arising out of
the willful misconduct of Owners or their representatives. Such indemnification
shall include the obligation to defend any claims asserted against the Owner to
pay all attorneys' fees and costs associated therewith through all appeals.
55. OPERATIONAL COSTS AND OPERATIONAL COMPANY.
Charter shall, at its own expense, man, victual, navigate, operate,
supply and fuel the Vessel and maintain such Vessel in a good state of repair,
reasonable wear excepted and in efficient operating condition in accordance with
good commercial maintenance practices, and shall repair her and pay all other
charges and expense of every kind and nature whatsoever
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incident to the use and operation of the Vessel, except as otherwise
specifically provided in this Charter.
During the Charter Period, it being understood by the Charterer that
V-Ships of Monaco shall not be directly or indirectly involved in the Vessel's
operation, management, crewing, and manning. Charterer, or any other entity
Charterer authorizes to operate the Vessel, shall obtain all certifications
necessary under international and United States law required to comply with all
laws, conventions, rules and regulations. Additionally, should Charterer execute
an Operating Agreement with any other entity, a copy thereof shall be provided
to the Owner.
56. USPH.
During the Charter Period, the Charterer shall be responsible for
implementing USPH standards at its own cost and expense. The Charterer shall
also be responsible for securing and keeping in full force and effect, at its
expense, all U.S. Maritime and Coast Guard certificates so as to comply with
U.S. law during the Charter Period. Any repairs, modifications or additions
necessary to secure and keep in effect such U.S. certifications shall be the
sole expense of Charterer.
57. OFF HIRE.
The Charterer shall be responsible for all loss of operating time
during the Charter, except for time lost to Owner's material breach of charter.
58. TRADING LIMITS.
The Vessel shall be employed and carry passengers in lawful trades
worldwide, provided that the Vessel will not be operated as a gaming vessel in
or out of the Ports of Port Everglades or New York/New Jersey. Owner shall not
unreasonably withhold approval of additional ports. However, the Charterer can
carry cargo except for hazardous materials, explosives, weapons and items that
can risk the compliance of rules and regulations in the area of trade. In the
event of serious outbreak of pestilence, war, Acts of God, force majeure, or
other causes beyond the Charterer's control making the use of the Vessel in such
trade commercially impracticable for a period in excess of 4 weeks, the Vessel
may be placed or may be sublet for employment in any other safe trades, upon
first securing the approval of the Owner, or Charterers may terminate this
Charter.
59. USE OF EQUIPMENT.
The Charterer shall have the use of all outfit, equipment, spare
supplies, and appliances now on board the Vessel without extra cost provided the
same or their substantial equivalent shall be returned to the Owner on
redelivery in the same good order and condition as when received, reasonable
wear excepted.
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60. INVENTORY.
The Owner shall prepare a complete inventory list, including deck and
engine and cabins. The Charterer shall verify said inventory list prior to the
day of delivery.
61. VESSEL'S UPGRADES.
Should the Charterer elect to effect upgrades to the Vessel, Charterer
shall be responsible to complete any interior and safety equipment upgrades on
the Vessel in accordance with the requirements for the same improvements
pertaining to the ship's passenger capacity.
Additionally, the Charterer shall indemnify and hold the Owner harmless
of and from any and all liability or responsibility in connection with the same
interior upgrades and should any liens be filed in consequence thereof by any
supplier or materialmen, it shall be the responsibility of the Charterer to pay
such lien or transfer the same to bond within a reasonable time.
The financial requirements set forth in Paragraph 45, "Modifications,"
shall apply to any work undertaken pursuant to this paragraph.
62. SAFETY OF LIFE AT SEA (SOLAS).
All future SOLAS requirements and upgrades are for the account of the
Charterer.
63. CHARTER HIRE.
Commencing as of the date of the day of delivery on or before May 1,
1998 the Charterer shall pay to the Owner the sum of [*]. Such amount will
constitute prepayment of the first twenty-eight (28) days of the Charter.
Subsequent payments to be paid in advance on a [*] basis in the amount of [*]
beginning on May 15, 1998.
64. DELETED.
65. OWNER'S REPRESENTATIVE.
During the pendency of this Bareboat Charter, the Owner, Silvercone or
Tranship, shall have the right to, at all times, have aboard the Vessel an
Owner's representative. The Owner's representative shall be provided a passenger
cabin (upon two week's notice of the desire to use such cabin), to wit, Cabin
No. 2036, and his/her meals at no cost or expense to the Owner. It shall be the
obligation of the Owner's representative to inspect the Vessel and determine
whether or not the Charterer is complying with each, all and every of the terms
and provisions of the Bareboat Charter. Accordingly, should the Owner's
representative determine any material violations or breaches of the Bareboat
Charter, he/she shall provide a notice to the Vessel's Captain, or other
appropriate representative of the Charterer, indicating the nature
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMMODORE HOLDINGS LIMITED
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of the violation or breach, in which event the Charterer shall be under an
obligation to cure the default within the time provided in Paragraph 88 of this
Bareboat Charter, or a default shall occur.
66. HOUSE CABINS.
The Owner and the Charterer agree that during the term of the Bareboat
Charter, the Owner, Silvercone or Tranship, shall have the right to the use,
occupancy and possession of one (1) cabin, to wit Cabin No. 1015. This cabin
shall not be sold or used by Charterer's passengers, but may be used by the
Owner or Owner's designees, provided that Charterers may sell this cabin if it
has not been reserved by Owners more than one month prior to the commencement of
the voyage.
67. LIENS.
(a) Charterer shall have no lien rights against the Vessel for any sums
expended for the improvement of the Vessel as all such expenditures are either
required to be made by the terms of this Charter or expenditures that Charterer
volunteers because of alterations, modifications or upgrades it elects.
(b) In the event a lien is filed with the U.S. Coast Guard or with any
federal or state court for any reason during the Charter Period as a result of
the activity or conduct of the Charterer, then it shall be the obligation of the
Charterer to provide immediate notice to the Owner of the existence of the lien
and to, within ten (10) days next after Charterer has notice of the lien, either
pay the lien or transfer the same to bond, and should Charterer fail to do so,
then Owner shall have the right to:
i. declare a default and cancel the Bareboat Charter imposing the
liquidated damage provisions hereinafter set forth; and
ii. pay the lien or transfer the same to bond in which event all
moneys advanced in consequence thereof shall be and constitute additional
charter hire due and payable with the next charter hire periodic payment.
68. VESSEL LOGS.
During the Charter Period, it shall be the obligation of the Charter to
insure that the Captain and Chief Engineer of the Vessel maintain a daily log in
traditional form.
69. LOSS OR DESTRUCTION OF THE VESSEL.
Should the Vessel be lost or destroyed as a result of casualty or for
any other reason, then this Bareboat Charter shall be canceled, each party shall
be released from further liability hereunder and it shall not be the obligation
of the Owner to replace the Vessel; provided, however, that any claim or
obligation accruing prior to the time of such loss or destruction shall survive
such cancellation. Any cancellation under this Paragraph shall impose the duty
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upon the Owner to return to the Charterer any prepaid charter hire. Owner will
obtain for Charterer's benefit insurance covering Charterer's interest to the
extent of its payments and expenses prior to delivery in the event of the loss
or destruction of the Vessel prior to delivery.
70. EVENTS OF DEFAULT.
Should any one or more of the following events occur, one party may,
without prejudice to the exercise of any right or remedy which may be available
to it, cancel this Charter forthwith or terminate the Charter on such notice
which, in its absolute discretion, it might think fit:
(a) the party shall fail to perform or comply in any material respect
with any one or more of its covenants, duties or obligations thereunder and,
having been given written notice of such failure, fails to rectify such failure
within ten (10) days, unless such party has commenced and is diligently
attempting to correct such failure within said ten (10) day period;
(b) any material statement, representation or warranty of the other
party contained in this Charter or in any document furnished pursuant to this
Charter shall prove to be knowingly or recklessly or negligently untrue or
incorrect in any material respect when made;
(c) i. the Vessel is requisitioned by title or for use by any
government claiming jurisdiction; or
ii. the Vessel becomes an actual or constructive total loss; or
iii. the other party shall (A) admit in writing its inability to
pay its debts as they mature; or (B) make any general assignment for the benefit
of creditors; or (C) be adjudicated bankrupt or insolvent, or be dissolved; or
(D) file a petition in bankruptcy or for the reorganization or for arrangement
pursuant to a Bankruptcy Act or any insolvency law providing for relief of
debtors now or hereafter in effect; or (E) file an answer admitting material
allegations of or consent to or default in answering a petition filed against it
in bankruptcy, reorganization or insolvency process, or take corporate action
for purpose of effecting any of the foregoing; or (F) be the subject of any
order made or resolution passed for its winding up.
71. CHARTERER'S DEFAULT.
In the event Charterer defaults in carrying out its obligations
hereunder after notice and a ten (10) day opportunity to cure (other than
defaults as a result of liens against the Vessel), then, and in such event, the
Charterer shall pay to the Owner the sum of [*] as agreed liquidated damages
less the amount of any prepaid charter hire. Upon the payment of liquidated
damages, both parties shall be released of and from any and all further
obligations under this Bareboat Charter and the same shall be deemed cancelled.
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMMODORE HOLDINGS LIMITED
20
<PAGE>
72. SECURITY FOR OWNER'S PERFORMANCE.
And as for security for the Owner's performance of its obligations
under this Bareboat Charter and the payment of any sums due hereunder by the
Owner to the Charterer, the Owner does hereby grant to the Charterer a lien
against the Vessel, which lien shall be enforceable by the Charterer only in the
event a default occurs and is not cured within the time provided in Paragraph 73
below.
73. OWNER'S DEFAULT.
In the event Owner defaults in carrying out its obligations hereunder
(other than a willful default in connection with the delivery of the Vessel to
Charterer or the right of Charterer to possess such Vessel during the Initial
Period, for which Charterer shall be entitled to seek its actual damages or
specific performance) and such default interferes with the continued possession
and use of the Vessel by the Charterer and after notice and a ten (10) day
opportunity to cure, then, and in such event, then Owner shall pay to the
Charterer the sum of [*] as agreed liquidated damages. Upon the payment of the
liquidated damages, each party shall be released of and from further obligations
under this Bareboat Charter and the same shall be deemed cancelled. Any other
defaults by the Owner not involving or affecting the possession and use of the
Vessel by the Charterer shall be remedied by the Charterer by deducting the
amount to cure from the charter hire in progressive order of charter hire
payments.
74. ATTORNEY'S FEES.
In the event a dispute arises in connection with this Bareboat Charter,
the prevailing party shall be entitled to recover reasonable attorneys' fees
incurred to and through all appeals.
75. ASSIGNMENT.
The Charterer may not assign this Bareboat Charter unless it has first
obtained the written consent of the Owner, which shall not be unreasonably
withheld, except that Charterer shall be permitted to assign the Charter and/or
subcharter the Vessel to an affiliate.
76. DELETED.
77. DELETED.
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMMODORE HOLDINGS LIMITED
21
<PAGE>
78. NOTICES.
Notices to the parties may be hand-delivered, transmitted by regular
mail, transmitted by facsimile transmission or Federal Express to the
representative parties at the following addresses:
CHARTERER: Commodore Cruises Limited
4000 Hollywood Boulevard, Suite 385-S
South Tower
Hollywood, Florida 33021
OWNER: Cruise Charter Ltd.
c/o Bostwick & Bostwick
50 George Street
P.O. Box "N" 1605
Nassau, Bahamas
79. ARBITRATION.
Any dispute arising under this Bareboat Charter is to be referred to
arbitration in the City of Fort Lauderdale, County of Broward, State of Florida,
conducted according to the Rules of the Miami Maritime Arbitration Council,
before three arbitrators one arbitrator to be nominated by the Charterer and the
other by the Owner, and the third by the two so chosen, the award of the
arbitrators to be final and binding upon both parties. Where appropriate, award
of the arbitrators may include any or all of affirmative relief, including
injunctive relief. General Maritime Law of the United States, and, where such
law does not apply, the law of Florida shall govern this Charter.
80. DELETED.
81. BROKERS.
Except as otherwise noted in Box 32, the Owner and the Charterer hereby
represent to each other that neither has contacted any broker in connection with
the instant Charter and should any broker or person make any claim for
commission as a result of the alleged activity of either party (other than as
noted in Box 32) then, the party responsible shall indemnify the other party of
and from any and all responsibility or liability in connection with such claim,
which shall include the duty to defend such claim. The fee of the broker noted
in Box 32 shall be paid by the Charterer.
82. MISCELLANEOUS.
Clause headings are for ease of reference only and shall not affect
construction.
22
<PAGE>
83. DELETED.
84. DELETED.
85. DELETED.
86. MATERIAL BREACH.
A material breach on the part of the Charterer shall mean a failure on
its part to observe and comply with any of the following:
(a) Payment of the charter hire, as required herein;
(b) Failure to post and maintain in good standing Federal Maritime
commission bond, as required herein;
(c) Failure to pay or to bond liens against the Vessel where required
herein; and
(d) Failure to carry out maintenance obligations to the extent that the
same materially affect the seaworthiness of the Vessel.
In addition to the above enumerated material breaches, a material
breach shall also include any failure by Charterer to carry out a covenant or
obligation under this Charter involving an expense to cure of $250,000.00 or
more, or a loss to the Owner in consequence thereof in an amount of $250,000.00
or more. Additionally, a material default of the Owner shall be the violation of
any obligation or covenant of this Charter which results in depriving the
Charterer of the use and possession of the Vessel. A material breach shall also
be and constitute any violation of the Charter by the Owner involving costs or
damages to the Charterer in an amount of $250,000.00 or more.
87. DELETED.
88. NOTICE OF DEFAULT.
Anything to the contrary in any part of this Charter notwithstanding,
whether in Parts I, II or this Addendum, Owners shall not repossess the Vessel
or deem Charterers in default unless Charterers first notice of, and a ten (10)
day opportunity to cure, any condition or event which Owners believe in good
faith to constitute a default, and of Owners' intention to declare Charterers to
be in default therefor.
89. CONFLICT.
In the event of any conflict between Part I and Part II of this Charter
on the one hand and the "Addendum" set forth in Paragraphs 43 through 90 on the
other hand, then Paragraphs 43 through 90 shall control.
23
<PAGE>
90. COUNTERPARTS.
This Charter may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
Signed, sealed and delivered
In the presence of: CHARTERER:
COMMODORE CRUISES LIMITED
/S/ MIRIAM CAMERA By:/S/ JEFFREY I. BINDER
- ------------------------------ -------------------------------
Witness Jeffrey I. Binder, Chairman
OWNER:
CRUISE CHARTER, LTD.
By:/S/ DOUGLAS BAETZ
- ------------------------------ -------------------------------
Witness Douglas Baetz, President
24
<PAGE>
SECOND ADDENDUM TO BARECON '89 BAREBOAT CHARTER
THIS SECOND ADDENDUM (the "Second Addendum") is made and entered into
this 16th day of March, 1998 between Cruise Charter, Ltd., a Bahamian
corporation, as Owner (the "Owner"), and Commodore Cruises Limited, a Bermudian
corporation, as Charterer (the "Charterer").
WHEREAS, Owner and Charterer entered into the Barecon '89 Bareboat
Charter and the Addendum thereto on March 9, 1998 (the "Charter"), pursuant to
which Owner agreed to charter the M/V Island Holiday to Charterer; and
WHEREAS, Owner and Charterer wish to amend the Charter in certain
respects.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. BOX 10. Box 10, "Class," of the Charter is hereby amended
by deleting the language contained therein and substituting the following
language in its place:
KM(*)A3(2)(being changed to a classification society
acceptable to the Bahamian registry (the "New Class"))
2. BOX 13. Box 13, "Port or Place of Delivery," of the Charter
is hereby amended by deleting the language contained therein and substituting
the following language in its place:
New Orleans, Louisiana
3. BOX 14. Box 14, "Time for Delivery," of the Charter is
hereby amended by deleting the language contained therein and substituting the
following language in its place:
May 14, 1998, or earlier per Clause 44
4. BOX 15. Box 15, "Canceling Date," is hereby amended by
deleting the language contained therein and substituting the following language
in its place:
May 20, 1998
5. BOX 16. Box 16, "Port or Place of Redelivery," is hereby
amended by deleting the language contained therein and substituting the
following language in its place:
Freeport, Grand Bahama
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<PAGE>
6. BOX 19. Box 19, "Trading Limits," of the Charter is hereby
amended by deleting the language contained therein and substituting the
following language in its place:
Lawful trades in North, Central and South America, the
Caribbean, Europe (including Scandinavia and the Mediterranean
Sea west of the Suez Canal), Australia, Japan, China
(including Hong Kong) and Singapore. Vessel is not to operate
day cruises from the Port of New York/New Jersey, Port
Everglades, or the Port of Miami.
7. BOX 20. Box 20, "Charter Period," of the Charter is hereby
amended by deleting the language contained therein and substituting the
following language in its place:
From delivery until January 1, 2003 with rights of first offer
as per Clause 43 of Addendum
8. PERIOD/EXTENSIONS. Clause 43 of the Addendum to the Charter
is hereby amended by deleting the first sentence thereof and replacing such
sentence with the following language:
Subject to the right of termination as is herein after set
forth and further subject to the terms and conditions as are
provided herein, the Owner shall let and the Charterer shall
hire the Vessel from delivery until 12 noon on January 1, 2003
(the "Initial Period").
9. DELIVERY/SURVEY AND CONDITION ON DELIVERY. Clause 44 of the
Addendum to the Charter is hereby amended by deleting subclauses 44(a), 44(c)
and 44(d) contained therein and substituting the following subclauses in their
respective places:
(a) Owner shall deliver the Vessel to Charterer at 12 noon on
May 14, 1998 or such earlier date not before May 1, 1998 on
which the Vessel can be delivered in compliance with this
Clause 44 (the "Delivery Date") at New Orleans, Louisiana, as
agreed fully found and in compliance both with the
requirements for registry under the Bahamian flag (and
actually registered under the Bahamian flag) and the
requirements of the New Class, without comments, in a
condition in accordance with the Condition Report described
below, and in compliance with current SOLAS and USPH
regulations. Subject to the terms and conditions hereof,
including without limitation the requirement that the Vessel
be delivered registered under and in compliance with the
requirements of the Bahamian flag and the New Class, without
comments, and in compliance with current SOLAS regulations,
Charterers will accept delivery of the Vessel on the Delivery
Date, at New Orleans, Louisiana, and such delivery shall
constitute full and proper delivery to the Charterer under the
Charter.
Should the Vessel be delivered not registered under the
Bahamian flag, or in a condition not, in some material aspect,
in accordance with the requirements of
-2-
<PAGE>
the Bahamian flag, the New Class (without comments), the
Condition Report or current SOLAS or USPH regulations, then
Charterer will have the option to reject the Vessel or to make
the repairs required for the Vessel to meet the conditions set
forth herein at the Owner's expense. Should the Vessel be
delivered in a condition not in accordance with the
requirements of the Bahamian flag, the New Class (without
comments), the Condition Report or current SOLAS or USPH
regulations, where such deviation from such requirements is
not material, Charterer shall accept delivery of the Vessel,
and shall make such repairs required for the Vessel to meet
the conditions set forth herein at the Owner's expense.
(c) After the survey of the Vessel and before the Delivery
Date, Charterer shall execute a written inventory confirmation
to which there shall be attached a description of the personal
property comprising the Vessel's equipment, furniture,
furnishings and gear and the Charterer shall be responsible
for the care, maintenance and replacement of such inventory
during the Charter Period and shall be further responsible to
return the same inventory to the Owner upon re-delivery of the
Vessel at the termination of the Charter.
(d) If the Owner has not delivered the Vessel at New Orleans,
Louisiana on or before May 14, 1998, by reason of Owner's
wilful default, the Owner shall pay to the Charterer the sum
of [*] Dollars [*] per day (the "Late Charges") for each day
after May 14, 1998, that the Vessel has not been delivered as
aforesaid. If the Vessel is not delivered at New Orleans,
Louisiana on or before May 20, 1998, Charterer, at its option,
may elect to terminate this Bareboat Charter (at which time
Late Charges will cease to accrue) or seek either damages for
its losses and/or specific performance. Owner represents and
warrants that it has the full right and authority to deliver
the Vessel as agreed.
10. MAINTENANCE/DRYDOCKING AND CLASS REPAIRS. Clause 48 of the
Addendum to the Charter is hereby amended by adding the following language to
the end of Clause 48:
Notwithstanding the foregoing, on or about April 23, 1998,
Owner shall place the Vessel in drydock for the purpose of
completing work necessary to cause the Vessel to comply with
the requirements of the Bahamian flag and the New Class (the
"Flag and Class Repairs"). Such Flag and Class Repairs shall
be performed at Owner's expense except that, upon delivery of
the Vessel, Charterer shall pay Owner [*] for drydock
expenses. On or after the date Owner delivers the Vessel to
drydock for the Flag and Class Repairs, Charterer may cause
additional work to be performed on the Vessel at its sole
expense. Charterer shall be entitled to have a representative
present during such drydock. Owner shall be responsible for
all expenses of the Vessel (including but not limited to
insurance and crew wages) until the Vessel is delivered to
Charterer.
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMMODORE HOLDINGS LIMITED
-3-
<PAGE>
11. CHARTERER BOND. Clause 51 of the Addendum to the Charter
is hereby amended by deleting the last sentence thereof and replacing such
sentence with the following language:
The Charterer shall name as entities covered under the bond
the Owner, Silvercone and Norsong Shipping, Ltd., a Liberian
corporation ("Norsong").
12. TRADING LIMITS. Clause 58 of the Addendum to the Charter
is hereby amended by deleting the first sentence thereof and replacing such
sentence with the following language:
The Vessel shall be employed and carry passengers in lawful
trades in North, Central and South America, the Caribbean,
Europe (including Scandinavia and the Mediterranean Sea west
of the Suez Canal), Australia, Japan, China (including Hong
Kong) and Singapore, provided that the Vessel will not be
operated as a day cruise vessel in or out of the ports of
Miami, Port Everglades or the Port of New York/New Jersey.
Such prohibition shall not prevent the Vessel from being
operated on multi-day cruises in or out of such designated
ports.
13. CHARTER HIRE. Clause 63 of the Addendum to the Charter is
hereby amended by deleting the language contained therein and substituting the
following language in its place:
Commencing as of May 1, 1998, the Charterer shall pay to the
Owner the sum of [*]. Such amount will constitute prepayment
of drydock hire and prepayment of Charter hire through May 29,
1998. Subsequent payments to be paid in advance on a [*] basis
in the amount of [*] beginning on May 15, 1998.
Upon confirmation by Charterer that the Flag and Class Repairs
have been completed and release of the Vessel from the drydock
shipyard, the Charterer shall also pay the shipyard the sum of
[*] toward the Flag and Class Repairs. Notwithstanding the
foregoing, the Charterer and the Owner will use their
reasonable best efforts to obtain the best payment terms from
the drydock shipyard, and if the shipyard agrees to accept
some or all of the payment for the Flag and Class Repairs
after the release of the Vessel from drydock, then Charterer
shall pay the shipyard its pro rata portion of each payment
due the shipyard, as and when required by the shipyard, based
on the ratio of [*] divided by the total amount due the
shipyard for the Flag and Class Repairs.
14. OWNER'S REPRESENTATIVE. Clause 65 of the Addendum to the
Charter is hereby amended by deleting the first sentence thereof and replacing
such sentence with the following language:
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMMODORE HOLDINGS LIMITED
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<PAGE>
During the pendency of this Bareboat Charter, Silvercone or
Norsong shall have the right to, at all times, have aboard the
Vessel an Owner's representative.
15. HOUSE CABINS. Clause 66 of the Addendum to the Charter is
hereby amended by deleting the first sentence thereof and replacing such
sentence with the following language:
The Owner and the Charterer agree that during the term of the
Bareboat Charter, Silvercone shall have the right to the use,
occupancy and possession of one (1) cabin, to wit Cabin No.
1015.
16. ASSIGNMENT. Clause 75 of the Addendum to the Charter is
hereby amended by deleting the language contained therein and substituting the
following language in its place:
The Charterer may not assign this Bareboat Charter unless it
has first obtained the written consent of the Owner, which
shall not be unreasonably withheld, except that Charterer
shall be permitted to assign the Charter and/or subcharter the
Vessel to an affiliate, in which case Charterer shall remain
responsible for the performance of this Bareboat Charter.
17. RATIFICATION. Except as specifically amended hereby, all
terms of the Charter shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Second Addendum on
the date first above written.
CHARTERER:
COMMODORE CRUISES LIMITED,
a Bermudian corporation
By: /S/ FREDERICK A. MAYER
-----------------------------------
Frederick A. Mayer, President
OWNER:
CRUISE CHARTER, LTD.,
a Bahamian corporation
By: /S/ DOUGLAS BAETZ
-----------------------------------
Douglas Baetz, President
-5-
<PAGE>
THIRD AMENDMENT TO BARECON '89 BAREBOAT CHARTER
THIS THIRD AMENDMENT (the "Third Amendment") is made and entered into
this 27th day of May, 1998, between Cruise Charter, Ltd., a Bahamian
corporation, as Owner (the "Owner"), and Commodore Cruises Limited, a Bermudian
corporation, as Charterer (the "Charterer").
WITNESSETH:
WHEREAS, Owner and Charterer entered into the Barecon '89 Bareboat
Charter and the Addendum thereto on March 9, 1998, which was further amended on
March 16, 1998 (the "Charter"), pursuant to which Owner agreed to charter the
"M/V Island Holiday" (the "Vessel") to Charterer, and
WHEREAS, Owner and Charterer wish to amend the Charter in certain
respects.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. BOX 13: Box 13, "Port of Place of Delivery" of the Charter is hereby
amended by deleting the language contained therein and substituting the
following language in its place:
Mobile, Alabama
2. BOX 15: Box 15, "Canceling Date" is hereby amended by deleting the
language contained therein and substituting the following date in its place:
May 27, 1998
3. ASSIGNMENT: Clause 75 of the Addendum to the Charter is hereby
amended by adding the following language to the end of such clause:
Owner acknowledges that the Charterer has assigned this
Charter to Capri Cruises, a Florida general partnership, which
is affiliated with Charterer. Charterer to remain responsible
for Charter.
4. DELIVERY/SURVEY AND CONDITION FOR DELIVERY: Pursuant to the Charter,
Owner has an obligation to deliver the Vessel to Charterer in accordance with
the requirements of the Bahamian flag, the New Class, the Condition Report and
current SOLAS and USPH regulations. The parties agree that in order to meet such
requirements, certain tanks aboard the Vessel must be replaced at a cost which
is not expected to exceed $_________________ up to $300,000.00 of which will be
credited against Charter Hire due under the First Sub-Bareboat Charter and the
Prime Charter, all in accordance with the provisions of the Third Addendum to
the Bareboat
<PAGE>
Charter dated September 26, 1997, a copy of which is appended hereto and made a
part hereof, and Norsong Shipping, Ltd. and Silvercone Holdings Limited have
endorsed this Third Amendment to signify their acceptance of such Charter Hire
adjustment. Although the parties acknowledge that the cost of such repairs is
the obligation of the Owner, the Charterer has agreed to advance [*] of such
amount, up to [*] toward the cost of such repairs. The parties agree that
Charterer shall recoup such amount by offsetting equal portions of the total
amount advanced from the [*] installments of Charter Hire beginning on May 29,
1998.
John Kafouras is hereby authorized on behalf of Owner and Rodolfo
Spinelli or Alan Pritzker is hereby authorized on behalf of Charterer to execute
the Protocol of Delivery and Acceptance and associated inventory in connection
with the delivery of the Vessel.
5. RATIFICATION. Except as specifically amended hereby, all terms of
the Charter shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Third Amendment on
the date first above-written.
Signed, sealed and delivered
in the presence of: CHARTERER:
COMMODORE CRUISES LIMITED, a Bermudian
corporation
By: /S/ FREDERICK A. MAYER
-----------------------------------
Frederick A. Mayer, President
OWNER:
CRUISE CHARTER, LTD., a Bahamian
corporation
By: /S/ DOUGLAS BAETZ
-----------------------------------
Douglas Baetz, President
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMMODORE HOLDINGS LIMITED
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<PAGE>
ASSIGNEE:
CAPRI CRUISES, a Florida general partnership
By: Commodore Cruises Limited, a general
partner
By: /S/ FREDERICK A. MAYER
-----------------------------------------------
Frederick A. Mayer, President
ACCEPTED AND AGREED:
NORSONG SHIPPING. LTD., a Liberian
corporation
By: /S/ IGOR CHORNYY
-----------------------------------------------
Igor Chornyy
Authorized Representative
SILVERCONE HOLDINGS LIMITED, a Cypriot
corporation
By: /S/ IGOR CHORNYY
-----------------------------------------------
Igor Chornyy
Authorized Representative
-3-
EXHIBIT 10.3
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED PURSUANT TO AN APPLICATION FOR AN
ORDER FOR CONFIDENTIAL TREATMENT REQUESTED BY COMMODORE HOLDINGS LIMITED
PROMISSORY NOTE
DATED: APRIL 22, 1998 $1,500,000
The undersigned, Commodore Holdings Limited, a Bermuda corporation (the
"Maker"), promises to pay to [*] ("Payee") the principal sum of One Million Five
Hundred Thousand Dollars ($1,500,000) (the "Principal Sum"). The entire
Principal Sum shall be due and payable in one payment on August 20, 1998.
Maker acknowledges receipt of $1,460,000 which represents the Principal
Sum as reduced by prepaid interest in the amount of $40,000, which was
calculated based on interest at the rate of eight percent (8%) per annum (the
"Interest Rate"). If the Principal Sum is not paid in accordance with this Note,
the Principal Sum shall bear interest beginning on the date of default and
continuing thereafter until paid in full, at the annual rate of ten percent
(10%) per annum ("Default Rate"). The acceptance of such payment at the Default
Rate shall not constitute a waiver of such default.
In no event shall the Interest Rate or Default Rate charged by Maker
exceed the highest rate permitted under any law which a court of competent
jurisdiction, in a final judgment, deems applicable hereto. In such event, Payee
shall promptly refund to Maker such excess amount and the provisions hereof
shall be deemed amended to provide for such permissible rate. Any such payment
of interest which is not made as a result of such limitations shall be made by
the Maker at the earlier interest payment date on which the receipt thereof
would be permissible under the applicable law limiting the rate of interest
chargeable by Payee.
All payments of interest, principal, or both, are payable at such place
as the Payee may designate in writing, in lawful money of the United States of
America, which shall be legal tender in payment for all debts, public and
private, at the time of payment. All payments shall be applied first to payment
of any of Payee's actual costs, fees or other charges incurred in connection
with collection of the indebtedness evidenced hereby, next to payment of accrued
interest and then to reduction of the Principal Sum.
The privilege is reserved and given to Maker to prepay without penalty
the Principal Sum, in whole or in part, at any time without notice.
Any of the following shall constitute an event of default under this
Note:
(a) Default in the payment within ten (10) days of when due, whether by
acceleration of maturity or otherwise, of the Principal Sum; or
(b) Any representation or warranty made by Maker herein or in the
Warrant of Maker delivered to Payee on the date hereof (the "Warrant") shall be
untrue or misleading in any material respect on the date as of which the facts
set forth are stated or certified; or
(c) Maker shall become insolvent or fail generally to pay its debts as
they mature or shall apply for, consent to, or acquiesce in the appointment of a
trustee, custodian or receiver for its
* MARKED TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL
TREATMENT BY COMODORE HOLDINGS LIMITED
1
<PAGE>
property; or, in the absence of such application, consent or acquiescence, a
trustee, custodian or receiver shall be appointed for the Maker; or Maker shall
make an assignment for the benefit of creditors; or
(d) Maker is voluntarily or involuntarily dissolved or initiates any
bankruptcy, reorganization, debt arrangement or other proceedings under any
bankruptcy or insolvency law; or any dissolution or liquidation proceeding shall
be instituted by or against Maker and shall be consented to or acquiesced in by
it, shall not have been dismissed within sixty days or a final order for relief
shall have been entered against it; or
(e) Any execution or attachment shall be issued whereby any substantial
part of the property of Maker shall be taken or attempted to be taken and the
same shall not have been vacated or stayed within sixty days after the issuance
thereof; or
(f) Default by maker in the performance of any other agreement,
covenant, condition, provision or term contained in this Note or the Warrant,
which shall remain unremedied for ten (10) days or more; or
(g) Maker is enjoined, restrained, or in any way prevented by the final
order of any court or any administrative or regulatory agency from conducting
all or a material part of its business and such order shall not be vacated or
stayed within 20 days after issuance.
Upon the occurrence of an Event of Default, Payee may, at its option, exercise
any or all rights, powers or remedies afforded, including the right to declare
the unpaid balance of the Principal Sum on this Note at once mature and payable.
If this Note is placed in the hands of an attorney for collection, by
suit or otherwise, or to protect any security for its payment, the undersigned
will pay all costs of collection and litigation, together with reasonable
attorneys' fees incurred at both trial and appellate levels. The laws of the
State of New Jersey shall govern. Each party hereto consents to personal
jurisdiction in the state and federal courts located in New Jersey and
voluntarily submits to the jurisdiction of the state and federal courts located
in New Jersey, in any action or proceeding with respect to this Agreement. Maker
agrees that it may be served at its address set forth below its signature on
this Note. Maker agrees not to assert any defense to any action or proceeding
initiated by Payee based upon improper venue or an inconvenient forum.
Payor expressly waives protest, demand, presentment and notice of
dishonor, and agrees that this Note may be extended, in whole or in part,
without limit as to the number of such extensions or the number of periods
thereof and without affecting the liability thereon.
Each of the provisions of this Note is and shall be deemed to be
severable; and in the event that any provision hereof be deemed to be invalid
for any reason of the operation of any law or by reason of the interpretation
placed thereon by any court, said provision shall be deemed to be stricken
herefrom, and this Note shall be construed as not containing such provision. The
validity or lack thereof of such provision shall not effect the validity of any
other provision hereof, and any and all other provisions which are otherwise
lawful and valid shall remain in full force and effect.
2
<PAGE>
Failure of Payee to exercise any option hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default or in the event of continuance of any existing default after demand for
strict performance hereof.
This Note may not be assigned or transferred without the written
consent of the other party hereto.
The word undersigned as used herein shall be considered to mean and
include all makers and endorsers hereof. Words used in the plural herein shall
include the singular, as the context may require.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year above first written.
COMMODORE HOLDINGS LIMITED, A BERMUDA CORPORATION
By: /S/ FREDERICK A. MAYER
-----------------------------------------------
Name: Frederick A. Mayer
Title: Chief Executive Officer
Address: 4000 Hollywood Boulevard
Suite 385-S, South Tower
Hollywood, FL 33021
3
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<PERIOD-END> JUN-30-1998
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0
0
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