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 the Quarterly Period Ended June 30, 1999
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 [ ]
7,647,618 Shares of Common Stock outstanding at August 13, 1999
<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 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Part II Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. A - Exhibits 14
B - Reports on Form 8-K 14
<PAGE>
Part I: Financial Information
Item 1: Financial Statements
<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, SEPTEMBER 30,
1999 1998
----------- -----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $10,393,000 $ 3,172,000
Restricted cash 3,228,000 2,326,000
Trade and other receivables, net 1,156,000 482,000
Due from affiliates 2,864,000 1,061,000
Inventories 1,805,000 1,466,000
Prepaid expenses 4,513,000 2,865,000
Other current assets 59,000 77,000
----------- -----------
Total current assets 24,018,000 11,449,000
Property and equipment, net 42,594,000 38,296,000
Investment in Joint Venture 1,408,000 1,481,000
Long-term receivable - affiliate 5,164,000 2,550,000
Investments - restricted -- 4,629,000
Other assets 1,648,000 732,000
----------- -----------
$74,832,000 $59,137,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 3,674,000 $ 4,393,000
Note payable -- 1,300,000
Accounts payable 4,313,000 6,457,000
Accrued liabilities 2,141,000 710,000
Due to affiliates 2,355,000 1,201,000
Customer deposits 10,119,000 7,741,000
Accrued interest 99,000 73,000
Capital lease obligations 62,000 --
----------- -----------
Total current liabilities 22,763,000 21,875,000
Long-term debt 19,105,000 12,445,000
Minority interest in subsidiary 1,065,000 228,000
Stockholders' equity
Preferred stock - authorized 10,000,000 shares
of $.01 par value; issued and outstanding 400,000
shares in 1999 and 0 in 1998 4,000 --
Common stock - authorized 100,000,000 shares
of $.01 par value; issued and outstanding
7,647,618 shares in 1999 and 7,264,821 in 1998 76,000 72,000
Paid-in capital 20,768,000 16,348,000
Retained earnings 11,051,000 8,169,000
----------- -----------
Total stockholders' equity 31,899,000 24,589,000
----------- -----------
$74,832,000 $59,137,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 2
<PAGE>
<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 16,755,000 $ 18,428,000 $ 41,021,000 $ 43,813,000
Expenses
Operating 10,558,000 11,553,000 27,044,000 30,604,000
Marketing, selling and administrative 2,733,000 3,097,000 6,960,000 7,088,000
Depreciation 665,000 511,000 1,755,000 1,567,000
------------ ------------ ------------ ------------
13,956,000 15,161,000 35,759,000 39,259,000
------------ ------------ ------------ ------------
Operating income 2,799,000 3,267,000 5,262,000 4,554,000
Other income (expense)
Interest income 156,000 114,000 442,000 374,000
Interest expense (536,000) (438,000) (1,333,000) (1,324,000)
Minority interest share of earnings
of consolidated joint venture (506,000) (250,000) (838,000) (95,000)
Equity in net earnings (loss) of
unconsolidated joint venture 252,000 (255,000) (323,000) (255,000)
------------ ------------ ------------ ------------
(634,000) (829,000) (2,052,000) (1,300,000)
------------ ------------ ------------ ------------
Net earnings before preferred
stock dividend 2,165,000 2,438,000 3,210,000 3,254,000
Preferred stock dividend 100,000 28,000 167,000 170,000
------------ ------------ ------------ ------------
Net earnings available for
common stockholders $ 2,065,000 $ 2,410,000 $ 3,043,000 $ 3,084,000
============ ============ ============ ============
Earnings per share available for common
stockholders - Basic $ 0.28 $ 0.36 $ 0.41 $ 0.52
============ ============ ============ ============
Weighted average number of common stock
outstanding - Basic 7,504,000 6,718,000 7,433,000 5,970,000
============ ============ ============ ============
Earnings per share available for common
stockholders - Diluted $ 0.22 $ 0.29 $ 0.35 $ 0.42
============ ============ ============ ============
Weighted average number of common stock
outstanding - Diluted 9,724,000 8,367,000 9,178,000 7,956,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
Page 3
<PAGE>
<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
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, 1998 -- $ -- 7,264,821 $72,000 $16,348,000 $ 8,169,000 $24,589,000
Fair value of options to
nonemployees -- -- -- -- 230,000 -- 230,000
Issuance of common stock
upon exercise of stock
options and warrants -- -- 382,797 4,000 524,000 -- 528,000
Issuance of preferred stock, net 400,000 4,000 3,666,000 -- 3,670,000
Preferred stock dividend -- -- -- -- -- (328,000) (328,000)
Net earnings -- -- -- -- -- 3,210,000 3,210,000
------- ------ --------- ------- ----------- ----------- -----------
Balances at June 30, 1999 400,000 $4,000 7,647,618 $76,000 $20,768,000 $11,051,000 $31,899,000
======= ====== ========= ======= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
<PAGE>
<TABLE>
<CAPTION>
COMMODORE HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 3,210,000 $ 3,254,000
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation 1,755,000 1,567,000
Amortization of deferred drydock 1,454,000 1,364,000
Fair value of options to nonemployees 88,000 211,000
Undistributed equity in loss of joint venture 323,000 256,000
(Increase) decrease in operating assets
Restricted cash (902,000) (3,089,000)
Trade and other receivables (674,000) 139,000
Due from affiliate (1,803,000) 471,000
Inventory (339,000) 937,000
Prepaid expenses and other current assets (3,084,000) (1,473,000)
Other assets (378,000) 4,000
Increase (decrease) in operating liabilities
Accounts payable (2,144,000) 124,000
Accrued liabilities 1,431,000 680,000
Due to affiliate 1,154,000 --
Customer and other deposits 2,378,000 4,619,000
Accrued interest 26,000 --
------------ ------------
Net cash provided by operating activities 2,495,000 9,064,000
Cash flows from investing activities
Capital expenditures (5,770,000) (3,582,000)
Long-term receivable - affiliate (2,614,000) (72,000)
Investments - restricted 4,629,000 --
Investment in unconsolidated joint venture (251,000) (2,251,000)
Increase in minority interest in subsidiary 837,000 194,000
------------ ------------
Net cash used in investing activities (3,169,000) (5,711,000)
Cash flows from financing activities
Principal payments of long-term debt (12,146,000) (3,294,000)
Proceeds from long-term debt 16,600,000 --
Proceeds from sale of preferred stock, net 3,670,000 --
Proceeds from exercise of stock options and warrants 528,000 600,000
Proceeds from sale of convertible subordinated debentures -- 1,484,000
Payment of capital lease obligations (35,000) --
Payment of loan costs (394,000) --
Preferred stock dividends (328,000) (228,000)
------------ ------------
Net cash provided by (used in) financing activities 7,895,000 (1,438,000)
------------ ------------
Net increase in cash and cash equivalents 7,221,000 1,915,000
Cash and cash equivalents at beginning of period 3,172,000 3,531,000
------------ ------------
Cash and cash equivalents at end of period $ 10,393,000 $ 5,446,000
============ ============
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 1,071,000 $ 1,260,000
============ ============
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, 1999 and 1998,
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. Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation. These financial
statements should be read in conjunction with the financial statements for the
year ended September 30, 1998, 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
1999, the Company issued warrants to purchase 131,633 shares of common stock to
nonemployees providing a variety of consulting services to the Company. Under
the application of FASB #123 the Company has valued these warrants at
approximately $230,000; $88,000 of which was recorded as part of marketing,
selling and administrative expense in the first nine months of fiscal 1999.
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>
1999 $2,065,000 7,504,000 $0.28 $2,165,000 9,724,000 $0.22
1998 $2,410,000 6,718,000 $0.36 $2,457,000 8,367,000 $0.29
</TABLE>
<TABLE>
<CAPTION>
NINE 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>
1999 $3,043,000 7,433,000 $0.41 $3,210,000 9,178,000 $0.35
1998 $3,084,000 5,970,000 $0.52 $3,317,000 7,956,000 $0.42
</TABLE>
Included in diluted shares are common stock equivalents relating to options,
warrants, convertible debt and preferred stock of 1,860,000 and 1,649,000 for
the three months ended June 30, 1999 and 1998, respectively, and 1,521,000 and
1,986,000 for the nine months ended June 30, 1999
Page 6
<PAGE>
and 1998, respectively. Net earnings were adjusted to calculate the diluted
earnings per share by adding back $100,000 of preferred stock dividends for the
three months ending June 30, 1999 and $47,000 of preferred stock dividends and
interest expense, relating to the preferred stock and convertible debentures,
for the three months ending June 30, 1998. Net earnings were adjusted to
calculate the diluted earnings per share by adding back $167,000 of preferred
stock dividend, and $186,000 of preferred stock dividend and interest expense,
relating to the preferred stock and convertible debentures, for the nine months
ending June 30, 1999 and 1998, respectively.
4. JOINT VENTURES. The Company's 50% investment in Capri Cruises resulted in net
earnings of $252,000 for the three months ended June 30, 1999 and a net loss of
$323,000 for the nine months ended June 30, 1999 as Capri Cruises continued to
define its market.
A condensed summary of the assets and liabilities and results of operations of
the Capri Cruises joint venture follows:
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, JUNE 30,
1999 1998
---------- ----------
<S> <C> <C>
Current assets $3,588,000 $3,109,000
Property and equipment, net 4,009,000 2,882,000
Other assets 96,000 979,000
---------- ----------
Total assets $7,693,000 $6,970,000
========== ==========
Current liabilities $4,341,000 $2,735,000
Other liabilities 536,000 246,000
Partners' capital accounts 2,816,000 3,989,000
---------- ----------
Total liabilities and
partners' capital $7,693,000 $6,970,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
FROM APRIL 16,
1998 (DATE OF
QUARTER QUARTER 9 MONTHS INCEPTION)
ENDING ENDING ENDING THROUGH
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $6,335,000 $ 989,000 $16,478,000 $ 989,000
Expenses 5,831,000 1,500,000 17,125,000 1,500,000
---------- ---------- ----------- ----------
Net earnings (loss) $ 504,000 ($ 511,000) ($ 647,000) ($ 511,000)
========== ========== =========== ==========
</TABLE>
On April 23, 1999, Albuferra Investments, Inc., a wholly owned subsidiary of the
Company ("Albuferra"), purchased the "Enchanted Sun" (the "Vessel") from Triple
Shipping Inc. for a purchase price of $5,000,000. The purchase price was
partially funded through a partial drawdown on a $14,250,000 credit facility
from Nordbanken AB (publ). The Company plans to make significant renovations to
the Vessel's interior and exterior with the balance of the proceeds from such
loan. Upon completion of these renovations, Albuferra will charter the vessel to
Coronado Seas, LLC ("Coronado"), an indirectly partially owned subsidiary of the
Company, for use in its gaming cruises operating from San Diego and Los Angeles,
California to Rosarito, Baja California, Mexico.
Page 7
<PAGE>
On June 24, 1999, the Company entered into a binding letter of intent with the
Viejas Band of Kumeyaay Indians ("Viejas") with respect to an investment in
Coronado, the joint venture entity that will operate day cruises between
Southern California, and Rosarito, Baja California, Mexico, and Albuferra.
Pursuant to the letter of intent, Viejas will purchase a one-third interest in
Coronado and a one-half interest in Albuferra. The Company and Viejas are
finalizing the definitive agreements that reflect Viejas' investment.
Two of the Company's subsidiaries, Sea-Comm and Capri Cruises, are operated as
joint ventures with unaffiliated third parties and the Company is finalizing the
definitive agreements to operate Coronado as a joint venture as well. In
accordance with the joint venture agreements, the Company periodically records
amounts due to or from its various partners. During the quarter ended June 30,
1999, the Company recorded approximately $500,000 of reimbursement of expenses
pursuant to one of these agreements.
5. PREFERRED STOCK. In January 1999, the Company closed on a $4,000,000 private
offering of its Series B Convertible Preferred Stock. The preferred stock
accrues dividends at the rate of 10% per annum and is convertible into the
Company's Common Stock at the rate of $5.50 per share beginning 18 months from
the date of issuance. The net proceeds to the Company were $3,670,000 after
deducting brokers' commissions and expenses of the offering.
Page 8
<PAGE>
Item 2:
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
Three Months Ended June 30, 1999, Compared to Three Months Ended June 30, 1998
Revenues decreased by $1,673,000, or 9.1%, for the quarter ended June 30, 1999
compared to the quarter ended June 30, 1998 primarily due to fewer operating
days in 1999 versus 1998 and a lucrative eight-day charter of the Enchanted Isle
in 1998.
The Company's operating, marketing, selling and administrative expenses
decreased by $1,359,000, or 9.3%, for the quarter ended June 30, 1999 primarily
due to fewer operating days in 1999 versus 1998 as well as reimbursements
relative to the Company's liability insurance premiums of $250,000 and joint
venture related expenses of $500,000.
Seawise's interest in the Company's Sea-Comm joint venture is reflected in the
($506,000) and ($250,000) line item for "Minority interest share of earnings of
consolidated joint venture" for the three months ended June 30, 1999 and 1998.
Sea-Comm earned $1,012,000 and $510,000 for the three months ended June 30, 1999
and 1998, respectively. The improvement in earnings was primarily due to
increased load factors and yields (higher rates collected from passengers) for
the summer Alaska voyages in 1999 versus 1998.
"Equity in net earnings (loss) of unconsolidated joint venture" represents
results associated with the Company's Capri Cruises joint venture, which began
operations in June 1998 and operates one vessel on two- and five-day cruises
from New Orleans. The Company accounts for the Capri Cruises joint venture under
the equity method. The Company's 50% investment resulted in net earnings of
$252,000 for the quarter ended June 30, 1999, versus a loss of $255,000 for the
quarter ended June 30, 1998. The improvement in earnings is primarily due to
higher passenger counts as Capri Cruises better defined its market in 1999. The
losses for the quarter ended June 30, 1998 were primarily due to start-up costs.
Nine Months Ended June 30, 1999, Compared to Nine Months Ended June 30, 1998
Revenues decreased by $2,792,000, or 6.3%, for the nine months ended June 30,
1999 compared to the nine months ended June 30, 1998 primarily due to the
Universe Explorer being out of service for 60 days of the first nine months of
fiscal 1999 for the installation of a sprinkler system as well as lucrative
eight-day charter of the Enchanted Isle in 1998.
The Company's operating, marketing, selling and administrative expenses
decreased by $3,688,000, or 9.8%, for the quarter ended June 30, 1999, primarily
due to the Universe Explorer being out of service for 60 days of the first nine
months of fiscal 1999 for the installation of a sprinkler system.
Page 9
<PAGE>
Seawise's interest in the Company's Sea-Comm joint venture is reflected in the
($838,000) and ($95,000) line item for "Minority interest share of earnings of
consolidated joint venture" for the nine months ended June 30, 1999 and 1998,
respectively. Sea-Comm earned $1,676,000 and $190,000 for the nine months ended
June 30, 1999 and 1998, respectively. The improvement in earnings was primarily
due to the Universe Explorer not operating a Caribbean program in fiscal 1999 as
it did in fiscal 1998. Such program was not profitable in fiscal 1998.
"Equity in net (loss) of unconsolidated joint venture" represents a loss of
$323,000 and $255,000 for the nine months ended June 30, 1999 and 1998,
respectively, associated with the Capri Cruises joint venture as Capri Cruises
continued to define its market.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $1,255,000 at June 30, 1999 as compared to a
working capital deficiency of $10,426,000 at September 30, 1998. The improvement
in the Company's working capital position was primarily due to the private sale
of $4,000,000 of preferred stock, the refinancing of the loan on the Universe
Explorer, as well as a change in the Company's FMC arrangement. The Company has
arranged for a surety bond to guarantee the Enchanted Isle's FMC requirements
thereby freeing the $4,629,000 long-term deposit that had been securing the
Company's FMC certificate.
Cash flows from operations provided $2,495,000 and $9,064,000 for the first nine
months of fiscal 1999 and 1998, respectively. Cash flows from operations
declined for the first nine months of fiscal 1999, as compared to the first nine
months of fiscal 1998, primarily due to increases in amounts due from
affiliates, relating to reimbursements of various expenses, prepaid expenses
associated with drydock expenses, increases in accrued liabilities and decreases
in accounts payable and customer and other deposits. The large increase in
customer deposits during the quarter ending June 30, 1998 was primarily due to
the Company beginning to accept customer deposits for the Enchanted Capri during
such quarter.
Cash flows from investing activities used $3,169,000 and $5,711,000 for the nine
months ended June 30, 1999 and 1998, respectively. During the nine months ended
June 30, 1999, the Company invested $566,000 in capital expenditures and
recorded a receivable, from its partner, Seawise, of approximately $3,200,000,
relating primarily to the installation of the sprinkler system on the Universe
Explorer. This receivable is being repaid over the next seven years, pursuant to
the terms of the Company's Sea-Comm joint venture agreement, as amended. The
improvement in cash flows for the first nine months of fiscal 1999 is primarily
attributable to the Company's new FMC arrangement, which was partially offset by
the amounts recorded due to the installation of the Universe Explorer sprinkler
system.
Cash flows from financing activities provided $7,895,000 during the nine months
ended June 30, 1999 and used $1,438,000 during the nine months ended June 30,
1998. This increase was primarily due to approximately $1,100,000 in net
proceeds from the Key Loan, proceeds from a $2,100,000 loan from Nationsbank to
finance a portion of the sprinkler system installation aboard the Universe
Explorer (the "NationsBank Loan") and a portion of the proceeds from a
$14,250,000 credit facility from Nordbanken AB (publ) (the "Nordbanken Loan")
used to finance the acquisition of the Enchanted Sun. The Nordbanken Loan, which
is secured by the Enchanted Sun, has a term of nine years and bears an interest
rate of 7.79%.
At June 30, 1999, the Company owed a total of $22,841,000 pursuant to the
EffJohn Loan, Key Loan, Nationsbank Loan and Nordbanken Loan which loans bear
interest at 6.97%, 9.14%, 7.30% and 7.79%, respectively. The EffJohn Loan, Key
Loan and Nordbanken Loan are secured by mortgages on the Company's vessels, and
the NationsBank Loan is secured by a letter of credit provided by Seawise.
Page 10
<PAGE>
In January 1999, the Company closed on a $4,000,000 private offering of its
Series B Convertible Preferred Stock. The preferred stock accrues dividends at
the rate of 10% per annum and is convertible into the Company's Common Stock at
the rate of $5.50 per share beginning 18 months from the date of issuance. The
net proceeds to the Company were $3,670,000 after deducting brokers' commissions
and expenses of the offering.
The Company expects to fund the cash needs for its Capri Cruises operation from
cash from its established operations. Capri Cruises earned a profit in the
current quarter.
The Company's plans to expend approximately $17,250,000 in capital improvements
to the Enchanted Sun and the Crown Dynasty during the remainder of the calendar
year. The Company will finance approximately $9,750,000 of that amount with
proceeds of the Nordbanken Loan and the balance from the Company's operating
funds.
In 1998, the AICPA issued Statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1
establishes standards for accounting for internal use software projects. This
Statement is effective for financial statements for fiscal years beginning after
December 15, 1998 for costs incurred in those fiscal years for all projects,
including projects in progress when the SOP was adopted. Management does not
expect this Statement to have a material impact on the Company's financial
statements.
In 1998, the AICPA issued Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-Up Activities." SOP 98-5 provides guidance on accounting for
start-up costs and organization costs, which must be expensed as incurred. This
Statement is effective for financial statements for fiscal years beginning after
December 15, 1998. Management does not expect this Statement to have a material
impact on the Company's financial statements.
In June 1998, the FASB issued Statement of Financial Accounting Standards (FAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS No.
133 establishes standards for accounting and reporting for derivative
instruments, and conforms the requirements for treatment of different types of
hedging activities. This statement is effective for all fiscal years beginning
after June 15, 2000. Management does not expect this standard to have a
significant impact on the Company's operations.
INFLATION
The impact of inflation on the Company's operations has not been significant to
date. There can be no assurance that a high rate of inflation in the future
would not have an adverse effect on the Company's operations.
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's major market risk exposure is to changing interest rates. The
Company's policy is to manage interest rate risk through the use of a
combination of fixed and floating rate instruments, with respect to both its
liquid assets and its debt instruments.
The Company maintains a portion of its cash and cash equivalents in financial
instruments with original maturities of three months or less. These financial
instruments are subject to interest rate declines. An immediate decline of 10%
in interest rates would reduce the Company's annual interest income by $59,000.
The Key Loan is a variable rate loan; however, the Company has purchased
interest rate protection for such loan in the form of an interest rate swap. As
a result, although the Key Loan
Page 11
<PAGE>
bears interest at the prime rate plus 80 basis points, the interest rate swap
provides that the rate shall effectively be fixed at 9.14% over the term of the
loan. The Nationsbank Loan is also a variable rate loan; however, the Company
has also purchased interest rate protection for such loan in the form of an
interest rate swap. As a result, although the Nationsbank Loan bears interest at
LIBOR plus 150 basis points, the interest rate swap provides that the rate shall
effectively be fixed at 7.3% over the term of the loan. The EffJohn Loan bears
interest at LIBOR plus 2%, and thus is affected by changes in interest rates. In
the event that interest rates increased by 10%, the Company's interest
obligation would increase $11,000, $33,000, $19,000 and $6,000, respectively, in
each of its fiscal years 1999, 2000, 2001, and 2002.
Page 12
<PAGE>
Part II: Other Information
Item 1. LEGAL PROCEEDINGS
In October 1995, Kristian Stensby filed an action in the
Circuit Court in Dade County, Florida, against EffJohn International B.V.
("EffJohn"), EffJohn International Cruise Holdings, the Company, Mr. Mayer and
others, alleging that due to the tortious acts or breaches of agreements by
various defendants, he did not receive certain fees and/or commissions to which
he was allegedly entitled upon the consummation of the sale of the Enchanted
Isle, the Universe Explorer (formerly the Enchanted Seas), and certain other
assets owned by Commodore Cruise Lines Limited, a Cayman Island corporation, to
the Company. Mr. Stensby alleged that he was entitled to damages as a result of
the alleged behavior of the various defendants. The court previously entered
summary judgment in favor of the Company, Mr. Mayer and all other defendants
except EffJohn on all counts alleged by Mr. Stensby except the unfair
competition and tortious interference counts.
On April 30, 1999, Mr. Stensby settled the remaining counts
with the Company and Mr. Mayer relating to unfair competition and tortious
interference. The Company settled the claims for an amount that was less than
the Company's estimated costs to defend the lawsuit. The court will enter its
final disposition order at such time as the settlement amount is paid to Mr.
Stensby.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 1999, the Company granted options to purchase an
aggregate of 667,000 shares of the Company's common stock to the Company's
directors and employees, pursuant to the Company's 1999 Stock Plan. The options
are exercisable at $5.00 per share, which was the fair market value of the
common stock on the date of grant. The options expire on March 21, 2004 and
March 29, 2009. The grant of options was exempt from registration pursuant to
Section 4(2) of the Securities Act.
On April 6, 1999, the Company and Promociones Turisticas de
Rosarito, S.A. de C.V. ("Proturo") entered into an operating agreement for
Coronado Seas, LLC. Pursuant to the agreement, the Company granted warrants to
purchase an aggregate of 250,000 shares of the Company's common stock to
Proturo. The warrants are exercisable at $6.00 per share. The warrants expire on
April 5, 2004. The issuance of the warrants was exempt from registration
pursuant to Section 4(2) of the Securities Act.
On June 10, 1999, the Company granted warrants to purchase
50,000 shares of the Company's common stock to an unaffiliated third party in
exchange for financial consulting services. The warrants are exercisable at
$7.00 per share. The warrants expire on June 9, 2004. The issuance of the
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
Page 13
<PAGE>
Item 5. OTHER INFORMATION
On April 23, 1999, Albuferra Investments, Inc., a wholly owned
subsidiary of the Company ("Albuferra"), purchased the vessel the "Enchanted
Sun" (the "Vessel") from Triple Shipping Inc. for a purchase price of
$5,000,000. The purchase price was partially funded through a partial drawdown
on a $14,250,000 credit facility from Nordbanken AB (publ). The Company plans to
make significant renovations to the Vessel's interior and exterior with the
balance of the proceeds from such loan. Upon completion of these renovations,
Albuferra will charter the vessel to Coronado Seas, LLC, an indirectly partially
owned subsidiary of the Company, for use in its gaming cruises operating from
San Diego and Los Angeles, California to Rosarito, Baja California, Mexico.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Employment Agreement dated as of March 1999 by and between New
Commodore Cruise Lines Limited and Ronald Kurtz
10.2 Employment Agreement dated as of May 1, 1999 by and between New
Commodore Cruise Lines Limited and Alan Pritzker
10.3 Employment Agreement dated as of May 17, 1999 by and between New
Commodore Cruise Lines Limited and James Sullivan
10.4 Operating Agreement of Coronado Seas, LLC dated April 6, 1999,
between Commodore Day Cruises Limited and Promociones Turisticas
De Rosarito, S.A. de C.V.*
10.5 Rosarito Pier Docking Contract dated April 6, 1999, between
Inversiones Rosarito, S.A. de C.V., Coronado Seas, LLC, Playas de
Rosarito Marina Resort, S.A. de C.V. and Banco Internacional,
S.A.*
10.6 Barecon '89 Bareboat Charter Agreement dated May 13, 1999,
between Capri Cruises and Norsong Shipping, Ltd.*
10.7 Loan and Guarantee Facility Agreement dated April 23, 1999, by
and between Albuferra Investments, Inc. and Nordbanken AB (publ)
10.8 Guarantee and Indemnity Agreement dated April 23, 1999, executed
by the Company in favor of Nordbanken AB (publ)
27 Financial Data Schedule.
- ------------
*Portions of this document 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
During the quarter ended June 30, 1999, the Company did not
file any current reports on Form 8-K.
Page 14
<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 16, 1999
Page 15
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Employment Agreement dated as of March 1999 by and between New
Commodore Cruise Lines Limited and Ronald Kurtz
10.2 Employment Agreement dated as of May 1, 1999 by and between New
Commodore Cruise Lines Limited and Alan Pritzker
10.3 Employment Agreement dated as of May 17, 1999 by and between New
Commodore Cruise Lines Limited and James Sullivan
10.4 Operating Agreement of Coronado Seas, LLC dated April 6, 1999,
between Commodore Day Cruises Limited and Promociones Turisticas
De Rosarito, S.A. de C.V.*
10.5 Rosarito Pier Docking Contract dated April 6, 1999, between
Inversiones Rosarito, S.A. de C.V., Coronado Seas, LLC, Playas de
Rosarito Marina Resort, S.A. de C.V. and Banco Internacional,
S.A.*
10.6 Barecon '89 Bareboat Charter Agreement dated May 13, 1999,
between Capri Cruises and Norsong Shipping, Ltd.*
10.7 Loan and Guarantee Facility Agreement dated April 23, 1999, by
and between Albuferra Investments, Inc. and Nordbanken AB (publ)
10.8 Guarantee and Indemnity Agreement dated April 23, 1999, executed
by the Company in favor of Nordbanken AB (publ)
27 Financial Data Schedule.
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made this ___ day of
March, 1999 and effective as of May 17, 1999 (the "Effective Date"), by and
between New Commodore Cruise Lines Limited, a corporation organized under the
laws of Bermuda (the "Company"), and Ronald Kurtz (the "Employee"). The Company
desires to develop, promote and expand its cruise business (the "Company's
Cruise Business") and to further such goals to secure the services of Employee.
In consideration of the premises and the mutual agreements herein, the Company
and Employee hereby agree as follows:
1. EMPLOYMENT.
The Company hereby employs Employee, and Employee hereby accepts and
agrees to such employment, commencing on the Effective Date. Employee shall be
employed by the Company as President of Crown Cruises Limited, a Bermuda
corporation ("Crown"), and Executive Vice President of Commodore Holdings
Limited ("Commodore"). Employee will be responsible for the sales and marketing
of such Commodore products, and have such other duties and responsibilities, as
determined by the Chief Executive Officer of Commodore, to whom he shall report.
The persons and departments set forth on the attached organizational chart shall
report to Employee. Unless earlier terminated under Sections 4 or 7 below, this
Agreement shall be in effect for three years from the Effective Date (the
"Term"). While employed by the Company, Employee shall not, without the prior
written consent of the Company, render his professional services to anyone other
than the Company, and will devote his full professional time, attention, and
best efforts to the business of the Company and the fulfillment of his duties
and obligations hereunder. Except as described herein, Employee will not, while
employed by the Company, accept any position, employment, gratuities,
compensation, promises, commitments, reimbursements or funds or the equivalent
of funds from any person, corporation, partnership or other business entity
whatsoever engaged in any aspect of the business in which the Company is engaged
or which is a supplier or customer of the Company.
2. COMPENSATION.
(a) For all services rendered by the Employee pursuant to Section 1
hereof, the Company shall pay to and provide for Employee (i) a salary of
$180,000 per annum and (ii) the additional benefits provided herein. Employee's
salary shall be increased by 4% over the prior year's salary on each anniversary
date of this Agreement.
(b) The Company shall pay Employee an annual bonus of $30,000 (the
"Bonus") plus such additional bonuses as Commodore's Board of Directors may
grant to him in its sole discretion.
(c) Employee shall receive an incentive stock option, to the extent
legally available (and a non-qualified stock option to the extent an incentive
stock option is not legally available) (the "Option"), to purchase 105,012
shares of the common stock, par value $.01 per share (the "Common Stock"), of
Commodore. The exercise price shall be $5.00 per share. The Option shall vest in
thirty-six (36) equal monthly increments commencing thirty (30) days after
<PAGE>
the date hereof. Once vested, the Option may be exercised, in whole or in part,
at any time within ten (10) years after the date hereof; provided, however, that
the exercise takes place during the time Employee is employed by Commodore or
its subsidiaries or within not more than 90 days of the termination of such
employment unless Employee is terminated pursuant to Section 7(i), in which case
such Option shall expire on the date of such termination. The exercise price
shall be payable by cashier's check on the date of exercise. The Option shall
also have such other terms as are set forth in the form of the Option, which is
attached hereto as EXHIBIT "A." The Company shall cause the sale of the shares
of common stock underlying the Option to be registered with the Securities and
Exchange Commission on the earlier of: (i) the date the Company hereafter
registers the sale of shares of common stock underlying options owned by any
other employee of Commodore, or (ii) two years from the Effective Date.
3. VACATION AND OTHER BENEFITS.
(a) During the Term, Employee shall be entitled to vacations
(without deduction in compensation or benefits) of such duration and at such
time or times as may be consistent with prevailing vacation policies of
Commodore, but not less than four weeks per calendar year. Such vacation time
shall be adjusted pro rata for the number of months worked in the initial and
final partial years of the Term. Unused available vacation time shall not
cumulate from year to year. Unused available vacation time shall be paid to
Employee at his normal salary rate plus the pro rata portion of the Bonus and
Expense Allowance (as hereafter defined) in the event of termination of this
Agreement for any reason. To the extent and as soon as he is eligible, Employee
may participate in any group hospitalization, medical, stock option, bonus or
other similar Commodore benefit plans, including but not limited to, the
Company's 401(k) retirement plan, which is or may become generally available to
executive employees of Commodore.
(b) With respect to medical insurance, Employee may elect to
maintain his present insurance instead of being covered under the Company's
plan. In such event, the Company will pay Employee or his designee the lesser of
the cost of his medical insurance premiums or the cost to the Company of the
premiums saved by not including him in the Company's plan.
4. INCAPACITY.
(a) If Employee is unable at any time during the Term of this
Agreement to perform his services by reason of physical or mental illness or
incapacity, he shall receive his then regular compensation plus the pro rata
portion of the Bonus and Expense Allowance, and his health insurance benefits
for a cumulative period of 90 days per calendar year (the "Medical Leave"), but
in no event beyond the Term of this Agreement. Such leave time shall be adjusted
pro rata for the number of months worked in the initial and final partial years
of the Term. Unused Medical Leave shall not cumulate from year to year. Unused
available Medical Leave shall be paid to Employee at his normal salary rate plus
the pro rata portion of the Bonus and Expense Allowance in the event of
termination of this Agreement for any reason. If Employee is unable to
consistently perform his material duties under this Agreement for any period of
90 consecutive days by reason of physical or mental illness or incapacity, the
Company shall continue payment of Employee's salary plus the pro rata portion of
the Bonus and Expense Allowance, and his health insurance benefits for 90 more
days after the first 90 days, PROVIDED, HOWEVER, after the second 90 days the
Company may terminate this Agreement at any time without any further liability
to Employee beyond the second
Page 2
<PAGE>
90 days of salary plus the pro rata portion of the Bonus and Expense Allowance
and his health insurance benefits. Periods of consecutive incapacity arising
from the same mental or physical condition which are less than 90 days each
shall be cumulated and considered consecutive. The Board of Directors of
Commodore shall determine in its sole discretion in good faith whether Employee
is ill or incapacitated for purposes of this Section 4(a).
(b) In the event of death of Employee at any time during the Term of
this Agreement, the Company shall pay to his surviving spouse, if any, the pro
rata portion of the salary, Bonus and Expense Allowance to which Employee was
entitled through the date of his death plus a death benefit of six months of
additional salary plus the pro rata portion of the Bonus and Expense Allowance.
If Employee has no surviving spouse, then the Company shall pay the aggregate
amount of such pro rata portion of the salary, Bonus and Expense Allowance and
death benefit to Employee's estate.
5. EXPENSES. Employee shall be reimbursed by the Company for his
ordinary and necessary business expenses upon presentation of receipts therefor
to the Company. In addition, he shall receive an annual expense allowance of
$20,000 (the "Expense Allowance") for his car, gas and social club membership
dues to be paid to him or his designee in equal monthly installments.
6. TERM. The initial term of this Agreement shall be for a period of
three (3) years from the Effective Date unless earlier terminated under Section
4 or 7. If the Company does not offer to extend this Agreement on the same or
more favorable terms, it shall notify Employee in writing not less than six
months before the end of the Term hereof. Upon Employee receiving notice from
the Company of its intent not to offer to extend this Agreement on the same or
more favorable terms, the Company may elect to terminate this Agreement
immediately upon receipt of such notice, in which case Employee shall be paid
one year's salary, Bonus, Expense Allowance and health insurance benefits, or
the Company may require the Employee to work until up to the end of the Term, in
which case Employee shall be paid six months' salary, Bonus, Expense Allowance
and health insurance benefits at the end of the Term if the Employee remains in
the Company's employ during the notice period.
7. TERMINATION FOR CAUSE. If at any time Employee shall (i) commit an
act of theft or embezzlement from or fraud on the Company or Commodore; (ii)
shall consistently neglect his duties while employed by the Company (except as
provided in Section 4(a)), which behavior continues after receiving written
notice from the Company or Commodore that he has been consistently neglecting
his duties; (iii) shall willfully refuse to continue his employment with the
Company, which refusal continues after receiving written notice from the Company
or Commodore of such refusal (except as provided in Section 4(a)); (iv) shall
fail materially to comply with the Company's or Commodore's policies in good
faith, which failure continues after receiving written notice from the Company
or Commodore of such failure; (v) shall be in material breach or default of this
Agreement, which breach or default continues after receiving notice from the
Company or Commodore of such breach or default; (vi) shall have materially
breached a representation or warranty herein, which breach continues after
receiving notice from the Company or Commodore of such breach; or (vii) shall
commit an act of moral turpitude or illegality that brings the reputation of the
Company or Commodore into public disrepute or causes the Company or Commodore to
be generally viewed unfavorably by customers or suppliers, the Company may
forthwith terminate this Agreement by written notice and shall have no further
liability hereunder except for compensation,
Page 3
<PAGE>
and a pro rata portion of the Bonus and Expense Allowance accrued to the date of
such termination notice or the first date of willful refusal by Employee to
continue his employment, as the case may be.
8. TRADE SECRETS AND EMPLOYMENT OF COMPANY EMPLOYEES.
(a) During the Term and thereafter, Employee shall not, except as
required by Employee's duties to the Company and Commodore, without Commodore's
prior written consent, directly or indirectly, disclose, furnish, or cause to be
disclosed or furnished, or use to the detriment of the Company or Commodore any
proprietary, confidential or trade secret information, whether or not patentable
or copyrightable, belonging to the Company or Commodore, which Employee gains
knowledge of during his employment and which was not known to Employee prior to
his employment with the Company, whether or not developed by Employee and
whether or not marked or designated as proprietary, confidential, or trade
secret. Such restriction shall not apply to information which: (i) is or become
generally available to the public other than as a result of a disclosure by
Employee or Employee's agents of affiliates, (ii) was available to Employee on a
non-confidential basis prior to its disclosure to Employee by the Company; or
(iii) becomes available to Employee on a non-confidential basis from a source
other than the Company or its agents, provided that such source is not bound by
a confidentiality agreement with the Company known to Employee or Employee's
agents or affiliates.
(b) For a period from the date hereof until six months from the date
of his termination of employment with the Company for any reason, Employee shall
not, directly or indirectly:
(1) induce or attempt to induce away, or aid, assist or abet any
other party or person in inducing or attempting to induce away any
person from his or her employment with the Company or Commodore;
(2) hire or attempt to hire any former employee of the Company
or Commodore within one year after the termination for any reason of
such employee's employment with the Company or Commodore;
(3) take away or attempt to take away, or aid, assist or abet
any other party or person in taking away or attempting to take away,
any customers of the Company or Commodore who were such customers at
the date of Employee's termination of employment; or
(4) in any form copy, duplicate or otherwise compile any list of
past, present, or potential customers of the Company or Commodore
except on an as-needed basis while employed by the Company and upon
termination of Employee's employment with the Company for any
reason, Employee shall immediately return all such lists, and all
copies, duplicates, and compilations thereof, to the Company.
Employee acknowledges that a violation of this Section 8(b) would
lead to inevitable injury to the Company and Commodore by interference with
critical customers and employees of the Company or Commodore.
Page 4
<PAGE>
9. NONCOMPETITION.
(a) For a period from the date hereof until the date specified in
Section 9(b), below, Employee will not, whether individually or as a member of a
partnership or as an officer, director, investor, stockholder, creditor,
employee or consultant of a corporation or of any other person, limited
liability company, partnership or other entity, engage or seek to engage in a
business the same as or similar to the Company's or Commodore's cruise business
in the same market that the Company or Commodore is operating; provided,
however, that following the termination of the Employee's employment with the
Company for any reason, the Employee may return to operating the consulting
service business he operated prior to the Effective Date of this Agreement. The
ownership by Employee of 5% or less of the outstanding stock of any corporation
engaged in any such competitive business, but whose stock is listed on a
national securities exchange or is a Nasdaq listed stock, shall not be deemed by
itself to be a violation by Employee of this Section. In the event that for any
reason there should be a determination by a court of competent jurisdiction that
the provisions of this Section are too broad or unreasonable or unenforceable as
such, then such provisions shall be deemed modified and fully enforceable as so
modified to the extent that such a court would find them fair, reasonable and
enforceable under the circumstances.
(b) This Section 9 shall be in effect for the longer of one year or
the unexpired term of this Agreement in the event the Employee voluntarily
terminates his employment with the Company or the Company terminates the
Employee under Section 7. In any other event of termination of this Agreement,
this Section 9 shall terminate on the date of the termination of this Agreement.
10. MATERIALITY AND REMEDIES. Employee acknowledges that a violation of
the noncompetition or nondisclosure provisions of Sections 8 and 9 will cause
irreparable injury to the Company and Commodore in that their vital confidential
or proprietary knowledge will become public knowledge causing them to lose their
competitive advantage and goodwill. Therefore, since damage to the Company and
Commodore will be difficult to ascertain, the Company shall be entitled without
the showing or proving of any factual damages sustained to a temporary
restraining order or injunction granted by a competent court of equity to
prevent a breach or further breach of Sections 8 and 9 of this Agreement. If a
court should nevertheless require a showing of damages, then the Company may
meet this burden by showing it has a legitimate business interest to protect and
that competition itself will be injurious to the Company and Commodore. Without
regard to whether or not the Company seeks or is granted equitable relief, the
Company shall not be prejudiced in its right to seek and be awarded damages for
breach.
11. CHANGE OF CONTROL.
(a) Unless this Agreement has been earlier terminated, upon a
Change of Control of the Company, as defined below, Employee shall have the
option to terminate this Agreement and receive an amount equal to the
continuation of his salary, and a pro rata portion of the Bonus and Expense
Allowance and other benefits for the greater of:
(1) six months from the date of the Change of Control, or
Page 5
<PAGE>
(2) the time remaining under the Term after the date of the
Change of Control.
Employee must exercise his rights under this Section by notifying
the Company in writing within thirty (30) days after the date of the Change of
Control. Payment shall be made to Employee in one lump sum within thirty (30)
days after receipt of Employee's notice of termination.
(b) A Change of Control shall have occurred on the date that a
majority of the persons on the Board of Directors of the Company are persons (i)
who obtained their seats other than in the normal course, as a result of death
or voluntary resignation, and (ii) whose appointment to the Board was not with
the approval of the majority of the directors in office immediately before his
election to the Board of Directors.
12. ADDITIONAL PAYMENTS UPON TRIGGER EVENTS.
(a) Unless this Agreement has been earlier terminated, upon the
occurrence of one of the Trigger Events defined in (b) below, Employee shall
have the option to terminate this Agreement and receive an amount equal to the
continuation of his salary, and a pro rata portion of the Bonus and Expense
Allowance and other benefits for one year.
(b) A Trigger Event shall have occurred on the date of any the
following events.
(i) The Company requires the Employee to provide his
services at an office located outside of Miami-Dade,
Broward or Palm Beach County, Florida;
(ii) The Employee's duties or title are substantially
altered by the Company; or
(iii) The current Chief Executive Officer of Commodore
ceases to hold such position and the Employee is not
selected as his permanent successor.
Employee must exercise his rights under this Section by notifying
the Company in writing within thirty (30) days after the date of a Trigger
Event. Payment shall be made to Employee in one lump sum within thirty (30) days
after his termination.
13. INDEMNIFICATION. The Company shall indemnify Employee including,
without limitation, for legal fees, to the fullest extent provided or permitted
under Bermuda law with respect to the performance of his duties hereunder, which
indemnification shall survive the termination of this Agreement, anything else
to the contrary in this Agreement notwithstanding. Employee, the Company and
Commodore, as expeditiously as possible following the execution of this
Agreement, shall enter into an indemnification agreement to implement Employee's
foregoing rights to indemnification and to provide for advancement of expenses
to Employee in the event of indemnification.
Page 6
<PAGE>
13. ARBITRATION. Any disagreement between Employee and the Company
concerning the interpretation or fulfillment of this Agreement shall be
submitted to arbitration pursuant to the rules then prevailing of the American
Arbitration Association in Miami, Florida. The ruling of the arbitrator shall be
final and binding on the parties and shall be enforceable in any court having
jurisdiction thereof. The arbitrator shall have the authority to award the costs
of the arbitration, including, without limitation, the legal fees and costs
incurred by the parties, to either party as such arbitrator deems appropriate.
14. ENTIRE AGREEMENT. This Agreement contains the entire agreement
concerning employment arrangements between the Company and Employee and
supersedes all prior written and oral understandings of the parties with respect
thereto. This Agreement may not be changed except by a writing signed by the
party against whom the enforcement of any waiver, change, extension,
modification or discharge is sought.
15. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered in person or sent by
certified mail, overnight courier or by facsimile (with confirmation of
transmission) to the party involved at the address shown on the signature page,
or to such other address as either party may specify to the other in writing.
The earlier of the date of actual receipt of the date two days after the date of
mailing of such notice shall be deemed to be the date of delivery thereof.
16. ASSIGNMENT. This Agreement shall inure to the benefit of, and shall
be binding upon, the Company, its successors and assigns, Employee, his heirs
and personal representatives, but may not be assigned by Employee. This
Agreement may be assigned by the Company, provided, however, that it may not be
assigned to any affiliate of the Company unless the affiliate assignee's
obligations hereunder are guaranteed by the Company.
17. SEVERABILITY. In the event any term, Section or provision of this
Agreement or its application to any circumstances shall to any extent be deemed
invalid or unenforceable, the remainder of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
18. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
19. CONSULTATION OF ATTORNEYS. The Company and Employee acknowledge
that they each have had the opportunity to consult its or his respective
attorney with respect to this Agreement and that they each understand its
contents.
20. SECTION HEADINGS. The section headings contained herein are for
reference only and shall not in any way affect the meaning or interpretation of
this Agreement.
21. APPROVAL OF BOARD OF DIRECTORS. Notwithstanding anything to the
contrary set forth herein, this Agreement shall be subject to the approval of
the Board of Directors of Commodore and shall not become effective until such
approval is received.
Page 7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
EMPLOYEE COMPANY
NEW COMMODORE CRUISE LINES LIMITED
By: /s/ Frederick A. Mayer
---------------------------------
/s/ Ronald Kurtz Its: Chief Executive Officer
- ----------------------------------
Ronald Kurtz
ADDRESS: ADDRESS:
__________________________________ 4000 Hollywood Boulevard
__________________________________ Suite 385, South Tower
__________________________________ Hollywood, Florida 33021
Page 8
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made this 1st day of
May, 1999 (the "Effective Date"), by and between New Commodore Cruise Lines
Limited, a corporation organized under the laws of Bermuda ("Company"), and Alan
Pritzker ("Employee"). The Company desires to develop, promote and expand its
cruise business (the "Company's Cruise Business") and to further such goals to
secure the continued services of Employee. In consideration of the premises and
the mutual agreements herein, the Company and Employee hereby agree as follows:
1. EMPLOYMENT.
The Company hereby employs Employee, and Employee hereby accepts and
agrees to such employment, commencing on the Effective Date. Employee shall be
employed by the Company and Commodore Holdings Limited as Senior Vice President
of Finance and Chief Financial Officer. Employee shall have the duties and
responsibilities normally associated with these offices. Employee shall report
to the Chief Executive Officer of the Company. Unless earlier terminated under
Paragraphs 4 or 7, below, this Agreement shall be in effect for a period of
three years (the "Term"). While employed by the Company, Employee shall not,
without the prior written consent of the Company, render his professional
services to anyone other than the Company, and will devote his full professional
time, attention, and best efforts to the business of the Company and the
fulfillment of his duties and obligations hereunder. Employee will not, while
employed by the Company, accept any position, employment, gratuities,
compensation, promises, commitments, reimbursements or funds or the equivalent
of funds from any person, corporation, partnership or other business entity
whatsoever engaged in any aspect of the business in which the Company is engaged
or which is a supplier or customer of the Company.
2. COMPENSATION.
(a) For all services rendered by the Employee pursuant to Paragraph
1 hereof, the Company shall pay to and provide for Employee (i) a salary of
$150,000 per annum, which salary shall be increased to $156,000 as of October 1,
1999, and (ii) any additional benefits provided herein.
(b) Employee shall be entitled to such bonuses as the Company grants
to him in its sole discretion.
3. VACATION AND OTHER BENEFITS.
(a) During the Term, Employee shall be entitled to vacations
(without deduction in compensation or benefits) of such duration and at such
time or times as may be consistent with prevailing vacation policies of the
Company, but not less than three weeks per calendar year. Such vacation time
shall be adjusted pro rata for the number of months worked in the initial and
final partial years of the Term. Unused available vacation time shall not
cumulate from year to year. Unused available vacation time shall be paid to
Employee at his normal salary rate in the event of
<PAGE>
termination of this Agreement for any reason. To the extent otherwise eligible,
Employee may participate in any group hospitalization, medical, stock, option,
bonus or other similar Company benefit plan which is or may become generally
available to executive employees of the Company.
(b) With respect to medical insurance Employee may elect to maintain
his present insurance instead of being covered under the Company's plan. In such
event, the Company will pay Employee the lesser of the cost of his medical
insurance premiums or the cost to the Company of the premiums saved by not
including him in the Company's plan.
4. INCAPACITY.
(a) If Employee is unable at any time during the Term of this
Agreement to perform his services by reason of physical or mental illness or
incapacity, he shall receive his then regular compensation for a cumulative
period of 90 days per calendar year but in no event beyond the Term of this
Agreement. Such leave time shall be adjusted pro rata for the number of months
worked in the initial and final partial years of the Term. Unused medical leave
shall not cumulate from year to year. Unused available medical leave shall be
paid to Employee at his normal salary rate in the event of termination of this
Agreement for any reason. If Employee is unable to consistently perform his
material duties under this Agreement for any period of 90 consecutive days by
reason of physical or mental illness or incapacity, the Company shall continue
payment of Employee's salary for 90 more days after the first 90 days, PROVIDED,
HOWEVER after the second 90 days the Company may terminate this Agreement at any
time without any further liability to Employee beyond the second 90 days of
salary. Periods of consecutive incapacity arising from the same mental or
physical condition which are less than 90 days each shall be cumulated and
considered consecutive. The Board of Directors of the Company shall determine in
its sole discretion in good faith whether Employee is ill or incapacitated for
purposes of this Paragraph 4(a).
(b) In the event of death of Employee at any time during the term of
this Agreement, the Company shall pay to his surviving spouse, if any, the pro
rata salary to which Employee was entitled through the date of his death plus a
death benefit of six months of additional salary. If Employee has no surviving
spouse, then the Company shall pay the aggregate amount of such pro rata salary
and death benefit to Employee's estate.
5. EXPENSES. Employee shall be reimbursed by the Company for his
ordinary and necessary business expenses upon presentation of receipts therefor
to the Company. In addition, he shall receive a car allowance of $500 per month.
6. TERM. The initial term of this Agreement shall be for a period of
three years, unless earlier terminated under Paragraph 4, above, or Paragraph 7,
below. The Company has the option to extend this Agreement for two additional
years, subject again to Paragraphs 4 and 7. If the Company elects to so extend
this Agreement it shall notify Employee in writing not later than six months
before the end of the initial term hereof.
7. TERMINATION FOR CAUSE. If at any time Employee shall (i) commit an
act of theft or embezzlement from or fraud on the Company; (ii) shall
consistently neglect his duties while employed by the Company (except as
provided in Paragraph 4(a)) which behavior continues after
Page 2
<PAGE>
receiving written notice from the Company that he has been consistently
neglecting his duties; (iii) shall willfully refuse to continue his employment
with the Company (except as provided in Paragraph 4(a)); (iv) shall fail
materially to comply with the Company's policies in good faith; (v) shall be in
material breach or default of this Agreement; (vi) shall have materially
breached a representation or warranty herein; or (vii) shall commit an act of
moral turpitude or illegality that brings the reputation of the Company into
public disrepute or causes the Company to be generally viewed unfavorably by
customers or suppliers, the Company may forthwith terminate this Agreement by
written notice and shall have no further liability hereunder except for
compensation accrued to the date of such termination notice or the first date of
willful refusal by Employee to continue his employment, as the case may be.
8. TRADE SECRETS AND EMPLOYMENT OF COMPANY EMPLOYEES.
(a) During the Term and thereafter, Employee shall not, except as
required by Employee's duties to the Company, without the Company's prior
written consent, directly or indirectly, disclose, furnish, or cause to be
disclosed or furnished, or use to the detriment of the Company any proprietary,
confidential or trade secret information, whether or not patentable or
copyrightable, belonging to the Company which Employee gains knowledge of during
his employment and which was not known to Employee prior to his employment with
the Company, whether or not developed by Employee and whether or not marked or
designated as proprietary, confidential, or trade secret.
(b) For a period from the date hereof until six months from the date
of his termination of employment with the Company for any reason, Employee shall
not, directly or indirectly:
(1) induce or attempt to induce away, or aid, assist or abet any
other party or person in inducing or attempting to induce away any
person from his or her employment with the Company;
(2) hire or attempt to hire any former employee of the Company
within one year after the termination for any reason of such
employee's employment with the Company;
(3) take away or attempt to take away, or aid, assist or abet
any other party or person in taking away or attempting to take away,
any customers of the Company who were such customers at the date of
Employee's termination of employment; or
(4) in any form copy, duplicate or otherwise compile any list of
past, present, or potential customers of the Company except on an
as-needed basis while employed by the Company and upon termination
of Employee's employment with the Company for any reason Employee
shall immediately return all such lists, and all copies, duplicates,
and compilations thereof, to the Company.
Employee acknowledges that a violation of this Paragraph 8(b) would
lead to inevitable injury to the Company by interference with critical customers
and employees of the Company.
Page 3
<PAGE>
9. NONCOMPETITION.
(a) For a period from the date hereof until the date specified in
Paragraph 9(b), below, Employee will not, whether individually or as a member of
a partnership or as an officer, director, investor, stockholder, creditor,
employee or consultant of a corporation or of any other person, limited
liability company, partnership or other entity, engage or seek to engage in a
business the same as or similar to the Company's Cruise Business in the same
market that the Company is operating. The ownership by Employee of 5% or less of
the outstanding stock of any corporation engaged in any such competitive
business, but whose stock is listed on a national securities exchange or is a
NASDAQ listed stock, shall not be deemed by itself to be a violation by Employee
of this paragraph. In the event that for any reason there should be a
determination by a court of competent jurisdiction that the provisions of this
paragraph are too broad or unreasonable or unenforceable as such, then such
provisions shall be deemed modified and fully enforceable as so modified to the
extent that such a court would find them fair, reasonable and enforceable under
the circumstances.
(b) This Paragraph 9 shall be in effect for the longer of one year
or the unexpired term of this Agreement in the event the Employee voluntarily
terminates his employment with the Company or the Company terminates the
Employee under Paragraph 7. In any other event of termination of this Agreement,
this Paragraph 9 shall terminate on the date of the termination of this
Agreement.
10. MATERIALITY AND REMEDIES. Employee acknowledges that a violation of
the noncompetition or nondisclosure provisions of Paragraphs 8 and 9 will cause
irreparable injury to the Company in that its vital confidential or proprietary
knowledge will become public knowledge causing it to lose its competitive
advantage and goodwill. Therefore, since damage to the Company will be difficult
to ascertain, the Company shall be entitled without the showing or proving of
any factual damages sustained to a temporary restraining order or injunction
granted by a competent court of equity to prevent a breach or further breach of
Paragraphs 8 and 9 of this Agreement. If a court should nevertheless require a
showing of damages, then the Company may meet this burden by showing it has a
legitimate business interest to protect and that competition itself will be
injurious to the Company. Without regard to whether or not the Company seeks or
is granted equitable relief, the Company shall not be prejudiced in its right to
seek and be awarded damages for breach.
11. CHANGE OF CONTROL.
(a) Unless this Agreement has been earlier terminated before a
Change of Control of The Company, as defined below, Employee shall have the
option in his discretion to terminate this Agreement in writing within 30 days
after the date of the Change of Control and receive an amount equal to a
continuation of his salary and other benefits for the greater of:
(1) one year from the date of the Change of Control, or
(2) the time remaining under this Agreement after the date of
the Change of Control.
Page 4
<PAGE>
Payment shall be made to Employee in one lump sum within 30
days after receipt of Employee's notice of termination.
(b) A Change of Control shall have occurred on the date that a
majority of the persons on the Board of Directors of the Company are persons (i)
who obtained their seats other than in the normal course as a result of death or
voluntary resignation and (ii) whose appointment to the Board was not with the
approval of the majority of the directors in office immediately before his
election to the Board of Directors.
12. INDEMNIFICATION. The Company shall indemnify Employee including,
without limitation, for legal fees, to the fullest extent provided or permitted
under Bermuda law to past or current directors and officers of the Company and
its affiliates in the performance of their duties which indemnification shall
survive the termination of this Agreement, anything else to the contrary in this
Agreement notwithstanding.
13. ARBITRATION. Any disagreement between Employee and the Company
concerning the interpretation or fulfillment of this Agreement shall be
submitted to arbitration pursuant to the rules then prevailing of the American
Arbitration Association in Miami, Florida. The ruling of the arbitrator shall be
final and binding on the parties and shall be enforceable in any court having
jurisdiction thereof. The arbitrator shall have the authority to award the costs
of the arbitration, including, without limitation, the legal fees and costs
incurred by the parties, to either party as he deems appropriate.
14. ENTIRE AGREEMENT. This Agreement contains the entire agreement
concerning employment arrangements between the Company and Employee and
supersedes all prior written and oral understandings of the parties with respect
thereto. This Agreement may not be changed except by a writing signed by the
party against whom the enforcement of any waiver, change, extension,
modification or discharge is sought.
15. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered in person or sent by
certified mail to the party involved at the address shown on the signature page,
or to such other address as either party may specify to the other in writing.
The date two days after the date of mailing of such notice shall be deemed to be
the date of delivery thereof.
16. ASSIGNMENT. This Agreement shall inure to the benefit of, and shall
be binding upon, the Company, its successors and assigns, Employee, his heirs
and personal representatives, but may not be assigned by Employee.
17. SEVERABILITY. In the event any term, paragraph or provision of this
Agreement or its application to any circumstances shall to any extent be deemed
invalid or unenforceable, the remainder of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
18. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
Page 5
<PAGE>
19. CONSULTATION OF ATTORNEYS. The Company and Employee acknowledge
that they each have had the opportunity to consult its or his respective
attorney with respect to this Agreement and that they each understand its
contents.
20. PARAGRAPH HEADINGS. The paragraph headings contained herein are for
reference only and shall not in any way
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
EMPLOYEE COMPANY
NEW COMMODORE CRUISE LINES LIMITED
By: /s/ FREDERICK A. MAYER
---------------------------------------
/s/ ALAN PRITZKER Its: CHIEF EXECUTIVE OFFICER
- ---------------------------------
Alan Pritzker
ADDRESS: ADDRESS:
_________________________________ 4000 Hollywood Boulevard
_________________________________ Suite 385, South Tower
_________________________________ Hollywood, FL 33021
Page 6
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective this 17th day
of May, 1999 (the "Effective Date"), by and between New Commodore Cruise Lines
Limited, a corporation organized under the laws of Bermuda ("Company"), and
James R. Sullivan ("Employee"). The Company desires to develop, promote and
expand its cruise business (the "Company's Cruise Business"). In consideration
of the premises and the mutual agreements herein, the Company and Employee
hereby agree as follows:
1. EMPLOYMENT.
The Company hereby employs Employee, and Employee hereby accepts and
agrees to such employment, commencing on the Effective Date. Employee shall be
employed by the Company as President. Employee shall have the duties and
responsibilities normally associated with this office. Employee shall report to
the Chief Executive Officer of Commodore Holdings Limited ("Commodore") and
functionally will liase with the Executive Vice President of Commodore with
respect to sales and marketing functions. Unless earlier terminated under
Sections 4, 6 or 7, below, this Agreement shall be in effect until May 16, 2001
(the "Term"). While employed by the Company, Employee shall not, without the
prior written consent of the Company, render his professional services to anyone
other than the Company, and will devote his full professional time, attention,
and best efforts to the business of the Company and the fulfillment of his
duties and obligations hereunder. Employee will not, while employed by the
Company, accept any position, employment, gratuities, compensation, promises,
commitments, reimbursements or funds or the equivalent of funds from any person,
corporation, partnership or other business entity whatsoever engaged in any
aspect of the business in which the Company is engaged or which is a supplier or
customer of the Company.
2. COMPENSATION.
(a) For all services rendered by the Employee pursuant to Section 1
hereof, the Company shall pay to and provide for Employee (i) a salary of
$175,500 per annum, which salary shall be increased by four percent (4%) on each
anniversary of the Effective Date, and (ii) any additional benefits provided
herein.
(b) Employee shall be entitled to such bonuses as the Company's
Board of Directors grants to him in its sole discretion.
3. VACATION AND OTHER BENEFITS.
During the Term, Employee shall be entitled to vacations (without
deduction in compensation or benefits) of such duration and at such time or
times as may be consistent with prevailing vacation policies of the Company, but
not less than three weeks per calendar year. Such vacation time shall be
adjusted pro rata for the number of months worked in the initial and final
partial years of the Term. Unused available vacation time shall not cumulate
from year to year. Unused available vacation time shall be paid to Employee at
his normal salary rate in the event of termination of this Agreement for any
reason. To the extent otherwise eligible, Employee may participate in any group
hospitalization, medical, stock option, bonus or other
<PAGE>
similar Company benefit plan which is or may become generally available to
executive employees of the Company.
4. INCAPACITY.
(a) If Employee is unable at any time during the term of this
Agreement to perform his services by reason of physical or mental illness or
incapacity, he shall receive his then regular compensation for a cumulative
period of 90 days per calendar year but in no event beyond the term of this
Agreement. Such leave time shall be adjusted pro rata for the number of months
worked in the initial and final partial years of this Agreement. Unused medical
leave shall not cumulate from year to year. Unused available medical leave shall
be paid to Employee at his normal salary rate in the event of termination of
this Agreement for any reason. If Employee is unable to consistently perform his
material duties under this Agreement for any period of 90 consecutive days by
reason of physical or mental illness or incapacity, the Company shall continue
payment of Employee's salary for 90 more days after the first 90 days, provided,
however after the second 90 days the Company may terminate this Agreement at any
time without any further liability to Employee beyond the second 90 days of
salary. Periods of consecutive incapacity arising from the same mental or
physical condition which are less than 90 days each shall be cumulated and
considered consecutive. The Board of Directors of the Company shall determine in
its sole discretion in good faith whether Employee is ill or incapacitated for
purposes of this Section 4(a).
(b) In the event of death of Employee at any time during the term of
this Agreement, the Company shall pay to his surviving spouse, if any, the pro
rata salary to which Employee was entitled through the date of his death plus a
death benefit of six months of additional salary. If Employee has no surviving
spouse, then the Company shall pay the aggregate amount of such pro rata salary
and death benefit to Employee's estate.
5. EXPENSES. Employee shall be reimbursed by the Company for his
ordinary and necessary business expenses upon presentation of receipts therefor
to the Company. In addition, he shall receive a car allowance of $500 per month.
6. TERM. The Term shall begin on the Effective Date and expire on May
16, 2001, unless earlier terminated under Section 4, above, or Section 7, below.
Notwithstanding the foregoing, the Company shall have the option to terminate
this Agreement upon six (6) months prior notice to Employee.
7. TERMINATION FOR CAUSE. If at any time Employee shall commit an act
of theft or embezzlement from or fraud on the Company, shall consistently
neglect his duties while employed by the Company (except as provided in Section
4(a)) which behavior continues after receiving written notice from the Company
that he has been consistently neglecting his duties, shall willfully refuse to
continue his employment with the Company (except as provided in Section 4(a)),
shall fail materially to comply with the Company's policies in good faith, shall
be in material breach or default of this Agreement, shall have materially
breached a representation or warranty herein, shall commit an act of moral
turpitude or illegality that brings the reputation of the Company into public
disrepute or causes the Company to be generally viewed unfavorably by customers
or suppliers, the Company may forthwith terminate this Agreement by written
2
<PAGE>
notice and shall have no further liability hereunder except for compensation
accrued to the date of such termination notice or the first date of willful
refusal by Employee to continue his employment, as the case may be.
8. TRADE SECRETS AND EMPLOYMENT OF COMPANY EMPLOYEES.
(a) During the Term and thereafter, Employee shall not, except as
required by Employee's duties to the Company, without the Company's prior
written consent, directly or indirectly, disclose, furnish, or cause to be
disclosed or furnished, or use to the detriment of the Company any proprietary,
confidential or trade secret information, whether or not patentable or
copyrightable, belonging to the Company which Employee gains knowledge of during
his employment and which was not known to Employee prior to the date of this
Agreement, whether or not developed by Employee and whether or not marked or
designated as proprietary, confidential, or trade secret.
(b) For a period from the date hereof until six months from the date
of Employee's termination of employment with the Company for any reason,
Employee shall not, directly or indirectly:
(1) induce or attempt to induce away, or aid, assist or abet any
other party or person in inducing or attempting to induce away any person from
his or his employment with the Company;
(2) hire or attempt to hire any former employee of the Company
within one year after the termination for any reason of such employee's
employment with the Company;
(3) take away or attempt to take away, or aid, assist or abet
any other party or person in taking away or attempting to take away, any
customers of the Company who were such customers at the date of Employee's
termination of employment; or
(4) in any form copy, duplicate or otherwise compile any list of
past, present, or potential customers of the Company except on an as-needed
basis while employed by the Company and upon termination of Employee's
employment with the Company for any reason Employee shall immediately return all
such lists, and all copies, duplicates, and compilations thereof, to the
Company.
Employee acknowledges that a violation of this Section 8(b) would
lead to inevitable injury to the Company by interference with critical customers
and employees of the Company.
3
<PAGE>
9. NONCOMPETITION.
(a) For a period from the date hereof until the date specified in
Section 9(b), below, Employee will not, whether individually or as a member of a
partnership or as an officer, director, investor, stockholder, creditor,
employee or consultant of a corporation or of any other person, limited
liability company, partnership or other entity, engage or seek to engage in a
business the same as or similar to the divisions of the Company's business with
which the Employee was materially involved in the same market that the Company
is operating. The ownership by Employee of 5% or less of the outstanding stock
of any corporation engaged in any such competitive business, but whose stock is
listed on a national securities exchange or is a Nasdaq listed stock, shall not
be deemed by itself to be a violation by Employee of this section. In the event
that for any reason there should be a determination by a court of competent
jurisdiction that the provisions of this section are too broad or unreasonable
or unenforceable as such, then such provisions shall be deemed modified and
fully enforceable as so modified to the extent that such a court would find them
fair, reasonable and enforceable under the circumstances.
(b) This Section 9 shall be effective for the longer of (i) one year
after the termination of Employee's employment pursuant to Section 7 or his
voluntary termination, or (ii) the unexpired Term. In any other event of
termination of this Agreement, this Section 9 shall terminate on the date of the
termination of this Agreement.
10. MATERIALITY AND REMEDIES. Employee acknowledges that a violation of
the noncompetition or nondisclosure provisions of Sections 8 and 9 will cause
irreparable injury to the Company in that its vital confidential or proprietary
knowledge will become public knowledge causing it to lose its competitive
advantage and goodwill. Therefore, since damage to the Company will be difficult
to ascertain, the Company shall be entitled without the showing or proving of
any factual damages sustained to a temporary restraining order or injunction
granted by a competent court of equity to prevent a breach or further breach of
Sections 8 and 9 of this Agreement. If a court should nevertheless require a
showing of damages, then the Company may meet this burden by showing it has a
legitimate business interest to protect and competition itself will be injurious
to the Company. Without regard to whether or not the Company seeks or is granted
equitable relief, the Company shall not be prejudiced in its right to seek and
be awarded damages for breach.
11. CHANGE OF CONTROL.
(a) Unless this Agreement has been earlier terminated before a
Change of Control of Commodore Holdings Limited, the Company's parent
("Commodore"), as defined below, Employee shall have the option in his
discretion to terminate this Agreement in writing within 30 days after the date
of the Change of Control and receive an amount equal to a continuation of his
salary and other benefits for the greater of:
(1) one year from the date of the Change of Control, or
4
<PAGE>
(2) the time remaining under this Agreement after the date of
the Change of Control. Payment shall be made to Employee in one lump sum within
30 days after receipt of Employee's notice of termination.
(b) A "Change of Control" shall have occurred on the date that a
majority of the persons on the Board of Directors of Commodore are persons (i)
who obtained their seats other than in the normal course as a result of death or
voluntary resignation and (ii) whose appointment to the Board was not with the
approval of the majority of the directors in office immediately before his
election to the Board of Directors.
12. INDEMNIFICATION. The Company shall indemnify Employee including,
without limitation, for legal fees, to the fullest extent provided or permitted
under Bermuda law to past or current directors and officers of the Company and
its affiliates in the performance of their duties which indemnification shall
survive the termination of this Agreement, anything else to the contrary in this
Agreement notwithstanding.
13. ARBITRATION. Any disagreement between Employee and the Company
concerning the interpretation or fulfillment of this Agreement shall be
submitted to arbitration pursuant to the rules then prevailing of the American
Arbitration Association in Miami-Dade County, Florida. The ruling of the
arbitrator shall be final and binding on the parties and shall be enforceable in
any court having jurisdiction thereof. The arbitrator shall have the authority
to award the costs of the arbitration, including, without limitation, the legal
fees and costs incurred by the parties, to either party as he deems appropriate.
14. ENTIRE AGREEMENT. This Agreement contains the entire agreement
concerning employment arrangements between the Company and Employee and
supersedes all prior written and oral understandings of the parties with respect
thereto. This Agreement may not be changed except by a writing signed by the
party against whom the enforcement of any waiver, change, extension,
modification or discharge is sought.
15. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered in person or sent by
certified mail to the party involved at the address shown on the signature page,
or to such other address as either party may specify to the other in writing.
The date two days after the date of mailing of such notice shall be deemed to be
the date of delivery thereof.
16. ASSIGNMENT. This Agreement shall inure to the benefit of, and shall
be binding upon, the Company, its successors and assigns, Employee, his heirs
and personal representatives, but may not be assigned by Employee.
17. SEVERABILITY. In the event any term, section or provision of this
Agreement or its application to any circumstances shall to any extent be deemed
invalid or unenforceable, the remainder of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
18. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
5
<PAGE>
19. CONSULTATION OF ATTORNEYS. The Company and Employee acknowledge
that they each have had the opportunity to consult its or his respective
attorney with respect to this Agreement and that they each understand its
contents.
20. SECTION HEADINGS. The section headings contained herein are for
reference only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
"Employee" "Company"
NEW COMMODORE CRUISE LINES LIMITED
/s/ JAMES R. SULLIVAN By: /s/ FREDERICK A. MAYER
- --------------------------- ------------------------------
JAMES R. SULLIVAN
Its: CHIEF EXECUTIVE OFFICER
Address: Address:
___________________________ 4000 Hollywood Boulevard
___________________________ Suite 385, South Tower
___________________________ Hollywood, FL 33021
6
EXHIBIT 10.4
OPERATING AGREEMENT
OF
CORONADO SEAS, LLC
BETWEEN
COMMODORE DAY CRUISES LIMITED
AND
PROMOCIONES TURISTICAS DE ROSARITO, S.A. DE C.V.
DATED APRIL 6, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1 DEFINITIONS....................................................................................1
Article 2 OFFICES AND STATUTORY AGENT....................................................................5
2.1 Principal Executive Office.....................................................................5
2.2 Other Offices..................................................................................5
Article 3 ESTABLISHMENT OF THE JOINT VENTURE.............................................................6
3.1 Establishment of the Joint Venture.............................................................6
3.2 Organization as a Limited Liability Company....................................................6
3.3 Name...........................................................................................6
3.4 Charter of Vessel..............................................................................6
3.5 Operations.....................................................................................6
3.6 Reservations...................................................................................8
3.7 Corporate Overhead.............................................................................8
3.8 Intellectual Property Assets...................................................................9
3.9 Representations and Warranties of the Members..................................................9
3.10 Covenants of Members..........................................................................10
Article 4 MEMBERS; MANAGEMENT; VOTING RIGHTS; MEETINGS OF DIRECTORS.....................................10
4.1 Members.......................................................................................10
4.2 Management Committee..........................................................................10
4.3 Management Committee Meetings.................................................................11
4.4 Voting........................................................................................12
4.5 Procedures in the Event of a Deadlock.........................................................14
4.6 Chief Executive Officer.......................................................................14
4.7 Executive Officers............................................................................15
4.8 Business Plan.................................................................................15
4.9 Budget Approval...............................................................................15
4.10 Employees and Employee Benefits...............................................................16
4.11 Arrangements with Members or Affiliates.......................................................17
4.12 Access to Books of Account....................................................................17
4.13 Duty of Members to Cooperate..................................................................17
4.14 Insurance and Risk Management.................................................................17
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
4.15 Limitations on Member's Authority.............................................................17
Article 5 CAPITAL CONTRIBUTIONS.........................................................................18
5.1 Initial Capital Contributions.................................................................18
5.2 Adjustments to Capital Accounts...............................................................18
5.3 Additional Capital Contributions..............................................................19
5.4 Procedure for Making Capital Calls by the Management Committee................................19
5.5 Failure of Member to Contribute Capital.......................................................19
5.6 No Third Party Beneficiaries..................................................................20
5.7 No Withdrawal of, or Payment of Interest on, Capitals Accounts................................20
5.8 Obligation to Restore.........................................................................20
Article 6 ALLOCATIONS, DISTRIBUTIONS, ACCOUNTING AND TAX MATTERS........................................20
6.1 Allocations...................................................................................20
6.2 Distributions and Reserves....................................................................21
6.3 Accounting Matters............................................................................22
6.4 Tax Status and Returns........................................................................22
6.5 Tax Matters Member............................................................................22
6.6 754 Election..................................................................................23
6.7 Membership Classification.....................................................................23
Article 7 TRANSFER OF INTERESTS; ADMISSION AND RESIGNATION OF MEMBERS...................................23
7.1 Transfer of Interests.........................................................................23
7.2 Right of First Refusal........................................................................24
7.3 Exempt Transfers..............................................................................25
7.4 Legend........................................................................................25
7.5 Admission of New Members......................................................................25
7.6 Resignation of Members........................................................................26
Article 8 DISSOLUTION/MANDATORY SALE....................................................................26
8.1 No Default Dissolution........................................................................26
8.2 Default Dissolution...........................................................................26
8.3 Mandatory Sale................................................................................27
8.4 Notice........................................................................................28
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.5 Dissolution Procedures........................................................................28
8.6 Settling of Accounts..........................................................................29
8.7 Distribution of Proceeds......................................................................29
8.8 Certified Liquidation Statement...............................................................29
8.9 Mandatory Sale Procedures.....................................................................30
Article 9 OUTSIDE ACTIVITIES; CONFIDENTIALITY...........................................................31
9.1 Outside Activities............................................................................31
9.2 Duties of Members.............................................................................31
9.3 Confidential Information......................................................................32
9.4 Duty of Members to Cooperate..................................................................33
Article 10 INDEMNIFICATION...............................................................................33
10.1 Limitation of Liability.......................................................................33
10.2 Indemnification: Proceeding other than by Joint Venture......................................33
10.3 Indemnification: Proceeding by Joint Venture.................................................34
10.4 Mandatory Indemnification.....................................................................34
10.5 Authorization of Indemnification..............................................................34
10.6 Mandatory Advancement of Expenses.............................................................34
10.7 Effect and Continuation.......................................................................35
10.8 Insurance and Other Financial Arrangements....................................................35
10.9 Notice of Indemnification and Advancement.....................................................35
10.10 Repeal or Modification........................................................................35
Article 11 INSPECTION OF JOINT VENTURE RECORDS; ANNUAL AND OTHER REPORTS.................................35
11.1 Records to be Kept............................................................................35
11.2 Inspection of Joint Venture Records...........................................................36
11.3 Financial Reports.............................................................................36
11.4 Joint Venture Auditors........................................................................36
Article 12 DEFAULTS AND REMEDIES.........................................................................36
12.1 Defaults......................................................................................36
12.2 Remedies......................................................................................36
12.3 No Waiver.....................................................................................36
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 13 DISPUTE RESOLUTION............................................................................37
13.1 Disputes......................................................................................37
13.2 Arbitration...................................................................................37
Article 14 MISCELLANEOUS.................................................................................40
14.1 Term..........................................................................................40
14.2 Amendments....................................................................................40
14.4 Nature of Membership Interest; Agreement Is Binding Upon Successors...........................40
14.5 Title to Property.............................................................................40
14.6 Attorney Fees.................................................................................40
14.7 Seal..........................................................................................41
14.8 Entire Agreement..............................................................................41
14.9 Third Parties.................................................................................41
14.10 Governing Law.................................................................................41
14.11 Counterparts..................................................................................41
14.12 Titles and Subtitles; Form of Pronouns; Construction and Definitions..........................41
14.13 Severability..................................................................................41
14.14 Costs.........................................................................................42
</TABLE>
-iv-
<PAGE>
OPERATING AGREEMENT
OF
CORONADO SEAS, LLC
THIS OPERATING AGREEMENT (this "Agreement") is made and entered into as
of the 6th day of April, 1999 by and between COMMODORE DAY CRUISES LIMITED, a
Bermuda corporation ("Commodore"), and PROMOCIONES TURISTICAS DE ROSARITO, S.A.
de C.V., a Mexican corporation ("Proturo").
W I T N E S S E T H
WHEREAS, the parties hereto wish to form and become Members of a
limited liability company, to be called CORONADO SEAS, LLC (the "Joint
Venture"), under and pursuant to Chapter 18 of the Delaware Statutes (the
Revised Delaware Limited Liability Company Act), for the purpose of operating a
cruise ship from San Diego, California, and such other business activities as
shall be approved by the members from time to time; and
WHEREAS, the parties agree that their respective rights, powers, duties
and obligations as members 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 18 of the Delaware Statutes (the Revised Delaware
Limited Liability Company Act), as from time to time in effect in the State of
Delaware, 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,
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.
<PAGE>
"AGREEMENT" means this Operating 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 from San Diego,
California to Rosarito, B.C., Mexico, and such other business activities as
shall be approved by the Members from time to time.
"BUSINESS PLAN" means the business plan of the Joint Venture described
in Article 4.8.
"CAPITAL ACCOUNT" means a Member'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 Members to
the Joint Venture pursuant to Article 5 hereof and, in the case of all the
Members, 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.
"CONCESSION" means the right to construct and operate a pier in
Rosarito, Baja California, Mexico, granted by the Mexican Secretaria de
Comunicaciones y Transportes to IRO (as hereinafter defined) on March 12, 1998.
"CONCESSION FEES" means those sums due and payable to Proturo, as agent
for IRO, pursuant to Section 7 of the Docking Agreement.
"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 Member, or any Affiliate of a Member furnished to a
Member, an Affiliate of a Member 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 Article 9.3 of this Agreement; (b)
already in the possession of the receiving Person (as defined below in this
Article) or its Representatives (as such term defined in Article 9.3 hereof)
without restriction (including restrictions contained in any confidentiality
agreement or other nondisclosure obligation entered into by the Member) 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.
-2-
<PAGE>
"DEFAULT RATE" means the rate announced from time to time by
NationsBank N.A. as its prime rate plus 5%.
"DOCKING AGREEMENT" means the Agreement between the Joint Venture and
IRO attached hereto as EXHIBIT "B".
"ESCROW DEPOSIT" means the aggregate of [*] as deposited in equal
amounts by Commodore and Proturo with Broad and Cassel, as escrow agent.
"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.
"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.
"GUARANTY" means the Guaranty executed by each of Commodore and
Proturo, in the form of EXHIBIT "A" hereto.
"GUARANTY LOAN" means a "Guaranty Loan" as defined in the Guaranty.
"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.
"INITIAL START-UP CAPITAL" means all capital necessary and required by
the Joint Venture to establish and commence operations, and shall include, but
shall not be limited to, the costs incurred
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-3-
<PAGE>
in connection with the acquisition, fitting, and preparation of the Vessel, its
relocation to San Diego, California, advertising and marketing for the Joint
Venture and other amounts set forth on the Joint Venture's Initial Budget, which
is attached hereto as EXHIBIT "G."
"INTEREST" means the entire ownership interest of a Member in the Joint
Venture at any particular time, including, without limitation, the right of such
Member to participate in the Joint Venture's income or losses and its Net Cash
Flow, and any and all other benefits to which a Member may be entitled as
provided in this Agreement and the Act, subject to the obligations of such
Member 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.
"IRO" means Inversiones Rosarito, S.A. de C.V., a Mexican corporation.
"MEMBER" shall mean each of the parties to this Agreement and any
Person (as defined below) who is admitted as a Member 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.
"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.
"PERCENTAGE INTEREST" means the allocable interest of each Member in
the income, gain, losses, deductions or credits of the Joint Venture. The
Percentage Interests of the Members are as set forth in SCHEDULE 3 hereto.
"PERSON" means any partnership, joint venture, association,
corporation, limited liability company, trust or other entity, or, where the
contexts so permits or requires, a natural Person.
"PRESENT OPERATIONS" means the Operations of the Joint Venture as
described in the Business Plan for its present fiscal year.
-4-
<PAGE>
"PROTURO FEES" means those amounts payable by the Joint Venture to
Proturo at the rate of [*], payable on a monthly basis, in arrears, and shall
be paid in addition to those sums payable as "Concession Fees" to Proturo, as
IRO's agent, pursuant to the Docking Agreement.
"REFERENCE RATE" means the rate announced from time to time by Citibank
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 Article 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 Sofia and/or the Enchanted Capris, or any 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.
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 Members within or without the State of
Florida.
2.2 OTHER OFFICES. The Members may at any time and from time to time
establish other business offices within or without the State of Florida.
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-5-
<PAGE>
ARTICLE 3
ESTABLISHMENT OF THE JOINT VENTURE
3.1 ESTABLISHMENT OF THE JOINT VENTURE. Upon execution of this
Agreement transfer of the Escrow Deposit to the Joint Venture and contribution
of the first installment of the Initial Capital Contributions due by each Member
as set forth on SCHEDULE 2 hereto, the Joint Venture shall commence its
existence. The purpose of the Joint Venture shall be for each of the Members to
provide its unique expertise and experience to the joint project of operating a
cruise ship between San Diego, California and Rosarito, Baja California, Mexico,
and such other business activities as shall be approved by the Members from time
to time.
3.2 ORGANIZATION AS A LIMITED LIABILITY COMPANY. Notwithstanding the
referral to the Joint Venture as a "Joint Venture," the Joint Venture shall
operate as a Delaware Limited Liability Company. The Joint Venture will be
managed by a Management Committee and none of the Members shall have the
authority to bind the Joint Venture by virtue of their status as Members of the
Joint Venture. The purpose of the Joint Venture shall be as described in Article
3.1.
3.3 NAME. The name of the Joint Venture shall be Coronado Seas, LLC 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. Commodore and Proturo shall together search for
a Vessel for the Joint Venture. All expenses of relocating any Vessel from its
then-current location to San Diego, California will be borne by the Joint
Venture. Thereafter, Commodore or its Wholly Owned Subsidiary shall charter the
Vessel to the Joint Venture (the "Charter Agreement") at a rate equal to [*]. If
Commodore sub-charters the Vessel to the Joint Venture (the "Joint Venture
Charter"), each of Commodore and Proturo shall execute a guaranty (the
"Guaranty") in the form of EXHIBIT "A", attached hereto, or such form as may
reasonably be requested by the owner of the Vessel. To the extent any security
deposit or letter of credit may be required to charter the Vessel, each of
Commodore and Proturo shall be responsible for half of such amount. In the event
Proturo is unable to contribute such amount, [*] Proturo such amount (the
"Charter Loan"). The terms of any Charter Loan shall be the same as any
Subsequent Capital Loan, as set forth in Article 5.1.
3.5 OPERATIONS. The Members shall operate the Joint Venture so as to
take advantage of their particular areas of expertise and experience.
Accordingly, the operation of the Joint Venture shall be divided among the
Members in the following manner:
(a) Commodore will operate the Vessel, and Proturo will
operate the Mexican pier located in Rosarito, B.C., Mexico (the "Rosarito Pier")
on behalf of IRO. The Members shall jointly establish the policies for the
operation of the casino, which policies shall be implemented by Commodore, with
the input and advice of the other party; including decisions with respect to the
management and operation of the casino and the purchase of casino equipment.
Commodore may provide services for the Vessel directly or through contracts with
others, except that Commodore may not contract with a third party to operate the
Casino on
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-6-
<PAGE>
board the Vessel without the approval of Proturo, which approval may be withheld
in Proturo's sole discretion.
(b) Commodore shall establish a sales and marketing office in
San Diego, California to market, promote, and operate the Vessel, and Proturo
shall coordinate and operate all facets of the Rosarito Pier, including, but not
limited to, obtaining all port and pier permits and permissions, ensuring that
passengers are able to safely and legally disembark at Rosarito, B.C., Mexico
and complying with all immigration and customs matters pertaining to docking the
Vessel and disembarking numerous passengers of U.S. and other citizenship.
(c) The marketing for the Joint Venture will be shared between
the Members, with Commodore marketing the base cruise from its office in Florida
and the Joint Venture's office in San Diego, California, and Proturo marketing
the Rosarito Pier (including shore excursions). The Management Committee of the
Joint Venture will agree upon the marketing and pricing schedule, 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 Article 4.9.
(d) Proturo shall ensure that the Rosarito Pier is fully
constructed, operational, and capable of receiving cruise ships, such as the
Vessel, not later than August 15, 1999. Proturo shall also arrange with IRO for
a port pilot or equivalent official to guide the Vessel into port at Rosarito,
B.C., Mexico. As compensation to Proturo for managing the Joint Venture's use of
the Rosarito Pier, the Joint Venture shall pay Proturo Fees to Proturo at any
time when the Joint Venture has use of the Rosarito Pier in accordance with the
Docking Agreement and is paying Concession Fees in accordance therewith. The
Joint Venture shall commence paying Proturo Fees thirty (30) days after payment
in full of the Pier Loan and the [*] Loan (as such terms are hereafter
defined) and shall continue to pay Proturo Fees on a monthly basis as and when
required to pay Concession Fees until the expiration or other termination of the
Docking Agreement.
(e) Proturo shall cause IRO to enter into the Docking
Agreement with the Joint Venture granting the Joint Venture the exclusive right
to land, dock and embark the Vessel at the Rosarito Pier, to the exclusion of
any other cruise ship or cruise line departing from the greater San Diego,
California geographical area. The Docking Agreement, which is attached hereto as
EXHIBIT "B", shall be executed on the date hereof.
(f) FINANCING OF PIER. Proturo shall arrange for the financing
necessary for IRO to complete the construction of the Rosarito Pier, which
arrangements shall be subject to Commodore's reasonable approval. [*] has loaned
Proturo [*] without interest (the "[*] Loan"). Commodore and IRO have loaned
Proturo an aggregate of [*] (the "Pier Loan"). The Pier Loan shall bear interest
at the rate of [*] per cent per annum and, together with the [*] Loan, shall be
repaid in [*] equal monthly installments of principal plus accrued interest,
pursuant to the principal repayment schedule attached hereto as SCHEDULE 1. It
is intended by the parties that the [*] the Joint Venture uses the Rosarito Pier
so that if the Joint Venture receives continuous use of the Rosarito Pier for
the first [*] of the Docking Agreement, [*], at the end of such [*] period. To
the extent the Joint Venture receives use of the Rosarito Pier
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-7-
<PAGE>
during the first twenty-four months of the Docking Agreement (as such [*] period
may be extended to the extent the Joint Venture does not receive use of the
Rosarito Pier for any period or periods of time therein), the scheduled [*] (as
such amounts may be prorated to reflect the availability of the Rosarito Pier)
shall be credited against amounts due, as and when due, and the Joint Venture
shall remit such amounts to Commodore, IRO and [*] in accordance with
SCHEDULE 1 as and when such payments are due. Commodore's portion of the Pier
Loan shall be memorialized by the loan agreement and promissory note
(collectively the "Loan Documents"), attached hereto as EXHIBIT "C".
(g) CONCESSION FEES. Upon execution of this Agreement and the
Docking Agreement, Proturo shall be entitled to a Concession Fee for the Joint
Venture's use of the Rosarito Pier as set forth in the Docking Agreement. The
Joint Venture shall pay the Concession Fee to Proturo on a monthly basis, in
arrears, commencing thirty (30) days the Vessel first docks at the Rosarito
Pier, and continuing on the same day of each consecutive month thereafter,
pursuant to the terms of the Docking Agreement.
(h) COMMODORE WARRANTS. Upon execution of this Agreement,
Commodore shall grant Proturo warrants (the "Warrants") to purchase 250,000
shares of common stock of Commodore Holdings Limited at an exercise price of
$6.00 per share, in the form attached hereto as EXHIBIT "D". Notwithstanding the
foregoing, the Warrants may not be exercised at any time when a Charter Loan,
Subsequent Capital Loan, Capital Call Loan, Pier Loan or Guaranty Loan is
outstanding and the Warrants shall act as security for the repayment of any such
loans. Upon exercise of any or all of the Warrants, Proturo may not sell or
transfer more than 62,500 shares of common stock of Commodore Holdings Limited
during any 90-day period without Commodore's prior written consent.
(i) INITIAL FINANCING OF VENTURE. Subject to Commodore's
rights under Article 8.1(e), during the first two years of this Agreement,
Commodore shall, at Proturo's request, [*] that are in excess of Proturo's [*]
Capital Contribution set forth on SCHEDULE 2. The terms of such loans shall vary
depending on the nature of each such loan (Charter Loan, Subsequent Capital Loan
or Capital Call Loan). Commodore's obligation to make loans to Proturo shall run
solely to Proturo's benefit and shall not be enforceable by any creditor of the
Joint Venture or Proturo.
3.6 RESERVATIONS. Reservations for the Joint Venture's Vessel will be
made through Commodore's reservations office using 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 Members can
provide to the Joint Venture, the Members may, where necessary and appropriate,
utilize the services of employees of each of the Members 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 Proturo'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
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-8-
<PAGE>
Committee. In addition, each Member 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 Members
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. Both parties shall be required to
provide such back-up documentation of such expenses as shall be required by the
Joint Venture's public accountants and in such detail as shall be required by
the Joint Venture. To the extent such Budgets include a salary for [*] the
Budget shall allocate the same amount of money to Commodore as reimbursement for
a portion of the salaries of its executive officers who dedicate time to the
Joint Venture.
3.8 INTELLECTUAL PROPERTY ASSETS. Each of the Members, as needed, shall
license certain of its Intellectual Property Assets to the Joint Venture for a
fee equal to US$1 per year for as long as such Member owns an Interest in the
Joint Venture and the Vessel is operating. Specifically, 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 Commodore on terms substantially similar to the those
contained in EXHIBIT "E" hereto.
3.9 REPRESENTATIONS AND WARRANTIES OF THE MEMBERS. Each Member
represents and warrants to each other Member and the Joint Venture as follows:
(a) Each Member 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 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 Member 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 Member, or its Affiliate, or
its respective assets are affected or bound.
(c) Except for that agreement dated February 26, 1999 between
New Gaming Systems and Rosarito Marina Resort d/b/a Promociones Turisticas de
Rosarito, S.A. de C.V. relative to the procurement of certain gaming devices
(the "Gaming Agreement"), there are no oral or written contracts, agreements, or
undertakings binding upon or affecting any Member or its Affiliate, or its
respective assets that would alter or impair the ability of such Member 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
Member or its Affiliate. Proturo and [*] shall indemnify the Joint Venture
and Commodore from any losses or expenses either of them may incur as a result
of any claims by New Gaming Systems that any agreements other than the Gaming
Agreement are binding upon the Joint Venture.
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
-9-
<PAGE>
3.10 COVENANTS OF MEMBERS. Each Member covenants to each other Member
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) Proturo will use its reasonable best efforts to operate
the Rosarito Pier on behalf of IRO, in accordance with applicable Mexican law
and the Docking Agreement and to implement and maintain internal controls with
respect to the Rosarito Pier as customarily implemented in the industry.
ARTICLE 4
MEMBERS; MANAGEMENT; VOTING RIGHTS; MEETINGS OF DIRECTORS
4.1 MEMBERS. Each of the parties to this Agreement, and each Person
admitted as a Member of the Joint Venture pursuant to the Act and Article 7 of
this Agreement, shall be a Member of the Joint Venture until ceasing to be a
Member as a result of the provisions of the Act or this Agreement. The names of
the initial Members are set forth on SCHEDULE 2 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 Member shall appoint two members of the
Management Committee (the "Directors"), except that at any time when a Charter
Loan, Pier Loan, Subsequent Capital Loan, Capital Call Loan or Guaranty Loan is
outstanding, only one Director appointed by Proturo shall be entitled to
exercise voting rights in connection with any matter requiring a vote by the
Management Committee in the exercise of its authority as quoted and designated
herein.
(b) Effective upon the giving of written notice to the other
Member, a Member 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 Member 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 Article 4.4 or elsewhere herein and including without
limitation the following matters:
(i) The approval of the Business Plan and Budget (as
defined in Article 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.
-10-
<PAGE>
Each Member, 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 Article 4.4(b))
to the CEO or to any other Executive Officer.
4.3 MANAGEMENT COMMITTEE MEETINGS.
(a) The Management Committee shall hold regular meetings (at
least monthly) at such time and place as shall be determined by the Management
Committee (or by the CEO). Special meetings of the Management Committee may be
called at any time by any Director by delivering the notice as provided in
Subsection (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
unanimous written consent of the Directors. 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 Article 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 Management Committee shall appoint such other officers
as it deems appropriate. Such additional officers may or may not be employees of
either Commodore or Proturo.
(g) 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 Member or of an Affiliate
thereof. Any such alternate shall be deemed to be a Director for all purposes
hereunder until such designation is revoked.
(h) 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
-11-
<PAGE>
expressly agreed to by the Director representing the Member 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.
4.4 VOTING.
(a) On any matter on which a vote is taken, each of the
Directors shall have one vote, except as provided in Article 4.2(a) of this
Agreement. At any time a Charter Loan, Pier Loan, Subsequent Capital Loan,
Capital Call Loan or Guaranty Loan is outstanding, the number of Directors
constituting a quorum for the transaction of business shall be two. At all other
times, 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 Subsection (b)
below, which shall require the affirmative vote of all 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 Members to the
Joint Venture or the issuance of any additional Interests in the Joint Venture;
(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 Article 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 Article 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 [*] in the
aggregate at anytime outstanding;
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-12-
<PAGE>
(ix) The determination to make any capital
expenditures or commitments therefor that aggregate in excess of [*] 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 Member or Affiliate;
(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 the Docking Agreement or a charter
agreement in accordance with the terms set forth in Section 3.4), which involve
an aggregate annual expenditure in excess of [*];
(xii) The authorization of any transaction between
the Joint Venture and any Member or Affiliate of a Member except the
authorization of a charter agreement in accordance with the terms set forth in
Section 3.4;
(xiii) The determination to engage a third-party
casino operator or procure gaming equipment;
(xiv) The taking of any action which may cause the
Joint Venture to become an entity other than a limited liability company; and
(xv) 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 Members 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 (the "Capital Call
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 Member 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 Member. In the
event such party fails to make such additional capital contribution within the
120-day period, the non-defaulting Member may elect any of the options under
Article 5.5 with respect to the Defaulting Partner's additional capital
contribution, may purchase the Defaulting Partner's Interest pursuant to Article
8.3 or dissolve the Joint Venture pursuant to Article 8.2. During the period
between the date such additional capital contribution is demanded and the
expiration of the 120-day period, the Member who does not dispute the additional
capital contribution may, but shall not be required to, make a Member Loan to
the Joint
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-13-
<PAGE>
Venture in the amount of the other Member's additional capital contribution,
which Member Loan shall bear interest at the Reference Rate until the decision
of the arbitrators is released. In the event that the arbitrators determine that
the additional capital call was not required, the Joint Venture shall refund any
Member Loan to the Member who made such Member Loan without interest. In the
event that such decision supports such additional capital contribution, the
interest rate on any Member Loan 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) The Dispute shall be submitted to arbitration pursuant to
the procedures set forth in Article 13. Each of Commodore and Proturo shall
select an arbitrator with experience in the area related to the source of the
Dispute and the two arbitrators shall together select a third arbitrator. The
decision of the arbitrators shall be final and binding on the Joint Venture,
Commodore and Proturo.
(b) Except as set forth in Article 4.5(c), 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 U.S. operations or marketing or the
operation of the Vessel, Commodore's decision shall control, and if the Dispute
relates to the operation or marketing of the Rosarito Pier, Proturo's decision
shall control. If the Dispute relates to a matter other than the U.S. operations
or marketing, or the operation of the Vessel or Rosarito Pier, no action shall
be taken respecting the matter pending the determination of the arbitrators and
the matter shall be STATUS QUO.
(c) Notwithstanding the provisions of this Article 4.5, a
deadlock with respect to any matter set forth in Article 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 Articles 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) Mr. Frederick Mayer shall act as the CEO of the Joint
Venture and shall serve at the discretion of the Management Committee. The CEO
also may serve as an executive officer or employee of one of the Members or an
Affiliate thereof.
(c) Subject to Articles 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;
-14-
<PAGE>
(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 [*] for any transaction or series of related transactions;
(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 Management Committee shall appoint such other officers
as it deems appropriate (the "Executive Officers"). An Executive Officer may
also be an officer or employee of one of the Members or an Affiliate.
(b) 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 "F" are the Joint
Venture's initial business plans (collectively, the "Business Plan"), which has
been approved by the Members. The Business Plan consists of a pre-operation
business plan from March 1, 1999 to May 31, 1999, and an operational business
plan from June 1, 1999 to September 30, 1999. 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 "G" is the Joint Venture's
Initial Budget (including the items of corporate overhead to be charged to the
Joint Venture) for the period ending September 30, 1999, which has been approved
by the Members.
(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. The Budget shall include an income statement, balance sheet, and
capital budget prepared consistently with the Joint Venture's method of
accounting, for the 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.
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-15-
<PAGE>
(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 Member in connection with services to be provided by such
Member 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) Except as set forth in Article 4.9(g), 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.
(g) Notwithstanding anything to the contrary contained herein,
exclusive of Article 4.9(e), at any time when there is a Charter Loan,
Subsequent Capital Loan, Capital Call Loan, Pier Loan or Guaranty Loan
outstanding, in the event of any disagreement regarding a budget for the Joint
Venture, Commodore's decision shall be binding on the Joint Venture with regard
to the Budget.
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 and which personnel shall be hired by the Joint
Venture, in accordance with the Business Plan and Budget and subject to
arrangements under Article 4.11. Except for personnel who are employees of a
Member and who are appointed by such Member to work for the Joint Venture and
for Executive Officers who also are employees of a Member or an Affiliate
thereof, unless otherwise agreed to, all Joint Venture personnel will be
employees of the Joint Venture and not of either Member. In the event that the
Joint Venture hires an employee of a Member, each Member shall indemnify the
Joint Venture against any claims that the transfer of that employee amounted to
a termination of employment.
(b) Notwithstanding anything contained in this Article 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.
-16-
<PAGE>
4.11 ARRANGEMENTS WITH MEMBERS 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 Members a bona fide written offer for
such a contract. Unless otherwise provided in the Agreement, if any Member or
any Affiliate of a Member elects to bid for any such contract, the Management
Committee may, by unanimous approval, award a contract to the bidding Member of
Affiliate of a Member 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 Members, 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 Member pursuant to a corporate overhead
allocation.
(b) Subject to Article 4.11(a), the Joint Venture may enter
into contracts with a Member 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 Member or any Affiliate of Member shall not be affected
by reason of the relationship between the Joint Venture and a Member or such
Affiliate of a Member.
4.12 ACCESS TO BOOKS OF ACCOUNT. Notwithstanding any other provision of
this Agreement, each Member 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 Member designated by it or by independent certified public accountants
or counsel designated by such Member. Each Member shall bear all expenses
incurred in all examinations made for such Member's account.
4.13 DUTY OF MEMBERS 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 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 Member 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. The Joint Venture and each Member shall be named as additional assureds
under that program.
4.15 LIMITATIONS ON MEMBER'S AUTHORITY. No Member shall have the right
to bind the Joint Venture or act on behalf of the Joint Venture by virtue of
such Member's ownership of an Interest, it being the intention of the Members
that the Joint Venture be managed by the Management Committee and the Executive
Officers, including the CEO, appointed by such Management Committee.
-17-
<PAGE>
ARTICLE 5
CAPITAL CONTRIBUTIONS
5.1 INITIAL CAPITAL CONTRIBUTIONS. Each Member shall make Capital
Contributions to the Joint Venture in cash, in installments pursuant to the
funding schedule, as set forth on SCHEDULE 2 hereto. Upon receipt of each such
Capital Contribution, the Joint Venture shall credit each Member's Capital
Account with the amount of such Member's Capital Contribution. Upon execution of
this Agreement, the [*] previously deposited by each Member into an
interest-bearing escrow account with Broad and Cassel (the "Escrow Deposit")
shall be contributed to the Joint Venture in order to commence initial
operations. In addition, within [*] days after the funding of the [*], each
Member shall contribute an additional [*] to the Joint Venture. The balance of
the Capital Contributions (the "Subsequent Capital Contributions") shall be paid
as provided in SCHEDULE 2 hereto. In the event Proturo is unable to contribute
any or all of the Subsequent Capital Contributions to the Joint Venture, [*].
Any such loan (a "Subsequent Capital Loan") shall be for a term not less than
[*], shall bear interest at [*] and shall be [*]. The Subsequent Capital Loan
shall be repaid, to the extent funds are available, as described in Article
6.2(a)(ii); provided, however, that in the event distributions under Article
6.2(a)(ii) are insufficient to repay such loan, according to its terms, the
balance of any such loan, if and only if, made within two years after the date
hereof, shall not become due until two years after the date of this Agreement
(the "Deferral Date"), at which time such loan shall be due and payable in full.
Amounts deferred until the Deferral Date pursuant to this Article 5.1 shall not
be deemed past due.
5.2 ADJUSTMENTS TO CAPITAL ACCOUNTS.
(a) GENERALLY. Subject to Article 5.1, each Member's Capital
Account shall be increased by:
(i) the amount of money contributed by it or on its
behalf to the Joint Venture;
(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 ss.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 Member is considered to assume or take subject to under IRC ss.752);
and
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-18-
<PAGE>
(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 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 Members shall be adjusted
simultaneously to reflect the allocations of gain or loss that would be Members
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 Members' 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
Members 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 Member, such
Member's Capital Account as determined under the preceding provisions of this
Article 5.2, increased by such Member'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 Article 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 Member 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.
5.4 PROCEDURE FOR MAKING CAPITAL CALLS BY THE MANAGEMENT COMMITTEE.
Subject to Article 4.4(c), all calls for Additional Capital Contributions
pursuant to Article 5.3: (a) shall have been unanimously approved by the
Management Committee, (b) shall be in writing delivered to each Member, (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 Member'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 Member's receipt of the written call.
5.5 FAILURE OF MEMBER TO CONTRIBUTE CAPITAL. If a Member (the "Debtor
Member") 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
Article 5.4, the other Member (the "Non-Debtor Member") may exercise one or more
of the following remedies:
(a) ASSIST DEBTOR MEMBER. The Non-Debtor Member may, in its
sole discretion, assist the Debtor Member to secure third-party financing for
the Additional Capital Contribution.
(b) SET-OFFS. Cause the Joint Venture to set-off against any
distributions otherwise due from the Joint Venture to the Debtor Member the
amount of capital due to the
-19-
<PAGE>
Joint Venture from the Debtor Member, and apply such amount to such capital
contribution required to be made by the Debtor Member.
(c) LOAN BY THIRD PARTY. In lieu of an Additional Capital
Contribution by either Member, cause the Joint Venture to borrow from a third
party the amount otherwise due from both Members without the requirement for the
consent of the Debtor Member or its representative Directors.
(d) LOAN TO DEBTOR MEMBER. The Non-Debtor Member may, in its
sole discretion, loan the Debtor Member such amounts required to meet the
Additional Capital Contribution requirements. During the first two years of this
Agreement, Commodore shall loan Proturo any amounts required for Additional
Capital Contributions. Any loan made under such circumstances (a "Capital Call
Loan") shall have the same terms as a Subsequent Capital Loan, except that the
interest rate shall be the greater of the Reference Rate or such rate of
interest actually paid by Commodore to procure such funds.
(e) REFUSE TO MAKE CAPITAL CONTRIBUTION. Refuse to make any
Additional Capital Contributions without being in default of any provision of
this Agreement.
(f) 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 Member, the amount set-off shall be deemed to have been
distributed to the Member and contributed by the Member to the Capital of the
Joint Venture.
5.6 NO THIRD PARTY BENEFICIARIES. The rights of the Joint Venture, or
either Member, 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
Member shall have any right to withdraw or make a demand for withdrawal of all
or any portion of such Member's capital (or the amount, if any, reflected in
such Member's Capital Account). No interest or additional share of profits shall
be paid or credited to the Members 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 Members.
5.8 OBLIGATION TO RESTORE. Upon liquidation of the Joint Venture (or
any Member's interest in the Joint Venture), a Member 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 Member.
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.
-20-
<PAGE>
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 within sixty (60) days after the end of such quarter, as follows:
(i) REPAY MEMBER LOANS. to repay any principal and
interest on loans to the Joint Venture by Members ("Member Loans");
(ii) THE BALANCE. to the Members in accordance with
their respective Percentage Interests; PROVIDED, HOWEVER, that at any time when
there is a Charter Loan, Subsequent Capital Loan, Capital Call Loan, Pier Loan
or Guaranty Loan outstanding, [*] of all distributions and Proturo Fees to be
paid to Proturo shall be applied toward principal and interest outstanding on
the loan or loans.
(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 Article 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 Member may
not be taxable on that Member's share of such income (e.g., because that Member
may be exempt from tax on such income under Article 883(a) of the Code, or
because that Member has losses from other sources to offset such income), shall
not be taken into account. The Tax Reserve shall be paid to the Members 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) PRIORITY AND DISTRIBUTION OF PROPERTY. Except as expressly
provided in this Agreement, no Member shall have priority over any other Member
as to the return of capital, allocation of income or losses, or distributions of
cash or any other distributions. No Member 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.
(d) 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 Articles 1441, 1442, 1445 or 1446 of the Code, unless otherwise
provided in Article 6.2(g)) to the Members, such distribution to be allocated
among the Members based on each Member's Percentage Interest.
(e) ADDITIONAL DISTRIBUTION PROVISIONS. Upon liquidation of
any Member's interest in the Joint Venture, liquidating distributions are
required in all cases to be made in accordance with Article 8.7.
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
-21-
<PAGE>
(f) FOREIGN MEMBERS. If the Joint Venture withholds any income
tax with respect to any foreign Member pursuant to Articles 1441, 1442, 1445 or
1446 of the Code or pursuant to applicable Mexican tax laws, the Joint Venture
will, at its option, either (x) require the foreign Member to repay such amount
to the Joint Venture within 45 days thereafter; or (y) offset any distributions
otherwise payable to the foreign Member by the amount of such payments.
6.3 ACCOUNTING MATTERS. The Members 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 Commodore'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 Members 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 Members.
(b) The Members 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 Members 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 Member, employee or
other Person and shall timely deliver such statements to such Persons. Within 90
days after the end of each fiscal year, the Members or such other Person as the
Members may direct shall prepare or cause to be prepared and delivered to each
Member a report setting forth in reasonable detail the information with respect
to the Joint Venture during such calendar year reasonably required to enable
each Member to prepare its federal, state and local income tax returns in
accordance with applicable law then prevailing.
6.5 TAX MATTERS MEMBER.
(a) The Tax Matters Member of the Joint Venture within the
meaning of section 6231(a)(7) of the Code shall be Commodore. 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 Member 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 Member 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 Members.
(b) The Tax Matters Member shall promptly advise the other
Members of all audits or other actions by the Internal Revenue Service and shall
furnish to the Joint Venture and to each Member a copy of each notice or other
communication received by the Tax Matters
-22-
<PAGE>
Member from the Internal Revenue Service except such notice or communication
sent directly to the Members by the Internal Revenue Service. All reasonable
expenses incurred by the Tax Matters Member in its 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 Proturo, which consent shall not be unreasonably
withheld.
(c) To the fullest extent permitted by law, the Joint Venture
shall indemnify the Members on an after-tax basis against any liabilities
incurred while acting as the Tax Matters Member of the Joint Venture but only to
the extent such Member acts within the scope of its authority as Tax Matters
Member under this Agreement. The Tax Matters Member 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 Member.
(d) No Member shall file a notice with the Internal Revenue
Service under section 6222(b) of the Code in connection with such Member's
intention to treat an item on such Member'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 Member has, not less than 30
days prior to the filing of such notice, provided the other Member with a copy
of the notice and thereafter in a timely manner provides such other information
related thereto as the other Member shall reasonably request.
6.6 754 ELECTION. In the event of a distribution of property to a
Member 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 MEMBERSHIP 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 MEMBERS
7.1 TRANSFER OF INTERESTS. Except as set forth in this Article 7, no
Member 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 Member, unless all Members approve the transfer in
writing. For all purposes of this Article 7, a transfer of a Member's Interest
in the Joint Venture shall be deemed to occur upon any change in control of such
Member. Any transfer of all or any portion of a Member's Interest in the Joint
Venture, in violation of this Article (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 Member's Interest is transferred by operation of law, the transferee of
such Interest shall not be a Member unless and until admitted to Membership in
accordance with the provisions of Article 7.5 and shall, until such time, be
considered merely an assignee of Economic Interests (as hereafter defined).
Notwithstanding the
-23-
<PAGE>
foregoing, any pledge, hypothecation or grant of a security interest in any
Interest shall not require the consent of any Members 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 part of a Member's Interest shall not cause
the Member to cease to be a Member. 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 Member ("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 Member 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 Member
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 Member would be entitled under this Agreement, and only if,
as and when such distributions are made by the Joint Venture. Neither the Joint
Venture nor any Member 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) Each of Commodore and Proturo shall a have a right of
first refusal with respect to the other Member's interest in the Joint Venture
(which right shall include the ability to assign such right to a purchaser
preferred by the other Member). If any Member 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 Member (the
"Seller") shall promptly give written notice (the "Notice") to the Joint Venture
and to the other Member (the "Non-Selling Member") 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. Notwithstanding the foregoing,
Proturo's right of first refusal shall only be valid at a time when there is no
Charter Loan, Subsequent Capital Loan, Capital Call Loan, Pier Loan or Guaranty
Loan outstanding or, if such a loan or loans is outstanding, when Proturo's
exercise of its right of first refusal is conditioned upon repayment of any
Charter Loan, Subsequent Capital Loan, Capital Call Loan, Pier Loan or Guaranty
Loan in full (whether by Proturo or by a third party) concurrently with the
closing of the sale of the Proposed Sale.
(b) The Non-Selling Member shall have the right, exercisable
upon written notice to the Seller within thirty (30) days after receipt of the
Notice, to purchase the Percentage Interest To Be Sold on the same terms and
conditions of the Proposed Sale.
(c) In the event the Non-Selling Member declines to purchase
the Percentage Interest To Be Sold, the Seller may consummate the Proposed Sale
with the third party.
(d) Notwithstanding anything to the contrary herein, the
Seller may not consummate a Proposed Sale to a Person if the Non-Selling Member
objects to such Person and the objection is based on a reasonable concern.
-24-
<PAGE>
7.3 EXEMPT TRANSFERS. Notwithstanding the foregoing, the first refusal
rights of the Members 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 Article 7.1); (ii) transfers occurring subsequent to
the two (2) year anniversary date of the execution of this Agreement of any
Member's entire Interest to an Affiliate, provided the transferring Member 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 Members; or (v) to another
Person as part of a merger, reorganization, consolidation or sale of all or
substantially all of the assets of Proturo or Commodore, provided that such
Person is not objectionable as provided in Article 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 Members or issued to any Person in connection with a
transfer pursuant to Article 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 MEMBERS 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.
(c) Each Member 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 Article 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 MEMBERS.
(a) Subject to this Article and to the Act, no Person shall be
admitted as a Member of the Joint Venture unless all the Members shall have
unanimously approved the admission of such Person as a new Member and shall have
agreed in writing upon the amendments, if any, to be made to this Agreement as a
result of such admission.
-25-
<PAGE>
(b) Upon the admission of a new Member 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 Members, in their sole and absolute
discretion, consider reasonable, and the Capital Accounts of the existing
Members 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 Member.
(c) Notwithstanding the foregoing, without the prior approval
of both Proturo and Commodore, the Joint Venture shall not sell additional
Interests in the Joint Venture to any other person or dilute or otherwise change
the Percentage Interests of either Commodore or Proturo in the Joint Venture
except as a result of a default on a Capital Call Loan or the transfer of either
Member's Interest in the Joint Venture as described herein.
7.6 RESIGNATION OF MEMBERS. No Member may resign or withdraw from the
Joint Venture without the prior express written consent of all the other
Members.
ARTICLE 8
DISSOLUTION/MANDATORY SALE
8.1 NO DEFAULT DISSOLUTION. The Joint Venture shall be dissolved and
its affairs wound up in accordance with Article 8.5 hereof upon the first to
occur of the following:
(a) Upon the expiration of the term specified in Article 14.1
of this Agreement;
(b) Issuance of an order by a court of competent jurisdiction,
requiring the dissolution of the Joint Venture;
(c) [*]
(d) [*]
(e) [*]
(f) The written consent of all the Members.
8.2 DEFAULT DISSOLUTION. A Non-Defaulting Member may give notice to a
Defaulting Member dissolving the Joint Venture upon the occurrence of any one of
the following events with respect to the Defaulting Member (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
Member or its Parent Entity to wind up, dissolve, cancel its incorporation or
otherwise terminate its corporate existence; or
(b) any action or proceeding is commenced against the
Defaulting Member which seeks or requires the winding up, dissolution,
revocation or cancellation of its incorporation or
- ------------
* Marked text omitted pursuant to an application for an order for confidential
treatment by Commodore Holdings Limited.
-26-
<PAGE>
other termination of its corporate existence unless the action or proceeding is
defended or contested in good faith by the Defaulting Member 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 Member 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 Member pursuant to
Article 12.1, which has not been cured within the applicable cure period; or
(e) the Defaulting Member 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 Member unless the appointment is defended or contested
in good faith by the Defaulting Member 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 Member 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
Member 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 Member 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 Member 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 Proturo or Commodore 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; or
(k) any failure by the Defaulting Member to make any
Additional Capital Contribution pursuant to Article 4.4(c) within 120 days after
the final decision of the arbitrators pursuant to Article 13 that such
Additional Capital Contribution is required for Seaworthiness or for items of
necessity to continue the Present Operations or pursuant to Article 5.5 within
the period specified therein; provided, however, it shall not be an Event of
Default by Proturo if it fails to make an Additional Capital Contribution
required within two years of the date hereof, unless Commodore has offered to
make a Capital Call Loan to Proturo, in the amount of such Additional Capital
Contribution, and Proturo has refused such loan.
8.3 MANDATORY SALE. Upon the occurrence of any of the events set out in
Article 8.2(a) through (k) with respect to a Member, as an alternative to giving
notice dissolving the Joint Venture, the Member entitled to dissolve the Joint
Venture (in this Article 8 referred to as
-27-
<PAGE>
the "purchasing Member") may give notice to the other Member (in this Article 8
referred to as the "selling Member") requiring the selling Member to sell its
Interest in the Joint Venture to the purchasing Member for the Purchase Price
(as defined in Article 8.9) and on the terms and conditions hereinafter
provided.
8.4 NOTICE.
(a) NOTICE OF ELECTION TO DISSOLVE. A Member electing to
dissolve the Joint Venture, pursuant to Article 8.2, must give notice of
dissolution to the other Member 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 Article 8.2 (unless there is a Dispute as
to the right to dissolve), the Member 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 Member giving the notice for all matters requiring
the vote of the Members with respect to the Joint Venture.
(b) NOTICE OF INTENTION TO BUY. The purchasing Member under
Article 8.3 must give notice of its intention to buy the interest of the selling
Member in the Joint Venture (the "Purchase Notice") within 60 days of the date
upon which the purchasing Member 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 Member 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 Member shall be deemed to have given its proxy to the
purchasing Member for all matters requiring the vote of the Members 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 Article 8.1,
the Members shall proceed to wind up the affairs of the Joint Venture in the
manner hereinafter provided; or
(ii) DEFAULT DISSOLUTION. Pursuant to Article 8.2,
the Member giving notice of dissolution shall wind up the affairs of the Joint
Venture in the manner hereinafter provided on behalf of the Members.
(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 Members or the Non-Defaulting
Member, 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 MEMBERS. Each Member shall immediately
pay to the Joint Venture all amounts owing to the Joint Venture, less any
amounts owed by the Joint Venture to the Member.
-28-
<PAGE>
(d) CANCELLATION OF VESSEL CHARTER. The Joint Venture and
Commodore or its wholly owned subsidiary shall agree to cancel the charter of
the vessel. Such cancellation shall be without penalty to the Joint Venture
except that Commodore or its wholly owned subsidiary shall retain all amounts
paid by the Joint Venture pursuant to the Charter Agreement.
(e) DISTRIBUTIONS. During the course of liquidation, the
Members shall continue to share profits and losses as provided in Article 6 of
this Agreement, but there shall be no cash distributions to the Members until
the distribution pursuant to Article 8.7(d).
8.6 SETTLING OF ACCOUNTS. Subject to section 18-801 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 Members or on account of Members' contributions;
(c) third, to pay all debts of the Joint Venture owing to a Member; 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 Members pursuant to Article 8.7 hereof.
8.7 DISTRIBUTION OF PROCEEDS. Subject to Article 18-801 of the Act,
upon final liquidation of the Joint Venture, the net proceeds of liquidation
shall be distributed to the Members in the following order of priority:
(a) to creditors, including Members who are owed Member Loans
to the extent of any unpaid expenses or any outstanding loan or advance;
(b) to the Members 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 Members who are owed on a Charter Loan, Subsequent
Capital Loan, Capital Call Loan, Pier Loan or Guaranty Loan to the extent of any
outstanding loan or advance;
(d) to the Members 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 Regulations
ss.1.704-1(b), such adjustments to be made within the time specified in such
Treasury Regulations; and
(e) after each Member has received the amount in its Capital
Account, to the Members in proportion to their respective Percentage Interests.
8.8 CERTIFIED LIQUIDATION STATEMENT. The Members, in the event of a
liquidation of the Joint Venture following dissolution pursuant to Article 8.1,
or the Non-Defaulting Member, in the event of a liquidation of the Joint Venture
following dissolution pursuant to Article 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;
-29-
<PAGE>
(ii) a statement of the debts and liabilities of the
Joint Venture owing to each Member;
(iii) a determination of the Capital Account of each
Member;
(iv) an allocation between the Members 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
Members. Each Member 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. The Purchase Price payable by the purchasing
Member for the interest of the selling Member in the Joint Venture (the
"Purchase Price") shall be an amount equal to 100% of the net book value of the
selling Member'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.
(b) CLOSING -- GENERALLY. The purchase and sale of the selling
Member's interest in the Joint Venture shall be consummated (the "Closing") at
the office of the purchasing Member's counsel, on the date which is 30 days
following the receipt by the selling Member of the Purchaser Notice.
(c) CLOSING -- SELLING MEMBER DELIVERIES. At the Closing, the
selling Member shall deliver to the purchasing Member the following duly
executed documentation, in form acceptable to the purchasing Member 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
Member 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 Member by the selling Member in respect of the
Joint Venture except for claims arising from the unauthorized actions of the
purchasing Member in respect of the Joint Venture which have not been disclosed
to the selling Member; and
(v) such other documentation as the attorneys for the
purchasing Member may require, acting reasonably, in order to vest in the
purchasing Member full right, title and interest in and to the Interest of the
selling Member in the Joint Venture and to reflect the assignment and transfer
of the interest of the selling Member in all of the underlying assets of the
Joint Venture, including, without limitation, the interest in the Vessel.
-30-
<PAGE>
(d) CLOSING -- PURCHASING MEMBER DELIVERIES. At the Closing,
the purchasing Member shall pay the selling Member the Purchase Price for the
Interest of the selling Member 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 Member shall deliver to the selling Member the following duly
executed documentation in a form acceptable to the selling Member, acting
reasonably:
(i) an indemnity of the Joint Venture and the
purchasing Member indemnifying the selling Member against any claims arising
from the conduct of the business of the Joint Venture from and after the time of
Closing; and
(ii) a general release of all claims against the
selling Member by the Joint Venture or the purchasing Member in respect of the
Joint Venture except for claims arising from the unauthorized actions of the
selling Member in respect of the Joint Venture which have not been disclosed to
the purchasing Member.
(e) At the Closing, the selling Member shall repay to the
Joint Venture or the purchasing Member, as the case may be, any amounts owing to
such parties, and the Joint Venture or the purchasing Member, as the case may
be, shall repay to the selling Member any amounts owing to it, which repayments
may occur as a set off of the respective amounts. If the amounts owed to the
purchasing Member by the selling Member and the Joint Venture exceed the amount
owed by the purchasing Member to such parties, the purchasing Member 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 Member 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 Member shall have any right by virtue of this Agreement in or to such
Member'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 Member 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 within the geographical zone
as described herein as the greater San Diego metropolitan area.
(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
Member or any Affiliate has to the other Members or their Affiliates as to
matters outside the scope of this Agreement.
9.2 DUTIES OF MEMBERS. The fiduciary duties of Members shall not
restrict any Member or Affiliate from:
(a) engaging in conduct not expressly prohibited by Article 9;
or
-31-
<PAGE>
(b) acting to prevent the Joint Venture from engaging in an
activity that is outside the scope of the Business;
whether or not such Member 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 Member 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
Member 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 Article 9.3;
and such Member disclosing Confidential Information pursuant to this Article 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 Member
is required by law, GAAP or a Governmental Body that regulates it 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 Member 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 Member or any Affiliate thereof received or acquired by or
disclosed to any other Member 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 Member or Affiliate thereof for any purpose other than for
the benefit of the Joint Venture in conducting the Business.
(c) In the event that a Member or anyone to whom a Member
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 Member will use its best efforts to provide the
other Member and the Joint Venture with prompt written notice prior to
disclosure (not less than 24 hours) so that the other Member 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 Member waive compliance with the provisions of this Article 9.3, the
Member or Person who is compelled to disclose such Confidential Information will
furnish only that portion of the
-32-
<PAGE>
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 Member who ceases to be such will, and will cause its
Affiliates and Representatives to, maintain the confidentiality required by this
Article 9.3 and to destroy or return upon request, all documents and other
materials, and all copies thereof, obtained by such Member or on its behalf from
either the Joint Venture or the other Members or any of their Affiliates in
connection with the transactions leading up to and contemplated by this Joint
Venture. The obligations under this Article 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 Member or any
of its Affiliates or Representatives breaches, or threatens to commit a breach
of, this Article 9.3, the other Member and the Joint Venture shall have the
right and remedy to have this Article 9.3 specifically enforced, it being
acknowledged and agreed that money damages will not provide an adequate remedy
to such other Member or the Joint Venture. Nothing in this Article 9.3 shall be
construed to limit the right of any Member or the Joint Venture to collect money
damages in the event of breach of this Article 9.3.
(f) Notwithstanding anything to the contrary, the provisions
of Article 9.3 shall not apply to any information that is publicly available
when provided or that thereafter becomes publicly available other than through a
breach of the Members or their Representatives of the agreements contained in
this Article 9.3.
9.4 DUTY OF MEMBERS TO COOPERATE. Each Member 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
any Government Body, and take such other action reasonably requested by the
Joint Venture or the other Members 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
Members, 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 Member for any action taken or
failure to act on behalf of the Joint Venture within the scope of authority
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 Member, Affiliate of a Member, member of the
Management Committee or Executive Officer and may indemnify any other Person who
was or is a party or is threatened to
-33-
<PAGE>
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 Member, 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 plea 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 Member, 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 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 Member, officer,
employee or agent of the Joint Venture requests indemnification pursuant to
Article 10.2 or has been successful on the merits or otherwise in defense of any
action, suit or proceeding described in Articles 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.
10.5 AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
Article 10.3, unless ordered by a court or advanced pursuant to Article 10.4,
may be made by the Joint Venture only as authorized in the specific case upon a
determination that indemnification of the Member, officer, employee or agent is
proper in the circumstances.
10.6 MANDATORY ADVANCEMENT OF EXPENSES. The expenses of Members 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 Article 10.2 or upon receipt of
-34-
<PAGE>
an undertaking by or on behalf of the Member 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 Article
10.6 do not affect any rights to advancement of expenses to which personnel of
the Joint Venture other than Members 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 Members, 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 Article 10.4 for the advancement of expenses made pursuant to
Article 10.6, may not be made to or on behalf of any Member 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 Member,
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,
Member, 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 Member, 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 Member 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 Members with or before the notice of the
next Members' meeting.
10.10 REPEAL OR MODIFICATION. Any repeal or modification of this
Article 10 by the Members of the Joint Venture shall not adversely affect any
right of a Member or officer of the Joint Venture existing hereunder at the time
of such repeal or modification.
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 Member and its designated Directors
separately identifying the Members 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 income tax returns and
reports, if any, for the three (3) most recent years; and
-35-
<PAGE>
(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 Member at any reasonable time during usual business hours. Such inspection
by a Member 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 45 days after
the close of each fiscal quarter and within 90 days after the close of each
fiscal year, deliver or mail to the Members the quarterly financial statements
and annual financial statements, respectively, of the Joint Venture. The Joint
Venture shall also prepare abbreviated monthly financial reports with respect to
the Joint Venture and provide such reports to the Members 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 Member demanding an examination of them or a copy
shall be mailed to such Member. The quarterly income statements and balance
sheets referred to in this Article 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 Proturo's reasonable approval.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 DEFAULTS. An Event of Default shall occur if a Member commits an
act described in Article 8.2 as being an act of a Defaulting Member 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 Member to the
Defaulting Member, 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 Member shall have the right, in addition to all other rights and
remedies provided herein (including rights under Article 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 Article 8.2, or both.
12.3 NO WAIVER. No consent or waiver, express or implied, by a Member
to or of any breach or default by another Member in the performance by such
other Member of its obligations
-36-
<PAGE>
under this Agreement shall constitute a consent to or waiver of any similar
breach or default by such Member. Failure by a Member to complain of any act or
omission to act by another Member, or to declare such other Member in default,
irrespective of how long such failure continues, shall not constitute a waiver
by such Member of its rights under this Agreement.
ARTICLE 13
DISPUTE RESOLUTION
13.1 DISPUTES. Except for actions described in Article 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
Article 13.2 (Arbitration). Judgment upon the award may be entered in any court
specified by the parties in this Agreement, 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.
(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 Article, 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 Article 13.2 (Arbitration), the provisions of this
Article 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 Article 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) days 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
-37-
<PAGE>
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.
(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
Article 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
-38-
<PAGE>
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 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.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, 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 shall 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
accordance with Article 14.5 of this Agreement. 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
-39-
<PAGE>
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.ss. I - 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 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
10 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 Members. Any such amendment shall be in writing, duly executed
by all the Members.
14.3 FINDERS. Each Member represents that no person has acted as finder
in connection with the Joint Venture and each agrees to indemnify the other with
respect to any claim for any finder's fee as a result of the transactions
contemplated hereby. In the event of any claim for a fee made by Malcolm Harris,
Proturo shall be responsible for such fee and shall indemnify Commodore with
respect to such claim.
14.4 NATURE OF MEMBERSHIP INTEREST; AGREEMENT IS BINDING UPON
SUCCESSORS. A membership interest is personal property. A Member 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 Member and the Joint
Venture. The successor of any Member shall be bound by the provisions of this
Agreement, including without limitation, Article 7.
14.5 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 Member shall have the right, and each Member does hereby agree
that it shall not seek, to cause a partition of the Joint Venture's property
whether by court action or otherwise.
14.6 ATTORNEY FEES. In the event that any dispute between the Joint
Venture and the Members or among the Members should result in litigation or
arbitration, the prevailing party in
-40-
<PAGE>
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 Article: (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.
14.7 SEAL. The Members may adopt a seal of the Joint Venture in such
form as the Members shall decide.
14.8 ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto, constitutes the entire agreement between the Members with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, representations, and understandings of the 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.
14.9 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.
14.10 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.
14.11 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.
14.12 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 Articles or
Articles are to the Articles or Articles in this Agreement. Unless the context
otherwise requires, the term "including" shall mean "including, without
limitation."
14.13 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
-41-
<PAGE>
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.
14.14 COSTS. Each Member, 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, provided however, that fees and expenses of Commodore's counsel,
Broad and Cassel, and Basham, Ringe y Correa, S.C., incurred after August 6,
1998 in connection with the negotiation and execution of the letter of intent,
this Agreement and the Pier Loan, and the cost of surveying the Vessel, shall be
paid from the Escrow Deposit, to the extent such amounts are less than or equal
to the aggregate of US$100,000. The balance of Commodore's attorney's fees, if
any, shall be paid directly by Commodore and the balance of the fees for the
survey of the Vessel, if any, shall be paid by the Joint Venture.
IN WITNESS WHEREOF, the Members of CORONADO SEAS, LLC hereby execute
this Operating Agreement as of the 6th day of April, 1999.
COMMODORE DAY CRUISES LIMITED, a
Bermuda corporation
By: /S/ FREDERICK A. MAYER
---------------------------------------------
Title: Chief Executive Officer
Frederick A. Mayer
PROMOCIONES TURISTICAS DE ROSARITO, S.A.
DE C.V., a Mexican corporation
By: [*]
---------------------------------------------
Title: President
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
-42-
EXHIBIT 10.5
ROSARITO PIER DOCKING CONTRACT
THIS CONTRACT (the "Contract") is made and entered into by and between
Inversiones Rosarito, S.A. de C.V., a Mexican corporation ("IRO"), represented
in this act by C.P. Hugo Torres Chabert, Coronado Seas, LLC, a Delaware limited
liability company (the "Venture"), represented in this act by Frederick A.
Mayer, Playas de Rosarito Marina Resort, S.A. de C.V., a Mexican corporation
("PLAYMAR"), represented in this act by Mr. Manuel Gamboa, and Banco
Internacional, S.A., a Mexican corporation ("BITAL"), represented in this act by
C.P. Hugo Torres Chabert, in conformity with the following Declarations and
Clauses:
DECLARATIONS
I. BITAL DECLARES:
(a) That it is a corporation duly organized under General Commercial
Law, as evidenced in public document number 12,718, dated July 22, 1941,
executed before Lic. Jose Bandera Olavarria, Notary Public No. 28 of the Federal
District, registered in the Public Registry of Mexico City under number 170,
page 114, book 3, dated August 16, 1941.
(b) That it is dedicated, among other activities, to the rendering of
banking services and elements necessary thereto.
(c) That C.P. Hugo Torres Chabert, its representative, has sufficient
legal capacity to execute this contract on behalf of Bital, as evidenced in
public document number 5,482 and 260, dated March 6, 1974 and August 1, 1997,
executed before C.C. Lics. Eduardo Illades Villafana and Luis A. Durazo Bazua,
Notaries No. 6 of Tijuana and No. 1 of Playas de Rosarito, B.C., respectively,
and that said powers have not been withdrawn nor modified in any way. Copies of
such documents are attached hereto as EXHIBITS 1 AND 2.
<PAGE>
(d) That on March 12, 1998, it became a concessionaire of the Secretary
of Communications and Transportation Concession for the use and development of a
federal maritime zone for the construction and operation of a marina and pier
located in the port of Rosarito, Baja California.
(e) On June 2, 1982, it entered into a trust as evidenced in Public
Document No. 16,807 dated June 2, 1982, executed before Eduardo Illades
Villafana, Public Notary No. 6 of Tijuana. Under the terms of said trust, IRO in
its capacity as trustee and Trustor "A," has the authority to develop the
concession referenced in paragraph (d) above. A copy of such document is
attached hereto as EXHIBIT 3.
II. IRO DECLARES:
(a) That it is a corporation with variable capital duly organized under
Mexican law as evidenced in Public Document No. 7,490 of May 23, 1960 executed
before Lic. Gustavo Cardenas y Estrada, Public Notary No. 3 of Tijuana, Baja
California and registered with the Public Registry of Tijuana under No. 3611
book XXX, of June 29, 1960, with Federal Registry No. 840828-CY7 and with a
purpose, among other activities, of the construction, use, operation and
development of ports, port areas, terminals, marinas, wharves, landings, etc.,
and the establishment and development of tourist centers such as hotels,
restaurants, bars, recreational facilities and the celebration of contracts
necessary for such activities, including lease, rental and loan agreements, and
the preparation and execution of all acts necessary to further these goals, as
stated in the corporate articles, attached hereto as EXHIBIT 4.
(b) That in accordance with the terms of the trust referenced in
paragraph I(e), above, it is responsible for and beneficiary of a concession
granted by the Mexican Secretary of Communications and Transportation, to
construct and operate a private pier and marina in Playas de Rosarito, Baja
California, and desires to encourage, develop and commence the flow of
2
<PAGE>
waterborne passenger commerce to said pier. A copy of the Concession is attached
hereto as EXHIBIT 5.
(c) That currently it has entered into a contract for construction of
the pier referred to in the previous Declaration, which provides for the
completion of construction by August 15, 1999.
(d) That C.P. Hugo Torres Chabert is the lawful representative of IRO,
as verified under Public Document Number 5,482, dated March 6, 1974,
respectively, duly executed before Notaries Public Number 1 of Playas de
Rosarito and number 6 of Tijuana, Lics. Luis A. Durazo Bazua and Eduardo Llades
Villafana, respectively, and that the powers granted under said documents have
not been withdrawn nor limited in any way. Copy of said power of attorney is
attached hereto as EXHIBIT 1.
III. PLAYMAR DECLARES:
(a) That it is a corporation with variable capital duly organized under
Mexican laws, as evidenced in Public Document No. 1,460 of February 15, 1999,
executed before Lic. Luis A. Durazo Bazua, Public Notary No. 1 of Playas de
Rosarito, B.C., and with a purpose as stated in the Corporate Articles, attached
hereto as EXHIBIT 6.
(b) That it entered into a Services Agreement with IRO, dated March 10,
1999, for the operation of the Pier (the "Services Agreement") which is the
subject of this Contract, as evidenced in EXHIBIT 7, hereto.
(c) That Mr. Manuel Gamboa is the lawful representative of PLAYMAR
under Public Document Number 1,460, dated February 15, 1999, duly executed
before Lic. Luis A. Durazo Bazva, Public Notary No. 1 of Playas de Rosarito,
B.C., and registered with the Public Registry under number 5166954, dated
February 19, 1999, as evidenced in EXHIBIT 6.
3
<PAGE>
IV. THE VENTURE DECLARES:
(a) That it is a limited liability company duly organized under the
laws of the State of Delaware, United States of America, as evidenced in the
Certificate of Formation of Commodore Day Cruises, LLC, Authentication Number
9514996, of January 11, 1999, which is attached hereto as EXHIBIT 8.
(b) That it duly changed its name with the State of Delaware to Baja
California, LLC, effective March 1, 1999, and that on March 5, 1999, it duly
changed its name with the State of Delaware to Coronado Seas, LLC.
(c) That it intends to operate a passenger cruise ship between San
Diego, California, USA and Playas de Rosarito, Baja California, Mexico, and it
wishes to dock at the pier referred to in this Contract at the Beginning of
Operations Date (as hereafter defined).
(d) That Mr. Frederick A. Mayer is the Venture's lawful representative,
as evidenced in the Unanimous Written Consent of the Members of the Venture, and
that the rights and duties granted under such document have not been withdrawn
nor limited in any way. A copy of such document is attached hereto as EXHIBIT 9.
C L A U S E S
FIRST. DEFINITIONS. For purposes of this contract, the words defined in
this clause shall have such meaning as provided:
Pier Agent: Playas, in its capacity as pier agent under the Law of
Ports and its Regulations.
Concession: Concession dated March 12, 1998, granted by SCT to BITAL
for the construction and operation of the Pier, and pursuant to which IRO is
named as trustee and trustor "A."
4
<PAGE>
Services Agreement: Agreement between IRO and PLAYMAR dated March 10,
1999, for the operation of the Pier, pursuant to Article 47 of the Resolutions
of the Law of Ports, which is attached hereto as EXHIBIT 10.
Cruise Ship: Any vessel operated by the Venture which may dock at the
Pier.
Docking Fee: The payment which the Venture shall make to IRO for the
right to dock at the Pier, pursuant to Clause Seventh A of this Contract.
Beginning of Operations Date: The date on which the Pier is capable of
safely receiving a cruise ship for dockage, which in no case shall be earlier
than July 15, 1999 or later than August 15, 1999, subject to authorization from
the SCT.
Monthly Federal Taxes: All fiscal obligations (taxes, duties,
assessments, etc.) set forth in Clause Seventh B that IRO may be required to pay
according to Mexican law.
IRO: Inversiones Rosarito S.A. de C.V., a corporation of variable
capital concessionaire of the Pier.
The Venture: Coronado Seas, LLC, a Delaware limited liability company,
operator of the Vessel.
The Pier: Pier in Playas de Rosarito, Baja California, Mexico currently
under construction in the federal maritime zone concessioned to Bital and to IRO
in its capacity as trustee and trustor "A."
Notices: Communications among IRO, the Venture, Bital and Playmar.
PLAYMAR: Playas de Rosarito Marina Resort, S.A. de C.V., a corporation
with variable capital, duly organized under Mexican law, which shall be in
charge of certain aspects of the operation of the Pier as authorized by the SCT.
Rosarito: The city of Playas de Rosarito, Baja California, Mexico.
5
<PAGE>
Other Route: Any route taken by the Cruise Ship other than between San
Diego and Rosarito.
The Route: The route taken by the Cruise Ship between San Diego and
Rosarito.
San Diego: The City of San Diego, California, U.S.A.
SCT: The Mexican Secretary of Communications and Transportations.
Effectiveness: Duration of the Docking Agreement between IRO and the
Venture from the Beginning Operations Date to February 28, 2009, and its
possible extension.
SECOND. PURPOSE. Commencing with the Beginning of Operations Date, the
Venture will use the berthing facilities at the Pier granted in and by this
Contract solely for the purpose of docking a Cruise Ship for voyages of variable
duration which will visit Rosarito one or two times per day together with the
purpose of conducting such other activities as are customarily associated
therewith. The Venture will not use any of said facilities for any unlawful
purpose, or otherwise violate any law, rule or regulation.
THIRD. TERM. The Effectiveness of this Contract will be of ten (10)
years counted as of the Beginning of Operations Date. Provided that the Venture
is not in default of this Contract, at the end of the Effectiveness period, the
Venture shall have the option to extend the Effectiveness until March 11, 2018,
the date the Concession terminates, under the same conditions established in
this Contract. The Venture shall exercise such option in writing, and not less
than 180 days prior to the expiration of the Effectiveness.
FOURTH. BERTHING RIGHTS. IRO hereby grants to the Venture the exclusive
berthing rights at the Pier for a Cruise Ship, in connection with voyages
departing from the San Diego metropolitan area. In the event that the Venture
[*] IRO may terminate its exclusive
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
6
<PAGE>
relationship with the Venture or maintain such exclusive relationship on the
terms agreed under this Contract. In the event that the exclusive relationship
is terminated, and, so long as the duties, tariffs, taxes and other payments
listed in the Seventh Clause of the Contract as obligations of the Venture are
paid by the Venture, IRO shall permit the Venture to use the Pier on a
non-exclusive basis during the Effectiveness of this Contract and will provide
docking space to the Venture as needed based on the Docking Schedule agreed upon
between IRO and the Venture, which shall be reasonable and similar to the one in
place prior to the Venture's loss of exclusivity. The Venture shall have a right
of first refusal throughout the Effectiveness period, to use the Pier with
respect to Other Routes. IRO shall notify the Venture in writing of any offer it
receives from any other party to use the Pier and shall immediately disclose the
details of such offer to the Venture. The Venture shall have a period of [*]
after receipt of such notice to decide whether it wishes to exercise such right
of first refusal. The Venture shall exercise its right of first refusal by
timely notifying IRO, in writing, of its intent to exercise such right of first
refusal. If the Venture fails to notify IRO within the aforementioned [*]
period, the Venture shall be deemed to have declined such right of first refusal
and IRO may contract with such party for the use of the Pier.
The following conditions shall apply in the event the Venture exercises
its right of first refusal:
(i) The Venture shall deposit in IRO's account, at least [*]
prior to the commencement date of the Other Route, a guarantee equivalent to [*]
of payments on the Other Route, with the understanding that such deposit shall
only be made if the company interested in the Other Route also offers to make a
deposit.
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
7
<PAGE>
(ii) The Venture shall at least match the offer of the company
proposing the Other Route, with the understanding that during the first two
years after the Beginning of Operations Date, IRO shall not grant Other Routes
to any other company, even if the Venture loses its exclusivity.
The Venture through this Contract guarantees that, independent of the
number of voyages made by the Cruise Ship during the first two years of the
Effectiveness, it shall pay IRO fees listed in Clauses Seventh A and B herein,
subject to compliance with the terms of this Contract.
The Venture, with input from the Pier's director, shall have the right
to determine which particular berth, dock or wharf may be used by it from day to
day for the berthing of said Cruise Ship. The berthing arrangements that are
provided for in this clause shall entitle the Venture to preferential berthing
rights (as compared to any other cruise ship which docks at the Pier) for any
particular Cruise Ship to be berthed, loaded or unloaded and readied for
departure. In the event that the Venture's Cruise Ship has not completed loading
and/or unloading, during any particular call at the Pier, due to a mechanical
breakdown, delay, schedule change or any other reason not imputable to IRO, then
and in that event, the Pier's director or his designee shall have the right to
require the Venture to move any such Cruise Ship from one dock, berth or wharf
to another berth, dock or wharf at no cost or expense to IRO if the extended
berthing of said Cruise Ship interferes with the flow of waterborne commerce at
the Pier.
Similarly, the Venture shall not directly or indirectly impede its
passengers from staying at the Hotel Rosarito Beach, but rather, on a
space-available basis, shall accommodate its passengers on-board the next Cruise
Ship in the event any have decided to lodge at the Hotel. Additionally, the
Venture shall not [*] located within ten miles of the Rosarito Pier.
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
8
<PAGE>
FIFTH. DOCKSIDE AREA. The particular berth, dock or wharf to be used by
the Venture during any particular time when a Cruise Ship is calling at the
Pier, shall have adjacent thereto a passenger gangway and other loading and
unloading facilities for the luggage of the passengers and sufficient land side
space for taxis and buses, at times of embarkation and disembarkation, without
blocking the movement of pedestrians or vehicles to the Hotel Rosarito Beach, as
shown on the diagram attached hereto as EXHIBIT 11. The Venture shall have the
right to use said dockside area for the purposes of this Contract during the
time at which any particular Cruise Ship is berthed at the Pier consistent with
the purposes of this Contract. The Venture shall keep every portion of the
dockside area in good repair and in a neat, orderly, clean, safe and healthy
condition at all times while being used by the Venture, including, but not
limited to, eliminating and removing all litter and trash from the dockside area
caused by the Venture, its representatives, agents, employees, invitees,
licensees, passengers, stevedores, subcontractors or others involved in the
loading and/or unloading of the Cruise Ship. IRO shall provide sufficient land
side facilities and personnel to assist in keeping cruise passengers and
associated pedestrian traffic isolated from other persons and from unauthorized
areas until the passengers are released by Mexican customs officials. IRO shall
also provide convenient access to the Pier for janitorial, security, baggage
handling, gangway and other personnel retained by the Venture, at the Venture's
expense, while the Cruise Ship is at the Pier.
SIXTH. CONDITION OF THE PIER. IRO, to ensure compliance with the
requirements for the construction of the Pier as set forth by SCT in the
Concession, and to satisfy the terms of this Contract, shall contract
"Estructuas y Puertos" S.A. de C.V. (a copy of the construction contract is
attached hereto as EXHIBIT 12), setting forth in such contract August 15, 1999
as the completion date for the Pier. Accordingly, IRO shall do everything within
its reach so that said contractor fully completes construction of the Pier
within the time and manner set
9
<PAGE>
forth in the applicable contract, so that the Pier shall be fully
constructed and capable of receiving cruise ships alongside safely afloat
(including causing the Pier to have enough bollards, bits and other fixtures and
equipment to safely tie a Cruise Ship alongside) no later than the Beginning of
Operations Date and throughout the Effectiveness of this Contract. Furthermore,
IRO agrees that upon completion of the Pier, it shall have an average water
depth of at least [*] at the berthing area, considered at an average low-low
tide level. For further specifications, the SCT nautical survey is attached
hereto as EXHIBIT 13. In the event that water depth conditions mentioned above
do not exist, and because of that reason, the Cruise Ship cannot berth at Pier
in the area under Concession, [*]. At all events, the parties expressly agree
that in the event that a Cruise Ship cannot berth at the Pier in the area under
Concession for any reason, the Venture is not obliged to pay the amounts
referred at the Seventh Clause of this Agreement. Notwithstanding the preceding
sentence, in the event the Vessel is unable to dock at the Pier due to foul
weather or because it would be unsafe in the opinion of the Vessel's Captain to
do so, the Vessel shall anchor in the area under Concession (if to do so would
be safe in the opinion of the Vessel's Captain), PLAYMAR shall assure that
Mexican authorities document the Vessel's arrival in Mexico and the Venture
shall be obligated to pay the amounts referred to at the Seventh Clause for such
voyage as if it had docked at the Pier.
IRO shall install at the Pier, and have ready and in normal operating
conditions at the Beginning of Operations Date, all installations and services
required by the applicable laws, having at least nautical entry and exit signals
to the Pier, public lighting, security for the Pier, fire safety equipment and
personnel, and will provide at its expense the maintenance support for such
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
10
<PAGE>
equipment and services. The cost of use of such installations and services shall
be borne by the Venture at reasonable market prices and fees.
SEVENTH. CONSIDERATION. The Venture shall pay to IRO the following
charges and fees as compensation, taxes and rights for the use of the Pier for
the berth of a Cruise Ship:
A. The Venture shall pay a Docking Fee of [*], payable on a
monthly basis, in arrears. For appropriate action, IRO represents that it has
entered into the Services Agreement for the operation of the Pier according to
the terms of this Contract and incorporated into this Contract. PLAYMAR may not
alter this Contract in any respect. If, after ten (10) years from the Beginning
of Operations Date, the Venture duly exercises its option to extend the
Effectiveness of this Contract through March 11, 2018, [*]. The Occupancy Study
shall be conducted in the following manner:
(i) IRO shall select an independent party (the "IRO
Expert");
(ii) The Venture shall select an independent party
(the "Venture Expert");
(iii) The IRO Expert and the Venture Expert shall
select an independent party (the "Occupancy Expert") who shall conduct the
Occupancy Study; and
(iv) [*] by virtue of the Venture's Cruise Ship
docking at the Pier, the Venture shall increase the Docking Fee set forth in
Clause Seventh A of this Contract to [*].
B. Monthly Federal Taxes for the use of the Pier in the amount
of [*]. The Venture shall pay such port taxes commencing thirty (30) days after
the Beginning of Operations Date directly to IRO.
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
11
<PAGE>
C. Pier Agent's fees in the amount of [*] (which amount
currently includes approximately [*] in taxes) for each call the Venture's
Cruise Ship makes at the Pier. Such Pier Agent fees also includes any passenger
"head" taxes. The Venture shall pay such fees on a bi-weekly basis, in arrears,
directly to the Pier Agent. Additionally, the Venture shall pay up to [*], as
required for any immigration and customs duties to the Mexican government from
the Venture's use of the Pier. PLAYMAR shall notify the Venture in writing of
the name of the Pier Agent and such Pier Agent shall not be changed without
thirty (30) days prior written notice to the Venture.
IRO agrees to deliver to the Venture, within the 20 days following each
tax and rights payment mentioned in Clause Seventh A, and Seventh B, and Seventh
C a copy of the corresponding receipts or any other document that irrefutably
proves that the payments were made duly and on time. In the event that IRO does
not comply with the foregoing, the Venture may retain future payments for such
purpose, and may use the Pier as usual, until it receives the payment receipts.
D. Linehandling may be accomplished by the Venture or by its
designated stevedore company without having the obligation to pay charges or
fees to the Pier.
E. Payment of the foregoing amounts shall entitle the Venture
to call at the Pier an unlimited number of times each day. Likewise, the parties
agree that the amounts set forth in this Contract are the valid ones at the time
of its execution. In the event that, because of Mexican authorities or by any
other cause the taxes related to Clauses Seventh B or Seventh C of this Contract
increase, IRO shall notify the Venture in writing within a period of time which
must not exceed twenty (20) days, so that both parties may adjust the amounts
due under this
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
12
<PAGE>
Contract by the amount of such tax increases. Additionally, to the extent the
Venture paid VAT on any of the payments made in Clause Seventh of this Contract,
IRO shall, to the extent permitted by law, through its independent accountants,
request a refund for such VAT paid by the Venture, and IRO shall remit to the
Venture any refund obtained upon receipt of the refund by IRO.
EIGHTH. CRUISE OPERATIONS. IRO is not exercising any dominion, control
or supervision over the activities of the Venture in connection with the cruise
ship operations at the Pier and the conduct of said operations by the Venture
and the provisions of this Contract do not create in the Venture any leasehold
or ownership interest in and to any real property at the Pier.
NINTH. COMPLIANCE WITH LAWS. The Venture shall comply with all federal
and state, statutes, ordinances, rules and regulations of the United States of
Mexico and the United States of America applicable to its operations.
TENTH. ASSIGNMENT. This Contract shall not be assigned by either party
without the express prior written approval of the other party, which shall not
be unreasonably withheld.
ELEVENTH. INSURANCE. IRO and the Venture shall each obtain all risk
insurance for their respective operations. The Venture agrees to pay for and
maintain in full force and effect comprehensive general liability and property
damage insurance in the amount of [*] in the aggregate for liability to any one
person and for any one occurrence and including an equal amount for property
damage. In compliance with applicable Mexican law, IRO shall obtain, pursuant to
the terms of the Concession, insurance covering civil liability of the operator
of the Concession, theft, and damage to the wharf, third parties, and items
material to the Concession. Each party shall provide the other with certificates
of insurance evidencing the existence of
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
13
<PAGE>
continuous insurance coverage. Each party shall, if permitted by their insurance
carrier, include in their respective insurance policy, damage protection for
each other for claims from third parties, so that in the event a Cruise Ship
passenger sues IRO, the Venture's insurance policy shall protect IRO. Similarly,
if a guest of IRO sues the Venture, the issuance policy of IRO shall protect the
Venture. IRO shall also obtain insurance for damage to the Pier caused by acts
of God in an amount of not less than [*], it being expressly understood that
such amount may be changed in accordance with the results of an appraisal
performed for such purpose, and that is acceptable to the Venture by written
consent. In any event, the parties further agree that the amount of insurance
coverage shall never be less than [*], and that IRO's responsibility shall not
exceed the amount of insurance coverage plus any deductibles for such Acts of
God.
TWELFTH. ACCESS. IRO shall at all times have access to the areas of the
Pier utilized by the Venture pursuant to the provisions of this Contract for the
purpose of examining and inspecting the Pier and for the purpose of conducting
IRO's routine business and operations at the Pier.
THIRTEENTH. DEFAULT OR BREACH. In the event either IRO or the Venture
fails or refuses to comply with the terms and conditions of this Contract, and
that said default is extended for a period in excess of thirty (30) days, then
and in any one or more of those events, the non-defaulting party shall provide
the defaulting party with written notice of such defaults and 30 days within
which to cure such defaults. If the defaulting party fails to cure such defaults
within such time period (or fails to take diligent steps to begin to cure such
defaults that cannot be cured within 30 days, the non-defaulting party shall
have the option of declaring this Contract in default and exercising any of the
remedies authorized by law.
FOURTEENTH. AGREEMENT ADMINISTRATION. IRO shall retain the services of
PLAYMAR for the operation of the Pier in accordance with the terms of the
Services
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
14
<PAGE>
Contract, and the collection of the Docking Fee; PLAYMAR shall develop all port
and maritime activities permitted under the Concession and Mexican law.
The Venture shall be entitled to rely on instructions from PLAYMAR, and
only PLAYMAR as IRO's sole representative with respect to the operation of the
Pier. In the event PLAYMAR fails to perform its duties under the Services
Contract and IRO wishes to terminate PLAYMAR, IRO shall provide the Venture with
thirty (30) days prior written notice of such termination and the name of
PLAYMAR's successor (or if IRO will operate the Pier directly, with such notice)
upon whom the Venture may rely with respect to the operation of the Pier and to
whom the Venture shall remit Docking Fees.
FIFTEENTH. NOTICES. All notices, approvals, requests and declarations
(hereinafter called "Notices") shall be classified as informal or formal.
Informal Notices may be sent by any medium and shall relate to any communication
that the parties hereto desire to make to the other but shall not have any legal
or economic effect. Formal Notices shall be those with legal or economic effect
and those proposing any changes to the terms and conditions of the present
agreement. All Notices shall be made in writing with the acknowledgement of
receipt. Formal Notices must be personally delivered, or mailed through
certified mail or under the methods permitted under Mexican law. Notices shall
be sent to the following addresses:
1. To the Company:
4000 Hollywood Boulevard
Suite 385-S, South Tower
Hollywood, Florida 33201
Telephone: (954) 967-2100
Fax: (954) 967-2147
Attn: Mr. Fredrick A. Mayer, Chief Executive Officer
15
<PAGE>
2. To IRO:
Boulevard Benito Juarez Numero 31
Playas de Rosarito, Baja California
Mexico
Telephone: 011-526-612-1111
Fax: 011-526-612-1176
Attn.: Mr. Hugo Torres Chabert
3. To PLAYMAR
Boulevard Benito Juarez Numero 31-M
Playas de Rosarito, Baja California
22710 Mexico
Telephone: 011-526-613-0434
Fax: 011-526-613-1313
Attn: Mr. Manuel Gamboa
4. To BITAL
Boulevard Benito Juarez Numero 31
Playas de Rosarito, Baja California
Mexico
Telephone: 011-526-612-1111
Fax: 011-526-612-1176
Attn.: Mr. Hugo Torres Chabert
In the event of change of address, each party must immediately notify
the other party in accordance with these formal notice procedures.
SIXTEENTH. AUTHORITY TO EXECUTE. Each of the parties hereto covenants
to the other party hereto that it has lawful authority to enter into this
Contract, that the governing or managing body of each of the parties has
approved this Contract and that the governing or managing body of each of the
parties has authorized the execution of this Contract.
SEVENTEENTH. APPLICABLE LAWS. This Contract shall be subject to the
federal laws of Mexico. In the event of any dispute in relation to the
interpretation and
16
<PAGE>
enforcement of this Contract, the parties expressly submit to the jurisdiction
of the courts of Mexico City. This Contract shall be subject to approval by [*].
This Contract, read and heard by all parties, all aware of its contents
and legal effect of each and everyone of its clauses, is executed before the
witnesses at the City of Playas de Rosarito, April 6, 1999.
WITNESS: INVERSIONES ROSARITO S.A. de C.V.,
____________________________________ By: /s/ C.P. Hugo Torres Chabert
_______________________________
Title: _______________________________
WITNESS: CORONADO SEAS, LLC:
____________________________________ By: /s/ Frederick A. Mayer
_______________________________
Title: Chief Executive Officer
_______________________________
WITNESS: PLAYAS DE ROSARITO MARINA
RESORT, S.A. de C.V.
____________________________________ By: /s/ Manuel Gamboa Moreno
_______________________________
Title: _______________________________
WITNESS: BANCO INTERNACIONAL, S.A.
____________________________________ By: /s/ Jesus Cerda Mendez
_______________________________
Title: _______________________________
- --------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
17
EXHIBIT 10.6
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
1. Shipbroker THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
STANDARD BAREBOAT CHARTER CODE NAME: "BARECON 89"
None PART I
- --------------------------------------------------------------------------------------------------------------------
2. Place and date
May 1, 1999
Fort Lauderdale, Florida
- --------------------------------------------------------------------------------------------------------------------
3. Owners/Place of business 4. Bareboat charterers (Charterers)/Place of business
Norsong Shipping, Ltd. Capri Cruises
80 Broad Street c/o New Commodore Cruise Line Limited
Monrovia, Liberia 4000 Hollywood Blvd., Suite 385-S
South Tower
Hollywood, Florida 33021
- --------------------------------------------------------------------------------------------------------------------
5. Vessel's name, Call Sign and Flag (Cl. 9(c))
M/V Enchanted Capri, C6KX, 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
1A1 Passenger Ship, Det Norske
Veritas June 4, 1998
- --------------------------------------------------------------------------------------------------------------------
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 6.20 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)
New Orleans, Louisiana Not Applicable Not applicable
- --------------------------------------------------------------------------------------------------------------------
16. Port or Place or redelivery (Cl. 14)
Freeport, Grand Bahama
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
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 a gaming vessel. See Clause 58 of Addendum.
- --------------------------------------------------------------------------------------------------------------------
20. Charter period 21. Charter hire (Cl. 10)
Expires September 30, 2005 with five year option As per Cl. 63 of Addendum
as per Clause 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, wire transfer
15% per annum
- --------------------------------------------------------------------------------------------------------------------
24. Place of payment, also state beneficiary and bank 25. Bank guarantee/bond (sum and place) (optional)
account (Cl. 10)
Corporate guaranty issued by Commodore Holdings
Limited pursuant to Clause 22
See Clause 63 of Addendum
- --------------------------------------------------------------------------------------------------------------------
26. Mortgage(s), if any (Cl. 11) 27. Insurance (marine and war risks)
See Cl. 11 As per Clause 53 of Addendum
- --------------------------------------------------------------------------------------------------------------------
28. Additional insurance cover, if any, for Owner's 29. Additional insurance cover, if any, for
account limited to (Cl. 12(b)) or, if applicable, (Cl. Charterer's account limited to (Cl. 12(b)) or, if
13(g)) applicable, (Cl. 13(g))
None. See Clause 53 of Addendum
- --------------------------------------------------------------------------------------------------------------------
30. Latent defects (only to be filled in if period other 31. War cancellation (indicate countries agreed)
than stated in Cl. 2) (Cl. 24)
Latent defects clause deleted.
- --------------------------------------------------------------------------------------------------------------------
2
<PAGE>
32. Brokerage commission and to whom payable (Cl. 25)
None
- --------------------------------------------------------------------------------------------------------------------
33. Law and arbitration 34. Number of additional clauses
covering special provisions, if agreed
See Clause 79 of Addendum
See Addendum Clauses 43 - 90
- --------------------------------------------------------------------------------------------------------------------
35. Newbuilding Vessel (indicate with "yes" or "no" 36. Name and place of Builders (only to be
whether Part III applies) (OPTIONAL) filled 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 "yes" or
whether Part IV applies) (OPTIONAL) "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 Charter 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)
NORSONG SHIPPING, LTD., a Liberian CAPRI CRUISES, a Florida general
corporation partnership
By: COMMODORE CRUISES LIMITED, a
Bermudan corporation and general
By: /s/ Boris Gershfield partner
----------------------------
Boris Gershfield, its
Authorized Representative
By: /s/ Frederick A. Mayer
--------------------------------
Frederick A. Mayer, President
4
<PAGE>
ENCHANTED CAPRI 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 Norsong Shipping, Ltd., a Liberian company, or
its permitted assignee.
"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 parties acknowledge
that the Charterer is now and has been since the 2nd day of June, 1998, in
possession of the Vessel pursuant to a Second Sub-Bareboat Charter between
Cruise Charter, Ltd. and Commodore Cruises Limited, which was assigned to
Charterer. Accordingly, no formal delivery of the Vessel is necessary with
respect to this Charter and, therefore, the term "delivery," as used herein,
shall be deemed to mean the "Commencement Date" of this Charter as is set forth
in Box 2, Part I hereof. However, and notwithstanding that delivery is automatic
as of the Commencement Date, nevertheless, the parties wish to establish as of
the Commencement Date the condition of the Vessel and the state of the inventory
so that the Vessel condition and inventory facts attributable to preceding
charter parties will be identified vis-a-vis this Charter. Accordingly, the
parties have nominated, constituted and appointed Chris Adams & Associates,
Inc., Marine Surveyor, as the Marine Surveyor who has surveyed the Vessel prior
to the Commencement Date hereof and has prepared a Condition Survey (the
"Condition Survey"), which has established the condition of the Vessel as of the
Commencement Date. A copy of the Condition Survey is appended hereto and made a
part hereof as EXHIBIT "A." All items on the Condition Survey requiring repairs,
maintenance or upgrades in order to keep the Vessel in class or to comply with
SOLAS or USPH requirements are the responsibility of the Charterer.
Additionally, the Condition Survey shall be the basis for evaluating the
condition of the Vessel upon its re-delivery (which shall be confirmed by a
Re-Delivery Survey). At the expiration of the charter period, the Vessel shall
be re-delivered in the same condition as is set forth in the Condition Survey,
reasonable wear excepted. Additionally, the parties agree that the cost of the
Condition Survey and the Re-Delivery Survey shall be borne equally by them.
The Charterer acknowledges that the Vessel is properly documented as of
the Commencement Date and that the execution of this Charter by the Charterer
shall constitute acceptance of the Condition Report and assumption of any repair
and maintenance responsibility in accordance with the terms hereof, which relate
to keeping the Vessel in class or complying with SOLAS or USPH requirements.
Therefore, upon the Commencement Date, the Owner's delivery of the Vessel to the
Charterer and the taking over of the Vessel by the Charterer shall be complete
and shall constitute full performance by the Owner of all of the Owner's
obligations under this Clause 2 (with respect to the delivery of the Vessel) and
Box 13 of Part I hereof and, thereafter, Charterer shall not be entitled to make
or assert any claim against the Owner on
5
<PAGE>
account of any conditions, representations or warranties, expressed or implied,
with respect to the condition of the Vessel on the Commencement Date.
Charterer and Owner agree that the written inventory attached hereto
correctly describes the personal property comprising the Vessel's equipment,
furniture, furnishings and gear, that is owned by a person other than Charterer,
as named therein, 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 or other
owner listed therein upon re-delivery of the Vessel at the termination of the
Charter.
Upon re-delivery of the Vessel, the Charterer shall be responsible to
have on board a three-day supply of water, lubricants and fuel, as follows:
IFO/HFO 150 metric tons
MGO 30 metric tons
Luboil 3 metric tons
Fresh Water 800 metric tons
The Owner shall be responsible to pay the Charterer for the above
liquids inventory at the then current market prices at the port of re-delivery;
such payment shall be made at the time of re-delivery. Upon re-delivery, the
Charterer shall be responsible to have on board the Vessel a minimum of spare
parts as prescribed by the Vessel's current class. Any additional spare parts on
board at the time of re-delivery may, at the option of the Owner, be purchased
from the Charterer or, should the Owner elect not to purchase such other items,
then the same may be removed by the Charterer. Food stuffs on board shall be
removed by the Charterer except for such food stuffs as are in sealed and
unbroken packages, which food stuffs may be purchased at Owner's option at
current market prices. Should Owner not elect to purchase food stuffs in sealed
and unbroken packages, then they likewise shall be removed. All alcoholic
beverages shall be removed by the Charterer upon re-delivery.
3. TIME FOR DELIVERY. Deleted.
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.
6
<PAGE>
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.
6. SURVEYS (not applicable to new building vessels). Deleted.
7. 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.
8. INVENTORIES AND CONSUMABLE OIL AND STORES. Deleted.
9. MAINTENANCE AND OPERATION.
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
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
7
<PAGE>
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 alia, 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. Deleted.
(a) 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.
(b) During the currency of this Charter, the Vessel shall retain her
present name as indicated in Box 5 and shall remain under and fly the flag as
indicated in Box 5 (or the flag of 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.
(c) 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.
8
<PAGE>
(d) 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 assure 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.
(e) 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 rate indicated in Box 21 commencing on and from the date and hour of her
delivery to the Charterers. Hire to continue until the date and hour when the
Vessel is redelivered by the Charterers to her Owners.
(b) Payment of Hire, except for the first and last month's Hire, if
subclause (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.
9
<PAGE>
(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.
Owners warrant that they have not effected any mortgage of the Vessel.
Owners plan to grant a mortgage on the Vessel in favor of a lender (the
"Lender") who agrees to refinance the loan (the "Loan") on the vessel.
Concurrently with the grant of such mortgage, Owners shall cause Lender to
execute a non-disturbance letter substantially in the form attached hereto as
EXHIBIT "B." Owners warrant that they have not effected, and will not effect,
any other mortgages on the Vessel without Charterer's prior written consent.
12. INSURANCE AND REPAIRS.
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 Protection and Indemnity
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 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 shall count as time on hire and shall form part of the Charter
period.
(a) 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
10
<PAGE>
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.
(b) 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.
(c) 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.
(d) 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.
(e) 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:
11
<PAGE>
"This Vessel is the property of Norsong Shipping, Ltd. It is under
charter to Capri Cruises 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 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. CORPORATE GUARANTEE. Contemporaneously with the execution of this Charter,
the Charterers have caused Commodore Holdings Limited ("Commodore") to execute a
Guaranty of
12
<PAGE>
this Charter according to the form of Guaranty of Bareboat Charter appended
hereto as EXHIBIT "C," which Guaranty is also indicated in Box 25 of Part 1 of
this Charter. In the event Owner becomes a partner in Charterer, Owner shall
have 30 days to take one of the following actions: (a) secure a bank guaranty or
letter of credit from an institution and in a form reasonably acceptable to
Charterer in the amount of [*] to secure Owner's guaranty to Charterer; (b)
obtain the Lender's consent to a reduction in the amount of the Guaranty to [*];
or (c) grant a second mortgage on the Vessel to secure Owner's guaranty to
Charterer in the amount of [*].
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
- ----------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
13
<PAGE>
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.
(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. Deleted.
CHARTERERS: OWNER:
CAPRI CRUISES, a Florida general NORSONG SHIPPING, LTD., a Liberian
Partnership Corporation
By: COMMODORE CRUISES LIMITED, a
Bermudan corporation and general
partner
By: /s/ Frederick A. Mayer By: /s/ Boris Gershfield
-------------------------------- ----------------------------------
Frederick A. Mayer, President Boris Gershfield, its Authorized
Representative
14
<PAGE>
ADDENDUM TO BARECON '89
BAREBOAT CHARTER DATED MAY 1, 1999
BETWEEN NORSONG SHIPPING, LTD.
A LIBERIAN CORPORATION, AS "OWNER,"
AND CAPRI CRUISES, A FLORIDA GENERAL
PARTNERSHIP, 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 commencing on the
Commencement Date and expiring on September 30, 2005 (the "Initial Period").
Subsequent to the Initial Period, the Charterer shall have an option with
respect to extending this Charter for a period of five (5) additional years (the
"Subsequent Period") on the same terms as set forth herein. Accordingly, should
the Charterer desire to exercise its option relative to the Subsequent Period,
it shall, within six (6) months prior to the expiration of the Initial Period,
notify the Owner in writing of Charterer's intention to exercise its option.
Notwithstanding the foregoing, the parties acknowledge that a sprinkler system
must be installed on the Vessel on or before October 1, 2005. In the event the
Charterer exercises its option for the Subsequent Period, the Owner and the
Charterer shall share equally the cost of such installation up to a maximum of
[*] each. In the event the cost to install the sprinkler system exceeds [*],
Charterer shall be responsible for the excess.
44. DELIVERY / SURVEY AND CONDITION ON DELIVERY. Deleted.
45. MODIFICATIONS
Except as described in Clause 61, 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. Except as described in
Clause 61, 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
The Owner represents, warrants and covenants to the Charterer as
follows:
- ----------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
15
<PAGE>
(a) That it or Multi-Group Enterprises, S.A. is and shall remain the
lawful Owner of said Vessel during the term of the Charter and that it will
warrant and defend the title to the same against the lawful claims and demands
of all persons, and has good right and lawful authority to enter into this
Charter and grant the rights and privileges herein set forth;
(b) Subject to the limitation of liability set forth in Clause 73
hereof, 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;
(c) That Owner will notify and obtain the consent of mortgagee or any
person whose consent to this Charter is required. Owner further agrees to make
any and all mortgage payments on the Vessel in a timely manner and promptly
notify Charterer of any "monetary default" by Owner in the monetary terms of any
and all mortgage (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 any mortgage (or related loans) on the Vessel; and
(d) That Owner will comply with all laws applicable to the Vessel
during the term of this Charter except those items that are the responsibility
of Charterer hereunder.
In the event of a seizure or threatened 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 (if the Vessel has actually been seized), in which event any payments
made by the Charterer to obtain a release of the Vessel (including payments to
an unpaid vendor) from seizure shall be credited toward any payments due to the
Owner pursuant to this Charter.
47. FLAG AND REGISTRY
The Vessel is registered under the Bahamian flag with Nassau, Bahamas
as its port of registry. 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.
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.
16
<PAGE>
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 and Lender.
52. NAME
Charterer shall have the right to change the name of the Vessel with
the approval of the Owner and Lender, 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
17
<PAGE>
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 reasonably acceptable to Owner in an
amount of $25,000,000;
(b) P&I Passenger Casualty Policy reasonably acceptable to Owner;
(c) P&I International Crew Policy reasonably 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
Charterer 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 incident to the use and
operation of the Vessel, except as otherwise specifically provided in this
Charter.
56. USPH/USCG
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
18
<PAGE>
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 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.
60. DELETED.
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.
Owner hereby consents to Charterer's construction of an additional 25
cabins on the Vessel. If Owner (or an affiliate of Owner) is not a partner in
Charterer at the time of such construction and has obtained the refinancing of
the Loan, Owner shall loan Charterer [*] of the cost of such additional cabins,
which amount loaned by Owner shall not exceed [*] (the "Cabin Loan"). The Cabin
Loan shall be amortized over six (6) years with interest at the same rate per
annum as Owner is paying on the Loan and shall be repaid by Charterer together
with charter hire on a bi-weekly basis. If Owner obtains the refinancing of the
Loan after Charterer has constructed the cabins, Owner shall make the Cabin Loan
to Charterer concurrently with the
- ----------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
19
<PAGE>
closing of the Loan (assuming neither Owner nor an affiliate of Owner has become
a partner in Charterer). If Owner (or an affiliate of Owner) becomes a partner
in Charterer after such additional cabins are constructed, the principal amount
of the Cabin Loan shall be reduced by [*] of the actual original cost to
construct such cabins (not to exceed [*]) and the balance, if any, shall
continue to be paid as described herein. For example, if the cost to construct
the cabins was [*] and Owner had loaned [*] to Charterer, the principal amount
of the Cabin Loan would be reduced by [*] ([*]).
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. Commodore
Holdings Limited hereby guaranties the obligation of Charterer to pay any and
all suppliers or materialmen who provide materials or services to the Vessel in
connection with such construction or transfer any claimed lien by such person to
a bond within a reasonable time.
62. SAFETY OF LIFE AT SEA (SOLAS)
Except as described in Section 43, all future SOLAS requirements and
upgrades are for the account of the Charterer.
63. CHARTER HIRE
Since the Charterer is in possession of the Vessel prior to the
Commencement Date pursuant to the Second Sub-Bareboat Charter between Cruise
Charter, Ltd. and Commodore Cruises Limited, which was assigned to Charterer,
the charter hire paid under such previous Charter shall be prorated as of the
Commencement Date and Multi-Group Enterprises, S.A. ("Multi-Group") shall refund
such portion of the prepaid charter hire to the Charterer on the Commencement
Date so as to zero the prepaid current charter hire as of the Commencement Date.
Multi-Group, by its signature at the end hereof, covenants and agrees to such
proration. Therefore, as of the Commencement Date, the Charterer shall pay the
Owner the sum of [*]representing the charter hire in advance for the two week
period next ensuing except that should the last day of the two week period fail
to end on a Friday, then the Charterer shall add to the initial payment per diem
charter hire so as to extend the initial two-week period as many additional days
as are necessary to have the initial payment period end on Friday. Thereafter,
subsequent charter hire payments are to be paid in advance on Friday on a
bi-weekly basis accordance with the following schedule:
TIME PERIOD BI-WEEKLY CHARTER HIRE
----------- ----------------------
First 183 days following Commencement Date [*]
Next 182 days [*]
Next 365 days [*]
Thereafter [*]
- ----------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
20
<PAGE>
All charter hire payments shall be sent by wire transfer as follows, or
as may be directed by the Owner to Charterer, in writing, from time to time
during the Charter Period:
Bank: First Union National Bank
Fort Lauderdale, Florida
ABA No. _________________
To the account of: International Investment
& Financial Group, Inc.
Account No.: _________________
64. DELETED.
65. DELETED.
66. HOUSE CABINS
The Owner and the Charterer agree that during the term of the Bareboat
Charter, the Owner 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. If Owner
requests the use of a cabin less than one month prior to the commencement of the
voyage and Cabin No. 1015 is not available, Charterer shall use its reasonable
efforts to provide another cabin to Owner.
67. LIENS
(a) Charterer, its vendors and contractors, 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.
21
<PAGE>
68. VESSEL LOGS
During the Charter Period, it shall be the obligation of the Charterer
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
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; and
(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.
22
<PAGE>
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.
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
(a) Owner's Default - Liquidated Damages - In the event Owner defaults
in carrying out its obligations hereunder, other than a Willful Default (as
hereafter defined) 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, the 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, after providing
Owner with notice and a ten (10) day opportunity to cure, by deducting the
amount to cure from the charter hire in progressive order of charter hire
payments.
(b) Owner's Default - Actual Damages - In the event the Owner commits a
Willful Default then the Charterer shall be entitled to pursue claims for actual
damages sustained as a result of such default or specific performance after
notice of such default to Owner. Willful Default shall mean a default including
all of (i), (ii) and (iii) OR (iv) below:
(i) the default shall interfere with Charterer's use and
possession of the Vessel,
(ii) the default shall have occurred after the closing and
funding of the loan from the Lender contemplated herein to be secured by the
Owner, and
(iii) the default shall involve the Owner's failure to pay
unpaid vendors outstanding and known at the time of the closing and funding of
the above-referenced loan;
OR
- ----------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
23
<PAGE>
(iv) the default shall be a willful and malicious
deprivation of Charterer's possession of the Vessel by the direct conduct, act
and deed of the Owner without color of legal right, and in flagrant disregard of
Charterer's rights under this Charter.
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. If Owner elects to sell the Vessel to
Multi-Group Enterprises, S.A., ("Multi-Group"), and the Lender consents to such
sale, then Owner may assign this Charter to Multi-Group, and Multi-Group shall
have all rights and obligations of Owner, and be referred to as Owner for
purposes of this Charter, thereafter.
76. TERMINATION OF CHARTER BY OWNER
In the event Owner (or an affiliate of Owner) is a partner in
Charterer, then beginning October 1, 2000, if Charterer incurs a net loss in
excess of [*] during any fiscal year, Owner may, with Lender's consent, upon six
(6) months written notice (or such lesser period as may be mutually agreed upon
with Charterer), cancel this Charter without penalty.
77. DELETED
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: Capri Cruises
Commodore Cruise Line Limited
4000 Hollywood Boulevard
Suite 385 - South Tower
Hollywood, Florida 33021
- ----------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
24
<PAGE>
WITH A COPY TO: Kathleen L. Deutsch, P.A.
Broad and Cassel
201 South Biscayne Boulevard
Miami Center - Suite 3000
Miami, Florida 33131
OWNER: Norsong Shipping, Ltd.
c/o International Investment & Financial
Group, Inc.
2455 E. Sunrise Boulevard, Suite 618-B
Fort Lauderdale, Florida 33304
WITH A COPY TO: Brian C. Deuschle, Chartered
Brian C. Deuschle, Esquire
800 S. E. Third Avenue
Fourth Floor
Fort Lauderdale, Florida 33316
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
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 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.
82. MISCELLANEOUS
Clause headings are for ease of reference only and shall not affect
construction.
83. DELETED
84. DELETED
85. DELETED
25
<PAGE>
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 [*] or more, or a
loss to the Owner in consequence thereof in an amount of [*] or more.
Additionally, a material breach 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 [*] 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 receive 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.
- ----------
* Marked text omitted pursuant to an application for an order for
confidential treatment by Commodore Holdings Limited.
26
<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:
CAPRI CRUISES, a Florida general partnership
By: COMMODORE CRUISES LIMITED, a
general partner
/s/ Kathleen L. Deutsch By: /s/ Frederick A. Mayer
- -------------------------------- ------------------------------------
Witness Frederick A. Mayer, President
OWNER:
NORSONG SHIPPING, LTD., a Liberian
corporation
/s/ Kathleen L. Deutsch By: /s/ Boris Gershfield
- -------------------------------- ------------------------------------
Witness Boris Gershfield, its Authorized
Representative
Multi-Group Enterprises, S.A. hereby executes this Charter Agreement solely for
the purpose of acknowledging its obligations pursuant to Section 63 herein and
agreeing to be bound thereby.
MULTI-GROUP ENTERPRISES, S.A., a
Bahamiam Corporation
By: /s/ Boris Gershfield
----------------------------
Boris Gershfield, President
Commodore Holdings Limited hereby executes this Charter Agreement solely for the
purpose of acknowledging its obligations pursuant to Section 61 herein and
agreeing to be bound hereby.
COMMODORE HOLDINGS LIMITED
By: /s/ Frederick A. Mayer
-----------------------
Frederick A. Mayer
Chief Executive Officer
27
EXHIBIT 10.7
TABLE OF CONTENTS
CLAUSE SUBJECT PAGE
- ------ ------- ----
1. PURPOSE AND DEFINITIONS ................................ 1
2. THE LENDER'S COMMITMENT ................................ 5
3. AVAILABILITY ........................................... 5
4. INTEREST ............................................... 7
5. REPAYMENT .............................................. 7
6. COMPULSORY AND VOLUNTARY PREPAYMENT .................... 7
7. COMMITMENT AND ARRANGEMENT FEES ........................ 8
8. INDEMNITY .............................................. 8
9. PAYMENTS ............................................... 11
10. APPLICATION OF MONEYS .................................. 12
11. DEFAULT ................................................ 13
12. SECURITY ............................................... 15
13. REPRESENTATIONS AND WARRANTIES ......................... 16
14. COVENANTS .............................................. 17
15. SET-OFF ................................................ 19
16. ASSIGNMENT AND PARTICIPATION ........................... 20
17. MISCELLANEOUS .......................................... 20
18. NOTICES ................................................ 20
19. PROPER LAW AND JURISDICTION ............................ 21
-i-
<PAGE>
THIS AGREEMENT is made the 23rd day of April, 1999 BETWEEN:
(1) THE LENDER (as hereinafter defined); and
(2) THE BORROWER (as hereinafter defined) jointly and severally.
IT IS HEREBY AGREED as follows:-
1. PURPOSE AND DEFINITIONS
1.1 This agreement contains the terms and conditions upon which the Lender will
make available to the Borrower a secured loan facility of up to but not
exceeding fourteen million two hundred and fifty thousand United States
Dollars (USD14,250,000) of which up to nine million seven hundred and fifty
thousand United States Dollars (USD9,750,000) may comprise a guarantee
facility.
1.2 In this agreement the following words and expressions shall have the
following meanings: -
"BORROWED MONEY"
means Indebtedness incurred in respect of (i) money borrowed or raised,
(ii) any bond, note, loan stock, debenture or similar instrument, (iii)
acceptance or documentary credit facilities, (iv) deferred payments for
assets or services acquired, (v) rental payments under and any amounts
payable on termination of leases (whether in respect of ships, land,
machinery, equipment or otherwise) entered into primarily as a method of
raising finance or of financing the acquisition of the asset leased, (vi)
guarantees, bonds, stand-by letters of credit or other instruments issued
in connection with the performance of contracts, and (vii) guarantees or
other assurances against financial loss in respect of Indebtedness of any
person, firm or company failing within any of (i) to (vi) above;
"BORROWER"
means Albuferra Investments, Inc., a company incorporated under the laws
of Panama with its registered office at c/o Galindo Arias & Lopez, Scotia
Plaza, No. 18 Avenida Federico Boyd y Calle 51, Pisos 9, 10 y 11, Panama,
Republic of Panama;
"BUSINESS DAY"
means any day on which banks and foreign exchange markets in Stockholm,
London and New York are open for the transaction of business of the
nature contemplated in this agreement;
"DRAWDOWN DATE"
means the date on which the relevant Drawing is advanced pursuant to
clause 3 hereof;
"DRAWING"
means any one amount advanced or to be advanced pursuant to clause 3
hereof and "Drawings" means more than one of them;
<PAGE>
"ENCUMBRANCE"
means any mortgage, charge, pledge, lien, assignment, hypothecation,
title retention, preferential right or trust arrangement and any other
security agreement or arrangement;
"EVENT OF DEFAULT"
means any of the events or circumstances specified in clause 11.1 hereof;
"GUARANTOR"
means Commodore Holdings Limited, a company incorporated under the laws
of Bermuda with its registered office at c/o Francis & Forrest, Corner
House, 20 Parliament Street, Hamilton HM 12, Bermuda;
"INDEBTEDNESS"
means any obligation for the payment or repayment of money, whether as
principal or as surety and whether present or future, actual or
contingent;
"INSURANCE ASSIGNMENT"
means the assignment executed pursuant to clause 12.1(B) hereof;
"INTERIOR CONVERTER"
means Jokiyhtyma Oy, a company incorporated under the laws of Finland
with its registered office in Finland;
"LENDER"
means Nordbanken AB (publ), a company incorporated under the laws of
Sweden acting through its office at Ostra Hamngatan 16, SE-405 09
Gothenburg, Sweden;
"LOAN"
means up to but not exceeding the Maximum Sum or, where the context so
requires, the aggregate amount of all Drawings from time to time
outstanding;
"MANAGEMENT AGREEMENT"
means the agreement for the management of the Vessel made or to be made
between the Borrower and the Manager;
"MANAGER"
means New Commodore Cruise Lines Limited, a company incorporated under
the laws of Bermuda with its registered office at c/o Francis & Forrest,
Corner House, 20 Parliament Street, Hamilton HM 12, Bermuda;
"MAXIMUM SUM"
means fourteen million two hundred and fifty thousand United States
Dollars (USD14,250,000);
2
<PAGE>
"MOA"
means the agreement for the sale and purchase of the Vessel made or to be
made between the Seller and the Borrower;
"MORTGAGE"
means the first priority statutory mortgage over the Vessel and the
collateral deed of covenants executed pursuant to clause 12.1(A) hereof;
"PERMITTED LIENS"
means liens for current crews' wages and salvage and liens incurred in
the ordinary course of trading the Vessel up to an aggregate amount at
any time not exceeding five percent (5%) of the charter-free sale value
of the Vessel;
"REFUND GUARANTEE"
means any refund guarantee to be provided by the Yard or the Interior
Converter (and to be approved in writing by the Lender) pursuant to the
relevant Refurbishment Contract in respect of any advance payment by the
Borrower thereunder and "Refund Guarantees" means more than one of them;
"REFURBISHMENT CONTRACTS"
means the two agreements made or to be made between the Borrower and the
Yard and between the Borrower and the Interior Converter respectively
(and to be approved in writing by the Lender) for the refurbishment of
the Vessel and "Refurbishment Contract" means either one of them;
"REFURBISHMENT GUARANTEE"
means any guarantee or letter of credit issued by the Lender in favour of
the Yard and/or the Interior Converter pursuant to clause 3.1(C) hereof
and "Refurbishment Guarantees" means more than one of them;
"REFURBISHMENT GUARANTEE AMOUNT"
means at any time the sum of the maximum actual and contingent
liabilities of the Lender in respect of principal, interest (other than
default interest) and commission under all the Refurbishment Guarantees
then issued;
"REPAYMENT INSTALMENTS"
means the instalments for repayment of the Loan and payment of interest
thereon specified in clause 5.1 hereof and "Repayment Instalment" means
any one of them;
"SECURITY DOCUMENTS"
means the documents executed pursuant to clause 12.1 hereof and any other
document or documents from time to time providing and/or evidencing
and/or constituting security in respect of the Loan;
3
<PAGE>
"SECURITY PARTIES"
means the Borrower, the Guarantor and the Manager and any other party to
any of the Security Documents from time to time (other than the Lender)
and "Security Party" means any one of them;
"SELLER"
means Triple Shipping Inc., a company incorporated under the laws of
Liberia with its registered office at 80 Broad Street, Monrovia, Liberia;
"SUBJECT DOCUMENTS"
means this agreement, the Security Documents, the MOA, the Management
Agreement, the Refurbishment Contracts, any and all Refund Guarantees and
any and all documents executed or to be executed pursuant to any one or
more of these documents;
"TERMINATION DATE"
means 15 October 1999;
"TOTAL LOSS"
means: -
(i) actual or constructive or compromised or agreed or arranged total
loss of the Vessel; or
(ii) requisition for title or other compulsory acquisition of the Vessel
otherwise than by requisition for hire; or
(iii) capture, seizure, arrest, detention or confiscation of the Vessel by
any government or by persons acting or purporting to act on behalf
of any government unless the Vessel is released and restored to the
Borrower from such capture, seizure, arrest or detention within
thirty (30) days after the occurrence thereof;
"UNITED STATES DOLLARS" and "USD"
mean the lawful currency of the United States of America;
"VESSEL"
means the motor vessel named "SOFIA" now registered under Bahamian flag
in the ownership of the Seller which is to be registered under Bahamian
flag in the ownership of the Borrower pursuant to the MOA; and
"YARD"
means Norfolk Shipbuilding & Drydock Corporation, a company incorporated
under the laws of Virginia with its registered office at P.O. Box 2100,
750 West Berkley Avenue, Norfolk, Virginia, U.S.A.
1.3 References to any document shall be construed to mean that document as
amended and/or varied and/or supplemented from time to time with the
agreement of the relevant parties
4
<PAGE>
and (where such consent is required by the terms of this agreement or the
relevant document) with the consent of the Lender.
1.4 Clause headings are inserted for convenience of reference only and shall be
ignored in the interpretation of this agreement.
2. THE LENDER'S COMMITMENT
2.1 In reliance upon the representations and warranties contained in clause
13 hereof and in the Security Documents and subject to the terms and
conditions of this agreement the Lender will: -
(A) make part of the Loan available to the Borrower for the purpose of
financing (in part) the purchase of the Vessel by the Borrower
pursuant to the MOA;
(B) make part of the Loan available to the Borrower for the purpose of
financing (in part) the refurbishment of the Vessel pursuant to the
Refurbishment Contracts;
(C) (in lieu of an advance pursuant to (B)) issue a Refurbishment
Guarantee for an amount equivalent to an advance pursuant to (B); and
(D) (when obliged to make payment under any Refurbishment Guarantee or on
the Termination Date, whichever is the earlier) advance the sum which
would (but for that Refurbishment Guarantee) have been advanced
pursuant to (B) for the purpose of reducing or providing cash
collateral for (as the case may be) the Refurbishment Guarantee
Amount.
3. AVAILABILITY
3.1 On and as from the date hereof the Borrower shall be entitled to draw
upon the Loan and to require the Lender to issue Refurbishment Guarantees
provided always that: -
(A) all items specified in schedule A hereto have been received by the
Lender and are in form and substance satisfactory to the Lender;
(B) no Event of Default and no event which with the giving of notice
and/or lapse of time would constitute an Event of Default has
occurred;
(C) not less than three (3) Business Days prior to the date upon which the
Borrower requires to draw upon the Loan and/or requires the Lender to
issue a Refurbishment Guarantee the Lender has received a written
utilization notice from the Borrower in the form set out in Appendix I
hereto, but no such notice shall be required in respect of any Drawing
for the purpose specified in clause 2.1(D) hereof which the Lender
shall be entitled to make in any event when obliged to make payment
under any Refurbishment Guarantee or on the Termination Date,
whichever is the earlier;
5
<PAGE>
(D) all items specified in schedule B hereto have been received by the
Lender in respect of the requirement specified in the said notice and
are in form and substance satisfactory to the Lender;
(E) no Drawing shall be made other than for one of the purposes specified
in clauses 2.1(A), (B) and (D) hereof; the maximum aggregate amount
which may be drawn for the purpose specified in clause 2.1(A) is
USD4,500,000; the maximum aggregate amount which may be drawn for the
purposes specified in clauses 2.1(B) and (D) hereof is USD9,750,000;
and the maximum aggregate amount which may be drawn for the purpose
specified in clause 2.1(B) hereof is USD9,750,000 less (i) the
Refurbishment Guarantee Amount from time to time, and (ii) the
aggregate amount of any sums due to the Lender under clause 8.5 hereof
from time to time;
(F) no Drawing shall increase the Loan to a sum which, when aggregated
with (i) the Refurbishment Guarantee Amount and (ii) any sums due to
the Lender under clause 8.5 hereof, exceeds the Maximum Sum;
(G) the first Drawing shall be for the purpose specified in clause 2.1(A)
hereof shall amount to USD4,500,000 and shall be made no later than 30
June 1999;
(H) up to seven (7) Drawings shall be permitted in aggregate for the
purposes specified in clauses 2.1(B) and (D) hereof, but no such
Drawings may be made prior to the making of the first Drawing or later
than the Termination Date;
(I) if any Drawing for the purpose specified in clause 2.1(D) hereof or
any cash collateral produced thereby (as the case may be) is
insufficient to pay all sums which the Lender is called upon to pay
under the relevant Refurbishment Guarantee, the Borrower shall
forthwith on the Lender's demand pay to the Lender the amount of the
insufficiency in accordance with clause 8.5(A) hereof;
(J) any cash collateral produced by a Drawing for the purpose specified in
clause 2.1(D) hereof shall be held by the Lender on an interest
bearing deposit account in the name of the Borrower pledged to the
Lender and applied in or towards satisfaction of the Refurbishment
Guarantee Amount as and when the Lender is obliged to pay the same;
(K) the Lender shall not be obliged to issue any Refurbishment Guarantee
unless and until the Lender has approved the terms and conditions
thereof; and
(L) no Refurbishment Guarantee shall be issued after 31 July 1999.
3.2 The Lender may in its absolute discretion allow any Drawing to be made or
issue any Refurbishment Guarantee notwithstanding that it has not received
all the items specified in schedule A hereto or all the items specified in
the relevant section of schedule B hereto and in this event the Borrower
hereby covenants to procure the delivery of all the missing items to the
Lender within thirty (30) days after the Drawdown Date of the relevant
6
<PAGE>
Drawing or the date of issue of the relevant Refurbishment Guarantee (as
the case may be).
4. INTEREST
4.1 Subject to clauses 4.2 and 6.2 hereof, the Borrower shall pay interest on
the Loan from the Drawdown Date of the first Drawing in an overall amount
equivalent to the difference between (A) the aggregate amount of the Loan
outstanding on the Termination Date and (B) the aggregate amount of all
Repayment Instalments due to be paid by the Borrower under clause 5.1
hereof.
4.2 In the event of default by the Borrower in the payment of any sum
whatsoever due to the Lender under this agreement (including interest) the
Borrower shall pay interest on that sum from the due date until payment
(after as well as before judgement) at a rate certified conclusively (save
for manifest error) by the Lender to be three percent (3%) per annum over
the cost to the Lender of funding that sum for such periods as the Lender
in its absolute discretion may think fit on the Business Day succeeding
that on which it became aware of the default and for so long as that sum
remains unpaid that rate shall be re-calculated on the same basis. Such
interest shall accrue and be payable on each day elapsing, shall be
calculated on the basis of a year of three hundred and sixty (360) days and
shall be paid on the demand of the Lender. In default of payment such
interest shall be compounded.
5. REPAYMENT
5.1 Subject to clauses 6 and 11.1 hereof the Borrower shall repay the Loan,
together with interest thereon in one hundred and eight (108) instalments
each amounting to one hundred and eighty four thousand United States
Dollars (USD184,000). The first such installment shall be paid on 15
October 1999 and the subsequent instalments shall be paid at one (1)
monthly intervals thereafter.
6. COMPULSORY AND VOLUNTARY PREPAYMENT
6.1 If for any reason whatsoever beyond the control of the Lender it shall
become unlawful or impossible for the Lender to maintain or give effect to
all or part of its obligations as contemplated by this agreement the
obligation of the Lender to make the Loan available to the Borrower shall
cease and the Borrower shall forthwith upon the demand of the Lender repay
the Loan (or such part thereof as the Lender shall specify in writing)
together with interest accrued thereon and any sums due to the Lender by
virtue of that repayment under clause 8.6 hereof.
6.2 If the Lender shall determine in good faith that it would not be
practicable or possible for the Lender to fund or continue to fund the Loan
or any relevant part thereof in the London Inter-Bank Market, then the
Lender shall inform the Borrower in writing to that effect and unless the
Lender and the Borrower shall agree acceptable alterations to the terms of
this agreement (on the basis of an alternative source of funds available to
the Lender) the obligation of the Lender to make the Loan or relevant part
thereof available to the Borrower shall cease and the Borrower shall be
obliged on receiving a written
7
<PAGE>
notice from the Lender to that effect to repay the Loan or the relevant
part thereof together with interest accrued thereon within thirty (30) days
thereafter.
6.3 From and after the Termination Date the Borrower may without penalty prepay
the whole or part of the Loan on the final day of any month. If all
Repayment Instalments due up to and including the date of the prepayment
have been duly paid, the amount of principal required to effect any
prepayment of the whole of the Loan on each such day is set out opposite
such day in the final column of schedule D hereto and in the case of any
part prepayment of the Loan the amount of principal paid shall be applied
in accordance with clause 6.3(D) hereof. Any such prepayment is also
subject to the following conditions: -
(A) the Borrower shall simultaneously pay to the Lender any sums due to
the Lender by virtue of that prepayment under clause 8.6 hereof;
(B) any part prepayment of the Loan shall amount to a whole multiple of
five hundred thousand United States Dollars (USD500,000);
(C) the Borrower shall have given the Lender not less than thirty (30)
days written notice of its intention to make such prepayment (which
once given shall be irrevocable) specifying such day and the amount of
intended prepayment and accompanied by such evidence as the Lender may
require that any governmental or other consents for such prepayment
have been obtained or will be forthcoming;
(D) any part prepayment shall be applied towards payment of the amount of
principal set out opposite the date of that prepayment in the final
column of schedule D hereto and the amount of each of the remaining
Repayment Instalments may be reduced by such sum (if any) as the
Lender may consider appropriate in its absolute discretion having
regard to the amount of interest thereafter accruing on the Loan, any
such reduction to be notified to the Borrower by the Lender in writing
as soon as practicable; and
(E) no sums prepaid hereunder may be reborrowed under this agreement.
7. COMMITMENT AND ARRANGEMENT FEES
7.1 Subject to clause 8 hereof, the Borrower shall not be obliged to pay any
commitment or arrangement fees in connection with this agreement.
8. INDEMNITY
8.1 If any change in law or regulation or in the interpretation thereof or if
compliance by the Lender with any direction request or requirement (whether
or not having the force of law) of any central bank or other authority
shall: -
(A) subject the Lender to any tax with respect to the Loan or any part
thereof and/or any Refurbishment Guarantee (other than tax on overall
net income);
8
<PAGE>
(B) change the basis of taxation to the Lender of payments of principal or
interest or any other payment due or to become due hereunder;
(C) impose or modify any reserve, liquidity or capital adequacy
requirements or require the making of any special deposits affecting
the Lender; or
(D) impose on the Lender any other condition affecting the Loan or any
part thereof and/or any Refurbishment Guarantee whether or not any
Drawing has been advanced and whether or not any Refurbishment
Guarantee has been issued
and the result is either to increase the cost to the Lender of making or
maintaining or committing to make the Loan or any part thereof and/or any
Refurbishment Guarantee or to reduce the amount of any payment received by
the Lender hereunder or to reduce the rate of return which the Lender would
have been able to obtain on its overall capital but for entering into
and/or performing this agreement and/or any Refurbishment Guarantee then
the Borrower shall forthwith upon demand by the Lender pay to the Lender
such amount as the Lender certifies to be necessary to indemnify the Lender
fully for such additional cost or reduction.
8.2 All costs and expenses whatsoever (save for legal fees in connection with
the negotiation, preparation and execution of this agreement and the
Subject Documents) incurred by the Lender in connection with any one or
more of this agreement, the Security Documents and any other documents
executed pursuant hereto or thereto (including without limitation the costs
of any physical inspections of the Vessel) shall be paid by the Borrower
forthwith upon demand by the Lender on a full indemnity basis whether or
not any Drawing is advanced and whether or not any Refurbishment Guarantee
is issued.
8.3 The Borrower shall pay forthwith upon demand by the Lender all stamp,
registration and other duties (including any such duties payable by the
Lender) imposed by any authority in respect of any one or more of this
agreement, the Security Documents and any other documents executed pursuant
hereto or thereto or otherwise in connection with the Loan and/or any
Refurbishment Guarantee.
8.4 Without prejudice to the rights of the Lender under or pursuant to clause
11 hereof the Borrower shall indemnify the Lender fully forthwith upon
demand by the Lender for any and all losses damages and/or expenses
whatsoever incurred by the Lender: -
(A) as a result of any Drawing not being advanced for any reason
whatsoever (other than default by the Lender and other than in respect
of the purpose specified in clause 2.1(D) hereof) in accordance with a
notice given pursuant to clause 3.1(C) hereof;
(B) as a result of an Event of Default;
(C) in perfecting, protecting the value of or enforcing any of its rights
or securities under any one or more of this agreement, the Security
Documents and any other documents executed pursuant hereto or thereto
or in attempting so to do; or
9
<PAGE>
(D) as a result of any payment hereunder, whether pursuant to a judgment
or otherwise, being made, obtained or enforced in a currency other
than United States Dollars.
8.5 In consideration of the Lender agreeing to issue the Refurbishment
Guarantees at the request of the Borrower, the Borrower hereby covenants
with the Lender: -
(A) to pay to the Lender upon the Lender's written demand each and every
amount which the Lender is called upon to pay to the Yard or the
Interior Converter pursuant to any Refurbishment Guarantee whether or
not such amount shall actually have been paid by the Lender thereunder
unless such amount shall forthwith be satisfied by a Drawing made for
the purpose specified in clause 2.1(D) hereof in accordance with
clause 3.1 hereof (or by cash collateral produced by such a Drawing
and/or produced pursuant to clause 8.5(C) hereof);
(B) hold the Lender harmless and indemnify the Lender and keep the Lender
indemnified upon the Lender's written demand from time to time and in
whatever currency or currencies the Lender shall specify against all
actions, proceedings, liabilities, costs, claims, demands and
expenses, losses or damages whatsoever and whensoever incurred or
sustained by the Lender under or in relation to any Refurbishment
Guarantee; and
(C) (if at any time the Lender shall determine in its absolute discretion
that the Refurbishment Guarantee Amount exceeds the amount available
for Drawings for the purpose specified in clause 2.1(D) hereof) to pay
to the Lender upon the Lender's written demand the whole of the
excess, which amount shall be held by the Lender on an interest
bearing deposit account in the name of the Borrower pledged to the
Lender and applied by the Lender in or towards satisfaction of any and
all sums due and payable under clauses 8.5(A) and/or (B) hereof on the
due dates for payment thereof, the balance of that amount (if any)
being returnable to the Borrower if and when all the Borrower's actual
and contingent liabilities under clauses 8.5(A) and/or (B) hereof have
been fully discharged PROVIDED THAT nothing contained in this clause
8.5(C) shall be deemed to effect the absolute obligations of the
Borrower under clauses 8.5(A) and (B) hereof.
8.6 In the event that the whole or part of the Loan is repaid or prepaid
pursuant to clause 6, clause 10 or clause 11 hereof the Borrower shall
indemnify the Lender fully forthwith upon demand by the Lender for any and
all losses damages and/or expenses incurred by the Lender in liquidating or
re-employing fixed deposits acquired from third parties to maintain the
Loan or the relevant part thereof (as the case may be) until the
anticipated maturity date in respect thereof.
8.7 The indemnities contained in this clause 8 shall apply irrespective of any
indulgence granted to the Borrower or any other party from time to time and
shall continue in full force and effect notwithstanding any payment in
favour of the Lender and any amount due from the Borrower under this clause
8 will be due as a separate debt and shall not be affected by judgment
being obtained for any other sums due under any one or more of
10
<PAGE>
this agreement, the Security Documents and any other documents executed
pursuant hereto or thereto.
9. PAYMENTS
9.1 All payments by the Borrower hereunder shall be made to the Lender's
account with such bank or banks as the Lender shall nominate from time to
time.
9.2 Subject to the sub-clauses of this clause 9.2 all payments by the Borrower
hereunder shall be made in full without set-off or counterclaim and free
and clear of and without deduction or withholding for or on account of any
tax of any jurisdiction.
(A) If the Borrower is required by law to make any deduction or
withholding from any payment hereunder for or on account of tax, it
shall do so and the sum due from the Borrower in respect of such
payment shall be increased to the extent necessary to ensure that,
after the making of such deduction or withholding, the Lender receives
and retains (free of any liability in respect of any such deduction or
withholding) a net sum equal to the sum it would have received and
retained had no deduction or withholding been required to be made.
(B) If at any time the Borrower is required by law to make any deduction
or withholding from any sum, payable by it hereunder (or if thereafter
there is any change in the rates at which or the manner in which such
deductions or withholdings are calculated) the Borrower shall promptly
and fully notify the Lender accordingly.
(C) If the Borrower makes any payment hereunder in respect of which it is
required by law to make any deduction or withholding it shall pay the
full amount to be deducted or withheld to the relevant taxation or
other authority within the time allowed for such payment under
applicable law and shall deliver to the Lender within thirty (30) days
after they have made such payment to the applicable authority the
appropriate receipt or certificate issued by such authority or the
Borrower as the case may be evidencing the payment to such authority
of all amounts so required to be deducted or withheld from such
payment.
9.3 If any sum becomes due for payment hereunder on a day which is not a
Business Day the due date for payment shall be extended to the next
succeeding Business Day unless that next succeeding Business Day falls
within a fresh month in which event the due date for payment shall be
brought forward to the immediately preceding Business Day. In the event
that the due date for payment of any Repayment Instalment is so extended or
brought forward the due date for payment of the next following Repayment
Instalment shall not be affected thereby.
9.4 All payments hereunder shall be made in United States Dollars not later
than 11:00 a.m. (New York time) on the due dates therefor in such funds as
may be customary for the same day settlement of international banking
transactions in United States Dollars in New York City provided that
payments in respect of costs and expenses shall be made in the currencies
in which the same are incurred.
11
<PAGE>
9.5 The Lender shall open and maintain on its books a control account in the
name of the Borrower showing the advance of the Loan and the computation
and payment of interest and all other sums due hereunder. The Borrower's
obligations to repay the Loan and to pay interest thereon and to pay all
other sums due hereunder shall be evidenced by the entries from time to
time made in the control account opened and maintained under this clause
9.5 which entries will be conclusive and binding in the absence of manifest
error.
10. APPLICATION OF MONEYS
10.1 Subject to clause 10.2 hereof all moneys payable to the Lender under the
Insurance Assignment and any other moneys payable to the Lender under any
one or more of this agreement, the Security Documents and any other
documents executed pursuant hereto or thereto the application of which is
not specifically provided for by another clause hereof shall be paid to the
Lender's account with such bank or banks as the Lender may nominate from
time to time and shall be applied by the Lender as follows: -
(A) all moneys received from a Total Loss or sale of the Vessel shall be
applied as follows: -
(i) first in payment of any and all sums whatsoever due and payable
to the Lender hereunder (such sums to be paid in such order as
the Lender may in its sole discretion elect);
(ii) second in payment of Repayment Instalments in reverse order of
maturity and in payment of any sums due to the Lender by virtue
of that payment under clause 8.6 hereof; and
(iii) third in payment of any credit balance to the Borrower or to
whomsoever may be entitled thereto; and
(B) all moneys not covered by clause 10.1(A) hereof shall be applied as
follows: -
(i) first in accordance with clause 10.1(A)(i) hereof;
(ii) second (in respect only of moneys received by virtue of the
Insurance Assignment) in reimbursement to the Borrower for such
of the costs (if any) incurred by the Borrower in effecting the
repair of the damage in respect of which those moneys are
received as the Lender shall approve (such approval not to be
unreasonably withheld);
(iii) third in payment of Repayment Instalments in reverse order of
maturity and in payment of any sums due to the Lender by virtue
of that payment under clause 8.6 hereof; and
(iv) fourth in payment of any credit balance to the Borrower or to
whomsoever may be entitled thereto.
12
<PAGE>
10.2 From and after the giving of notice by the Lender to the Borrower pursuant
to clause 11.1 hereof all moneys whatsoever received or recovered by the
Lender under any one or more of this agreement, the Security Documents and
any other documents executed pursuant hereto or thereto shall be applied by
the Lender as follows:-
(A) first in payment in such order as the Lender may in its sole
discretion elect of any and all sums whatsoever due and payable to the
Lender hereunder (other than the sums (if any) declared by the Lender
to be immediately due and payable in respect of the Refurbishment
Guarantee Amount pursuant to clause 11.1 hereof), subject to any right
the Lender may have to delay any such application in order to maximise
its claim;
(B) second (unless the Refurbishment Guarantee Amount has been reduced to
nil) in payment to a deposit account in the name of the Lender of a
sum equal to the Refurbishment Guarantee Amount; and
(C) third in payment of any credit balance to the Borrower or to
whomsoever may be entitled thereto
PROVIDED THAT: -
(i) sums paid to the deposit account pursuant to clause 10.2(B)
hereof shall be held on deposit at such rates of interest as the
Lender shall determine in its absolute discretion and any
interest accruing thereon shall be credited to that deposit
account at such intervals as the Lender shall determine in its
absolute discretion;
(ii) sums paid to the deposit account pursuant to clause 10.2(B)
hereof and any interest accrued thereon shall be applied in
payment to the Yard and/or the Interior Converter of the sums
due under the relevant Refurbishment Guarantee(s) on the due
date(s) therefor in accordance with the relevant Refurbishment
Contract(s); and
(iii) nothing herein contained shall be deemed to affect the absolute
obligation of the Borrower to indemnify the Lender in accordance
with this agreement.
11. DEFAULT
11.1 The Lender may by notice in writing to the Borrower declare the Loan and
guarantee facility made available under this agreement to be cancelled and
the Loan to be immediately repayable with accrued interest thereon in
accordance with the figures set out in schedule D hereto but adjusted for
any prior Repayment Instalment which has not been duly paid (plus any sums
due to the Lender by virtue of that repayment under clause 8.6 hereof) and
(unless the Refurbishment Guarantee Amount has been reduced to nil) an
amount equal to the Refurbishment Guarantee Amount as certified by the
Lender (which certificate shall be conclusive save for manifest error) to
be immediately due and payable
13
<PAGE>
to the Lender and any security held by the Lender shall become immediately
enforceable if any of the following events occurs: -
(A) failure by the Borrower to pay within three (3) days after the due
date for payment thereof any sum whatsoever due for payment by it
under this agreement;
(B) any one or more of the Security Parties making default in the
observance or performance of any other obligation covenant or
undertaking contained in any one or more of this agreement, the
Security Documents and any other documents executed pursuant hereto or
thereto and (if the same is in the opinion of the Lender capable of
remedy) the continuation of that default unremedied for a period of
fifteen (15) days after receipt by such one or more of the Security
Parties of a written notice from the Lender requiring the same to be
remedied;
(C) any of the representations and warranties made or deemed to have been
made in any one or more of this agreement, the Security Documents and
any other documents executed pursuant hereto or thereto being
materially inaccurate or misleading when made or becoming materially
inaccurate or misleading at any time hereafter were the same to be
repeated in relation to the facts subsisting at that time (whether or
not any such repetition actually occurs);
(D) any event of default occurring under any one or more of the Security
Documents;
(E) the fulfilment of any one or more of the material obligations
covenants and undertakings contained in any one or more of this
agreement, the Security Documents and any other documents executed
pursuant hereto or thereto or the exercise of any of the rights vested
in the Lender hereunder or thereunder becoming either unlawful under
any applicable law or unauthorised by any authority having
jurisdiction or otherwise impossible;
(F) a bona fide petition being presented or an order being made or an
effective resolution being passed for the commencement of any
proceedings for the liquidation winding-up or re-organisation of any
one or more of the Security Parties except for the purpose of and
followed by an amalgamation or reconstruction the terms of which shall
have been previously approved in writing by the Lender;
(G) a distress or execution being levied or enforced upon any part of the
assets of the Borrower which in the Lender's opinion would have a
material adverse effect on any one or more of the Security Parties and
not being satisfied removed or discharged within fourteen (14) days;
(H) the holder of any Encumbrance taking possession of or a liquidator,
administrator, receiver, administrative receiver, trustee or similar
officer being appointed in respect of the whole or a substantial part
of the assets of the Borrower;
(I) any one or more of the Security Parties being unable or admitting its
inability to pay its or their lawful debts as they mature or convening
a meeting of or preparing
14
<PAGE>
to enter into any arrangement or composition with or making a general
assignment for the benefit of its or their creditors or being
adjudicated bankrupt or insolvent;
(J) any other Borrowed Money of the Borrower becoming due or becoming
capable of being declared due prior to its stated date of maturity by
reason of default on the part of any one or more of the Security
Parties;
(K) any one or more of the Security Parties ceasing to carry on or
suspending or threatening to cease to carry on or to suspend its or
their business or a substantial part of the assets or business of the
Borrower being seized confiscated or expropriated;
(L) a Total Loss occurring and either (i) the Lender not being satisfied
at any time in its absolute discretion that the Total Loss is
adequately covered by insurance and that the relevant insurance
proceeds will be paid to the Lender or (ii) any insurance claim in
respect thereof being rejected by the underwriters at any time or
(iii) the Lender failing to receive the insurance proceeds in respect
thereof within one hundred and eighty (180) days thereafter;
(M) any one or more of the Subject Documents being repudiated or
terminated without the prior written consent of the Lender;
(N) a material adverse change occurring in the business, assets or
financial condition of any one or more of the Security Parties which
may reasonably be considered to affect its or their ability to comply
with all or any of its or their respective obligations under any one
or more of the Subject Documents; or
(O) any of the final conditions precedent specified in schedule C hereto
not being received by the Lender in form and substance satisfactory to
the Lender on or before the Termination Date.
12. SECURITY
12.1 As security for the Loan, interest thereon and all other sums due and to
become due hereunder the Borrower shall provide the Lender with the
following documents in form and substance satisfactory to the Lender: -
(A) duly registered first priority statutory mortgage over the Vessel and
a collateral deed of covenants duly executed by the Borrower;
(B) first priority assignment duly executed by the Borrower of all
insurances whatsoever in respect of the Vessel and loss of its
earnings and all compensation in respect of the requisition for title
or other compulsory acquisition of the Vessel (with the exception of
requisition hire);
(C) guarantee and indemnity duly executed by the Guarantor;
15
<PAGE>
(D) first priority assignments duly executed by the Borrower of the
benefit of any and all Refund Guarantees;
(E) first priority Swedish law pledges over any and all accounts opened
pursuant to clauses 3.1(J) and/or 8.5(C) hereof duly executed by the
Borrower; and
(F) letter of subordination duly executed by the Manager subordinating its
interests under the Management Agreement to those of the Lender under
this agreement.
13. REPRESENTATIONS AND WARRANTIES
13.1 The Borrower hereby represents and warrants that: -
(A) each of the Security Parties is a duly incorporated company validly
existing and in good standing under the laws of its country of
incorporation and all the shares in the Borrower are beneficially
owned by the Guarantor;
(B) each of the Security Parties has full power and authority to execute
deliver and perform such of the Subject Documents to which it is a
party;
(C) each of the Security Parties has taken all necessary corporate or
other action required to authorise the execution delivery and
performance of such of the Subject Documents to which it is a party;
(D) all consents licences approvals or authorisations whatsoever required
to make the Subject Documents legal valid enforceable and admissible
in evidence have been obtained and are in full force and effect;
(E) from and after execution and delivery thereof each of the Subject
Documents will constitute legal valid and binding obligations of the
parties thereto (other than the Lender) enforceable in accordance with
its terms and will not contravene any applicable law or regulation or
any contractual constitutional or other restriction binding on any of
the parties thereto (other than the Lender);
(F) no material litigation or administrative proceedings of or before any
board of arbitration, Court or Governmental authority or agency is
pending or (to the Borrower's knowledge) threatened the result of
which would or might be to have a material adverse effect on the
business, assets or financial condition of any one or more of the
Security Parties;
(G) the copies of any of the Subject Documents delivered or to be
delivered to the Lender hereunder constitute the full agreement
between the parties thereto with respect to the subject matter thereof
and none of the parties thereto is in default thereunder;
(H) all financial information and other documentation submitted to the
Lender by or on behalf of the Borrower in connection herewith is
accurate and correct in all material respects and not misleading;
16
<PAGE>
(I) each Security Party and its business and assets (including, without
limitation, all computer systems, all systems and equipment containing
embedded microchips (including leased systems and equipment) and any
other systems, equipment or parts of the business or assets whatsoever
of that Security Party whose proper functioning or operation is
capable of being affected by the incorrect processing, storing,
calculation or recognition of dates, together with all software and
data in connection with any of the foregoing) shall at all times after
30 June 1999 comply with the requirements of Year 2000 Conformity as
defined in "A DEFINITION OF YEAR 2000 CONFORMITY REQUIREMENTS" issued
by the British Standards Institution (BSI DISC PD2000-1:1998) or such
later reviewed, revised or amended version thereof as may be published
by the British Standards Institution from time to time (in which case
the later version shall be the relevant one for the purposes of this
clause); and
(J) no Event of Default has occurred or is continuing and no event which
with the giving of notice and/or lapse of time would constitute an
Event of Default has occurred or is continuing.
14. COVENANTS
14.1 The Borrower hereby covenants that from the date hereof until the
Borrower has no remaining obligations, actual or contingent, under this
agreement: -
(A) the Borrower will file all requisite tax returns and will pay all tax
as shown to be due and payable on such returns or any of the
assessments made against it (other than those being contested in good
faith);
(B) the Borrower will carry on and conduct its business in a proper and
efficient manner and will duly pay all outgoings as and when they fall
due and in particular without limiting the generality of the foregoing
will duly observe and perform all the terms and conditions of any
contract of employment of the Vessel to be observed and performed by
it;
(C) the Borrower will prepare or cause to be prepared accounts at least
once in every period of 12 consecutive months and will furnish the
Lender with audited copies of those accounts no later than one hundred
and eighty (180) days after the end of each financial year; the first
such accounts shall relate to the period ending on 30 September 1999;
those accounts shall include profit and loss accounts, balance sheets
and cash flow analyses certified and audited by Grant Thornton or an
accountant of similar standing acceptable to the Lender;
(D) the Borrower shall promptly furnish to the Lender all such accounts
and financial information concerning any one or more of the Security
Parties and the Vessel as the Lender may from time to time reasonably
require including without limiting the generality of the foregoing
cash flow analyses and details of the operating costs of the Vessel;
17
<PAGE>
(E) the Vessel and the Lender's interest as mortgagee thereof shall be
insured with such underwriters insurance offices and clubs for such
amounts for such risks in such form and upon such conditions as are
satisfactory to the Lender from time to time;
(F) the Borrower will not without the prior written consent of the
Lender: -
(i) create or allow to subsist any Encumbrance over any of its
assets or any part thereof save for Permitted Liens and those
created by any of the Security Documents;
(ii) incur any liability in respect of Borrowed Money except for
Borrowed Money not secured on the Vessel or any share therein
or its insurances and not having a higher value in terms of
right of payment than the Loan hereunder;
(iii) make loans or advances to others (except for loans or advances
made in the ordinary course of business in connection with the
chartering and/or operation and/or repair of the Vessel);
(iv) except in connection with the chartering and/or operation
and/or repair of the Vessel incur any other liability to a
third party which in the opinion of the Lender is of a
substantial nature;
(v) consolidate with any other company or merge into any company;
(vi) engage in any business other than the ownership operation
chartering and management of the Vessel;
(vii) guarantee endorse or otherwise become or remain liable in
respect of the obligations of any person firm or corporation;
(viii) pay any dividends or other distributions or issue any new
shares, or transfer any shares;
(ix) sell or otherwise dispose of the Vessel or any share therein
(the Lender's consent not to be unreasonably withheld);
(x) appoint any manager of the Vessel other than the Manager (the
Lender's consent not to be unreasonably withheld);
(xi) change the class, flag or management of the Vessel (the
Lender's consent not to be unreasonably withheld); or
(xii) make or allow any alteration to or waiver of the terms of any
one or more of the Subject Documents;
18
<PAGE>
(G) the Borrower will promptly inform the Lender if any Event of Default
or any event which with the giving of notice and/or lapse of time
would constitute an Event of Default occurs or if any event occurs
which may materially adversely affect its ability to perform any of
its obligations under any one or more of this agreement, the Security
Documents and any other documents executed pursuant hereto or thereto;
(H) the Borrower will permit the Lender or procure that the Lender be
permitted by surveyors or other persons appointed by it in that behalf
to board the Vessel both before any Drawdown Date and at all
reasonable times thereafter without in any way disturbing the
refurbishment of the Vessel for the purpose of inspecting and
reporting to the Lender on the refurbishment works being carried out
on the Vessel by the Yard and/or the Interior Converter under the
Refurbishment Contracts and the Borrower will afford or procure the
affording of all proper facilities for such inspections and send
copies of any periodic reports on the refurbishment works to the
Lender;
(I) the Borrower will take all steps within its power to ensure that the
Yard and the Interior Converter observe and perform all the conditions
and obligations imposed on them by the Refurbishment Contracts and
that the Yard and the Interior Converter proceed with the
refurbishment of the Vessel with due diligence and dispatch; and
(J) the Borrower will from time to time at the request of the Lender
execute and deliver to the Lender or procure the execution and
delivery to the Lender of all such documents as the Lender shall deem
desirable in its absolute discretion for giving full effect to this
agreement and for perfecting, protecting the value of or enforcing any
rights or securities granted to the Lender under any one or more of
this agreement, the Security Documents and any other documents
executed pursuant hereto or thereto.
15. SET-OFF
15.1 The Lender is hereby authorised to combine any and all accounts held by the
Borrower with the Lender at any of the Lender's offices and to apply
(without any prior notice) any credit balance to which the Borrower is then
beneficially entitled on any such account (whether or not that credit
balance is then due to the Borrower) in or towards satisfaction of any sums
then due and payable by the Borrower hereunder. For that purpose the Lender
is hereby authorised to use all or part of that credit balance to buy such
other currency or currencies as may be required to enable it to effect that
application. The Lender shall not be obliged to exercise any of its rights
under this clause, which shall be without prejudice and in addition to any
right of set off, combination of accounts, lien or other rights to which it
at any time otherwise is entitled (whether by operation of law, contract or
otherwise).
19
<PAGE>
16. ASSIGNMENT AND PARTICIPATION
16.1 This agreement shall be binding upon and inure to the benefit of the
Lender and the Borrower and their respective successors and assigns.
16.2 The Borrower may not assign its rights or obligations hereunder without
the prior written consent of the Lender.
16.3 The Lender may at any time assign transfer or grant participations in all
or a proportion of its rights and obligations hereunder to any other bank
or financial institution and for this purpose: -
(A) the Lender shall be at liberty to disclose on a confidential basis to
any other bank or financial institution which has taken or may take
such an assignment transfer or participation all such information
concerning any one or more of the Security Parties, the Vessel and the
Subject Documents as the Lender deems appropriate; and
(B) the Borrower shall upon demand by and at the expense of the Lender
execute all such documents and do all such acts and things as may be
necessary to give effect to any such assignment transfer or
participation.
17. MISCELLANEOUS
17.1 Time shall be of the essence of this agreement but no failure or delay on
the part of the Lender to exercise any power or right hereunder shall
operate as a waiver of such power or right nor shall any single or partial
exercise of any power or right hereunder preclude any other or further
exercise thereof or the exercise of any other power or right hereunder. The
powers and rights provided to the Lender in this agreement are cumulative
and shall not exclude any powers or rights provided to the Lender by law.
17.2 In the event of any of the provisions contained in any one or more of this
agreement, the Security Documents and any other documents executed pursuant
hereto or thereto being invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the remaining
provisions herein or therein contained shall not in any way be affected or
impaired thereby.
17.3 The Lender shall not be liable for any failure to meet its obligations
hereunder resulting from any cause whatsoever beyond its control.
18. NOTICES
18.1 Any notice or other correspondence in connection herewith required to be
sent or given by the Borrower to the Lender shall be sent to the Lender in
the English language at Ostra Hamngatan 16, SE-405 09 Gothenburg, Sweden
(telex no. 12399 (NBBANK S) facsimile no. +46 31 771 6470) or to such other
address or addresses as may from time to time be notified by the Lender to
the Borrower in writing for such purpose and shall be deemed to
20
<PAGE>
have been validly given and received on the date of dispatch if sent by
telex and five (5) days after having been posted if sent by prepaid first
class or airmail post.
18.2 Any notice or other correspondence in connection herewith required to be
sent or given by the Lender to the Borrower shall be sent to the Borrower
in the English language at c/o Commodore Holdings Limited, 4000 Hollywood
Boulevard, Suite 385-S, Hollywood, F1 33021, U.S.A., Attention Chief
Financial Officer (facsimile no. + 954 921 2147) with copies to Kathleen L
Deutsch, P.A., Broad and Cassel, Miami Center - Suite 3000, 201 S. Biscayne
Boulevard, Miami, F1 33131, U.S.A. (facsimile no. + 305 373 9443) or to
such other address or addresses as the Borrower may from time to time
notify to the Lender in writing and shall be deemed to have been validly
given and received on the date of dispatch if sent by telex and five (5)
days after having been posted if sent by prepaid first class or airmail
post.
19. PROPER LAW AND JURISDICTION
19.1 This agreement shall be governed by and construed in accordance with the
Laws of England and for the exclusive benefit of the Lender the Borrower
hereby irrevocably submits to the jurisdiction of the High Courts of
Justice in England. Such submission shall not limit the right of the Lender
to commence any proceedings relating to this agreement (in addition or
alternatively) in any other jurisdiction which the Lender deems fit. The
Borrower hereby irrevocably authorises and appoints Consult Marine, 58
London Fruit Exchange, Brushfield Street, London E1 6EP as its agent in
England for the acceptance of service of legal proceedings on it hereunder.
21
EXHIBIT 10.8
INDEX OF CONTENTS
CLAUSE HEADING PAGE NO.
- ------ ------- --------
1. DEFINITIONS AND CONSTRUCTION ......................... 1
2. REPRESENTATIONS AND WARRANTIES........................ 2
3. GUARANTEE AND INDEMNITY .............................. 3
4. EXPENSES ............................................. 3
5. CONTINUING GUARANTEE ................................. 3
6. UNDERTAKINGS ......................................... 4
7. ENFORCEMENT .......................................... 6
8. CURRENCY INDEMNITY ................................... 7
9. ASSIGNMENT ........................................... 8
10. MISCELLANEOUS ................ ....................... 8
11. NOTICES ...................... ....................... 8
12. GOVERNING LAW AND JURISDICTION ....................... 9
-i-
<PAGE>
THIS GUARANTEE AND INDEMNITY is given the 23rd day of April 1999
BY:-
(1) COMMODORE HOLDINGS LIMITED a company incorporated and registered under
the laws of Bermuda whose registered office is at c/o Francis &
Forrest, Corner House, 20 Parliament Street, Hamilton HM 12, Bermuda
(the "Guarantor" which expression shall include the successors and
permitted assigns of the Guarantor) in favour of:-
(2) NORDBANKEN AB (PUBL) a company incorporated under the laws of Sweden
acting through its office at Ostra Hamngatan 16, SE-405 09 Gothenburg,
Sweden (the "Lender" which expression shall include its successors and
assigns).
WHEREAS:
(A) By a loan and guarantee facility agreement dated 23 April 1999 made
between the Lender (1) and Albuferra Investments, Inc. (the "Borrower")
(2) the Lender agreed to make available to the Borrower a loan facility
of up to fourteen million two hundred and fifty thousand United States
Dollars (USD14,250,000) (of which up to nine million seven hundred and
fifty thousand United States Dollars (USD9,750,000) might comprise a
guarantee facility) pursuant to and subject to the terms and conditions
therein contained.
(B) In order to induce the Lender to enter into the Agreement, to advance
the loan to be advanced thereunder and to issue any guarantee or letter
of credit to be issued pursuant thereto and as a condition precedent
thereto the Guarantor has agreed to give the guarantee and indemnity
herein contained.
NOW THIS DEED WITNESSETH as follows:-
1. DEFINITIONS AND CONSTRUCTION
1.1 In this Guarantee and Indemnity unless the context otherwise requires:-
"AGREEMENT"
means the loan and guarantee facility agreement referred to in Recital
(A) above as supplemented by any amendment or supplement thereto which
may from time to time be agreed to by the Lender and the Borrower;
"DEFAULT RATE"
means the rate of interest calculated in accordance with clause 4.2 of
the Agreement;
"INDEBTEDNESS"
means the Loan together with all interest accrued thereon and all other
moneys, costs, fees and expenses whatsoever which from time to time may
be or become owing or due and payable to the Lender under or pursuant
to the Agreement or any of the Security Documents;
<PAGE>
"LOSS"
means any and all losses, costs, expenses, damages, claims, demands,
rights of set-off and/or counterclaim incurred by the Lender in respect
of or in connection with the Agreement and/or the Security Documents or
any liability arising therefrom;
"SECURED OBLIGATIONS"
means all covenants, agreements, warranties, conditions and provisions
expressed or implied on the part of the Borrower to be performed,
observed or complied with under the Agreement including, without
limitation, the due and punctual payment of the principal sum and all
interest and other moneys expressed to be payable by the Borrower in
accordance with the terms of the Agreement; and
"THIS GUARANTEE"
means this Guarantee and Indemnity.
1.2 Unless otherwise defined herein or the context otherwise requires,
words and expressions, defined in the Agreement shall have the same
meanings herein. Clause headings are inserted for convenience only and
shall be ignored in the interpretation of this Guarantee.
2. REPRESENTATIONS AND WARRANTIES
2.1 The Guarantor HEREBY REPRESENTS AND WARRANTS to the Lender that as of
the date hereof and (save in respect of sub-paragraph (B)(ii) below) as
continuing warranties until all of the Indebtedness shall have been
paid and discharged in full:-
(A) the Guarantor has full power and authority to make and perform this
Guarantee and the same constitutes the legal, valid and binding
obligations of the Guarantor enforceable in accordance with its
terms;
(B) the making and performance by the Guarantor of this Guarantee will
in no way exceed the powers granted to the Guarantor by, or violate
in any respect any provision of (i) any mortgage, charge, deed,
contract or other undertaking or instrument to which the Guarantor
is a party or which is binding on the Guarantor or any of the
assets of the Guarantor; or (ii)any law or regulation or any order
or decree of any governmental authority, agency or court; or (iii)
the Memorandum and/or Articles of Association (or equivalent
corporate documents) of the Guarantor;
(C) all consents, licences, approvals or authorisations which are
required in connection with the execution, validity, performance or
enforceability of this Guarantee have been obtained and are and
will continue to be valid and subsisting;
(D) save as disclosed to the Lender in writing, the Guarantor is not in
default under any agreement to which the Guarantor is a party or by
which the Guarantor may be bound, nor in respect of any financial
commitment or obligation;
2
<PAGE>
(E) the Guarantor is not engaged in litigation or arbitration before
any court or before any tribunal which might if determined against
the Guarantor have a material adverse effect on the financial
condition of the Guarantor and there is no claim against the
Guarantor which, with the passage of time might result in any such
litigation or arbitration;
(F) the Guarantor has received a copy of the Agreement and approves of
and agrees to the terms and conditions thereof; and
(G) the Guarantee is and will remain the beneficial owner of all the
shares in the Borrower.
3. GUARANTEE AND INDEMNITY
3.1 The Guarantor HEREBY UNCONDITIONALLY AND IRREVOCABLY:-
(A) GUARANTEES the due and punctual performance and observance of and
compliance with the Secured Obligations by the Borrower in
accordance with the terms of the Agreement and the Guarantor HEREBY
COVENANTS that, if any amount of principal or interest or other
moneys payable by the Borrower under the Agreement shall not be
paid when the same shall be due and payable, whether on maturity or
otherwise, the Guarantor will, forthwith on demand, make such
payment, or cause such payment to be made, to the Lender in the
manner specified by the Lender together with all interest expressed
to accrue on any such amount pursuant to the Agreement until the
date of receipt by the Lender; and
(B) without prejudice to (A) above and as a separate and independent
obligation thereto INDEMNIFIES and agrees to indemnify the Lender
upon written demand in respect of any Loss which the Lender may
suffer or incur in good faith directly or indirectly as a result of
or in connection with any failure by the Borrower fully and
effectually to perform, observe and/or comply with the Secured
Obligations.
4. EXPENSES
4.1 The Guarantor further agrees to pay to the Lender on demand on a full
indemnity basis all commissions, charges; costs and expenses of
whatsoever nature incurred by the Lender in the administration,
preservation and enforcement of any of its rights hereunder together
with interest thereon (both before and after judgment) at the Default
Rate from the date of demand until the date of receipt by the Lender
compounded on such days in the year as the Lender reasonably may
select.
5. CONTINUING GUARANTEE
5.1 This Guarantee shall:-
(A) be a continuing security and shall be construed and take effect as
security for all of the Secured Obligations until they shall have
been satisfied and discharged in
3
<PAGE>
full and the Guarantor hereby waives any right of set-off or
counter-claim which the Guarantor may otherwise have had against
the Lender;
(B) be in addition to any other guarantee, indemnity or other security
which the Lender may now or hereafter hold in respect of all or any
of the Secured Obligations whether from the Guarantor or otherwise,
and shall be binding on the Guarantor notwithstanding that any
other Security Party shall fail to give the security to be provided
by it or shall be released from any such security or such security
shall be varied;
(C) not be discharged by the granting to any Security Party of time or
any other indulgence or by compounding with any Security Party or
by any variation whatsoever of any of the Secured Obligations or by
any actual or alleged invalidity, irregularity or unenforceability
of or defect in any of the Secured Obligations or in any of the
provisions of the Agreement or any one or more of the Security
Documents or by the absence of any action to enforce any of the
rights of the Lender thereunder or by any act or circumstance
whatsoever whereby this Guarantee would or might otherwise but for
the provisions of this Clause have been so discharged; and
(D) remain in full force and effect notwithstanding any change in the
name, constitution or otherwise of any Security Party or the Lender
or their respective successors and assigns or the absorption or
amalgamation of any thereof by or with any other corporate entity.
6. UNDERTAKINGS
6.1 The Guarantor AGREES WITH REPRESENTS AND UNDERTAKES to the Lender
that:-
(A) if the Guarantor becomes liable to make any payment pursuant to
Clause 3 hereof, then the Guarantor will not thereafter make demand
for payment of any moneys for the time being due to the Guarantor
from any Security Party or exercise any other right or remedy to
which the Guarantor is entitled in respect of such moneys unless
and until all moneys whatsoever owing by all Security Parties to
the Lender have been irrevocably paid in full;
(B) if any Security Party shall become insolvent or shall be wound up
or liquidated, the Guarantor shall not (unless so required by the
Lender and then only on condition that the Guarantor holds the
benefit of any claim in such insolvency or liquidation upon trust
to pay any amounts recovered thereunder to the Lender) prove in
such insolvency, winding-up or liquidation until all moneys
whatsoever owing by all Security Parties to the Lender have been
irrevocably paid in full;
(C) the Guarantor has not taken and will not take from any Security
Party any security whatsoever for the moneys hereby secured and,
notwithstanding the foregoing, any such security now or hereafter
held by the Guarantor shall be held in trust for
4
<PAGE>
the Lender and for its benefit in respect of the obligations of the
Guarantor hereunder;
(D) the Guarantor will not exercise any right to which the Guarantor
may be entitled as a surety until all moneys whatsoever owing or
due and payable by all Security Parties to the Lender have been
irrevocably paid in full;
(E) the Guarantor hereby waives any right to require the Lender to
proceed first against any Security Party and/or to give notice to
or demand on any Security Party whatsoever;
(F) all payments to be made hereunder shall be made in immediately
available funds without set-off or counter-claim and free and clear
of and without deduction for or on account of any present or future
taxes of any nature now or hereafter imposed, levied, collected,
withheld, deducted or assessed by any taxing and/or governmental
authority whatsoever or wheresoever unless the Guarantor is
compelled by law to deduct such taxes. In that event all such taxes
shall be borne by the Guarantor or, if under the provisions of any
applicable law this stipulation cannot be applied, then the
Guarantor shall increase the payments to the Lender so that the net
amounts received by the Lender shall be equal to the full amounts
which the Lender would have received had payment not been made
subject to such taxes; PROVIDED THAT taxes payable by the Lender on
its profits arising by virtue of the transaction herein described
in the countries in which it carries on business shall not be
included in the foregoing. As used in this sub-clause the term
"taxes" includes all levies, imposts, duties, charges, fees,
deductions and withholdings whatsoever and any restriction or
condition resulting in a charge.
If the Guarantor is required to deduct taxes, the Guarantor will
promptly thereafter deliver all receipts and other documents
relating thereto to the Lender.
If and when the Lender shall receive (in its reasonable opinion) a
credit in respect of any taxes deducted by the Guarantor and to
which this sub-clause refers, it shall allow the Guarantor a credit
against amounts due or to become due under the Agreement or any one
or more of the Security Documents (the "Guarantor's Credit") of
such amount as shall be fair and reasonable in the opinion of the
Lender in respect of any such credit as is received by the Lender
or, if all of the Indebtedness shall have been repaid in full,
shall make a payment to the Guarantor equal to the amount of the
Guarantor's Credit. The Lender shall be under no obligation to
discuss or reveal its tax affairs with the Guarantor;
(G) the Guarantor shall give to the Lender all such information as the
Lender may request with regard to the performance by the Security
Parties of their respective obligations under the Agreement and the
Security Documents;
(H) the Guarantor will prepare or cause to be prepared audited and
consolidated accounts at least once in every period of 12
consecutive months will furnish the Lender with copies of the
audited accounts no later than one hundred and eighty
5
<PAGE>
(180) days after the end of each financial year; the first such
audited accounts shall relate to the period ending on 30 September
1999, the audited accounts shall be in the form required by the
United States Securities Exchange Commission ("SEC") and shall
include profit and loss accounts and balance sheets certified and
audited by an accountant acceptable to the Lender; and
(I) the Guarantor will provide the Lender with copies of the quarterly
filing as made by the Guarantor with the SEC.
7. ENFORCEMENT
7.1 The Guarantor AGREES, ACKNOWLEDGES AND DECLARES that:-
(A) in order to give effect to this Guarantee the Lender shall be at
liberty to act as though the Guarantor were the principal debtor
and obligor in respect of the Secured Obligations and in the event
of the winding-up, dissolution, reconstruction or amalgamation in
which or as a consequence of which any Security Party loses its
separate corporate identity the Guarantor shall become liable to
the Lender for the payment of all moneys expressed to be payable by
the Security Parties to the Lender pursuant to the Agreement and
the Security Documents and the performance and observance of and
compliance with all the Secured Obligations;
(B) any release, settlement or discharge in relation to the obligations
of the Guarantor hereunder shall be conditional upon no security,
disposition or payment to the Lender in respect of any of the
Indebtedness being avoided or reduced by virtue of any provisions
or enactments relating to bankruptcy, insolvency or liquidation and
if any such security, disposition or payment be avoided or reduced
as aforesaid, this Guarantee shall continue to apply in respect of
the amount of such security, disposition or payment and the
Guarantor shall indemnify the Lender in respect thereof;
(C) the Lender may take such action as the Lender in its own discretion
may consider appropriate against any other Security Party or
Parties to recover moneys due and payable in respect of the Secured
Obligations, the Guarantor, however, remaining liable under this
Guarantee for payment and discharge of all moneys payable in
respect thereof;
(D) the Lender shall be entitled (after a demand for payment has been
made hereunder but without further notice) to procure the
setting-off of any liability of the Guarantor hereunder against any
moneys standing to the credit of any account or accounts which the
Guarantor may now or hereafter have with the Lender at any of the
Lender's offices or with any subsidiary or parent company of the
Lender (whether or not those moneys are then due to the Guarantor)
and, for this purpose, to combine any and all such accounts and to
use all or part of those moneys to buy such other currency or
currencies as may be required to enable the Lender to effect that
setting-off. The Lender shall also be entitled to retain as
security for the
6
<PAGE>
discharge of the liability of the Guarantor hereunder all
securities or other property of the Guarantor held by the Lender at
any of the Lender's offices and/or by any subsidiary or parent
company of the Lender (whether for safe custody or otherwise);
(E) notwithstanding that the Secured Obligations and any moneys due
from the Guarantor hereunder shall have been complied with, paid or
discharged, the Lender shall be entitled to retain this Guarantee
and refrain from releasing the Guarantor from this Guarantee for
such period thereafter as the Lender may determine and in the event
of bankruptcy, winding-up or any similar proceedings being
commenced in respect of any Security Party or any other person as
may have performed, paid or discharged any of the Secured
Obligations within such period as aforesaid, the Lender shall be at
liberty to retain this Guarantee and any security held for the
obligations of the Guarantor hereunder and refrain from releasing
the Guarantor from this Guarantee and may retain such security for
and during such period as the Lender may determine;
(F) for the purpose of enabling the Lender to sue any other Security
Party or to prove in its winding-up, liquidation or bankruptcy or
in any similar proceedings for any moneys due and unpaid by the
Borrower to the Lender, the Lender may at any time place and keep
for such time as it may think fit any moneys received hereunder to
the credit of an interest bearing suspense account without any
obligation on the part of the Lender to apply the same or any part
thereof in or towards the discharge of the Indebtedness; and
(G) the certificate of the Lender as to the sum of money owed by any
Security Party to the Lender shall, in the absence of manifest
error, be conclusive for any purpose and binding on the Guarantor.
8. CURRENCY INDEMNITY
8.1 Any amount received by the Lender in connection herewith in a currency
(the "Relevant Currency") other than the currency in which the same
should be received pursuant to the terms hereof (the "Agreed Currency")
whether pursuant to a judgment or order of a court or tribunal of any
jurisdiction or any enforcement proceedings or otherwise howsoever in
connection herewith or otherwise shall only constitute a discharge to
the Guarantor to the extent of the amount of the Agreed Currency which
the Lender is able, promptly on receipt, to purchase in such foreign
exchange market as the Lender may select with the amount of the
Relevant Currency so received. If:-
(A) the amount of the Agreed Currency which the Lender is so able to
purchase is less than the amount of the Agreed Currency due to the
Lender hereunder; and/or
(B) any condition imposed in relation to the conversion of any amount
paid in the Relevant Currency into the Agreed Currency including,
without limitation, any condition imposed by any exchange control
authority, reduces the amount in the Agreed Currency which the
Lender actually receives for the amount of such
7
<PAGE>
payment in the Relevant Currency below that amount which it would
have received had such condition not been imposed;
the Guarantor will indemnify and hold the Lender harmless against any
loss, damage, costs and/or expenses arising as a result.
8.2 The above indemnity shall constitute a separate and independent
obligation from the other obligations contained herein shall give rise
to a separate and independent cause of action and shall continue in
full force and effect notwithstanding any judgment or order for amounts
due hereunder.
9. ASSIGNMENT
9.1 This Guarantee shall be binding upon and inure to the benefit of and be
enforceable by the successors and permitted assigns of the Lender. The
Guarantor may not assign or transfer rights or obligations hereunder
without the prior written consent of the Lender (which may be
withheld).
10. MISCELLANEOUS
10.1 The Guarantor HEREBY AGREES that at any time and from time to time,
upon the request of the Lender, the Guarantor will promptly and duly
execute and deliver and/or procure the execution and delivery of any
and all such further instruments and documents as may be deemed
desirable by the Lender for the purpose of obtaining for the Lender the
full benefits and of the rights and powers herein granted.
10.2 Any provisions contained herein prohibited by or unlawful or
unenforceable under any applicable law shall, to the extent required by
such law, be ineffective without modifying the remaining provisions
hereof. Where however the provisions of any such applicable law may be
waived, they are hereby waived by the Guarantor to the fullest extent
permitted by such law with the intent that this Guarantee shall be
valid, binding and enforceable in accordance with its terms.
10.3 Time is of the essence of this Guarantee but no failure or delay by the
Lender in exercising any right, power or privilege hereunder and no
course of dealing between any Security Party and the Lender shall
operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein
are cumulative and not exclusive of any rights or remedies which the
Lender would otherwise have. No notice to or demand on the Guarantor
shall entitle the Guarantor to any other or further demand in similar
or other circumstances or constitute a waiver of the rights of the
Lender to any other or further action in any circumstances without
notice or demand.
11. NOTICES
11.1 Any demand or notice to be given hereunder shall be in writing and sent
by prepaid first class or airmail letter post or telex or facsimile or
delivered by hand addressed to the Guarantor as follows:-
8
<PAGE>
Commodore Holdings Limited
4000 Hollywood Boulevard
Suite 385-S
Hollywood
Fl 33021
U.S.A.
Attention Chief Financial Officer
Facsimile No: + 954 921 2147
with a copy to:-
Kathleen L Deutsch, P.A.
Broad and Cassel
Miami Center - Suite 3000
201 S. Biscayne Boulevard
Miami
Fl 33131
U.S.A.
Facsimile no. + 305 373 9443
or to such other person or address as the Guarantor may notify in
writing to the other party hereto.
11.2 Any such notice shall be deemed to have been validly given and received
on the date of despatch if sent by telex and five (5) days after having
been posted if sent by prepaid first class or airmail post.
12. GOVERNING LAW AND JURISDICTION
12.1 This Guarantee and all agreements entered into pursuant or supplemental
hereto shall be governed by and construed in accordance with English
law.
12.2 The Guarantor HEREBY SUBMITS for the exclusive benefit of the Lender to
the jurisdiction of the English Courts and appoints Consult Marine
whose address is for the time being at 58 London Fruit Exchange,
Brushfield Street, London E1 6EP or such other person as the Guarantor
may with the prior written approval of the Lender from time to time
appoint to be the attorney of the Guarantor for the purpose of
accepting service on behalf of the Guarantor of any writ, notice,
order, judgment or other legal process with respect hereto or any
matter arising hereout and agrees that failure by any such process
agent to give notice of such service of process to the Guarantor shall
not impair or affect the validity of such service or of any judgment
based thereon. The aforesaid submission shall not limit the right of
the Lender to commence proceedings against the Guarantor in any
jurisdiction it may think fit or in two or more jurisdictions.
9
<PAGE>
IN WITNESS whereof this Guarantee has been executed the day and year first
before written.
SIGNED FOR AN ON BEHALF OF
COMMODORE HOLDINGS LIMITED
By: /s/ Jeffrey I. Binder
--------------------------------
JEFFREY I. BINDER
Its duly authorised director
In the presence of:
____________________________________
____________________________________
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 10,393,000
<SECURITIES> 0
<RECEIVABLES> 1,156,000
<ALLOWANCES> 0
<INVENTORY> 1,805,000
<CURRENT-ASSETS> 24,018,000
<PP&E> 48,169,912
<DEPRECIATION> 5,575,912
<TOTAL-ASSETS> 74,832,000
<CURRENT-LIABILITIES> 22,763,000
<BONDS> 22,779,000
0
4,000
<COMMON> 76,000
<OTHER-SE> 31,819,000
<TOTAL-LIABILITY-AND-EQUITY> 74,832,000
<SALES> 0
<TOTAL-REVENUES> 41,021,000
<CGS> 0
<TOTAL-COSTS> 35,759,000
<OTHER-EXPENSES> (1,161,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,333,000
<INCOME-PRETAX> 3,210,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,210,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,210,000
<EPS-BASIC> 0.41
<EPS-DILUTED> 0.35
</TABLE>
