-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KORZfFZ6dcI6slg97NB8Ma3h0xjw6WgeZre80eKfxYFMfecmHeAEirbV74GAjvX4 6UL1vGt/O7x4E3FiNPCy9w== 0000950144-99-004018.txt : 19990405 0000950144-99-004018.hdr.sgml : 19990405 ACCESSION NUMBER: 0000950144-99-004018 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROYAL CARIBBEAN CRUISES LTD CENTRAL INDEX KEY: 0000884887 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 980081645 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: SEC FILE NUMBER: 001-11884 FILM NUMBER: 99586728 BUSINESS ADDRESS: STREET 1: 1050 CARIBBEAN WAY CITY: MIAMI STATE: FL ZIP: 33132 BUSINESS PHONE: 3055396000 MAIL ADDRESS: STREET 1: 1050 CARIBBEAN WAY CITY: MIAMI STATE: FL ZIP: 33132 20-F 1 ROYAL CARIBBEAN CRUISES FORM 20-F 12-31-98 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (MARK ONE) [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-11884 ROYAL CARIBBEAN CRUISES LTD. (Exact name of Registrant as specified in its charter) REPUBLIC OF LIBERIA (Jurisdiction of incorporation or organization) 1050 CARIBBEAN WAY, MIAMI, FLORIDA 33132 (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock, par value $.01 per share New York Stock Exchange $3.625 Series A Convertible Preferred Stock New York Stock Exchange par value $.01 per share
Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: As of December 31, 1998, the Registrant had outstanding 168,945,222 shares of common stock, par value $.01 per share. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 [ ] Item 18 [X] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ROYAL CARIBBEAN CRUISES LTD. INDEX TO REPORT ON FORM 20-F
PAGE ---- PART I. Item 1. Description of Business..................................... 1 Item 2. Description of Property..................................... 12 Item 3. Legal Proceedings........................................... 13 Item 4. Control of Registrant....................................... 14 Item 5. Nature of Trading Market.................................... 16 Item 6. Exchange Controls and Other Limitations Affecting Security Holders..................................................... 17 Item 7. Taxation.................................................... 17 Item 8. Selected Financial Data..................................... 17 Item 9. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 17 Item 9A. Quantitative and Qualitative Disclosures About Market Risk........................................................ 24 Item 10. Directors and Officers of the Registrant.................... 25 Item 11. Compensation of Directors and Officers...................... 27 Item 12. Options to Purchase Securities From Registrant or Subsidiaries................................................ 28 Item 13. Interest of Management in Certain Transactions.............. 29 PART II. Item 14. Description of Securities to be Registered.................. 29 PART III. Item 15. Defaults Upon Senior Securities............................. 29 Item 16. Changes in Securities and Changes in Security for Registered Securities.................................................. 29 PART IV. Item 17. Financial Statements........................................ 30 Item 18. Financial Statements........................................ 30 Item 19. Financial Statements and Exhibits........................... 30 SIGNATURES............................................................. 31
3 PART I ITEM 1. DESCRIPTION OF BUSINESS GENERAL Royal Caribbean Cruises Ltd., a Liberian corporation, including its subsidiaries (the "Company"), is the world's second largest cruise company with 16 cruise ships and a total of 29,800 berths. The Company offers more than 110 different itineraries that call on more than 175 destinations on six continents. The Company operates two brands, the Royal Caribbean International brand ("Royal Caribbean International") and the Celebrity Cruises brand ("Celebrity Cruises"). The Company acquired Celebrity Cruise Lines Inc. ("Celebrity") in July 1997. The Royal Caribbean International Brand Royal Caribbean International serves the volume cruise vacation market which it categorizes as the contemporary and premium segments. The brand operates 11 cruise ships with an aggregate of 21,600 berths, offering more than 60 different cruise itineraries, that range from three to 21 nights and call on more than 140 destinations on six continents. Royal Caribbean International's strategy is to attract a broad array of vacationing consumers in the contemporary segment of the volume market by providing a wide variety of itineraries, varying cruise lengths and multiple options for dining and entertainment aboard its vessels. The Company believes that the variety and quality of Royal Caribbean International's product offering represent excellent value to consumers, especially to couples and families traveling with children. While the brand is positioned at the upper end of the contemporary segment, the Company believes that Royal Caribbean International's quality enables it to attract consumers from the premium segment as well, thereby achieving the broadest market coverage of any of the major brands in the cruise industry. The Celebrity Cruises Brand Celebrity Cruises primarily serves the premium segment of the cruise vacation market. Celebrity Cruises operates five cruise ships with an aggregate of 8,200 berths. Celebrity Cruises offers more than 40 different itineraries, that range from five to 19 nights, reaching over 80 destinations in Alaska, Bermuda, the Caribbean, Europe, Mexico, and the Panama Canal. Celebrity Cruises' strategy is to attract consumers who want an enhanced cruise vacation in terms of modern vessels, fine dining and service, large staterooms, a high staff to guest ratio, excellent spas and high technology. These are hallmarks of the premium cruise vacation market, which is Celebrity Cruises' primary target. One of Celebrity Cruises' principal objectives is to offer a premium cruise experience. As such, it also attracts consumers from the contemporary and luxury cruise categories. Both brands offer a wide array of shipboard activities, services and amenities including swimming pools, sun decks, beauty salons, exercise and massage facilities, gaming facilities, lounges, bars, show-time entertainment, retail shopping and cinemas. Although many of the shipboard activities are included in the base price of the cruise, revenues are also realized from gaming facilities, the sale of alcoholic and other beverages, retail sales and shore excursions. INDUSTRY Since 1970, cruising has been one of the fastest growing sectors of the vacation market, as the number of North American guests has grown to an estimated 5.4 million in 1998 from 0.5 million in 1970, a compound annual growth rate of approximately 9%, according to Cruise Lines International Association ("CLIA"). The Company has capitalized on the increasing popularity of cruises through an extensive fleet expansion program. The Company's revenues have increased at a compound annual growth rate of approximately 18% between 1 4 1988 and 1998. The Company's market share of North American guests carried in 1998 is estimated to have been approximately 33.9%. The following table sets forth data regarding industry and Company growth over the past five years based on guests carried for at least three consecutive nights:
GUESTS CARRIED ON NORTH THE AMERICAN COMPANY'S CRUISE COMPANY YEAR SHIPS(2) GUESTS(1) PERCENTAGE ---- ---------- ------------- ---------- 1994.................................. 1,051,868 4,448,000 23.6% 1995.................................. 1,058,126 4,378,000 24.2 1996.................................. 1,245,696 4,659,000 26.7 1997.................................. 1,633,457 5,051,000 32.3 1998.................................. 1,841,152 5,428,000 33.9
- --------------- (1) Source: CLIA (2) 1994 -- 1997 are proforma to include Celebrity Cruises According to CLIA and other trade publications, the North American market was served by an estimated 130 cruise ships with an aggregate capacity of approximately 102,000 berths at the end of 1993. The number of berths in the industry is estimated to have increased to approximately 128,000 berths on 122 ships by the end of 1998. There are a number of cruise ships on order with a total estimated capacity of 64,000 berths which will be placed in service between 1999 and 2004. Over the last five years, approximately 48 ships with an aggregate capacity of approximately 28,900 berths have either been retired or moved out of the North American market. Although the Company cannot predict the rate at which future retirements will occur, the Company believes ship retirements will continue due to competitive pressures and age of vessels. During 1998, the Company's weighted average berth capacity increased 9.8% (on a proforma basis to include Celebrity Cruises as of January 1, 1997) versus the industry average of 8.7%. The following table sets forth data regarding the supply of berths marketed in North America:
WEIGHTED AVERAGE SUPPLY OF BERTHS MARKETED IN PERCENTAGE YEAR NORTH AMERICA(1) CHANGE - ---- ---------------- ---------- 1994........................................................ 102,130 4.7% 1995........................................................ 103,313 1.2 1996........................................................ 105,586 2.2 1997........................................................ 109,257 3.5 1998........................................................ 118,747 8.7
- --------------- (1) Source: CLIA, other trade publications and Company estimates Cruise lines compete for consumers' disposable leisure time dollars with other vacation alternatives such as land-based resort hotels and sightseeing destinations, and public demand for such activities is influenced by general economic conditions. The Company believes that cruise guests currently represent only a small share of the vacation market and that a significant portion of cruise guests carried are "first-time cruisers." The Company operates principally in Alaska, the Bahamas, Bermuda, the Caribbean, Canada, Europe, Hawaii, Mexico, the Panama Canal and Scandinavia. Competition for guests in all of these geographic areas is vigorous. In most of these areas, the Company competes with cruise ships owned by other international operators. The Company competes with a number of cruise lines; however, the Company's principal competitors are Carnival Cruise Lines, Holland America Line, Norwegian Cruise Line and Princess Cruises. The Company competes principally on the basis of quality of service, variety of itineraries and price. 2 5 OPERATING STRATEGIES The Company's principal operating strategies are the following: (i) build the awareness and market penetration of the brands; (ii) continue to expand its fleet with state-of-the-art cruise ships; (iii) broaden its itineraries worldwide; (iv) maintain its competitive position with respect to the quality and innovation of its on-board product; (v) maintain strong relationships with travel agencies, the principal industry distribution system; (vi) further expand international passenger sourcing; (vii) utilize sophisticated yield management systems (revenue optimization per berth); and (viii) further improve its technological capabilities. Brand Awareness The Company's strategy is to continue to broaden the recognition of both the Royal Caribbean International brand and the Celebrity Cruises brand in the cruise vacation marketplace. Each brand has a distinct identity and marketing focus but utilizes shared infrastructure resources. Royal Caribbean International has positioned itself in the contemporary and premium segments of the cruise vacation market and focuses on providing multiple choices to its guests through a variety of itineraries, accommodations, dining, ship activities and shore excursions. Hallmarks of the brand include friendly service, family programs, entertainment, health and fitness and activities for various age groups. Celebrity Cruises primarily serves the premium segment of the cruise vacation market. The brand is recognized for its fine dining, impeccable service, large staterooms, a high staff to guest ratio and excellent spa facilities. In 1998 and 1999 Berlitz rated Celebrity Cruises the highest rated premium cruise line in the large vessel category (over 1,000 passenger berths). Fleet Expansion Royal Caribbean International Founded in 1968, Royal Caribbean International was the first cruise line to design ships specially for warm water year round cruising. Royal Caribbean International operated a modern fleet in the 1970's and early 1980's, establishing a reputation for high quality. Between 1988 and 1992, the brand tripled its capacity by embarking on its first major capital expansion program. Royal Caribbean International committed to its second capital expansion program with orders for six Vision-class vessels, ranging in size from 1,800 to 2,000 berths, for delivery from 1995 through 1998. With the delivery of the Vision-class vessels, Royal Caribbean International's capacity increased by 61.7% to 23,000 berths at the end of 1998. Each Vision-class ship features a seven-deck atrium with glass elevators, skylights and glass walls; a pool and entertainment complex covered by a moveable glass roof; hundreds of cabins with verandahs; a two-deck main dining room; a state-of-the-art show theater; a glass-encased indoor/outdoor cafe; and a shopping mall. The ships are designed to be faster than most cruise ships which permits more flexibility in itinerary planning. Royal Caribbean International currently has three Eagle-class vessels on order for delivery in the fourth quarter of 1999, third quarter of 2000 and second quarter of 2002. The Eagle-class vessels will be the largest passenger cruise ships built to date; 142,000 tons with 3,100 berths. This new generation of vessels will be designed to provide more diverse vacation options for families and those seeking active sports and entertainment alternatives. Each Eagle-class ship features the cruise industry's first horizontal atrium which is the length of two football fields, four decks high and includes two eleven-deck atriums; recreational activities such as rock climbing and ice skating; enhanced staterooms; expanded dining options; and a variety of intimate spaces. Royal Caribbean International also has two Vantage-class vessels on order scheduled for delivery in the first quarter of 2001 and second quarter of 2002. The Vantage-class is a progression from the brand's Vision-class series and will carry approximately 2,100 guests. Beginning in 1999 through 2002, Royal Caribbean International's capacity is expected to increase 52.6% to 35,100 berths. 3 6 CELEBRITY CRUISES Celebrity Cruises was founded in 1990 and operated three ships between 1992 and 1995. Between 1995 and 1997, Celebrity Cruises undertook its first capital expansion program, adding three Century-class vessels which range in size from 1,750 to 1,850 berths. Celebrity Cruises has on order four Millennium-class vessels which will have approximately 2,000 berths and are scheduled for delivery in the second quarter 2000, first quarter 2001, third quarter 2001 and second quarter 2002. The Millennium-class ships are a progression from the Century-class vessels, which have been widely accepted in the premium segment of the marketplace. This new class of vessels will build on the brands' primary strengths, including fine dining, large cabins, extensive spa facilities and impeccable service. Beginning in 2000 through 2002, Celebrity Cruises' capacity is expected to increase 97.7% to 16,200 berths. At year-end 1998, the Company's combined fleet had an average age of approximately five years, which the Company believes is the youngest of any major cruise company. On a combined basis, beginning in 1999 through 2002, the Company's year-end berth capacity is expected to increase 64.4% from 31,200 to 51,300 berths. The Company's increased average ship size and number of available berths have enabled it to achieve certain economies of scale. Larger ships allow the Company to transport more guests than smaller ships without a corresponding increase in certain operating expenses. This increase in fleet size also provides a larger revenue base to absorb its marketing, selling and administrative expenses. Worldwide Itineraries The Company's 1999 itineraries include more than 110 different itineraries that call on more than 175 destinations on six continents. New ships allow the Company to expand into new destinations, itineraries and markets. In 1999, Royal Caribbean International will be offering the "Royal Journeys" program which offers 10 global cruise itineraries visiting 41 ports in 19 countries on four continents. Celebrity Cruises is repositioning a vessel to the European market. In addition, the Company is increasing its capacity in the short cruise market in 2000 by establishing a Royal Caribbean International vessel year round in Port Canaveral to provide 3 and 4 day Bahamas cruises. Product Innovation The Company recognizes the need for new and innovative on-board products and experiences for guests, and develops these products based on guest feedback, crew suggestions and competitive product reviews. Accordingly, the Company continues to invest in design innovations on new ships and additional product offerings on its existing fleet. New offerings such as expanded dining options, and recreational activities such as rock climbing and ice skating are among the services to be offered in the future. Travel Agency Support Because essentially all the bookings for the Company's ships are made by independent travel agencies, the Company is committed to supporting the travel agency community. The Company maintains a large sales support organization including 100 district sales managers supporting both brands in North America. The Company was the first cruise company to develop an automated booking system, CruiseMatch 2000(TM). This automated reservations system allows travel agents direct access to the Company's computer reservation system to improve ease of bookings. More than 30,000 independent travel agencies worldwide can book cruises for both brands using CruiseMatch 2000(TM). The Company also offers CruiseMatch 2000 Online(R) which makes CruiseMatch 2000(TM) accessible to travel agencies through the Royal Caribbean International and Celebrity Cruises websites. In 1998, the Company launched CruiseWriter(sm), an instant collateral system that allows travel agents to customize collateral materials for their clients. In 1997, the Company also opened a reservation call center in Wichita, Kansas to offer greater flexibility and extended hours of operations. 4 7 International Guests International guests continue to provide an increasing share of the Company's growth. International guests have grown from approximately 7% of total guests in 1991 to approximately 16% of total guests in 1998. One of the Company's strategies is to use fleet deployment and expanded itineraries to increase its passenger sourcing outside North America. During 1998, the Company hired a senior vice president of international sales and marketing to further develop and expand its international sales capability. The Company carries out its international sales effort through sales offices located in London, Frankfurt, Oslo, Genoa and Paris, and a network of 38 independent international representatives located throughout the world. The Company is also able to accept bookings in various currencies. Yield Management The Company continues to develop more sophisticated pricing and yield management programs to maximize its occupancy and revenue by projecting the demand for its cruises in various passenger markets and, based on certain variables, directing its marketing efforts toward such markets. In addition to projecting demand, these programs will continue to enable the Company to react quickly to changes in market conditions. Technological Development The Company's computer system, known as Enterprise 2000, is used by both brands and provides the foundation for: (i) a sophisticated reservation system; (ii) sales tools to be used by the Company's combined field sales force; and (iii) productivity tools for travel agents. The Company has developed a corporate shoreside intranet as well as electronic ship to shore communication tools to improve its internal productivity. Both Royal Caribbean International and Celebrity Cruises have extensive websites, providing access to millions of Internet users throughout the world. SALES, MARKETING AND PASSENGER SERVICES The Company sells its cruise vacations almost exclusively through approximately 30,000 independent travel agencies worldwide. The Company maintains a large sales support organization including 100 district sales managers supporting both brands in North America. The Company also utilizes a telemarketing program in the United States and Canada called CruiseConnect to contact smaller travel agencies to inform them of new products and promotions. The Company believes that maintaining personal contact with travel agency owners, managers and front-line retail agents is crucial to retaining travel agency loyalty. The Company augments this type of contact with an extensive program of seminars designed to familiarize travel agents with the cruise industry and the marketing of cruises. Royal Caribbean International pursues a comprehensive marketing program with an emphasis on consumer advertising using the tag line, "Like no vacation on earth(sm)." Through its advertising, Royal Caribbean International positions itself as a provider of high quality, all-inclusive, cruise vacations offering a variety of destinations and, in the Company's opinion, considerable value. Royal Caribbean International attempts to convey the message that the style and level of service of its shipboard cruise experience, together with the destinations visited by its ships, is an attractive alternative to land-based vacations. Celebrity Cruises also pursues a comprehensive marketing program with an emphasis on consumer advertising using the tag line, "Exceeding expectations(sm)". An advertising campaign utilizing national television, magazines and newspapers features commercials with the theme, "Simply the Best". The Company believes that Celebrity Cruises represents enhanced value to the premium segment based on elements such as its dining experience, staff to guest ratio, cabin size, artwork, technology, AquaSpa(sm) packages and its modern fleet of ships, all of which have been built in the 1990's. The Company offers to handle travel aspects related to passenger reservations and transportation. Arranging passenger air transportation is one of the Company's important areas of operation. The Company 5 8 maintains a comprehensive relationship with many of the major airlines ranging from fare negotiation and space handling to baggage transfer. OPERATIONS Cruise Ships and Itineraries The Company operates 16 ships under two brands and offers more than 110 different itineraries ranging from three to 21 nights that call on more than 175 destinations on six continents. The following table represents summary information concerning the Company's ships and their areas of operation based on 1999 itineraries (subject to change):
YEAR VESSEL PASSENGER ENTERED SERVICE CAPACITY(1) PRIMARY AREAS OF OPERATION --------------- ----------- ---------------------------- ROYAL CARIBBEAN INTERNATIONAL: Voyager of the Seas(2)............. 1999 3,100 Western Caribbean Vision of the Seas................. 1998 2,000 Panama Canal, Hawaii, Alaska Enchantment of the Seas............ 1997 1,950 Eastern & Western Caribbean Rhapsody of the Seas............... 1997 2,000 Alaska, Southern Caribbean, Mexico, Panama Canal, Hawaii Grandeur of the Seas............... 1996 1,950 Eastern Caribbean Splendour of the Seas.............. 1996 1,800 Europe, Caribbean, Canada/New England Legend of the Seas................. 1995 1,800 Europe, Hawaii, Panama Canal, Mexico, Royal Journeys Majesty of the Seas................ 1992 2,350 Western & Southern Caribbean Monarch of the Seas................ 1991 2,350 Southern Caribbean Viking Serenade(3)................. 1982/1991 1,500 Mexican Baja Nordic Empress..................... 1990 1,600 Southern Caribbean, Bermuda Sovereign of the Seas.............. 1988 2,250 Bahamas CELEBRITY CRUISES: Mercury............................ 1997 1,850 Western Caribbean, Alaska, Panama Canal Galaxy............................. 1996 1,850 Southern Caribbean, Alaska Century............................ 1995 1,750 Eastern & Western Caribbean, Europe Zenith............................. 1992 1,350 Panama Canal, Bermuda Horizon............................ 1990 1,350 Southern Caribbean, Bermuda
- --------------- (1) Based on double occupancy per cabin. (2) Voyager of the Seas is expected to enter service in November 1999. (3) Indicates year placed in service and year redeployed after conversion to expand capacity. At year-end 1998, the combined fleets of Royal Caribbean International and Celebrity Cruises had an average age of approximately five years, which the Company believes is the youngest of any major cruise company. 6 9 New Vessels The Company has nine ships on order. The planned passenger capacity and expected delivery dates of the ships on order are as follows:
EXPECTED PASSENGER VESSEL DELIVERY DATES CAPACITY(1) - ------ ----------------- ----------- ROYAL CARIBBEAN INTERNATIONAL: Eagle-class Voyager of the Seas(2)................................. 4th Quarter 1999 3,100 Explorer of the Seas................................... 3rd Quarter 2000 3,100 Adventure of the Seas.................................. 2nd Quarter 2002 3,100 Vantage-class Radiance of the Seas................................... 1st Quarter 2001 2,100 Brilliance of the Seas................................. 2nd Quarter 2002 2,100 CELEBRITY CRUISES: Millennium-class Millennium............................................. 2nd Quarter 2000 2,000 Unnamed................................................ 1st Quarter 2001 2,000 Unnamed................................................ 3rd Quarter 2001 2,000 Unnamed................................................ 2nd Quarter 2002 2,000
- --------------- (1) Based on double occupancy per cabin. (2) Included in table on prior page -- Cruise Ships and Itineraries. The Eagle-class vessels are being built in Turku, Finland by Kvaerner-Masa Yards which built two of the Royal Caribbean International ships. The Vantage-class vessels are being built in Papenburg, Germany by Meyer Werft, the same shipyard which built all of the Celebrity Cruises vessels. The Millennium-class vessels are being built by Chantiers de l'Atlantique in St. Nazaire, France, the same shipyard which built seven of the Royal Caribbean International ships. The aggregate contract price of the nine ships, which excludes capitalized interest and other ancillary costs, is approximately $3.6 billion. Shipboard Activities and Shipboard Revenues Both brands offer modern fleets with a wide array of shipboard activities, services and amenities including swimming pools, sun decks, spa facilities which include massage and exercise facilities, beauty salons, gaming facilities (which operate while the ships are at sea), lounges, bars, Las Vegas-style entertainment, retail shopping, libraries, cinemas, conference centers and shore excursions at each port of call. While many shipboard activities are included in the base price of a cruise, additional revenues are realized from gaming, the sale of alcoholic and other beverages, the sale of gift shop items, shore excursions, photography and spa services. Private Destinations Royal Caribbean International operates two private destinations: (i) CocoCay, an island owned by the Company and known as Little Stirrup Cay located in the Bahamas; and (ii) Labadee, a secluded peninsula leased by the Company and located on the north coast of Haiti. The facilities at CocoCay and Labadee include, among others, a variety of watersports activities, refreshment bars, artisan markets and picnic facilities. Seasonality The Company's revenues are moderately seasonal, due to variations in rates and occupancy percentages. See Note 14 to the Annual Consolidated Financial Statements. 7 10 Guests and Capacity The following table sets forth the aggregate number of guests carried and the number of guests expressed as a percentage of total capacity for the Company's ships:
FISCAL YEARS ------------------------------- 1998 1997 1996 --------- --------- ------- Number of Guests....................................... 1,841,152 1,465,450 973,602 Percentage of Total Capacity........................... 105.2% 104.2% 101.3%
In accordance with cruise industry practice, total capacity is determined based on double occupancy per cabin even though some cabins accommodate three or four guests; accordingly, a percentage in excess of 100% indicates that more than two guests occupied some cabins. Cruise Pricing The Company's cruise prices include a wide variety of activities and amenities, including all meals and entertainment. Prices vary depending on the destination, cruise length, cabin category selected and the time of year the voyage takes place. Additionally, the Company offers "Air add-ons" for guests that elect to utilize the Company's Air/Sea Program. Air add-ons vary by gateway and destination and are available from cities in the United States, Canada and Europe. Furthermore, the Company sells trip cancellation insurance which provides guests with insurance coverage for trip cancellation, medical protection and baggage protection. SUPPLIERS The Company's largest purchases are for airfare, food and related items, advertising, diesel fuel, hotel supplies and products related to passenger accommodations. Most of the supplies required by the Company are available from numerous sources at competitive prices. The Company's largest operating cost is air transportation for its guests. None of the Company's suppliers provided goods or services representing in excess of 10% of the Company's revenues in 1998. INSURANCE The Company maintains an aggregate of approximately $6.3 billion of insurance on the hull and machinery of its ships, which includes additional coverage for disbursements, earnings and increased value, which are maintained in amounts related to the value of each vessel. The coverage for each of the hull policies is maintained with syndicates of insurance underwriters from the British, Scandinavian, United States and other international insurance markets. Liability coverage for shipowners, commonly referred to as protection and indemnity insurance, is available through a worldwide network of mutual insurance associations. Each of these associations participates in and is subject to rules issued by the International Group of Protection and Indemnity Associations. The Company maintains protection and indemnity insurance on each of its ships through either Assuranceforeningen GARD or the United Kingdom Mutual Steam Ship Assurance Association (Bermuda Limited). The Company maintains war risk insurance on each vessel through a Norwegian war risk insurance organization in an amount equal to the total insured hull value. This coverage includes physical damage to the vessel and protection and indemnity risks for which coverage would be excluded by reason of war exclusion clauses in the hull policies or rules of the indemnity insurance organization. The Company also maintains a form of business interruption insurance with its insurance underwriters in the event that a vessel is unable to operate during scheduled cruise periods due to loss or damage to the vessel arising from certain covered events which last more than a specified period of time. Insurance coverage is also maintained for certain events which would result in a delayed delivery of the Company's contracted new vessels, which it normally places starting approximately two years prior to the scheduled delivery dates. 8 11 Insurance coverage for shoreside property, shipboard consumables and inventory and general liability risks are maintained with insurance underwriters in the United States and the United Kingdom. The Company has decided not to carry business interruption insurance for its shoreside operations based on its evaluation of the risks involved and the Company's protective measures already in place, as compared to the premium expense. All insurance coverage is subject to certain limitations, exclusions and deductible levels. In addition, in certain circumstances, the Company co-insures a portion of these risks. Premiums charged by insurance carriers, including carriers in the maritime insurance industry, increase or decrease from time to time and tend to be cyclical in nature. The Company historically has been able to obtain insurance coverage in amounts and at premiums it has deemed commercially acceptable. The Company believes that, based on its historical experience, it will continue to be able to do so. EMPLOYEES As of December 31, 1998, the Company and its subsidiaries employed approximately 2,300 full-time and 400 part-time employees in shoreside operations worldwide. The Company and its subsidiaries also employ approximately 18,300 crew and staff for its vessels. As of December 31, 1998, approximately 70% of the Company's shipboard employees are covered by collective bargaining agreements. The Company believes that its relationship with its employees is good. TRADEMARKS The Company owns a number of registered trademarks relating to, among other things, the name ROYAL CARIBBEAN, its crown and anchor logo, the name CELEBRITY, its "X" logo and the names of the Company's cruise ships. The Company believes such trademarks are widely recognized throughout the world and have considerable value. REGULATION All of the Company's ships are registered in Norway or Liberia except for Mercury which is registered in Panama. Each ship is subject to regulations issued by its country of registry, including regulations issued pursuant to international treaties governing the safety of the ship and its guests. Each country of registry conducts periodic inspections to verify compliance with these regulations. In addition, ships operating out of United States ports are subject to inspection by the United States Coast Guard for compliance with international treaties and by the United States Public Health Service for sanitary conditions. The Company's ships are required to comply with international safety standards defined in the Safety of Life at Sea Convention ("SOLAS"). The SOLAS standards are revised from time to time, and the most recent modifications are being phased in through the year 2010. The Company does not anticipate that it will be required to make any material expenditures in order to comply with these rules. In 1993 SOLAS was amended to adopt the International Safety Management Code (the "ISM Code"). The ISM Code provides an international standard for the safe management and operation of ships and for pollution prevention. The ISM Code became mandatory for passenger vessel operators such as the Company on July 1, 1998. The Company is also subject to various United States and international laws and regulations relating to environmental protection. Under such laws and regulations, the Company is prohibited from, among other things, discharging certain materials, such as petrochemicals and plastics, into the waterways. See Item 3. Legal Proceedings. The Company is required to obtain certificates from the United States Federal Maritime Commission ("FMC") relating to its ability to meet liability in cases of nonperformance of obligations to guests and casualty or personal injury. Under the FMC's current regulations, the Company is required to provide a $15 million bond for each of Royal Caribbean International and Celebrity Cruises, as a condition to obtaining the required certificates. The FMC has proposed a revision to its regulations that would require the Company to 9 12 significantly increase the amount of this bond based on the level of its customer deposits. The Company has indicated to the FMC that it supports an increase in the bond amount and does not expect any revisions to the FMC regulations to have a material effect on the Company. The Company is required to obtain certificates from the United States Coast Guard relating to its ability to meet liability in cases of water pollution. Under the United States Coast Guard's current regulations, Royal Caribbean International and Celebrity Cruises are required to provide guarantees of approximately $71 million and $70 million, respectively, as a condition to obtaining the required certificates. The Company believes it is in material compliance with all regulations applicable to its ships and has all licenses necessary to the conduct of its business. From time to time various other regulatory and legislative changes have been or may in the future be proposed that could have an effect on the cruise industry in general. TAXATION OF THE COMPANY The following discussion of the application to the Company and its subsidiaries of the United States federal income tax laws is based on the current provisions of the Internal Revenue Code of 1986, as amended, (the "Code"), proposed, temporary and final Treasury Department regulations, administrative rulings and court decisions. All of the foregoing are subject to change, and any change thereto could affect the accuracy of this discussion. Application of Section 883 of the Code The Company and its wholly owned subsidiary, Celebrity Cruises Inc. ("CCI"), are foreign corporations that are engaged in a trade or business in the United States, and the Company's vessel-owning subsidiaries are foreign corporations that, in many cases, depending upon the itineraries of their vessels, receive income from sources within the United States. Under Section 883 of the Code, certain foreign corporations are not subject to United States income or branch profits tax on United States source income derived from or incidental to the international operation of a ship or ships, including income from the leasing of such ships. A foreign corporation will qualify for the benefits of Section 883 of the Code if in relevant part (i) the foreign country in which the foreign corporation is organized grants an equivalent exemption to corporations organized in the United States and (ii) either more than 50% of the value of its capital stock is owned, directly or indirectly, by individuals who are residents of a foreign country that grants such an equivalent exemption to corporations organized in the United States or the stock of the corporation (or the direct or indirect corporate parent thereof) is "primarily and regularly traded on an established securities market" in the United States. Although no Treasury regulations have been promulgated that explain when stock will be considered "primarily and regularly traded on an established securities market" for purposes of Section 883, Treasury regulations have been promulgated interpreting a similar phrase under Section 884 of the Code which, like the phrase in Section 883, was enacted in the Tax Reform Act of 1986. Under these regulations, stock of a corporation will be considered primarily and regularly traded on an established securities market in the United States for purposes of Section 884 in any taxable year if in relevant part the following tests are met for one or more classes of stock, representing at least 80% of the outstanding vote and value of stock of the corporation: (i) the class of stock is regularly quoted by brokers or dealers making a market in the stock and (ii) 50% or more of the outstanding shares of stock of the class are not owned (within the meaning of the applicable regulation) for more than 30 days during the relevant taxable year by persons who each own 5% or more of the value of the outstanding shares of stock of the class and (a) are not "qualifying shareholders" for purposes of this provision of Section 884 or (b) fail to provide to the Company the required proof of their qualifying status. The Company, CCI and the Company's vessel-owning subsidiaries are organized in countries that grant equivalent exemptions to corporations organized in the United States, and to the Company's knowledge, more than 50% of the outstanding shares of common stock are held (i) by persons who each own less than 5% of the value of the outstanding shares of common stock or (ii) directly or indirectly by individuals who are residents of countries that grant an equivalent exemption to corporations organized in the United States. The common stock and the $3.625 Series A Convertible Preferred Stock ("Convertible Preferred Stock") are listed on the 10 13 NYSE; and the common stock represents more than 80% of the outstanding vote and value of stock of the Company. Accordingly, in the opinion of Drinker Biddle & Reath LLP, United States tax counsel to the Company, and based on the representations and assumptions set forth therein, the Company, CCI and the Company's vessel-owning subsidiaries currently qualify for the benefits of Section 883 of the Code because the Company and each of its subsidiaries are incorporated in a qualifying jurisdiction and the Company's common stock and Convertible Preferred Stock are primarily and regularly traded on an established securities market in the United States. In addition, the Company believes that substantially all of its income, the income of CCI and the income of the Company's vessel-owning subsidiaries is derived from or incidental to the international operation of a ship or ships. Any United States source income of the Company, CCI or the Company's vessel-owning subsidiaries that is not so derived will be subject to United States taxation, but the Company believes that such income is not a material portion of the Company's total income. The Company does not know of any plan regarding (i) disposition of the interests held by the Company's current ultimate individual shareholders or (ii) any changes in the residency of the Company's current ultimate individual shareholders, that would cause the loss of the availability of Section 883 of the Code (or, in either case, any agreements with respect to any of the foregoing). However, there is no agreement that would preclude the Company's current direct or indirect shareholders from disposing of their interests in the Company, or from changing their residence, and there can be no assurance that such shareholders will not do so, nor is there any assurance that a person or persons who are not qualifying shareholders for purposes of Section 883 will not acquire sufficient beneficial ownership of the outstanding shares of common stock (or, under certain circumstances, Convertible Preferred Stock) through purchase on the NYSE or otherwise to preclude the availability of an exemption under Section 883. Any change in the holdings of the current direct or indirect shareholders of the Company or the residence of such shareholders (both as determined for United States tax purposes), any acquisition of beneficial ownership of 5% or more of the outstanding common stock by a nonqualifying shareholder, or the issuance of shares of Company stock or any other change in the capitalization of the Company could affect the continued availability of Section 883 of the Code. In addition, (i) future regulations promulgated under Section 883 might adopt an interpretation of the phrase "primarily and regularly traded on an established securities market" inconsistent with the approach adopted by the regulations under Section 884 in which case the Company and its subsidiaries could cease to be eligible for the benefits of Section 883 and (ii) even if an approach consistent with the approach of the Section 884 regulations is adopted, certain modifications or interpretations of such approach, which tax counsel believes should reasonably be adopted, would be required in order for such phrase to apply to the Company and its subsidiaries for purposes of Section 883. Moreover, whether or not such regulations are promulgated, there is no assurance that the Company's tax counsel's interpretation of such phrase will be accepted by the Internal Revenue Service or the courts. Section 883 of the Code has been the subject of legislative modifications in past years that have had the effect of limiting its availability to certain taxpayers, and there can be no assurance that future legislation or changes in the ownership of the Company will not preclude the Company or its subsidiaries from obtaining the benefits of Section 883 of the Code. Taxation in the Absence of an Exemption Under Section 883 of the Code In the event that the Company, CCI or the Company's vessel-owning subsidiaries were to fail to meet the requirements of Section 883 of the Code, or if such provision were repealed, such companies would be subject to United States income taxation on a portion of their income. Since the Company and CCI conduct a trade or business in the United States, they would be taxable at regular corporate rates on their separate company taxable income (i.e., without regard to the income of the vessel-owning subsidiaries), from United States sources, which includes 100% of their income, if any, from transportation which begins and ends in the United States (not including possessions of the United States), 50% of their income from transportation which either begins or ends in the United States, and none of their income from transportation which neither begins nor ends in the United States. The legislative history of the transportation income source rules suggests that a cruise that begins and ends in a United States port, but that calls on more than one foreign port, will derive United States source income only from the first and last legs of such cruise. Because there are no regulations 11 14 or other Internal Revenue Service interpretations of these rules, the applicability of the transportation income source rules in the aforesaid favorable manner is not free from doubt. If the suggested application of these rules is correct and if Section 883 of the Code did not apply to the Company, the Company estimates, based on certain assumptions, that approximately 15% of the Company's separate company taxable income in 1998 (as computed under United States tax principles) would be subject to United States corporate income tax. In addition, if any earnings and profits of the Company or CCI effectively connected with its United States trade or business are withdrawn or are deemed to have been withdrawn from its United States trade or business (by dividend distribution, for example, or otherwise), such withdrawn amount would be subject to a "branch profits" tax at the rate of 30%. The amount of such earnings and profits would be equal to the aforesaid United States source income, with certain generally minor adjustments, less income taxes. Finally, the Company and CCI would also be potentially subject to tax on portions of certain interest paid by them at rates of up to 30%. If Section 883 of the Code were not available to a vessel-owning subsidiary, such subsidiary would be subject to a special 4% tax on its United States source gross transportation income, if any, each year because its income is derived from the leasing of a vessel and because it does not have a fixed place of business in the United States. Such United States source gross transportation income may be determined under any reasonable method, including ratios based upon (i) days traveling directly to or from United States ports to total days; or (ii) the lessee's United States source gross income from the vessel (as determined under the source rules discussed in the preceding paragraph, and subject to the assumptions and qualifications set forth therein) to the lessee's total gross income from the vessel. Under these rules, if Section 883 of the Code did not apply to the vessel-owning subsidiaries, the Company estimates based on certain assumptions that the 4% tax would apply to approximately 15% of the gross income of the vessel-owning subsidiaries in 1998 (as computed under United States tax principles). While the Company believes that the methods used to calculate the foregoing estimates of United States source income are reasonable, the calculations are based on an interpretation of applicable law that in many respects is not clear due to the absence of controlling regulations. The Company's position as to certain matters of law and its determination of the amount of income subject to United States taxation could be challenged by the Internal Revenue Service and, if so challenged, might not be upheld by a United States court. Furthermore, there can be no assurance that the applicable law will not change or that regulations or rulings will not take a different position. In addition, although the Company does not currently intend to change its operations or the operations of its subsidiaries, such a change, or changes in the amount, source or character of the Company's or any subsidiary's income and expense, could affect the amount of income that would be subject to United States tax in the event Section 883 of the Code were not available to the Company, CCI and the Company's vessel-owning subsidiaries. ITEM 2. DESCRIPTION OF PROPERTY For a description of the Company's cruise ships, see "Item 1. Description of Business -- Operations -- Cruise Ships and Itineraries." The Company leases three office buildings on the Port of Miami from Dade County, Florida. Two of the buildings have initial terms of 20 years which began in 1991 and 1995, respectively, and the third building has an initial term of 17 years which began in 1998. The Company also leases a building in Wichita, Kansas which is used as an additional reservation center with an initial term of ten years beginning in 1997. The Company leases space for its international sales offices in London, Oslo, Frankfurt, Genoa and Paris. Royal Caribbean International operates two private destinations, (i) CocoCay, an island owned by the Company and known as Little Stirrup Cay located in the Bahamas and (ii) Labadee, a secluded peninsula leased by the Company and located on the north coast of Haiti. The Company owns one building in San Juan, Puerto Rico and leases a second building in St. Thomas, Virgin Islands for Royal Caribbean International's Crown and Anchor Clubs. These facilities, which are exclusively for Royal Caribbean International's guests, provide a rest stop where guests can check packages, get refreshments or make phone calls. 12 15 The Company believes that its facilities are adequate for its current needs. ITEM 3. LEGAL PROCEEDINGS In June 1998, the Company entered into a plea agreement with the U.S. Department of Justice settling previously filed charges contained in two indictments pending in the U.S. District of Puerto Rico and the Southern District of Florida, respectively. The indictments, which pertained to events that occurred in 1994 and prior years, contained a total of 11 felony counts related to improper disposal of oil-contaminated bilge water and attempts to conceal such activities from the U.S. Coast Guard. Under the plea agreement, the Company pled guilty to eight of the 11 counts and paid $9.0 million. The Company was also placed on probation for up to five years and has implemented a Court supervised Environmental Compliance Plan. The U.S. government is continuing its investigation of the Company's bilge water and other waste disposal practices through federal grand jury proceedings in Anchorage, Alaska, Los Angeles, California, Miami, Florida and New York, New York. In February 1999, the Company was indicted by the grand jury in Los Angeles on charges that it presented false oil record books for one of its vessels to the U.S. Coast Guard three times during 1994 and the Company has pled guilty to these charges. Each of the three counts in the indictment carries a maximum fine of $500,000, subject to increase under certain circumstances. Although the Company is not able at this time to estimate the timing or impact of these continuing investigations, the Company may be subject to additional charges for violations of U.S. law. Beginning in December 1995, several purported class action suits were filed alleging that Royal Caribbean International and Celebrity misrepresented to guests the amount of its port charge expenses. The suits seek declaratory relief and damages in an unspecified amount. Beginning in August 1996, several purported class action suits were filed alleging that Royal Caribbean International and Celebrity should have paid commissions to travel agents on port charges included in the price of cruise fares. The suits seek damages in an unspecified amount. Similar suits are pending against other companies in the cruise industry. In February 1997, Royal Caribbean International, Celebrity and certain other cruise lines entered into an Assurance of Voluntary Compliance with the Florida Attorney General's office. Under the Assurance of Voluntary Compliance, Royal Caribbean International and Celebrity agreed to include all components of the cruise ticket price, other than governmental taxes and fees, in the advertised price. In January 1999, Royal Caribbean International entered into an agreement to settle certain of the class-action suits filed on behalf of its guests. Celebrity entered into a similar settlement agreement. Under the terms of the settlement agreements, each of Royal Caribbean International and Celebrity will issue travel vouchers having a face amounts ranging from $8 to $30, in the case of Royal Caribbean International, and from $20 to $45 in the case of Celebrity, to guests who are U.S. residents and who sailed on Royal Caribbean International or Celebrity, as the case may be, between April 1992 and April 1997. Such vouchers may be applied to reduce the cruise fare of a future cruise on Royal Caribbean International or Celebrity, as the case may be, and are valid for up to three years from the date of issuance. The settlements have received preliminary court approval but are subject to final court approval. Since the amount and timing of the vouchers to be redeemed and the effect of redemption of revenues is not reasonably determinable, the Company has not established a liability for the vouchers and will account for their redemption as a reduction of future revenues. In December 1998, a Florida state court judge dismissed one of the class-action suits filed on behalf of travel agents for failure to state a claim under Florida law. The plaintiff in that case has filed an appeal of that decision. The Company is not able at this time to estimate the timing or impact of the travel agent proceedings on the Company. The Company is routinely involved in other claims typical to the cruise industry. The majority of these claims are covered by insurance. Management believes the outcome of such other claims which are not covered by insurance would not have a material adverse effect upon the Company's financial condition or results of operations. 13 16 ITEM 4. CONTROL OF REGISTRANT PRINCIPAL SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of the common stock of the Company as of March 12, 1999 (i) by each person who is known by the Company to own beneficially more than 10% of any class of the outstanding common stock and (ii) by all of the Company's directors and officers as a group.
NUMBER OF SHARES OF COMMON PERCENTAGE NAME STOCK(1) OWNERSHIP - ---- ---------------- ---------- A. Wilhelmsen AS(2)......................................... 47,129,330 27.9% P.O. Box 1583 Vika N-0118 Oslo, Norway Cruise Associates(3)........................................ 50,781,900 30.0% c/o Canadian Imperial Bank of Commerce Trust Company (Bahamas) Limited P.O. Box N-3933 Nassau, Bahamas All Directors and Officers (31 persons)(4).................. 3,614,902 2.1%
- --------------- (1) For purposes of this table, any security which a person or group has a right to acquire within 60 days after March 12, 1999 is deemed to be owned by such person or group. Such security is deemed to be outstanding for the purpose of computing the percentage ownership of such person or group, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person or group. (2) Includes 31,900 shares of common stock issuable upon exercise of options under the Company's 1990 Shareholders Stock Option Plan. A. Wilhelmsen AS. ("Wilhelmsen") is a Norwegian corporation, the indirect beneficial owners of which are members of the Wilhelmsen family of Norway. (3) Includes 31,900 shares of common stock issuable upon exercise of options under the Company's 1990 Shareholders Stock Option Plan. Cruise Associates is a Bahamian general partnership, the indirect beneficial owners of which are various trusts primarily for the benefit of certain members of the Pritzker family of Chicago, Illinois, and various trusts primarily for the benefit of certain members of the Ofer family. (4) Includes (i) 1,890,826 shares of common stock issuable upon exercise of options granted to officers and directors of the Company, (ii) 1,321,412 shares of common stock held by Monument as nominee for various trusts primarily for the benefit of certain members of the Fain family and (iii) 374,664 shares of common stock issued to a trust for the benefit of Mr. Fain. Mr. Fain disclaims beneficial ownership of some or all of the shares of common stock referred to in (ii) and (iii) above. Does not include commitments by the Company's officers to purchase an aggregate of approximately $9,000 of common stock for the first calendar quarter of 1999 under the Company's 1994 Employee Stock Purchase Plan or shares of common stock held by Wilhelmsen or Cruise Associates. SHAREHOLDERS AGREEMENT Wilhelmsen and Cruise Associates are parties to the Shareholders Agreement dated as of February 1, 1993 as amended (the "Shareholders Agreement") and, pursuant thereto, have agreed upon certain matters relative to the organization and operation of the Company and certain matters concerning their respective ownership of the Company's voting stock. Pursuant to the Shareholders Agreement, Wilhelmsen and Cruise Associates have agreed to vote their shares of common stock in favor of the following individuals as directors of the Company: (i) up to four nominees of Wilhelmsen (at least one of whom must be independent); (ii) up to four nominees of Cruise Associates (at least one of whom must be independent); and (iii) one nominee who must be Richard D. Fain or such other individual who is then employed as the Company's chief executive 14 17 officer. The Shareholders Agreement also provides that the Board of Directors of each of the Company's subsidiaries are similarly constituted. In connection with the Company's acquisition of Celebrity, Wilhelmsen and Cruise Associates have agreed to vote their shares of common stock in favor of the election of one additional director to be nominated by Archinav Holdings, Ltd., a former shareholder of Celebrity, for a specified period of up to seven years from the date of the acquisition. Archinav Holdings, Ltd has designated John D. Chandris as its nominee for director. In addition, until either of them should decide otherwise, Wilhelmsen and Cruise Associates have agreed to vote their shares of common stock in favor of Edwin W. Stephan and William K. Reilly as directors of the Company. Of the current directors of the Company, Wilhelmsen nominated Messrs. Arneberg, Kielland, Lorange and Wilhelmsen, and Cruise Associates nominated Ms. Laviada and Messrs. Aronson, Ofer and Pritzker. Pursuant to the Shareholders Agreement, Wilhelmsen and Cruise Associates have agreed not to vote their shares of common stock in favor of the following corporate actions by the Company or any subsidiary unless such action is approved by a majority of the Board of Directors of the Company, at least one non-independent director of the Company nominated by Wilhelmsen and at least one non-independent director of the Company nominated by Cruise Associates: (i) any purchase, sale, long-term charter, long-term lease, exchange, transfer or other acquisition or disposition of a cruise vessel or all or a substantial portion of the Company's or any subsidiary's business; (ii) the taking of any action relative to the bankruptcy or insolvency of the Company or any subsidiary; (iii) any increase, reduction, change or reclassification of the authorized or issued shares of capital stock and any issuance of equity securities, including (a) any issuance of warrants, options or rights to directly or indirectly acquire equity securities and (b) any issuance of securities directly or indirectly convertible into or exchangeable or exercisable for equity securities (in each case, except for the issuance of options and common stock pursuant to the Employee Stock Option Plan and the Shareholders Stock Option Plan); (iv) any consolidation, merger or amalgamation with, or the acquisition of any interest in, any other entity or its assets other than (a) an acquisition in which the purchase price does not exceed $10 million and (b) acquisitions of goods and services in the ordinary course of business; (v) any borrowing or guarantee commitments or obligations (secured or unsecured), other than those incident to the approval of activities contemplated by clause (i) above, (a) in an aggregate principal amount exceeding $50 million other than those incurred in the normal course of the Company's business consistent with past practice or (b) containing a provision limiting the Company's ability to declare or pay dividends or engage in a transaction constituting a change in control, in each case in a manner more restrictive (other than the date from which the restrictions become operative) than the restrictions contained in the Indenture governing the Company's redeemed Senior Subordinated Notes; (vi) any resolution altering the Restated Articles of Incorporation or By-Laws or similar constitutional documents of the Company or any subsidiary; (vii) any resolution to voluntarily liquidate or dissolve; (viii) the appointment annually or removal of the Chairman of the Board, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer of the Company; or (ix) any material modification, change or amendment to any agreement or arrangement described in the foregoing clauses (i) and (iii) through (viii). The Company's Restated Articles of Incorporation provides that for so long as the Shareholders Agreement is in effect, the Board of Directors may not approve the foregoing corporate actions unless such actions are approved by one non-independent director nominated by Wilhelmsen and one non-independent director nominated by Cruise Associates. The Shareholders Agreement also contains restrictions on the disposition of common stock, provides for certain rights of refusal and sets forth procedures for the purchase or sale of a party's common stock upon certain events, including the failure of Wilhelmsen and Cruise Associates to agree upon any of the matters set forth in the immediately preceding paragraph. The Shareholders Agreement will terminate and be of no further force and effect upon the earlier to occur of (i) the written agreement of Wilhelmsen and Cruise Associates and (ii) the failure by Wilhelmsen and Cruise Associates to collectively own at least 40% of the outstanding common stock. In addition, in the event that either party (the "Smaller Holder") fails to own at least (i) 15% of the outstanding common stock and (ii) 50% of the outstanding common stock is owned by the other party (the "Larger Holder"), then, so long as such condition continues to exist, the Shareholders Agreement may be terminated by the Larger Holder. 15 18 The Shareholder Agreement provides that Wilhelmsen and Cruise Associates will from time to time consider the dividend policy for the Company with due regard for the interests of the shareholders in maximizing the return on their investment in the Company and the ability of the Company to pay such dividends. The declaration of dividends shall at all times be subject to the final determination of the Board of Directors of the Company that a dividend is prudent at that time in consideration of the needs of the business. The Shareholders Agreement also provides that payment of dividends will depend, among other factors, upon the Company's earnings, financial condition and capital requirements and the income and other tax liabilities of Wilhelmsen, Cruise Associates and their respective affiliates relating to their ownership of common stock. In addition, under the Shareholders Agreement, if Wilhelmsen or Cruise Associates desires to invest in other cruise projects which will or does own or operate cruise vessels, such shareholder is required to submit such project to the Company with a view to the Company investing therein rather than the submitting shareholder. Unless the Company decides to invest in such project within 21 days after such submission and the Company makes such investment within a reasonable period thereafter, the submitting shareholder will be free to invest in such project. Moreover, if Wilhelmsen or Cruise Associates acquires any controlling beneficial interest in any person which owns or operates any cruise vessels incidental to, but not as, its primary business, such shareholder is required to offer the cruise vessels and the business directly related thereto for sale to the Company at its fair market value (determined by an investment banking firm mutually acceptable to Wilhelmsen and Cruise Associates). If the Company does not acquire such business opportunity within six months, Wilhelmsen or Cruise Associates is permitted to retain and operate such business for its own benefit. ITEM 5. NATURE OF TRADING MARKET The Company's common stock is listed on the New York Stock Exchange ("NYSE") and the Oslo Stock Exchange ("OSE") under the symbol "RCL". The Company's Convertible Preferred Stock is listed on the NYSE under the symbol "RCL Pr". The table below sets forth the quarterly high and low prices of the common stock and Convertible Preferred Stock for its two most recent fiscal years:
NYSE OSE NYSE COMMON STOCK COMMON STOCK(1) PREFERRED STOCK ------------------- -------------------- -------------------- 1998 HIGH LOW HIGH LOW HIGH LOW - ---- -------- ------- -------- -------- -------- -------- First Quarter................... $35 7/16 $24 3/4 262 1/2 185 $113 $ 80 1/8 Second Quarter.................. 40 3/8 32 5/8 305 247 1/2 126 1/8 104 Third Quarter................... 43 29/32 23 1/8 327 1/2 195 139 72 2/3 Fourth Quarter.................. 37 1/8 17 274 137 115 1/4 60 1997 - ---- First Quarter................... $16 7/16 $11 5/8 -- -- $ 58 3/8 $ 51 3/8 Second Quarter.................. 19 11/16 14 15/16 -- -- 66 7/8 55 5/8 Third Quarter................... 22 15/16 17 7/32 162 1/2 147 1/2 76 60 1/2 Fourth Quarter.................. 26 13/16 20 13/16 185 140 85 3/8 70
- --------------- (1) Denominated in Norwegian Kroner. As of December 31, 1998, there were 1,043 record holders of common stock in the United States, holding 55,655,644 shares or approximately 32.9% of the total outstanding common stock. During 1998, the Company paid two quarterly cash dividends of $0.08 per common share and two quarterly cash dividends of $0.09 per common share, totaling $55.2 million. In addition, the Company paid dividends on its Convertible Preferred Stock totaling $12.5 million. During 1997, the Company paid two quarterly cash dividends of $0.07 per common share and two quarterly cash dividends of $0.08 per common share, totaling $40.8 million as well as dividends on its Convertible Preferred Stock totaling $9.2 million. The declaration and payment of future common stock dividends, if any, will at all times be subject to the final determination of the Board of Directors that a dividend is prudent at the time in consideration of the needs of the Company's business. Payment of dividends will depend, among other things, upon the Company's 16 19 earnings, financial condition and capital requirements, dividend payments on the Company's Convertible Preferred Stock and certain tax considerations of Wilhelmsen, Cruise Associates and their respective affiliates. ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS Liberian law does not presently impose exchange control restrictions on the Company relative to, among other things, (i) the Company's payment of interest or dividends to non-Liberian residents; or (ii) the Company's operations in Liberia by reason of its incorporation in Liberia. Further, Liberian law does not presently impose any limitations on non-Liberian residents holding or voting securities. ITEM 7. TAXATION Since (i) the Company is and intends to maintain its status as a "non-resident corporation" under the Internal Revenue Code of Liberia and (ii) the Company's vessel-owning subsidiaries are not now engaged, and are not in the future expected to engage, in any business in Liberia, including voyages exclusively within the territorial waters of the Republic of Liberia, the Company has been advised by Watson, Farley & Williams, special Liberian counsel for the Company, that, under current Liberian law, no Liberian taxes or withholding will be imposed on payments to holders of Company securities, other than a holder that is a resident Liberian entity or a resident individual or citizen of Liberia. ITEM 8. SELECTED FINANCIAL DATA The following selected financial data are for each of the fiscal years in the period 1994 through 1998 and as of the end of each such fiscal year. The financial information presented for fiscal years 1998, 1997 and 1996 and as of the end of fiscal years 1998 and 1997 is derived from the financial statements of the Company and should be read in conjunction with such financial statements and the related notes included elsewhere herein. The 1997 financial information includes the results of Celebrity commencing July 1, 1997. The following should also be read in conjunction with "Item 9. Management's Discussion and Analysis of Financial Condition and Results of Operations."
FISCAL YEARS -------------------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues............................. $2,636,291 $1,939,007 $1,357,325 $1,183,952 $1,171,423 Net income........................... 330,770 175,127 150,866 148,958 136,625 Net income per share -- basic(1)..... 1.90 1.17 1.19 1.17 1.08 Net income per share -- diluted(2)... 1.83 1.15 1.17 1.16 1.07 Dividends declared per share......... 0.34 0.29 0.27 0.24 0.20 Total assets......................... 5,686,076 5,339,748 2,842,299 2,203,243 1,865,004 Total debt, including capital leases............................. 2,469,082 2,572,696 1,366,967 935,692 747,107
- --------------- (1) Net income per share -- basic is computed by dividing net income, after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period, adjusted for stock split. (2) Net income per share -- diluted is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during each period, adjusted for stock split. ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements under this caption "Management's Discussion and Analysis of Financial Condition and Results of Operations", may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements to differ materially from the future results, performance or achievements 17 20 expressed or implied in such forward-looking statements. Such factors include inter alia general economic and business conditions, cruise industry competition, the impact of tax laws and regulations affecting the Company and its principal shareholders, changes in other laws and regulations affecting the Company, delivery schedule of new vessels, emergency ship repairs, incidents involving cruise vessels at sea, changes in interest rates, Year 2000 compliance and weather. GENERAL Summary Royal Caribbean Cruises Ltd. (the "Company") reported improved revenues, operating income, net income and earnings per share for the year ended December 31, 1998 as shown in the table below. The improvements were driven primarily by capacity increases resulting from the acquisition of Celebrity Cruise Lines Inc. ("Celebrity") in July 1997, and additions to the Royal Caribbean International brand as well as improved revenue per available lower berth ("Yield"). Net income for 1998 included a $9.0 million charge related to a plea agreement with the U.S. Department of Justice in the second quarter and a reduction in earnings of approximately $9.0 million related to the grounding of Monarch of the Seas in the fourth quarter. Also included in net income for 1998 is a $31.0 million gain on the sale of Song of America and a $32.0 million write-down of Viking Serenade to reflect its estimated fair market value. Net income for 1997 included an extraordinary loss of $7.6 million resulting from the early extinguishment of debt as well as a gain of $4.0 million from the sale of Sun Viking. Accordingly, on a comparable basis, before these items, earnings increased to $349.8 million or $1.93 per share in 1998, from $178.7 million or $1.17 per share in 1997.
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------ 1998 1997 1996 ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues................................................... $2,636,291 $1,939,007 $1,357,325 Operating Income........................................... 488,735 303,555 217,033 Net Income................................................. 330,770 175,127 150,866 Basic Earnings Per Share................................... $1.90 $1.17 $1.19 Diluted Earnings Per Share................................. $1.83 $1.15 $1.17
Selected Statistical Information
1998 1997 1996 ---------- ---------- ---------- Passengers Carried......................................... 1,841,152 1,465,450 973,602 Passenger Cruise Days...................................... 11,607,906 8,759,651 6,055,068 Occupancy Percentage....................................... 105.2% 104.2% 101.3%
Fleet Expansion The Company's fleet expansion continued in 1998 with the delivery of the last of the six Vision-class vessels in the Royal Caribbean International fleet, Vision of the Seas, in April 1998. With the delivery of these six ships and the acquisition of Celebrity in 1997, the Company's capacity has increased approximately 119.3% from 14,228 berths at December 31, 1994 to 31,200 at December 31, 1998. 18 21 The Company has nine ships on order. The planned passenger capacity and expected delivery dates of the ships on order are as follows:
EXPECTED PASSENGER VESSEL DELIVERY DATES CAPACITY(1) - ------ ----------------- ----------- ROYAL CARIBBEAN INTERNATIONAL: Eagle-class Voyager of the Seas.................................... 4th Quarter 1999 3,100 Explorer of the Seas................................... 3rd Quarter 2000 3,100 Adventure of the Seas.................................. 2nd Quarter 2002 3,100 Vantage-class Radiance of the Seas................................... 1st Quarter 2001 2,100 Brilliance of the Seas................................. 2nd Quarter 2002 2,100 CELEBRITY CRUISES: Millennium-class Millennium............................................. 2nd Quarter 2000 2,000 Unnamed................................................ 1st Quarter 2001 2,000 Unnamed................................................ 3rd Quarter 2001 2,000 Unnamed................................................ 2nd Quarter 2002 2,000
- --------------- (1) Based on double occupancy per cabin. The Eagle-class vessels will be the largest passenger cruise ships built to date. The Vantage-class vessels are a progression from Royal Caribbean International's Vision-class vessels, while the Millennium-class vessels are a progression from Celebrity Cruises' Century-class vessels. Between 1998 and 2002, the Company's year-end berth capacity is expected to increase 64.4% from 31,200 to 51,300 berths. In May 1998, the Company sold Song of America for $94.5 million and recognized a gain on the sale of $31.0 million. The Company operated the vessel under a charter agreement until March 1999. RESULTS OF OPERATIONS: The following table presents operating data as a percentage of revenues:
FOR THE YEAR ENDED DECEMBER 31, --------------------- 1998 1997 1996 ----- ----- ----- Revenues.................................................... 100.0% 100.0% 100.0% Expenses: Operating................................................. 60.5 62.9 63.0 Marketing, selling and administrative..................... 13.6 14.0 14.3 Depreciation and amortization............................. 7.4 7.4 6.7 ----- ----- ----- Operating Income............................................ 18.5 15.7 16.0 Other Income (Expense)...................................... (6.0) (6.3) (4.9) ----- ----- ----- Income Before Extraordinary Item............................ 12.5% 9.4% 11.1% ===== ===== =====
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997 Revenues Revenues increased 36.0% to $2.6 billion compared to $1.9 billion in 1997. The increase in revenues was primarily due to a 31.2% increase in capacity and a 3.6% increase in Yield. The acquisition of Celebrity (which occurred in July 1997) accounted for approximately two-thirds of the capacity increase, while additions to the Royal Caribbean International fleet accounted for the balance of the increase. The increase in 19 22 Yield was due to an increase in occupancy levels to 105.2% as compared to 104.2% in 1997 as well as an increase in cruise ticket per diems, partially offset by a reduction in shipboard revenue per diems. The reduction in shipboard revenue per diems is due to the inclusion of Celebrity's results for the full year 1998 as compared to six months in 1997. Celebrity derives a higher percentage of its shipboard revenue from concessionaires than does Royal Caribbean International, resulting in a dilutive effect on the per diem. Concessionaires pay a net commission to the Company which is recorded as revenue, in contrast to in-house operations, where shipboard revenues and the related cost of sales are recorded on a gross basis. Expenses Operating expenses increased 30.7% in 1998 to $1.6 billion as compared to $1.2 billion in 1997. The increase in operating expenses was primarily due to the increase in capacity. Included in operating expenses is a $9.0 million charge related to the plea agreement with the U.S. Department of Justice. As a percentage of revenues, operating expenses decreased 2.4% in 1998 due to improved ticket pricing as well as the inclusion of Celebrity results for the full year of 1998 versus six months of 1997. Celebrity's operating expenses as a percentage of revenues were lower than Royal Caribbean International's due to lower shipboard cost of sales as a result of the higher use of concessionaires onboard Celebrity vessels as discussed above. Marketing, selling and administrative expenses increased 31.9% in 1998 to $359.2 million from $272.4 million in 1997. The increase was primarily due to the acquisition of Celebrity as well as higher advertising and staffing costs. As a percentage of revenues, marketing, selling and administrative expenses decreased to 13.6% in 1998 as a result of economies of scale. Depreciation and amortization increased to $194.6 million in 1998 from $143.8 million in 1997. The increase was primarily due to the acquisition of Celebrity as well as additions to the Royal Caribbean International fleet. Other Income (Expense) Interest expense, net of capitalized interest, increased to $167.9 million in 1998 as compared to $128.5 million in 1997. The increase is due to the increase in the average debt level as a result of the Company's fleet expansion program as well as the acquisition of Celebrity in July 1997. Included in Other income (expense) in 1998 is a $31.0 million gain from the sale of Song of America as well as a $32.0 million charge related to the write-down to fair market value of Viking Serenade. Based on the Company's strategic objective to maintain a modernized fleet, the unique circumstances of this vessel and indications of the current value of Viking Serenade, the Company recorded a write-down of the carrying value to its current estimated fair market value. The Company continues to operate and depreciate the vessel which is classified as part of Property and Equipment on the balance sheet. On December 15, 1998, Monarch of the Seas experienced significant damage to the ship's hull and equipment, resulting in the ship being out of service until mid-March 1999. The incident resulted in a net reduction in earnings of approximately $9.0 million, or $0.05 per share in the fourth quarter of 1998. This reduction is comprised of lost revenue, net of related variable expenses, of $5.2 million, and costs associated with repairs to the ship, passenger transportation and lodging, commissions and various other costs, net of estimated insurance recoveries, of $3.8 million. The costs of $3.8 million were included in Other income (expense) for the quarter and year ended December 31, 1998. Included in Other income (expense) in 1997 is a $4.0 million gain from the sale of Sun Viking. Extraordinary Item Included in 1997 is an extraordinary charge of $7.6 million or $0.05 per share related to the early extinguishment of debt. 20 23 YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 Revenues Revenues increased 42.9% in 1997 to $1.9 billion compared to $1.4 billion in 1996 as a result of a 40.7% increase in capacity as well as an increase in Yield. The acquisition of Celebrity contributed 22.1% of the capacity increase while additions to the Royal Caribbean International fleet accounted for 18.6% of the increase. Yield for the year increased 1.5% over 1996 as a result of an increase in occupancy. Occupancy levels increased to 104.2% in 1997 as compared to 101.3% in 1996. Expenses Operating expenses increased 42.7% to $1.2 billion in 1997 as compared to $854.5 million in 1996. This increase in operating expenses was primarily due to the 40.7% increase in capacity and higher variable costs associated with the increased occupancy. Marketing, selling and administrative expenses increased 39.9% in 1997 to $272.4 million versus $194.6 million in 1996. The increase was primarily due to the acquisition of Celebrity, an increase in staffing and additional advertising costs. These expenses decreased as a percentage of revenues in 1997 as a result of the economies of scale achieved with the increase in capacity. Depreciation and amortization increased to $143.8 million in 1997 from $91.2 million in 1996. The increase was primarily due to the acquisition of Celebrity as well as additions to the Royal Caribbean International fleet. Other Income (Expense) Interest expense, net of capitalized interest, increased to $128.5 million in 1997 from $76.5 million in 1996. The increase was a result of an increase in the average debt level associated with the Company's fleet expansion program and from the acquisition of Celebrity in July 1997. Other income (expense) in 1997 includes a gain of $4.0 million from the sale of Sun Viking as compared to 1996 which includes a gain of $10.3 million from the sale of Song of Norway. Extraordinary Item In May 1997, the Company redeemed the remaining $104.5 million of 11 3/8% Senior Subordinated Notes and incurred an extraordinary charge of $7.6 million, or $0.05 per share on the early extinguishment of debt. LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash The Company generated substantial cash flows resulting in net cash provided by operating activities of $526.9 million in 1998 as compared to $434.1 million in 1997 and $299.5 million in 1996. The increase was primarily due to higher net income as well as timing differences in cash payments relating to operating assets and liabilities. In March 1998, the Company issued $150.0 million of 6.75% Senior Notes due 2008 and $150.0 million of 7.25% Senior Debentures due 2018. The net proceeds to the Company were approximately $296.1 million. In March 1998, the Company issued 6,100,690 shares of common stock. The net proceeds to the Company were approximately $165.5 million. (See Note 7 -- Shareholders' Equity.) During the year ended December 31, 1998, the Company's capital expenditures were approximately $557.0 million as compared to $1.1 billion during 1997 and $722.4 million during 1996. The largest portion of capital expenditures related to the delivery of Vision of the Seas in 1998, delivery of Rhapsody of the Seas, Enchantment of the Seas and Mercury in 1997, delivery of Splendour of the Seas and Grandeur of the Seas in 1996, as well as progress payments for ships under construction during 1998, 1997 and 1996. Also included in 21 24 capital expenditures are shoreside capital expenditures and costs for vessel refurbishing to maintain consistent fleet standards. The Company received proceeds of $94.5 and $100.0 million from the sale of vessels during 1998 and 1997, respectively. Capitalized interest decreased to $15.0 million in 1998, from $15.8 million in 1997 and $15.9 million in 1996. The decrease during 1998 was due to a reduction in the level of construction-in-progress expenditures associated with the Company's fleet expansion program. During 1998, the Company paid quarterly cash dividends on its common stock totaling $55.2 million as well as quarterly cash dividends on its preferred stock, totaling $12.5 million. During 1997, the Company paid quarterly cash dividends totaling $40.8 and $9.2 million on its common stock and preferred stock, respectively. The Company made principal payments totaling approximately $335.1 and $245.4 million under various term loans and capital leases during 1998 and 1997, respectively. Future Commitments The Company currently has nine ships on order for an additional capacity of 21,500 berths. The aggregate contract price of the nine ships, which excludes capitalized interest and other ancillary costs, is approximately $3.6 billion, of which the Company deposited $144.6 million during 1998 and $74.3 million during 1997. Additional deposits are due prior to the dates of delivery of $237.4 million in 1999, $88.1 million in 2000 and $25.0 million in 2001. The Company anticipates that overall capital expenditures will be approximately $997, $1,196, and $1,368 million for 1999, 2000 and 2001, respectively. The Company has $2.5 billion of long-term debt of which $127.9 million is due during the twelve month period ending December 31, 1999. (See Note 6 -- Long-Term Debt.) In addition, the Company continuously considers potential acquisitions, strategic alliances and adjustments to its fleet composition, including the acquisition or disposition of vessels. If any such acquisitions, strategic alliances and adjustments to its fleet composition were to occur, they would be financed through the issuance of additional shares of equity securities, by the incurrence of additional indebtedness or from cash flows from operations. Funding Sources As of December 31, 1998, the Company's liquidity was $1.2 billion consisting of $172.9 million in cash and cash equivalents and $1.0 billion available under its $1.0 billion unsecured revolving credit facility (the "$1 Billion Revolving Credit Facility"). The capital expenditures and scheduled debt payments will be funded through a combination of cash flows provided by operations, drawdowns under the $1 Billion Revolving Credit Facility, and sales of securities in private or public securities markets. In addition, the agreements related to the ships scheduled for delivery subsequent to 1999 require the shipyards to make available export financing for up to 80% of the contract price of the vessels. The Company's cash management practice is to utilize excess cash to reduce outstanding balances on the $1 Billion Revolving Credit Facility, and to the extent the cash balances exceed the amounts drawn under the $1 Billion Revolving Credit Facility, the Company invests in short-term securities. Other The Company enters into interest rate swap agreements to manage interest costs as part of its liability risk management program. The differential in interest rates to be paid or received under these agreements is recognized in income as part of interest expense over the life of the contracts. The objective of the program is to modify the Company's exposure to interest rate movements. The Company continuously evaluates its debt portfolio, including its interest rate swap agreements, and makes periodic adjustments to the mix of fixed rate and floating rate debt based on its view of interest rate movements. (See Note 12 -- Financial Instruments.) 22 25 Impact of Year 2000 The "Year 2000 issue" is the result of computer programs that were written using two digits rather than four to define the applicable year. If the Company's computer programs with date-sensitive functions are not Year 2000 compliant, they may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions to operations. State of Readiness The Company continuously upgrades its computer systems. In 1992, the Company implemented a new computer reservation and passenger services system which was designed to be Year 2000 compliant. Since then, the Company has sought to fix Year 2000 issues as an indirect part of its efforts to upgrade many of its internally developed computer systems. Prior to 1998, the Company did not separately track associated Year 2000 software compliant costs. In 1997, the Company engaged a third-party consultant to assess the status of the Company relative to the Year 2000 issue. The assessment was completed in early 1998. The Company then formed an internally staffed program management office that is conducting a comprehensive review of computer programs to address the impact of the Year 2000 issue on its operations and otherwise address the Year 2000 issues identified by the third-party consultant (the "Year 2000 Project"). Employees in various departments throughout the Company are assisting the program management office by addressing Year 2000 issues applicable to their departments. The Company has identified three major categories of Year 2000 risk: (1) internally developed software systems -- these include the Company's reservation, accounting, remote reservation booking and revenue management systems; (2) third-party supplied software systems and equipment with embedded chip technology -- these include the Company's computer hardware equipment, building facilities control systems and shipboard equipment and control systems (e.g., navigation, engine, and bridge control systems, fire alarm and safety systems); and (3) external vendors and suppliers -- these include key suppliers (e.g., suppliers of air travel, hotel accommodations, food and other on-board provisions), travel agents, on-board concessionaires and other third parties whose system failures potentially could have a significant impact on the Company's operations. The general phases common to all three categories are (1) inventorying Year 2000 items, (2) assessing the Year 2000 compliance of key items, (3) repairing or replacing key internally developed and third-party supplied non-compliant items, (4) testing and certifying key internally developed and third-party supplied items, and (5) designing and implementing contingency plans as needed. The Company has substantially completed its inventory of all internally developed and third-party supplied software systems and equipment and has identified external vendors and suppliers whose system failures potentially could have a significant impact on the Company's operations ("Key External Vendors"). The Company has completed its assessment of its internally developed software systems. Through the use of questionnaires and other communications, the Company has contacted substantially all third-party suppliers of critical software and equipment and Key External Vendors to ascertain whether their systems and/or equipment are Year 2000 compliant. The Company has been receiving responses from these third parties, and is evaluating them as they are received. The Company has repaired substantially all internally developed software systems that were determined non-compliant. By mid-1999, the Company plans to complete testing and certification of these systems, at which time it expects that its key internally developed software systems will be Year 2000 compliant. As the Company identifies non-compliant systems and equipment supplied by third parties or used by Key External Vendors, it will request that they be remediated. If a party's response is unsatisfactory, the 23 26 Company will implement appropriate contingency plans, including, when possible, the repair or replacement of supplied systems or equipment or the replacement of a vendor. The Company's objective is to complete all assessment, remediation and certification of third-party supplied software systems and equipment in the third quarter of 1999. Over the next few months, as the Company receives more information on the extent of the Year 2000 compliance by third-party suppliers and Key External Vendors, the nature of any contingency plans that may be needed will evolve. The Company is currently preparing contingency plans to identify and determine how to handle its most reasonably likely worst case scenarios. It expects to complete these plans in the third quarter of 1999 in conjunction with completion of its assessment, remediation, testing and certification phases. The Company has not retained third-party consultants to assist it in the remediation, testing or certification phases, although it may choose to do so in the future. Risks Based on its current assessment efforts, the Company does not believe that Year 2000 issues will have a material adverse effect on the results of its operations, liquidity or financial condition. However, this assessment is dependent on the ability of third-party suppliers and others whose system failures potentially could have a significant impact on the Company's operations to be Year 2000 compliant. For instance, the operations of the Company could be impacted by disruptions in airlines, port authorities, travel agents or others in the transportation or sales distribution channels whose systems are not Year 2000 compliant. Although the Company cannot control the conduct of these third parties, the Year 2000 Project is expected to reduce the Company's level of uncertainty and the adverse effect that any such failures may have. Costs The total cost associated with required modifications to become Year 2000 compliant are not expected to be material to the Company's financial position. The Company estimates that it will incur approximately $6.0 million in expense on efforts directly related to fixing the Year 2000 issue, as well as an additional $5.0 million of capital expenditures related to the accelerated replacement of non-compliant systems. The Company has incurred approximately $2.0 million in expense since January 1, 1998, and spent an additional $2.0 million for capital expenditures related to the accelerated replacement of non-compliant systems. Estimated costs do not include costs that may be incurred by the Company as a result of the failure of any third parties to become Year 2000 compliant or costs to implement any contingency plans. The information contained in this "Impact of Year 2000" section is a Year 2000 Readiness Disclosure pursuant to the Year 2000 Information and Disclosure Act. ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK General The Company is exposed to market risks attributable to changes in interest rates, currency exchange rates and commodity prices. The Company enters into various derivative transactions to manage a portion of these exposures to market risk pursuant to the Company's hedging practices and policies. The impacts of these hedging instruments are offset by corresponding changes in the underlying exposures being hedged. The Company achieves this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged. The Company does not hold or issue derivative financial instruments for trading or other speculative purposes. Derivative positions are monitored using techniques including market valuations and sensitivity analysis. See Notes 2 and 12 to the Consolidated Financial Statements for a discussion of the Company's accounting policies for financial instruments. 24 27 Interest Rate Risk The Company's exposure to market risk for changes in interest rates relates to its long-term debt obligations. At December 31, 1998, the fair value of the Company's long-term fixed rate debt was estimated at approximately $2,565.0 million using quoted market prices where available, or discounted cash flow analyses. Market risk associated with the Company's long-term debt is the potential increase in fair value resulting from a decrease in interest rates. The Company uses interest rate swaps to modify its exposure to interest rate movements and manage its interest expense. The Company's interest rate swaps are primarily floating rate instruments that are tied to LIBOR. The fair value of the Company's interest rate swaps was approximately $48.6 million at December 31, 1998. A 10% decrease in assumed interest rates would increase the fair value of the Company's long-term debt by approximately $73.8 million. This increase would be partially offset by an increase in the fair value of the Company's interest rate swaps of $18.6 million. ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT The directors and executive officers of the Company are set forth below. Currently all directors hold office until the annual meeting of shareholders of the Company following their election or until their successors are duly elected and qualified. Officers are appointed by the Board of Directors and serve at its discretion. In February 1999, the Board of Directors approved a proposal to establish a classified Board of Directors. If the proposal is approved by the shareholders at the 1999 Annual Meeting, the directors will be elected commencing with the 1999 Annual Meeting for a classified Board of Directors with four directors being elected for a term of one year, four directors being elected for a term of two years and four directors being elected for a term of three years, and until their successors are duly elected and qualified. In subsequent meetings, each newly elected director will serve three years from the date of his or her election. If the proposal for a classified Board of Directors is not approved at the 1999 Annual Meeting, the directors will be elected for terms of one year and until their successors are duly elected and qualified.
NAME AGE POSITION - ---- --- -------- Richard D. Fain......................... 51 Chairman, Chief Executive Officer and Director Jack L. Williams........................ 49 President, Royal Caribbean International Richard E. Sasso........................ 49 President, Celebrity Cruises Richard J. Glasier...................... 53 Executive Vice President and Chief Financial Officer Kenneth D. Dubbin....................... 45 Vice President and Treasurer Michael J. Smith........................ 44 Vice President, General Counsel and Secretary Tor Arneberg............................ 70 Director Bernard W. Aronson...................... 52 Director John D. Chandris........................ 48 Director Kaspar K. Kielland...................... 69 Director Laura Laviada........................... 48 Director Peter Lorange........................... 55 Director Eyal Ofer............................... 48 Director Thomas J. Pritzker...................... 48 Director William K. Reilly....................... 59 Director Edwin W. Stephan........................ 67 Director Arne Wilhelmsen......................... 69 Director
Richard D. Fain has served as Chairman and Chief Executive Officer of the Company since April 1988. Mr. Fain has served as a Director of the Company since 1981. Mr. Fain is vice chairman of the International Council of Cruise Lines, an industry trade organization, and served as its chairman from 1992 to 1994. Mr. Fain is a director of Assuranceforeningen GARD, a mutual shipowners' insurance organization. Mr. Fain has been involved in the shipping industry for over 20 years. Mr. Fain has served as a director of SEMX Corporation, a manufacturer of electronics packaging materials, since November 1991. 25 28 Jack L. Williams has served as President of the Company since January 1997. Formerly Vice President and General Sales Manager for American Airlines, Mr. Williams had been employed at American Airlines for 23 years in a variety of positions in finance, marketing and operations. In his most recent assignment, Mr. Williams was responsible for American's sales programs and promotions worldwide. Richard E. Sasso has served as President of Celebrity Cruises since January 1996. From the founding of Celebrity Cruise Lines in 1990 through January 1996, Mr. Sasso served as its Senior Vice President Sales and Marketing. Mr. Sasso has been involved in the cruise industry for over 25 years. Richard J. Glasier has served as Executive Vice President and Chief Financial Officer since June 1996 and as Senior Vice President and Chief Financial Officer since 1985. Mr. Glasier has held various senior financial positions in the hospitality and cruise industry for over 20 years. Kenneth D. Dubbin has served as Vice President and Treasurer since 1988. Mr. Dubbin has held various financial positions with the Company since 1986. Michael J. Smith has served as Vice President, General Counsel and Secretary since February 1995 and Secretary and General Counsel since 1990. Tor Arneberg has served as a Director since November 1988. Mr. Arneberg is a senior advisor and has served as an Executive Vice President of Nightingale & Associates, a management consulting company, since 1982. From 1975 until 1982, Mr. Arneberg co-founded and operated AgTek International, a company involved in the commercial fishing industry. Prior thereto, Mr. Arneberg was director of marketing for Xerox Corporation. He is an executive trustee and vice president of the American Scandinavian Foundation and received a silver medal in the 1952 Summer Olympics in Helsinki, Finland as a member of the Norwegian Olympic Yachting Team. Bernard W. Aronson has served as a Director since July 1993. Mr. Aronson is currently Chairman of ACON Investments, LLC and Newbridge Andean Partners, L.P. Prior to that he served as international advisor to Goldman, Sachs & Co. From June 1989 to July 1993, Mr. Aronson served as Assistant Secretary of State for Inter-American Affairs. Prior thereto, Mr. Aronson served in various positions in the private and government sectors. Mr. Aronson is a member of the Council on Foreign Relations. Since January, 1998, Mr. Aronson has served as a Director of Liz Claiborne, Inc. John D. Chandris has served as a Director since July 1997. Mr. Chandris is Chairman of Chandris (UK) Limited, a shipbrokering office based in London, England. Until September 1997, Mr. Chandris also served as Chairman of Celebrity Cruise Lines Inc. Mr. Chandris is a director of Leathbond Limited, a U.K. real estate company, and serves on the Board of the classification society, Lloyd's Register. Kaspar K. Kielland has served as a Director since July 1993. Until May 1996, Mr. Kielland served as Chairman of Kvaerner A/S, a company of diversified shipping, shipbuilding and energy businesses. From 1980 through 1988, Mr. Kielland served as President and Chief Executive Officer of Elkem A/S, a company engaged in aluminum and ferro-alloys. Since 1991, Mr. Kielland has served as a Director of Anders Wilhelmsen & Co. A/S. In 1985, Mr. Kielland was awarded the Knight 1st Class of the Royal Norwegian Order of St. Olav. Laura Laviada has served as a Director since July 1997. Ms. Laviada is the President and Chief Executive Officer of Editorial Televisa, the largest Spanish language magazine publishing company based in Mexico and a Grupo Televisa subsidiary. A former magazine editor, Ms. Laviada began her career in 1979 when she founded Tu magazine. In 1988, she created Eres and two years later created Somos. In 1995, when Editorial Eres merged with Editorial Televisa, Ms. Laviada was named President and Chief Executive Officer of the company. Peter Lorange has served as a Director since July 1993. Since 1993, Dr. Lorange has served as the President of IMD, International Institute for Business Development, an institute for studies in corporate management. Dr. Lorange received a Doctorate in Business Administration in 1972 from Harvard University and has written numerous publications on the subject of corporate management. From 1979 until 1990, Dr. Lorange held various teaching positions at the Wharton School, University of Pennsylvania. From 1990 26 29 until 1993, he was President of the Norwegian School of Management and served as Chairman of the Board of Citibank Norway A/S. Dr. Lorange is also a director of Citibank International PLC and ISS A/S. Eyal Ofer has served as a Director of the Company since May 1995. Mr. Ofer has served as the Chief Executive Officer of Carlyle Properties, Limited, a real estate management company, since May 1991. Thomas J. Pritzker has served as a Director since February 1999. Mr. Pritzker is President of The Pritzker Organization and a partner in the law firm of Pritzker & Pritzker. He is Chairman of Hyatt Hotels and Resorts, Chairman of Hyatt International and President of Hyatt Corporation. Mr. Pritzker is also a founder and Chairman of First Health Corporation, a publicly traded company engaged in the managed care industry, and a founder and a Director of Triton Container Holding, Ltd., a major lessor of dry van containers. Mr. Pritzker is a member of the Board of Trustees of the University of Chicago and the Art Institute of Chicago where he is Chairman of the Committee on Asian Art. William K. Reilly has served as a Director since January 1998. Mr. Reilly is the chief executive officer of Aqua International Partners, an investment group which finances water purification in developing countries. From 1989 to 1993, Mr. Reilly served as the Administrator of the U.S. Environmental Protection Agency. He has also previously served as the Payne Visiting Professor at Stanford University's Institute of International Studies, president of World Wildlife Fund and of The Conservation Foundation, executive director of the Rockefeller Task Force on Land Use and Urban Growth and Chairman of the Natural Resources Council of America. He serves on the Board of Trustees of the National Geographic Society, World Wildlife Fund, the Packard Foundation, Yale University Corporation, the American Farmland Trust and the Education and Training Institute of North America. He also serves as a director of Dupont, Conoco and Evergreen Holdings. Edwin W. Stephan has served as a Director since January 1996. From the inception of Royal Caribbean Cruise Lines in 1968 through 1995, Mr. Stephan served as President or General Manager of the Company. Mr. Stephan has been involved in the cruise industry for over 30 years. Arne Wilhelmsen has served as a Director since 1968. Mr. Wilhelmsen, one of the founders of Royal Caribbean Cruise Line, is a principal and Chairman of the Board of Anders Wilhelmsen & Co. A/S and other holding companies in the Anders Wilhelmsen & Co. Group. Mr. Wilhelmsen has been involved in the shipping industry for over 40 years. The Compensation Committee consists of not less than two directors who are not salaried officers of the Company. The purpose of the Compensation Committee is to review the Company's compensation of its executives and to make determinations relative thereto. The current members of the Compensation Committee are Mr. Arneberg and Mr. Aronson. The Audit Committee consists of two independent directors. The purpose of the Audit Committee is to provide general oversight of audit, legal compliance and potential conflict of interest matters. The current members of the Audit Committee are Mr. Arneberg and Mr. Aronson. ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS CASH COMPENSATION The Company paid its directors and officers (31 persons) aggregate cash compensation of $8.6 million for fiscal 1998. EXECUTIVE COMPENSATION PURSUANT TO PLANS Executive Bonus Plan The Company's Executive Bonus Plan (the "Bonus Plan") provides a means of rewarding key executives who contribute to its profitable growth. Annual bonuses under the Bonus Plan are paid to eligible executives based upon (i) the extent to which the Company's financial performance during the year meets certain established objectives and (ii) the extent to which the executive attains established individual and corporate performance objectives. The Bonus Plan is administered by the Compensation Committee of the Board of Directors. 27 30 Retirement Plan and Other Executive Compensation Plans All eligible shoreside officers and employees are participants in the Company's Retirement Plan. Contributions of between 8% and 12% of the participant's compensation (as defined in the plan), depending on the length of such participant's employment, are made on an annual basis to the participant's account. Benefits under the Retirement Plan are payable on the later of the date the participant attains the age of 65 or the date the participant actually retires, but in no event later than the April 1st following the calendar year in which the participant attains the age of 70 1/2. Benefits are payable as follows: (i) in a single lump sum, payable upon termination of employment; (ii) as a life annuity, payable monthly upon retirement during the lifetime of the employee; (iii) in installments payable upon retirement for a period not to exceed 120 months; or (iv) a joint and 50% surviving spouse annuity, payable monthly upon retirement during the lifetime of the employee and spouse. The Company also has a Supplemental Executive Retirement Plan ("SERP"). Under SERP, the Company accrues, but does not fund, an annual amount for the account of each Company Executive equal to the reduction in the Company contribution under the Retirement Plan pursuant to Section 401(a)(17) of the Code. Other terms and benefits of SERP are the same as those of the Retirement Plan. In connection with his employment, Richard D. Fain is entitled to receive upon his cessation of employment by the Company for any reason the assets of a grantor trust established by the Company for the benefit of Mr. Fain. The Company makes quarterly contributions of common stock to the grantor trust and will continue to do so until the earlier of the cessation of Mr. Fain's employment or June 2014. The aggregate amount set aside or accrued by the Company during 1998 to provide pension, retirement or other executive compensation benefits for the 31 directors and officers as a group was $1.0 million. ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES The Company's 1990 Employee Stock Option Plan (the "Employee Stock Option Plan") provides for the issuance of options to directors, officers and other key employees of the Company or its subsidiaries to purchase up to 6,703,000 shares of the Company's common stock. As of March 12, 1999 there were outstanding under the Employee Stock Option Plan options to purchase an aggregate of 4,446,688 shares of common stock. The outstanding options are exercisable at prices ranging from $6.28 to $35.09 per share and expire on various dates between January 1, 2000 and February 5, 2009. The Company's 1990 Shareholder Stock Option Plan (the "Shareholder Stock Option Plan"), which provided for the issuance of options to the then shareholders of the Company, was terminated in May 1993 in conjunction with the Company's initial public offering and no further options will be granted thereunder. As of March 12, 1999 there are outstanding options to purchase up to 63,800 shares of the Company's common stock. The outstanding options are exercisable at a price of $6.28 per share and expire on December 31, 1999. In connection with the Company's initial public offering in April 1993, the Company issued 379,714 stock options at an exercise price of $9.00 per share to an Officer of the Company. The options, which vested immediately, will generally expire upon termination of the Officer's employment by the Company. The 1994 Employee Stock Purchase Plan (the "Stock Purchase Plan") provides for the grant of rights to eligible employees to purchase a maximum of 800,000 shares of common stock. The Stock Purchase Plan is generally available to all employees of the Company who have been employed for at least one year and who customarily work at least five months per calendar year. Offerings to employees under the Stock Purchase Plan are made on a quarterly basis. Subject to certain limitations, the purchase price for each share of common stock under the Stock Purchase Plan is equal to 90% of the average of the market prices of the common stock as reported on the NYSE on the first business day of the purchase period and the last business day of each month of the purchase period. The Company's 1995 Incentive Stock Option Plan (the "ISO Plan") provides for the issuance of options to purchase up to 2,700,000 shares of the Company's common stock to officers and other key employees of the Company. As of March 12, 1999, there were outstanding under the ISO Plan, options to purchase an 28 31 aggregate of 2,362,191 shares of common stock. The outstanding options are exercisable at prices ranging from $11.19 to $35.09 per share and expire on various dates between February 3, 2005 and February 5, 2009. Effective January 1, 1998, the Company instituted a program to award stock to employees up to a maximum of 1,400,000 shares of common stock. Employees are awarded five shares of the Company's stock at the end of each year of employment over a 10-year period. Employees can elect to receive cash equal to the fair market value of the stock upon vesting. Compensation expense was $3.6 million in 1998 related to this program. ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS Not applicable. PART II ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED Not applicable. PART III ITEM 15. DEFAULTS UPON SENIOR SECURITIES None. ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES In February 1999, the Board of Directors amended the By-Laws of the Company to increase the shareholder vote to call a special meeting from 20% to 50%. Effective as of the 1999 Annual Meeting, the Board also amended the By-Laws to require that any shareholder proposal or nomination for election to the Board of Directors must be submitted to the Secretary of the Company at least 120 days in advance of the first anniversary of the Company's last annual meeting. Subject to approval by the shareholders of the 1999 Annual Meeting of Shareholders, the Board of Directors also approved (i) amendments to the By-Laws and Articles of Incorporation to provide for a classified Board of Directors, and (ii) an amendment to the Articles of Incorporation that, subject to certain exceptions, would increase from a majority to 66 2/3% the number of outstanding shares needed to amend the Articles of Incorporation or to approve any shareholder proposed amendment to the By-Laws. This latter amendment would not apply to any amendment to the Articles of Incorporation (a) to change the registered agent or registered address of the Company; (b) to change the authorized number of shares of stock which the Company shall have authority to issue; and (c) which arises from the filing of a copy of a resolution establishing and designating the shares of any class or any series of any class. 29 32 PART IV ITEM 17. FINANCIAL STATEMENTS The Company's Consolidated Financial Statements have been prepared in accordance with Item 18 hereof. ITEM 18. FINANCIAL STATEMENTS The Company's financial statements are included beginning at page F-1 of this report and are hereby incorporated herein by this reference. ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS (a) The list of financial statements is set forth in the accompanying Index to Consolidated Financial Statements and is hereby incorporated herein by this reference. (b) The exhibits listed on the accompanying Exhibit Index are filed and incorporated herein by reference as part of this report and such Exhibit Index is hereby incorporated herein by this reference. 30 33 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. ROYAL CARIBBEAN CRUISES LTD. (Registrant) By: /s/ RICHARD J. GLASIER ------------------------------------ Richard J. Glasier Executive Vice President and Chief Financial Officer Date: April 1, 1999 31 34 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION - ------- ----------- 1.1 -- Amendment No. 1 dated April 24, 1998 to Contract for Hull Number R-31 dated March 16, 1998 between the Company and Chantiers de l'Atlantique.** 1.2 -- Amendment No. 1 dated April 24, 1998 to Contract for Hull Number S-31 dated March 16, 1998 between the Company and Chantiers de l'Atlantique.** 1.3 -- Amendment No. 3 dated September 17, 1998 to Lease Agreement dated March 3, 1993 between the Company and G.I.E. Cruise Vision One. 1.4 -- Amendment No. 4 dated September , 1998 to Lease Agreement dated March 3, 1993 between the Company and G.I.E. Cruise Vision Two. 1.5 -- Amendment Nos. 1 and 2 dated January 27, 1999 and February 19, 1999, respectively, to Contract for Hull Number T-31 dated March 16, 1998 between the Company and Chantiers de l'Atlantique.** 1.6 -- Amendment Nos. 1 and 2 dated January 27, 1999 and February 19, 1999, respectively, to Contract for Hull Number U-31 dated March 16, 1998 between the Company and Chantiers de l'Atlantique.** 1.7 -- Amendment No. 1 and Addendum Nos. 1 and 2 dated January 15, 1999, February 18, 1999 and March 11, 1999, respectively, to contract for Hull Number 1344 dated January 7, 1997 between the Company and Kvaerner Masa-Yards. 1.8 -- Second Supplemental Agreement dated September 1, 1998 to Loan Facility Agreement dated November 29, 1993 between Esker Marine Shipping Inc. and Kreditanstalt fur Wiederaufbau ("KfW"). 1.9 -- Second Supplemental Agreement dated September 1, 1998 to Loan Facility Agreement dated November 29, 1993 between Blue Sapphire Marine Inc. and KfW. 1.10 -- Sixth Supplemental Agreement dated September 1, 1998 to Loan Facility Agreement dated June 21, 1990 between Zenith Shipping Corporation and KfW. 1.11 -- Sixth Supplemental Agreement dated September 1, 1998 to Loan Facility Agreement dated March 6, 1989 between Fantasia Cruising Inc. and KfW. 2.1 -- Restated Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form F-1, File No. 33-59304, filed with the Securities and Exchange Commission (the "Commission") and to Exhibit 2.2 to the Company's 1996 Annual Report on Form 20-F filed with the Commission). 2.2 -- Certificate of the Powers, Designations, Preferences and Rights of the Convertible Preferred Stock (incorporated by reference to Exhibit 2.2 to the Company's 1996 Annual Report on Form 20-F filed with the Commission). 2.3 -- Restated By Laws of the Company. 2.4 -- Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.4 to the Company's 1994 Annual Report on Form 20-F filed with the Commission). 2.5 -- First Supplemental Indenture dated as of July 28, 1994 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.5 to the Company's 1994 Annual Report on Form 20-F filed with the Commission). 2.6 -- Second Supplemental Indenture dated as of March 29, 1995 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.5 to the Company's 1995 Annual Report on Form 20-F filed with the Commission). 2.7 -- Third Supplemental Indenture dated as of September 18, 1995 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.6 to the Company's 1995 Annual Report on Form 20-F filed with the Commission). 2.8 -- Fourth Supplemental Indenture dated as of August 12, 1996 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, as Trustee (incorporated by reference to Document No. 2 in the Company's Form 6-K filed with the Commission on February 10, 1997).
32 35
EXHIBIT DESCRIPTION - ------- ----------- 2.9 -- Fifth Supplemental Indenture dated as of October 14, 1997 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 2.10 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.10 -- Sixth Supplemental Indenture dated as of October 14, 1997 to Indenture dated as of July 15, 1994 between the Company, as issuer and The Bank of New York, as Trustee (incorporated by reference to Exhibit 2.11 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.11 -- Seventh Supplemental Indenture dated as of March 16, 1998 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 2.12 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.12 -- Eighth Supplemental Indenture dated as of March 16, 1998 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 2.13 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.13 -- Amended and Restated Credit Agreement dated as of June 28, 1996 among the Company and various financial institutions and The Bank of Nova Scotia as Administrative Agent and Amendment No. 1 thereto (incorporated by reference to Document No. 3 in the Company's Form 6-K filed with the Commission on February 10, 1997 and Exhibit 1.1 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.14 -- New Credit Agreement dated December 12, 1997 between Seabrook Maritime Inc. and Kreditanstalt fur Wiederaufbau ("KfW") (incorporated by reference to Exhibit 2.13 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.15 -- Loan Facility Agreement dated November 29, 1993 between Esker Marine Shipping Inc. and KfW, together with supplemental agreement thereto (incorporated by reference to Exhibit 2.16 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.16 -- Loan Facility Agreement dated November 29, 1993 between Blue Sapphire Marine Inc. and KfW, together with supplemental agreement thereto (incorporated by reference to Exhibit 2.17 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.17 -- Loan Facility Agreement dated June 21, 1990 between Zenith Shipping Corporation and KfW, together with supplemental agreements thereto (incorporated by reference to Exhibit 2.18 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.18 -- Loan Facility Agreement dated March 6, 1989 between Fantasia Cruising Inc. and KfW, together with supplemental agreements thereto (incorporated by reference to Exhibit 2.19 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.19 -- Amended and Restated Registration Rights Agreement dated as of July 30, 1997 among the Company, A. Wilhelmsen AS, Cruise Associates, Monument Capital Corporation, Archinav Holdings, Ltd. and Overseas Cruiseship, Inc (incorporated by reference to Exhibit 2.20 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.20 -- Lease Agreement dated March 3, 1993 between the Company and G.I.E. Cruise Vision One and Amendment Nos. 1 and 2 thereto (incorporated by reference to Exhibit 2.9 to the Company's 1994 Annual Report on Form 20-F filed with the Commission and Exhibit 1.4 to the Company's 1995 Annual Report on Form 20-F filed with the Commission). 2.21 -- Lease Agreement dated March 3, 1993 between the Company and G.I.E. Cruise Vision Two and Amendment Nos. 1, 2 and 3 thereto (incorporated by reference to Exhibit 2.11 to the Company's 1995 Annual Report on Form 20-F filed with the Commission). 2.22 -- Contract dated October 21, 1994 between the Company and Chantiers de l'Atlantique and Amendment No. 1 and Addendum No. 1 thereto (incorporated by reference to Exhibits 2.15 and 1.1 to the Company's 1995 Annual Report on Form 20-F filed with the Commission and Exhibit 1.2 to the Company's 1997 Annual Report on Form 20-F filed with the Commission).** 2.23 -- Contract dated January 7, 1997 between the Company and Kvaerner Masa-Yards Inc. (incorporated by reference to Document No. 4 in the Company's Form 6-K filed with the Commission on February 10, 1997).*
33 36
EXHIBIT DESCRIPTION - ------- ----------- 2.24 -- Contract dated March 20, 1997 between the Company and Kvaerner Masa-Yards Inc. (incorporated by reference to Exhibit 2.22 to the Company's 1996 Annual Report on Form 20-F filed with the Commission).* 2.25 -- Contract dated March 5, 1998 between the Company and Kvaerner Masa-Yards Inc. (incorporated by reference to Exhibit 2.30 to the Company's 1997 Annual Report on Form 20-F filed with the Commission).* 2.26 -- Contract for Hull Number R-31 dated March 16, 1998 between the Company and Chantiers de l'Atlantique (incorporated by reference to Exhibit 2.31 to the Company's 1997 Annual Report on Form 20-F filed with the Commission).* 2.27 -- Contract for Hull Number S-31 dated March 16, 1998 between the Company and Chantiers de l'Atlantique (incorporated by reference to Exhibit 2.32 to the Company's 1997 Annual Report on Form 20-F filed with the Commission).* 2.28 -- Contract for Hull Number T-31 dated March 16, 1998 between the Company and Chantiers de l'Atlantique (incorporated by reference to Exhibit 2.33 to the Company's 1997 Annual Report on Form 20-F filed with the Commission).* 2.29 -- Contract for Hull Number U-31 dated March 16, 1998 between the Company and Chantiers de l'Atlantique (incorporated by reference to Exhibit 2.34 to the Company's 1997 Annual Report on Form 20-F filed with the Commission).* 2.30 -- Contract for Hull No. S-655 dated as of April 9, 1998 between the Company and Jos. L. Meyer GMBH & Co. and Addendum Nos. 1 and 2 thereto.** 2.31 -- Contract for Hull No. S-656 dated as of April 9, 1998 between the Company and Jos. L. Meyer GMBH & Co. and Addendum Nos. 1 and 2 thereto.** 2.32 -- Office Building Lease Agreement dated July 25, 1989 between Dade County and the Company, as amended (incorporated by reference to Exhibits 10.116 and 10.117 to the Company's Registration Statement on Form F-1, File No. 33-46157, filed with the Commission). 2.33 -- Office Building Lease Agreement dated January 18, 1994 between Dade County and the Company (incorporated by reference to Exhibit 2.13 to the Company's 1993 Annual Report on Form 20-F filed with the Commission). 23 -- Consent of PricewaterhouseCoopers LLP, independent certified public accountants.
- --------------- * Portions of this document have been omitted pursuant to an order by the Commission granting confidential treatment. Confidential portions of this document have been separately filed with the Commission. ** Portions of this document have been omitted pursuant to an application filed with the Commission for an order for confidential treatment. Confidential portions of this document have been separately filed with the Commission. 34 37 ROYAL CARIBBEAN CRUISES LTD. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Consolidated Financial Statements: Report of Independent Certified Public Accountants.......... F-2 Consolidated Statements of Operations for the Fiscal Years ended December 31, 1998, 1997 and 1996.................... F-3 Consolidated Balance Sheets as of December 31, 1998 and 1997...................................................... F-4 Consolidated Statements of Cash Flows for the Fiscal Years ended December 31, 1998, 1997 and 1996.................... F-5 Notes to the Consolidated Financial Statements.............. F-6
F-1 38 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Directors of Royal Caribbean Cruises Ltd.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and of cash flows present fairly, in all material respects, the financial position of Royal Caribbean Cruises Ltd. and its subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Miami, Florida February 5, 1999, except for the second paragraph of Note 13, which is as of February 24, 1999 F-2 39 ROYAL CARIBBEAN CRUISES LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, ------------------------------------ 1998 1997 1996 ---------- ---------- ---------- Revenues................................................... $2,636,291 $1,939,007 $1,357,325 ---------- ---------- ---------- Expenses Operating................................................ 1,593,728 1,219,268 854,478 Marketing, selling and administrative.................... 359,214 272,368 194,629 Depreciation and amortization............................ 194,614 143,816 91,185 ---------- ---------- ---------- 2,147,556 1,635,452 1,140,292 ---------- ---------- ---------- Operating Income........................................... 488,735 303,555 217,033 ---------- ---------- ---------- Other Income (Expense) Interest income.......................................... 15,912 4,666 2,278 Interest expense, net of capitalized interest............ (167,869) (128,531) (76,540) Other income (expense)................................... (6,008) 2,995 8,095 ---------- ---------- ---------- (157,965) (120,870) (66,167) ---------- ---------- ---------- Income Before Extraordinary Item........................... 330,700 182,685 150,866 Extraordinary Item......................................... -- (7,558) -- ---------- ---------- ---------- Net Income................................................. $ 330,700 $ 175,127 $ 150,866 ========== ========== ========== Basic Earnings Per Share Income before extraordinary item......................... $ 1.90 $ 1.22 $ 1.19 Extraordinary item....................................... -- (0.05) -- ---------- ---------- ---------- Net income............................................... $ 1.90 $ 1.17 $ 1.19 ========== ========== ========== Diluted Earnings Per Share Income before extraordinary item......................... $ 1.83 $ 1.20 $ 1.17 Extraordinary item....................................... -- (0.05) -- ---------- ---------- ---------- Net, income.............................................. $ 1.83 $ 1.15 $ 1.17 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-3 40 ROYAL CARIBBEAN CRUISES LTD. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AMOUNTS)
1998 1997 ---------- ---------- ASSETS Current Assets Cash and cash equivalents................................. $ 172,921 $ 110,793 Trade and other receivables, net.......................... 36,532 22,628 Inventories............................................... 31,834 37,274 Prepaid expenses.......................................... 45,044 40,450 ---------- ---------- Total current assets.............................. 286,331 211,145 Property and Equipment -- at cost less accumulated depreciation and amortization............................. 5,073,008 4,785,291 Goodwill -- less accumulated amortization of $107,365 and $96,952, respectively..................................... 309,801 320,214 Other Assets................................................ 16,936 23,098 ---------- ---------- $5,686,076 $5,339,748 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt......................... $ 127,919 $ 141,013 Accounts payable.......................................... 115,833 108,474 Accrued liabilities....................................... 243,477 210,454 Customer deposits......................................... 402,926 429,403 ---------- ---------- Total current liabilities......................... 890,155 889,344 Long-Term Debt.............................................. 2,341,163 2,431,683 Commitments and Contingencies (Note 13) Shareholders' Equity Preferred stock ($.01 par value; 20,000,000 shares authorized; cumulative convertible preferred shares issued and outstanding, 3,450,000 shares stated at liquidation value)..................................... 172,500 172,500 Common stock ($.01 par value; 500,000,000 shares authorized 168,945,222 and 162,128,974 shares issued)................................................ 1,690 1,621 Paid-in capital........................................... 1,361,796 1,188,304 Retained earnings......................................... 923,691 660,655 Treasury stock (354,492 and 314,148 common shares at cost).................................................. (4,919) (4,359) ---------- ---------- Total shareholders' equity........................ 2,454,758 2,018,721 ---------- ---------- $5,686,076 $5,339,748 ========== ==========
The accompanying notes are an integral part of these financial statements. F-4 41 ROYAL CARIBBEAN CRUISES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
1998 1997 1996 -------- ----------- -------- OPERATING ACTIVITIES: Net income.................................................. $330,770 $ 175,127 $150,866 Adjustments: Depreciation and amortization............................. 194,614 143,816 91,185 Gain on sale of assets.................................... (31,031) (4,000) (10,306) Write-down of vessel to fair value........................ 32,035 -- -- Extraordinary item........................................ -- 2,387 -- Changes in operating assets and liabilities: (Increase) decrease in trade and other receivables, net... (13,904) 145 (3,364) Decrease (increase) in inventories........................ 5,440 (1,885) (5,835) (Increase) in prepaid expenses............................ (3,600) (6,206) (7,065) Increase (decrease) in accounts payable................... 7,359 2,010 (2,437) Increase in accrued liabilities........................... 27,722 31,299 22,451 (Decrease) increase in customer deposits.................. (26,477) 89,896 61,408 Other, net................................................ 3,930 1,532 2,611 -------- ----------- -------- Net cash provided by operating activities......... 526,858 434,121 299,514 -------- ----------- -------- INVESTING ACTIVITIES: Purchase of property and equipment.......................... (556,953) (1,106,214) (722,389) Proceeds from sale of assets................................ 94,500 99,966 40,000 Acquisition of Celebrity Cruise Lines Inc., net of cash, cash equivalents and short-term investments acquired...... -- (152,423) -- Other, net.................................................. 247 (11,802) (6,039) -------- ----------- -------- Net cash used in investing activities............. (462,206) (1,170,473) (688,428) -------- ----------- -------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt.................... 296,141 695,189 452,668 Repayment of long-term debt................................. (395,144) (367,353) (22,025) Dividends................................................... (67,734) (49,984) (34,384) Proceeds from issuance of common stock...................... 165,532 364,631 -- Proceeds from issuance of preferred stock................... -- 167,030 -- Other, net.................................................. (1,319) (2,787) 1,818 -------- ----------- -------- Net cash (used in) provided by financing activities...................................... (2,524) 806,726 398,077 -------- ----------- -------- Net increase in cash and cash equivalents................... 62,128 70,374 9,163 Cash and cash equivalents, beginning of year................ 110,793 40,419 31,256 -------- ----------- -------- Cash and cash equivalents, end of year...................... $172,921 $ 110,793 $ 40,419 ======== =========== ======== SUPPLEMENTAL DISCLOSURE Interest paid, net of amount capitalized.................... $170,278 $ 127,457 $ 65,110 ======== =========== ======== Capital stock issued for acquisition........................ $ -- $ 270,000 $ -- ======== =========== ========
The accompanying notes are an integral part of these financial statements. F-5 42 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. GENERAL Description of Business Royal Caribbean Cruises Ltd., a Liberian corporation, and its subsidiaries (the "Company"), is a global cruise company. In July 1997, the Company acquired 100% of the outstanding stock of Celebrity Cruise Lines Inc. ("Celebrity") (See Note 4 -- Acquisition). The Company operates two cruise brands, Royal Caribbean International, which operates operates 12 cruise ships (one of which has been sold and will operate under a charter agreement until March 1999), and Celebrity Cruises, which operates five cruise ships. The Company's ships call on destinations in Alaska, the Bahamas, Bermuda, the Caribbean, Canada, Europe, Hawaii, Mexico, New England, the Panama Canal and Scandinavia. Basis for Preparation of Consolidated Financial Statements The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles and are presented in U.S. dollars. Management estimates are required for the preparation of financial statements in accordance with generally accepted accounting principles. Actual results could differ from these estimates. All significant intercompany accounts and transactions are eliminated in consolidation. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cruise Revenues and Expenses Deposits received on sales of passenger cruises are recorded as customer deposits and are recognized, together with revenues from shipboard activities and all associated direct costs of a voyage, upon completion of voyages with durations of 10 days or less and on a pro rata basis for voyages in excess of 10 days. Certain revenues and expenses for pro rata voyages are estimated. Cash and Cash Equivalents Cash and cash equivalents include cash and marketable securities with original maturities of less than 90 days. Inventories Inventories consist of provisions, supplies, fuel and gift shop merchandise carried at the lower of cost (weighted-average) or market. Property and Equipment Property and equipment are stated at cost. Significant vessel refurbishing costs are capitalized as additions to the vessel, while costs of repairs and maintenance are charged to expense as incurred. The Company capitalizes interest as part of the cost of construction. The Company reviews long-lived assets, identifiable intangibles and goodwill and reserves for impairment whenever events or changes in circumstances indicate, based on estimated future cash flows, the carrying amount of the assets will not be fully recoverable. Depreciation of property and equipment, which includes amortization of vessels under capital lease, is computed using the straight-line method over useful lives of primarily 30 years for vessels and three to 10 years for other property and equipment. (See Note 5 -- Property and Equipment.) Goodwill Goodwill represents the excess of cost over the fair value of net assets acquired and is being amortized over 40 years using the straight-line method. F-6 43 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Advertising Costs Advertising costs are expensed as incurred except those costs which result in tangible assets, such as brochures, are treated as prepaid supplies and charged to operations as consumed. Advertising expense consists of media advertising as well as brochure, production and direct mail costs. Media advertising was $76.7, $62.5 and $46.6 million, and brochure, production and direct mail costs were $63.2, $33.7 and $29.2 million for the years 1998, 1997 and 1996, respectively. Drydocking Drydocking costs are accrued evenly over the period to the next scheduled drydocking and are included in accrued liabilities. Financial Instruments The Company enters into various forward, option and swap contracts to limit its exposure to fluctuations in foreign currency exchange rates and oil prices, to modify its exposure to interest rate movements and to manage its interest costs. The differential in interest rates and oil prices to be paid or received under these agreements is recognized in income over the life of the contracts as part of interest expense and fuel expense, respectively. Foreign exchange forward and/or option contracts are revalued as of the balance sheet date based on forward and/or option contracts with comparable characteristics, and resulting gains and losses are recognized in income currently. Foreign Currency Transactions The majority of the Company's transactions are settled in U.S. dollars. Gains or losses resulting from transactions denominated in other currencies and remeasurements of other currencies are recognized in income currently. Earnings Per Share Basic earnings per share is computed by dividing net income, after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during each period. Stock Based Compensation The Company accounts for stock-based compensation using the intrinsic value method and discloses certain fair market value information with respect to its stock option activity in the notes to the financial statements. Segment Reporting The Company adopted Statement of Financial Accounting Standards No. 131 -- Disclosures About Segments of an Enterprise and Related Information for the year ended December 31, 1998. Although the Company operates two brands, Royal Caribbean International and Celebrity Cruises, the brands have been aggregated as a single operating segment based on the similarity of their economic characteristics as well as product and services provided. F-7 44 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information about geographic areas is shown in the table below. Revenues are attributed to geographic areas based on the source of the customer.
1998 1997 1996 ---- ---- ---- Revenues: United States............................................... 84% 85% 85% All Other Countries......................................... 16% 15% 15%
NOTE 3. STOCK SPLIT On June 23, 1998, the Company authorized a two-for-one split of its common stock effected in the form of a stock dividend. The additional shares were distributed on July 31, 1998 to shareholders of record on July 10, 1998. All share and per share information has been retroactively restated to reflect this stock split. NOTE 4. ACQUISITION In July 1997, the Company acquired all of the outstanding stock of Celebrity, a provider of cruises to the North American market. The purchase price was $515.0 million, payable in cash of $245.0 million and 14,896,552 shares of the Company's common stock. This acquisition has been accounted for under the purchase method, and the results of the operations of Celebrity have been included in the consolidated financial statements since July 1, 1997. The total cost of the acquisition was allocated to the tangible assets acquired and liabilities assumed based on their respective fair values. The following unaudited pro forma information presents a summary of consolidated results of operations of the Company, including Celebrity, as if the acquisition had occurred January 1, 1996 (in thousands, except per share amounts).
1997 1996 ---------- ---------- Revenue..................................................... $2,196,571 $1,769,216 Income before extraordinary item............................ $ 174,406 $ 136,498 Net income.................................................. $ 166,848 $ 136,498 Earnings per share Income before extraordinary item Basic.................................................. $ 1.10 $ 0.96 Diluted................................................ $ 1.10 $ 0.95 Net income Basic.................................................. $ 1.05 $ 0.96 Diluted................................................ $ 1.05 $ 0.95
The unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional depreciation expense as a result of a step-up in the basis of fixed assets and increased interest expense on acquisition debt. They do not purport to be indicative of the results which would actually have been achieved if this acquisition had been effected on the date indicated or of those results which may be obtained in the future. F-8 45 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands):
1998 1997 ---------- ---------- Land........................................................ $ 5,320 $ 5,320 Vessels..................................................... 4,457,070 4,201,443 Vessels under capital lease................................. 763,350 760,941 Vessels under construction.................................. 285,243 160,771 Other....................................................... 170,290 139,281 ---------- ---------- 5,681,273 5,267,756 Less -- accumulated depreciation and amortization........... (608,265) (482,465) ---------- ---------- $5,073,008 $4,785,291 ========== ==========
Vessels under construction includes progress payments for the construction of new vessels as well as planning, design, interest, commitment fees and other associated costs. The Company capitalized interest costs of $15.0, $15.8 and $15.9 million for the years 1998, 1997 and 1996, respectively. Accumulated amortization related to vessels under capital lease was $67.9 and $45.8 million at December 31, 1998 and 1997, respectively. In May 1998, the Company sold Song of America for $94.5 million and recognized a gain on the sale of $31.0 million which is included in Other income (expense). In the second quarter of 1998 the Company incurred a $32.0 million charge related to the write-down to fair market value of Viking Serenade. Based on the Company's strategic objective to maintain a modernized fleet, the unique circumstances of this vessel and indications of the current value of Viking Serenade, the Company recorded a write-down of the carrying value to its current estimated fair market value which is included in Other income (expense). The Company continues to operate and depreciate the vessel which is classified as part of Property and Equipment on the balance sheet. In October 1997, the Company sold Sun Viking for $30.0 million and recognized a gain on the sale of $4.0 million. In September 1997, the Company sold Meridian. The sale price was $62.1 million and there was no gain or loss recognized in the transaction. In October 1996, the Company sold Song of Norway for $40.0 million and recognized a gain on the sale of $10.3 million. The Company has recorded the gains in Other income (expense). F-9 46 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
1998 1997 ---------- ---------- $1 billion revolving credit facility, LIBOR plus 0.30% interest rate on balances outstanding, 0.15% facility fee, due 2003.................................................. $ -- $ 60,000 Senior Notes and Senior Debentures bearing interest at rates ranging from 6.75% to 8.25%, due 2002 through 2008, 2018 and 2027.................................................. 1,390,006 1,090,443 Unsecured fixed rate loan bearing interest at 8.0%, due 2006...................................................... 185,277 211,075 Fixed rate loans bearing interest at rates ranging from 6.7% to 8.0%, due through 2005, secured by certain Celebrity vessels................................................... 403,560 595,147 Variable rate loans bearing interest at 6.5% through Nov. 2001, LIBOR plus 0.45% through 2004, due through 2004, secured by certain Celebrity vessels...................... 30,978 142,670 Capital lease obligations, implicit interest rates ranging from 7.0% to 7.2%, due through 2011....................... 459,261 473,361 ---------- ---------- 2,469,082 2,572,696 Less -- current portion..................................... (127,919) (141,013) ---------- ---------- Long-term portion........................................... $2,341,163 $2,431,683 ========== ==========
Under the Company's $1.0 billion unsecured revolving credit facility (the "$1 Billion Revolving Credit Facility"), the contractual interest rate on balances outstanding varies with the Company's debt rating. In addition, the $1 Billion Revolving Credit Facility contains a competitive bid provision which may allow the Company to borrow funds at less than the contractual interest rate. In March 1998, the Company issued $150.0 million of 6.75% Senior Notes due 2008 and $150.0 million of 7.25% Senior Debentures due 2018. Net proceeds to the Company were approximately $296.1 million. In May 1997, the Company redeemed the remaining $104.5 million of 11 3/8% Senior Subordinated Notes and incurred an extraordinary charge of approximately $7.6 million, or $0.05 per share on the early extinguishment of debt. The Senior Notes and Senior Debentures are unsecured and are not redeemable prior to maturity. The Company entered into a $264.0 million capital lease to finance Splendour of the Seas and a $260.0 million capital lease to finance Legend of the Seas in 1996 and 1995, respectively. The capital leases each have semi-annual payments of $12.0 million over 15 years with final payments of $99.0 and $97.5 million, respectively. The Company's debt agreements contain covenants that require the Company, among other things, to maintain minimum liquidity amounts, net worth and fixed charge coverage ratios and limit debt to capital ratios. The Company is in compliance with all covenants as of December 31, 1998. Following is a schedule of principal repayments on long-term debt (in thousands):
YEAR - ---- 1999........................................................ $ 127,919 2000........................................................ 128,086 2001........................................................ 109,982 2002........................................................ 259,853 2003........................................................ 110,948 Thereafter.................................................. 1,732,294 ---------- $2,469,082 ==========
F-10 47 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 7. SHAREHOLDERS' EQUITY The following represents an analysis of the changes in shareholders' equity for the years 1998, 1997 and 1996 (in thousands):
PREFERRED COMMON PAID-IN RETAINED TREASURY STOCK STOCK CAPITAL EARNINGS STOCK TOTAL --------- ------ ---------- -------- -------- ---------- Balance, January 1, 1996................... $ -- $1,270 $ 548,339 $419,030 $(3,551) $ 965,088 Issuance under Employee Related Plans...... -- 6 3,606 -- (248) 3,364 Common stock dividends..................... -- -- -- (34,384) -- (34,384) Net Income................................. -- -- -- 150,866 -- 150,866 -------- ------ ---------- -------- ------- ---------- Balance, December 31, 1996................. -- 1,276 551,945 535,512 (3,799) 1,084,934 Issuance of Convertible Preferred Stock.... 172,500 -- (5,470) -- -- 167,030 Acquisition of Celebrity................... -- 148 269,852 -- -- 270,000 Issuance of Common Stock................... -- 187 364,444 -- -- 364,631 Issuance under Employee Related Plans...... -- 10 7,533 -- (560) 6,983 Preferred stock dividends.................. -- -- -- (9,201) -- (9,201) Common stock dividends..................... -- -- -- (40,783) -- (40,783) Net Income................................. -- -- -- 175,127 -- 175,127 -------- ------ ---------- -------- ------- ---------- Balance, December 31, 1997................. 172,500 1,621 1,188,304 660,655 (4,359) 2,018,721 Issuance of Common Stock................... -- 61 165,471 -- -- 165,532 Issuance under Employee Related Plans...... -- 8 8,021 -- (560) 7,469 Preferred stock dividends.................. -- -- -- (12,506) -- (12,506) Common stock dividends..................... -- -- -- (55,228) -- (55,228) Net Income................................. -- -- -- 330,770 -- 330,770 -------- ------ ---------- -------- ------- ---------- Balance, December 31, 1998................. $172,500 $1,690 $1,361,796 $923,691 $(4,919) $2,454,758 ======== ====== ========== ======== ======= ==========
In March 1998, the Company completed a public offering of 13,800,000 shares of common stock at a price of $28.25 per share. Of the total shares sold, 7,699,310 shares were sold by selling shareholders and the balance of 6,100,690 shares were sold by the Company. After deduction of the underwriting discount and other estimated expenses of the offering, net proceeds to the Company were approximately $165.5 million. In February 1997, the Company issued 3,450,000 shares of $3.625 Series A Convertible Preferred Stock (the "Convertible Preferred Stock"). The Convertible Preferred Stock has a liquidation preference of $50 per share and is convertible by the holder at any time into shares of common stock at a conversion price of $16.20 per share of common stock (equivalent to a conversion rate of 3.0864 shares of common stock for each share of Convertible Preferred Stock). The shares of Convertible Preferred Stock are redeemable, at the option of the Company, subsequent to February 16, 2000 at pre-established redemption prices. The Company's Employee Stock Purchase Plan facilitates the purchase by employees of up to 800,000 shares of common stock commencing January 1, 1994. The purchase price is derived from a formula based on 90% of the fair market value of the common stock during the quarterly purchase period, subject to certain restrictions. Shares of common stock of 35,546, 33,276 and 49,560 were issued under the Employee Stock Purchase Plan at an average price of $28.33, $16.48 and $11.50 during 1998, 1997 and 1996, respectively. F-11 48 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Under an executive compensation program approved in 1994, the Company will award to a trust 10,086 shares of common stock per quarter, up to a maximum of 806,880 shares. The Company issued 40,344 shares under the program during 1998, 1997 and 1996. The Company has an Employee Stock Option Plan and an Incentive Stock Option Plan which provide for awards to officers, directors and key employees of the Company up to an aggregate 6,703,000 shares and 2,700,000 shares of common stock, respectively. Options are granted at a price not less than the fair value of the shares on the date of grant and expire not later than 10 years after the date of grant. Options under the Employee Stock Option Plan generally become exercisable as to 40% of the amount granted two years after the grant date and 20% of the amount granted at the end of each of the three succeeding years. Options under the Incentive Stock Option Plan generally become exercisable as to 25% of the amount granted two years after the grant date and 25% of the amount granted at the end of each of the three succeeding years. Stock option activity and information about stock options are summarized in the following tables.
NUMBER OF AVERAGE STOCK OPTION ACTIVITY OPTIONS PRICE - --------------------- --------- ------- Balance at January 1, 1996.................................. 4,243,928 $ 9.74 Granted................................................... 1,706,094 $12.62 Exercised................................................. (425,778) $ 6.56 Canceled.................................................. (202,544) $12.48 --------- Balance at December 31, 1996................................ 5,321,700 $10.81 Granted................................................... 1,080,000 $19.49 Exercised................................................. (831,608) $ 7.87 Canceled.................................................. (95,776) $13.16 --------- Balance at December 31, 1997................................ 5,474,316 $12.92 Granted................................................... 2,013,000 $25.07 Exercised................................................. (652,474) $ 9.90 Canceled.................................................. (342,452) $16.74 --------- Balance at December 31, 1998................................ 6,492,390 $16.78 ========= Available for Future Grants, end of the Year................ 1,274,360
STOCK OPTIONS OUTSTANDING AS OF DECEMBER 31, 1998
OUTSTANDING EXERCISABLE -------------------------------------- -------------------------- AVERAGE REMAINING AVERAGE AVERAGE EXERCISE PRICE RANGE SHARES LIFE EXERCISE PRICE SHARES EXERCISE PRICE - -------------------- --------- --------- -------------- --------- -------------- $6.28 - $12.16......................... 1,641,816 4.4 years $ 9.00 1,188,494 $ 8.08 $13.16 - $13.78........................ 1,814,474 6.6 years $13.49 983,322 $13.49 $14.03 - $22.31........................ 1,860,100 8.9 years $20.45 81,930 $14.24 $25.59 - $32.84........................ 1,176,000 9.2 years $26.95 -- $ -- --------- --------- 6,492,390 7.2 years $16.78 2,253,746 $10.66 ========= =========
The Company uses the intrinsic value method of accounting for stock-based compensation. Had the fair value based method been used to account for such compensation, compensation costs would have reduced net income by $8.2, $4.0 and $2.6 million or $0.05, $0.03 and $0.02 per share in 1998, 1997 and 1996, respectively. The weighted-average fair value of options granted during 1998, 1997 and 1996 was $10.49, $7.80 and $5.42, respectively. Fair market value information for the Company's stock options for 1998, 1997 and 1996 was F-12 49 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) estimated using the Black-Scholes Model assuming an expected dividend rate of 1.5%, an estimated term of six years, a risk-free rate of approximately 5% in 1998 and 6% in 1997 and 1996 and an expected volatility of 35.0% in 1998 and 28.0% in 1997 and 1996. Effective January 1, 1998, the Company instituted a program to award stock to employees up to a maximum of 1,400,000 shares of common stock. Employees are awarded five shares of the Company's stock at the end of each year of employment over a 10-year period. Employees can elect to receive cash equal to the fair market value of the stock upon vesting. Compensation expense was $3.6 million in 1998 related to this program. NOTE 8. EARNINGS PER SHARE Below is a reconciliation between basic and diluted earnings per share before extraordinary item for the years ended December 31, 1998, 1997 and 1996 (in thousands, except per share amounts).
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------------------ 1998 1997 1996 -------------------------- -------------------------- -------------------------- PER PER PER INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE -------- ------- ----- -------- ------- ----- -------- ------- ----- Income before extraordinary item......... $330,770 $182,685 $150,866 Less: Preferred stock dividend........... (12,506) (10,765) -- -------- -------- -------- Basic earnings per share................. 318,264 167,577 $1.90 171,920 141,010 $1.22 150,866 127,295 $1.19 ===== ===== ===== Effect of Dilutive Securities Stock options.......................... 2,940 1,978 1,132 Convertible preferred stock............ 12,506 10,648 10,765 9,186 -- -- -------- ------- -------- ------- -------- ------- Diluted earnings per share............... $330,770 181,165 $1.83 $182,685 152,174 $1.20 $150,866 128,427 $1.17 ======== ======= ===== ======== ======= ===== ======== ======= =====
Extraordinary loss per share for the year ended 1997 for basic and diluted earnings per share was ($0.05). NOTE 9. RETIREMENT PLANS The Company maintains a defined contribution pension plan covering all of its full-time shoreside employees who have completed the minimum period of continuous service. Annual contributions to the plan are based on fixed percentages of participants' salaries and years of service, not to exceed certain maximums, as defined in the plan. Pension cost was $6.9, $4.9 and $4.3 million for the years 1998, 1997 and 1996, respectively. NOTE 10. OPERATING LEASES The Company is obligated under noncancelable operating leases for various facilities, primarily office and warehouse space. As of December 31, 1998, future minimum lease payments under noncancelable operating leases were as follows (in thousands):
YEAR - ---- 1999........................................................ $ 5,134 2000........................................................ 4,444 2001........................................................ 4,205 2002........................................................ 4,110 2003........................................................ 4,023 Thereafter.................................................. 26,017 ------- $47,933 =======
F-13 50 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Total rent expense for all operating leases amounted to $6.9, $5.7 and $4.9 million for the years 1998, 1997 and 1996, respectively. NOTE 11. INCOME TAXES The Company and the majority of its subsidiaries are not subject to U.S. corporate income tax on income generated from the international operation of ships pursuant to Section 883 of the Internal Revenue Code, provided that they meet certain tests related to country of incorporation and composition of shareholders. The Company believes that it and a majority of its subsidiaries meet these tests. Income tax expense related to the Company's remaining subsidiaries is not significant. NOTE 12. FINANCIAL INSTRUMENTS The estimated fair values of the Company's financial instruments are as follows (in thousands):
1998 1997 ------------------------- ------------------------- CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE ----------- ----------- ----------- ----------- Cash and Cash Equivalents........... $ 172,921 $ 172,921 $ 110,793 $ 110,793 Long-Term Debt (including current portion of long-term debt)........ (2,469,082) (2,564,985) (2,572,696) (2,668,447) Interest Rate Swap Agreements in a net receivable position...... 2,370 48,558 1,567 21,372
The carrying amounts shown are the amounts reported in the consolidated balance sheets. The reported fair values are based on a variety of factors and assumptions. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of December 31, 1998 or 1997 or that will be realized in the future and do not include expenses that could be incurred in an actual sale or settlement. The following methods were used to estimate the fair values of the Company's financial instruments, none of which are held for trading or speculative purposes: Cash and Cash Equivalents The carrying amount approximates fair value because of the short maturity of those instruments. Long-Term Debt The fair values of the $1 Billion Revolving Credit Facility, the capital leases, the secured fixed and variable rate loans and the unsecured fixed rate loan were estimated based on the market rates available to the Company for similar debt with the same remaining maturities. The fair values of the Senior Notes and Senior Debentures were estimated by obtaining quoted market prices. Interest Rate Swap Agreements The fair value of interest rate swap agreements was estimated based on quoted market prices for similar or identical financial instruments to those held by the Company. The Company's exposure to market risk for changes in interest rates relates to its long-term debt obligations. Market risk associated with the Company's long-term debt is the potential increase in fair value resulting from a decrease in interest rates. The Company uses interest rate swaps to modify its exposure to interest rate movements and manage its interest expense. As of December 31, 1998, the Company had agreements in effect which exchanged floating interest rates for fixed interest rates in a notional amount of $100.0 million maturing in 1999 and fixed interest rates for floating interest rates in a notional amount of $668.8 million maturing in 2002 through 2008. F-14 51 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has exposure under these interest rate swap agreements for the cost of replacing the contracts in the event of nonperformance by the counterparties, all of which are currently the Company's lending banks. To minimize that risk, the Company limits its exposure to any individual counterparty and selects counterparties with credit risks acceptable to the Company. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 -- Accounting for Derivative Instruments and Hedging Activities ("FAS 133") which requires all derivative instruments to be carried at fair market value on the balance sheet with changes in fair value recognized in income in the period they occur. FAS 133 is effective for fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company). The Company has not yet determined the impact that the adoption of FAS 133 will have on its earnings or statement of financial position. NOTE 13. COMMITMENTS AND CONTINGENCIES The Company has nine ships on order. Three are Eagle-class vessels designated for the Royal Caribbean International fleet, the first of which, Voyager of the Seas is scheduled for delivery in the fourth quarter of 1999, followed by two sister vessels scheduled for delivery in the third quarter of 2000 and second quarter of 2002. The Company also has two Vantage-class vessel designated for the Royal Caribbean International fleet scheduled for delivery in the first quarter of 2001 and second quarter of 2002 and four Millennium-class vessels designated for the Celebrity Cruises fleet, scheduled for delivery in the second quarter of 2000, first quarter of 2001, third quarter of 2001 and second quarter of 2002. The aggregate contract price of the nine ships, which excludes capitalized interest and other ancillary costs, is approximately $3.6 billion of which the Company deposited $144.6 million during 1998 and $74.3 million during 1997. Additional deposits are due prior to the dates of delivery of $237.4 million in 1999, $88.1 million in 2000 and $25.0 million in 2001. In June 1998, the Company entered into a plea agreement with the U.S. Department of Justice settling previously filed charges contained in two indictments pending in the U.S. District of Puerto Rico and the Southern District of Florida, respectively. The indictments, which pertained to events that occurred in 1994 and prior years, contained a total of 11 felony counts related to improper disposal of oil-contaminated bilge water and attempts to conceal such activities from the U.S. Coast Guard. Under the plea agreement, the Company pled guilty to eight of the 11 counts and agreed to pay $9.0 million. The U.S. government is continuing its investigation of the Company's bilge water and other waste disposal practices through federal grand jury proceedings in Anchorage, Alaska, Los Angeles, California, Miami, Florida and New York, New York. In February 1999, the Company was indicted by the grand jury in Los Angeles on charges that it presented false oil record books for one of its vessels to the U.S. Coast Guard three times during 1994. Each of the three counts in the indictment carries a maximum fine of $500,000, subject to increase under certain circumstances. Although the Company is not able at this time to estimate the timing or impact of these continuing investigations, the Company may be subject to additional charges for violations of U.S. law. Beginning in December 1995, several purported class action suits were filed alleging that Royal Caribbean International and Celebrity misrepresented to its guests the amount of its port charge expenses. The suits seek declaratory relief and damages in an unspecified amount. Beginning in August 1996, several purported class action suits were filed alleging that Royal Caribbean International and Celebrity should have paid commissions to travel agents on port charges included in the price of cruise fares. The suit seeks damages in an unspecified amount. Similar suits are pending against other companies in the cruise industry. In February 1997, Royal Caribbean International, Celebrity and certain other cruise lines entered into an Assurance of Voluntary Compliance with the Florida Attorney General's office. Under the Assurance of Voluntary Compliance, Royal Caribbean International and Celebrity agreed to include all components of the cruise ticket price, other than governmental taxes and fees, in the advertised price. In January 1999, Royal Caribbean International entered into an agreement to settle certain of the class-action suits filed on behalf of its passengers. Celebrity entered into a similar settlement agreement. Under the terms of the settlement F-15 52 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) agreements, each of Royal Caribbean International and Celebrity will issue travel vouchers having a face amounts ranging from $8 to $30, in the case of Royal Caribbean International, and from $20 to $45 in the case of Celebrity, to passengers who are U.S. residents and who sailed on Royal Caribbean International or Celebrity, as the case may be, between April 1992 and April 1997. Such vouchers may be applied to reduce the cruise fare of a future cruise on Royal Caribbean International or Celebrity, as the case may be, and are valid for up to three years from the date of issuance. The settlements have received preliminary court approval but are subject to final court approval. Since the amount and timing of the vouchers to be redeemed and the effect of redemption of revenues is not reasonable determinable, the Company has not established a liability for the vouchers and will account for their redemption as a reduction of future revenues. In December 1998, a Florida state court judge dismissed one of the class-action suits filed on behalf of travel agents for failure to state a claim under Florida law. The plaintiff in that case has filed an appeal of that decision. The Company is not able at this time to estimate the timing or impact of the travel agent proceedings on the Company. The Company is routinely involved in other claims typical to the cruise industry. The majority of these claims are covered by insurance. Management believes the outcome of such other claims which are not covered by insurance would not have a material adverse effect upon the Company's financial condition or results of operations. NOTE 14. QUARTERLY DATA (UNAUDITED)
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER ------------------- ------------------- ------------------- ------------------- 1998 1997 1998 1997 1998 1997 1998 1997 -------- -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues.............................. $659,777 $394,590 $656,456 $403,467 $744,910 $612,542 $575,148 $528,408 Operating Income...................... 119,461 60,637 121,533 67,397 183,592 116,911 64,149 58,610 Income Before Extraordinary Item...... 77,537 38,481 79,770 45,918 150,038 75,931 23,425 22,355 Extraordinary Item.................... -- -- -- (7,558) -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- Net Income............................ $ 77,537 $ 38,481 $ 79,770 $ 38,360 $150,038 $ 75,931 $ 23,425 $ 22,355 ======== ======== ======== ======== ======== ======== ======== ======== Basic Earnings Per Share(1): Income before extraordinary item.... $ 0.45 $ 0.29 $ 0.45 $ 0.33 $ 0.87 $ 0.50 $ 0.12 $ 0.12 Extraordinary item.................. -- -- -- (0.05) -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- Net income.......................... $ 0.45 $ 0.29 $ 0.45 $ 0.28 $ 0.87 $ 0.50 $ 0.12 $ 0.12 ======== ======== ======== ======== ======== ======== ======== ======== Diluted Earnings Per Share(1): Income before extraordinary item.... $ 0.44 $ 0.29 $ 0.44 $ 0.32 $ 0.82 $ 0.48 $ 0.12 $ 0.12 Extraordinary item.................. -- -- -- (0.05) -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- Net income.......................... $ 0.44 $ 0.29 $ 0.44 $ 0.27 $ 0.82 $ 0.48 $ 0.12 $ 0.12 ======== ======== ======== ======== ======== ======== ======== ======== Dividends Declared Per Share.......... $ 0.08 $ 0.07 $ 0.08 $ 0.07 $ 0.09 $ 0.08 $ 0.09 $ 0.08 ======== ======== ======== ======== ======== ======== ======== ========
- --------------- (1) Earnings per share is computed after giving effect to the two-for-one stock split effective July 31, 1998. Prior year amounts have been restated. F-16 EX-1.1 2 CONTRACT FOR HULL #R-31 1 EXHIBIT 1.1 AMENDMENT NO. 1 TO CONTRACT FOR HULL NUMBER R-31 DATED 16 MARCH 1998 Whereas, Royal Caribbean Cruises Ltd. (the "Shipowner") and Chantiers de l'Atlantique (the "Builder") have entered into a Contract for Hull Number R-31 dated 16 March 1998 (the "Contract") pursuant to which the Builder has agreed to construct the vessel having Builder's hull number R-31 (the "Vessel"); and Whereas, the Shipowner and the Builder wish to amend the Contract to provide that the Vessel shall be equipped with a different type of machinery and contain a greater number of passenger cabins; Now, therefore, in consideration of the premises, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Article I.1 of the Contract is hereby amended by deleting the phrase "revised 11 March 1998" from the third and fourth lines thereof and inserting "revised 20 March 1998" in its place. Article I.1 of the Contract is hereby further amended by deleting the phrase "revised 13 March 1998" from the fifth and sixth lines thereof and inserting the phrase "revised 20 March 1998" in its place. 2. Article I.3.1 of the Contract is hereby amended by (i) increasing the Vessel's life saving equipment capacity (total) from 3,350 persons to 3,450 persons, (ii) increasing the Vessel's number of passenger cabins from 975 cabins to 1,025 cabins, and (iii) increasing the Vessel's number of crew cabins from 502 cabins to 503 cabins. 3. Article I.3.2 of the Contract is hereby amended in its entirety to read as follows: 3.2 MACHINERY The machinery to consist of two (2) gas turbine generator sets and one (1) steam turbine generator set (COGES type), having a total maximum continuous rating of 57,800 kW electric power under the reference conditions set forth in the Specifications, to supply power [PORTIONS OF THIS DOCUMENT HAVE BEEN 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.] 2 to two (2) electric propulsion motors and the remaining electric systems of the VESSEL as stipulated in the Specifications. 4. Article I.6 of the Contract is hereby amended in its entirety to read as follows: 6. FUEL CONSUMPTION The fuel consumption of each of the VESSEL's two (2) gas turbine generator sets shall be determined on the test bed under conditions stipulated in the Specifications, and shall not exceed 242.2 grams per kW per hour when developing 100% of Maximum Continuous Rating. 5. Article IX.1 of the Contract is hereby amended by increasing the Contract Price by Six Million Two Hundred Seventy Thousand United States Dollars (U.S. $6,270,000), so that the Contract Price is now U.S. $351,270,000. In connection with the foregoing increase in the Contract Price, the Shipowner shall pay the Builder U.S. $313,500 within three Business Days of the date of this Amendment as a part of the 1st installment referred to in Article X.1 of the Contract. 6. Article IX.2.3 of the Contract is hereby amended in its entirety to read as follows: 2.3 EXCESSIVE FUEL CONSUMPTION 2.3.1 The BUILDER guarantees that the fuel consumption of each of the two (2) gas turbine generator sets at the test bed runs as stipulated in Article I.6 shall not exceed 242.2 grams per kW per hour. The Contract Price shall not be affected or changed if the actual fuel consumption of both generators is not greater than [*] above 242.2 grams per kW per hour. 2.3.2 If the actual fuel consumption of either generator is over [*] greater than 242.2 grams per kW per hour, then, as sole compensation, the Contract Price shall be reduced by the sum of [*] for each full [*] increase in fuel consumption above said [*] (fractions of a percent to be prorated) for each generator. - ------------- * TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 2 3 2.3.3 If such actual fuel consumption of either generator is more than [*] greater than 242.2 grams per kW per hour, then the SHIPOWNER may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract in accordance with the provisions of and with the consequences provided for in Article XII.2 hereof. 7. Except as set forth herein, the Contract remains in full force and effect in accordance with its terms. In witness whereof, the parties have caused this Amendment No. 1 to be duly executed by their authorized representatives on this 24th day of April, 1998. FOR THE SHIPOWNER FOR THE BUILDER Royal Caribbean Cruises Ltd. Chantiers de l'Atlantique By: /s/ Richard D. Fain By: /s/ Patrick Boissier --------------------------- ------------------------ Richard D. Fain Patrick Boissier Chairman & CEO Chairman & CEO - ------------ * TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 3 EX-1.2 3 CONTRACT FOR HULL #R-31 1 EXHIBIT 1.2 AMENDMENT NO. 1 TO CONTRACT FOR HULL NUMBER S-31 DATED 16 MARCH 1998 Whereas, Royal Caribbean Cruises Ltd. (the "Shipowner") and Chantiers de l'Atlantique (the "Builder") have entered into a Contract for Hull Number S-31 dated 16 March 1998 (the "Contract") pursuant to which the Builder has agreed to construct the vessel having Builder's hull number S-31 (the "Vessel"); and Whereas, the Shipowner and the Builder wish to amend the Contract to provide that the Vessel shall be equipped with a different type of machinery and contain a greater number of passenger cabins; Now, therefore, in consideration of the premises, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Article I.1 of the Contract is hereby amended by deleting the phrase "revised 11 March 1998" from the third and fourth lines thereof and inserting "revised 20 March 1998" in its place. Article I.1 of the Contract is hereby further amended by deleting the phrase "revised 13 March 1998" from the fifth and sixth lines thereof and inserting the phrase "revised 20 March 1998" in its place. 2. Article I.3.1 of the Contract is hereby amended by (i) increasing the Vessel's life saving equipment capacity (total) from 3,350 persons to 3,450 persons, (ii) increasing the Vessel's number of passenger cabins from 975 cabins to 1,025 cabins, and (iii) increasing the Vessel's number of crew cabins from 502 cabins to 503 cabins. 3. Article I.3.2 of the Contract is hereby amended in its entirety to read as follows: 3.2 MACHINERY The machinery to consist of two (2) gas turbine generator sets and one (1) steam turbine generator set (COGES type), having a total maximum continuous rating of 57,800 kW electric power under the reference conditions set forth in the Specifications, to supply power [PORTIONS OF THIS DOCUMENT HAVE BEEN 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.] 2 to two (2) electric propulsion motors and the remaining electric systems of the VESSEL as stipulated in the Specifications. 4. Article I.6 of the Contract is hereby amended in its entirety to read as follows: 6. FUEL CONSUMPTION The fuel consumption of each of the VESSEL's two (2) gas turbine generator sets shall be determined on the test bed under conditions stipulated in the Specifications, and shall not exceed 242.2 grams per kW per hour when developing 100% of Maximum Continuous Rating. 5. Article IX.1 of the Contract is hereby amended by increasing the Contract Price by Six Million Two Hundred Seventy Thousand United States Dollars (U.S. $6,270,000), so that the Contract Price is now U.S. $346,270,000. In connection with the foregoing increase in the Contract Price, the Shipowner shall pay the Builder U.S. $313,500 within three Business Days of the date of this Amendment as a part of the 1st installment referred to in Article X.1 of the Contract. 6. Article IX.2.3 of the Contract is hereby amended in its entirety to read as follows: 2.3 EXCESSIVE FUEL CONSUMPTION 2.3.1 The BUILDER guarantees that the fuel consumption of each of the two (2) gas turbine generator sets at the test bed runs as stipulated in Article I.6 shall not exceed 242.2 grams per kW per hour. The Contract Price shall not be affected or changed if the actual fuel consumption of both generators is not greater than [*] above 242.2 grams per kW per hour. 2.3.2 If the actual fuel consumption of either generator is over [*] greater than 242.2 grams per kW per hour, then, as sole compensation, the Contract Price shall be reduced by the sum of [*] for each full [*] increase in fuel consumption above said [*] (fractions of a percent to be prorated) for each generator. - ------------ * TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 2 3 2.3.3 If such actual fuel consumption of either generator is more than [*] greater than 242.2 grams per kW per hour, then the SHIPOWNER may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract in accordance with the provisions of and with the consequences provided for in Article XII.2 hereof. 7. Except as set forth herein, the Contract remains in full force and effect in accordance with its terms. In witness whereof, the parties have caused this Amendment No. 1 to be duly executed by their authorized representatives on this 24th day of April, 1998. FOR THE SHIPOWNER FOR THE BUILDER Royal Caribbean Cruises Ltd. Chantiers de l'Atlantique By: /s/ Richard D. Fain By: /s/ Patrick Boissier --------------------------- ------------------------ Richard D. Fain Patrick Boissier Chairman & CEO Chairman & CEO - ------------ * TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 3 EX-1.3 4 LEASE AGREEMENT 1 EXHIBIT 1.3 Dated 17 September 1998 (1) GIE CRUISE VISION ONE (2) ROYAL CARIBBEAN CRUISES LTD. - -------------------------------------------------------------------------------- Amendment No. 3 to a Lease Agreement ("credit-bail") dated 3 March 1993 relating to one passenger cruise vessel, yard number A31 - -------------------------------------------------------------------------------- 2 -2- AMENDMENT NO. 3 to the LEASE AGREEMENT ("CREDIT-BAIL") dated March 3, 1993 relating to one passenger cruise vessel yard number A31 BETWEEN (1) G.I.E. CRUISE VISION ONE, a French "Groupement d'Interet Economique" governed by Ordinance No. 67-821 of 23 September 1967, having its registered office at Tour Societe Generale, 17 cours Valmy - 92800 PUTEAUX, France (the "Owner"), represented by its "administateur", AIR-BAIL, in turn represented by Diony LEBOT, being duly authorized, and (2) ROYAL CARIBBEAN CRUISES LTD., a company incorporated in Liberia and having its registered office at 80 Broad Street, Monrovia, Liberia (the "Charterer"), represented by Kenneth D. DUBBIN an officer being duly authorized, WHEREAS A) By a lease agreement ("Credit-Bail") dated 3 March 1993 as complemented by Amendment No. 1 dated 12 July 1994 and Amendment No. 2 dated 20 February 1996 (together the "Lease Agreement") the Owner agreed to bareboat charter by way of credit-bail to the Charterer one passenger cruise vessel more particularly described therein (the "Vessel"). B) For the acquisition or continuing ownership of the Vessel, the Owner has been granted financial facilities by the Lenders (as defined in the Lease Agreement). It is a condition of the documentation relating to the said financial facilities that no amendment or modification to the Lease Agreement may be made without the consent of the Lenders. C) The parties wish to amend the Lease Agreement as hereafter appears. NOW, THEREFORE, IT IS AGREED AS FOLLOWS : 1. Expressions defined in the Lease Agreement shall have the same meaning when used in this Amendment No. 3. 2. The Owner declares and warrants that it has received the consent of the Lenders for the execution by it of this Amendment No. 3. 3. Clause 9.6 of the Lease Agreement is hereby amended in its entirety to read as follows : " The Charterer may, by not more than six months', nor less than one month's, notice by registered letter, return receipt requested, or by letter delivered by "huissier" to the Owner, elect to purchase the Vessel on the eighteenth Rental Payment Date, or on any subsequent Rental Payment Date, for a price equal to the aggregate of (i) the Purchase Option Price and (ii) all other sums then due and unpaid under this Agreement, excluding the Rental Payment on the date of payment of the Purchase Option Price, which such Rental Payment shall not be due and payable as a result of the purchase of the Vessel by the Charterer, (and, for this purpose, the amount then subject to the Pledge shall be set off against such obligation of the Charterer to pay the Purchase Option Price), payable in cash (OPTION D'ACHAT ANTICIPEE), under the same conditions (except for the price) as stated in clause 9.2. Any election pursuant to this Clause 9.6 shall be irrevocable and the amount referred to above , less an amount equal to the amount then subject to the Pledge, shall be paid by the Charterer into an account of the Owner specified by the Owner, prior to the sale of the Vessel being effected. Moreover, if the Charterer elects to purchase the Vessel pursuant to this Clause 9.6 on or before the thirtieth Rental Payment Date, the Charterer shall be required to purchase the cruise vessel, yard number B31, 3 -3- chartered by GIE CRUISE VISION TWO under a lease agreement dated 3 March 1993 completed in particular by an Amendment No. 4 of even date herewith (the "Lease B31"). Such purchase shall be completed under the provisions of clause 9.6 of Lease B31, on the first rental payment date (as defined in the Lease B31) following the date of receipt of the notice by the Owner defined hereabove in this paragraph." 4. The first sentence of Clause 9.7 (I) (a) of the Lease Agreement is hereby amended to read as follows : " In the event that any of the Early Termination Events described in paragraph ( c ) occurs after Delivery, the Owner shall, whilst such Early Termination Event is continuing, be entitled, by notice in writing to the Charterer given not more than 30 days following the receipt by the Owner of written notice from the Charterer stating that such event has occured (and, for the avoidance of doubt, failure by the Owner to give such notice within such period shall result in the Owner having no further rights under this Clause in relation to the Early Termination Event in question), to terminate the Lease on the ninetieth (90th) day following the date of the Owner's notice whereupon the Charterer shall be obliged to pay (i) the relevant Early Termination Amount set out in column D or E of Appendix B together (if the Early Termination Amount does not become due on a Rental Payment Date) with accrued interest thereon, , (it being agreed however that no interest shall accrue on that portion of the Early Termination Amount as equals the amount of money then subject to the Pledge) from the Rental Payment Date immediately preceding the date on which the Early Termination Amount becomes due to the date of payment calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date at a rate equal to 8.442 % per annum (during the first 102 calendar months after the Delivery Date) or 7.82 % per annum thereafter and (ii) if the Early Termination Amount is due on a Rental Payment Date, the relevant Rental Payment which falls due on that Rental Payment Date and (iii) all other sums then due and unpaid under this Agreement and (iv) (if the Early Termination Amount is not due on a Rental Payment Date) such additional amounts as may be necessary to compensate the Owner for any costs, losses or expenses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the costs to the Lenders of obtaining such funds until the next scheduled Rental Payment Date (and, for this purpose, an amount equal to the Instalments then subject to the Pledge shall be set off against the Early Termination Amount)." 5. Clause 9.7 (II) of the Lease Agreement is hereby amended in its entirety to read as follows : "In the event that, following Delivery there is a real risk that access of the Vessel to U.S. ports will be denied or restricted (to an extent which the Charterer, acting reasonably, deems material) by the enactment and implementation of U.S. federal or state law of general application to vessels or classes of vessels built, owned or controlled in France and, in the reasonable opinion of the Charterer, access of the Vessel to the U.S. ports would not or could not be fully restored by the fulfilment by the Shipyard of the provisions of Article XXII of the Shipbuilding Contract, the Charterer shall be entitled (but not bound), at any time thereafter but within eight and a half years after the Delivery Date if and whilst such threat continues, by not less than fifteen (15) days' prior written notice (which shall be revocable at any time prior to the fifth day before the date stated therein on which the Vessel is to be purchased) to the Owner, to purchase the Veseel upon the date specified in such notice in the manner provided in Clause 9.6 save and except that the price payable by the Charterer to the Owner for the Vessel on such date shall be a price equal to the aggregate of (i) the relevant Early Termination Amount specified in column F or G of Appendix B and (if the Vessel is not purchased on a Rental Payment Date) accrued interest thereon at the rate specified in Clause 9.7 (I)(a) from the Rental Payment Date immediately preceding the date on which the Vessel is purchased to the date of payment calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date (it being agreed however that no interest shall accrue on that portion of the Early Termination Amount as equals the amount of money then subject to the Pledge) and (ii) if the Vessel is purchased on a Rental Payment Date, the relevant Rental Payment which falls due on that Rental Payment Date and (iii) all other sums then due and unpaid under this Agreement and (iv) if the Vessel is not purchased on a Rental Payment Date such additional amounts as may be necessary to compensate the Owner for any costs, losses or expenses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the costs to the Lenders of obtaining such funds until the next scheduled Rental Payment Date (and for this purpose, an amount equal to the Instalments then subject to the Pledge shall be set off against the Early Termination Amount)." 4 -4- 6. The first sentence of Clause 11.5 (a) of the Lease Agreement is hereby amended to read as follows : "Upon termination pursuant to Clause 11.4, the Charterer shall pay to the Owner (i) the Termination Indemnity, together (if the Termination Indemnity does not fall due on a Rental Payment Date) with accrued interest thereon (it being agreed however that no interest shall accrue on that portion of the Termination Indemnity as equals the amount of money then subject to the Pledge) from the preceding Rental Payment Date to the date of payment calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date at a rate equal to 8.442 % per annum (during the first 102 calendar months after the Delivery Date) or 7.82 % per annum thereafter, (ii) if the Termination Indemnity is due on a Rental Payment Date, the relevant Rental Payment which falls due on that Rental Payment Date (iii) any other amounts which have then become due under this Agreement and have not already been paid and (iv) (if the Termination Indemnity does not fall due on a Rental Payment Date) such additional amounts as may be necessary to compensate the Owner for any costs, or losses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the cost to the Lenders of obtaining such funds until the next Rental Payment Date." 7. The first sentence of Clause 14.6 of the Lease Agreement is hereby amended to read as follows : "If the Lease shall terminate pursuant to Clause 14.4, the Charterer shall forthwith pay to the Owner (i) the Early Termination Amount set out in column D or E of Appendix B together (if the Early Termination Amount does not fall due on a Rental Payment Date) with accrued interest thereon (it being agreed however that no interest shall accrue on that portion of the Early Termination Amount as equals the amount of money then subject to the Pledge) from the preceding Rental Payment Date to the date of payment, calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date at a rate equal to 8.442 % per annum (during the first 102 calendar months after the Delivery Date) or 7.82 % per annum thereafter, (ii) if the Early Termination Amount is due on a Rental Payment Date, the relevant Rental Payment which falls due on that Rental Payment Date, (iii) any other amounts which have then become due under this Agreement and have not already been paid and (iv) if the Early Termination Amount does not fall due on a Rental Payment Date such additional amounts as may be necessary to compensate the Owner for any costs, losses or expenses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the cost to the Lenders of obtaining such funds until the next scheduled Rental Payment Date." 8. The third sentence of clause 18.2 of the Lease Agreement is hereby amended to read as follows : "In the event of termination after Delivery, the Charterer shall pay to the Owner in accordance with Clause 18.4 (i) all amounts due under this Agreement as shall be payable and remain outstanding, (ii) if the Termination Indemnity becomes due on a Rental Payment Date the Rental Payment payable on that date, (iii) the Termination Indemnity together (if the Termination Indemnity does not become due on a Rental Payment Date) with accrued interest thereon (it being agreed however that no interest shall accrue on that portion of the Termination Indemnity as equals the money then subject to the Pledge) from the preceding Rental Payment Date to the date of payment calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date at a rate equal to 8.442 % per annum (during the first 102 calendar months after the Delivery Date) or 7.82 % per annum thereafter (provided always that the amount equal to the Instalments which is then subject to the Pledge shall be set off against and go to reduce the Charterer's obligation to pay the Termination Indemnity), (iv) if the Termination Indemnity does not become due on a Rental Payment Date, such additional amounts as may be necessary to compensate the Owner for any costs, losses or expenses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the costs to the Lenders of obtaining such funds until the next scheduled Rental Payment Date, and (v) such additional amounts as may be necessary to compensate the Owner for any costs resulting from repossessing the Vessel. 5 -5- 9. The terms of Clause 21 of the Lease Agreement shall apply to the fees described in a letter of even date herewith from the Charterer to the Owner. 10. The Owners' address stated in Clause 22 of the Lease Agreement shall be replaced by the following : GIE CRUISE VISION ONE c/o Societe Generale (FINT/STR/Ing) Tour Societe Generale 92 972 PARIS - LA DEFENSE CEDEX Fax : 33 1 42.14.01.63 11. Exhibits A and B of the Lease Agreement are hereby amended in their entirety to read as set forth in Exhibits A and B hereto. 12. The Charterer confirms to the Owner, for its benefit and for the benefit of the Lenders, that all the terms of the Delegation signed by the Charterer on the 28 April 1995 shall apply mutatis mutandis to the sums due by the Charterer to the Owner under the provisions of this Amendment No. 3. 13. This Amendment No. 3 takes effect as from 28th April 1998 (not included). 14. All the terms and conditions of the Lease Agreement not amended by this Amendment No. 3 shall remain unaltered in full force and effect and shall apply to this Amendment No. 3 whenever consistent. Signed on September 17, 1998 in three originals. GIE CRUISE VISION ONE ROYAL CARIBBEAN CRUISES LTD. by : AIR BAIL (Administrateur) by : /s/ DIONY LEBOT by: /s/ KENNETH D. DUBBIN ------------------------------ ----------------------- DIONY LEBOT KENNETH D. DUBBIN (Vice-President and Treasurer): 6 CRUISE VISION ONE EXHIBIT A : RENTAL PAYMENTS ------------------------------------------------------------------------- AMOUNT OF RENTAL PAYMENT RENTAL PAYMENT DATE (A) (in % of Owner's No. Date Purchase Price) ------------------------------------------------------------------------- 1 28-avr-95 3,8800% 2 28-oct-95 3,8800% 3 28-avr-96 3,8800% 4 28-oct-96 3,8800% 5 28-avr-97 3,8800% 6 28-oct-97 3,8800% 7 28-avr-98 3,8800% 8 28-oct-98 3,6922% 9 28-avr-99 3,6922% 10 28-oct-99 3,6922% 11 28-avr-00 3,6922% 12 28-oct-00 3,6922% 13 28-avr-01 3,6922% 14 28-oct-01 3,6922% 15 28-avr-02 3,6922% 16 28-oct-02 3,6922% 17 28-avr-03 3,6922% 18 28-oct-03 3,6922% 19 28-avr-04 3,6922% 20 28-oct-04 3,6922% 21 28-avr-05 3,6922% 22 28-oct-05 3,6922% 23 28-avr-06 3,6922% 24 28-oct-06 3,6922% 25 28-avr-07 3,6922% 26 28-oct-07 3,6922% 27 28-avr-08 3,6922% 28 28-oct-08 3,6922% 29 28-avr-09 3,6922% 30 28-oct-09 3,6922% 31 28-avr-10 7,4692% 32 28-oct-10 7,4692% 33 28-avr-11 7,4692% 34 28-oct-11 7,4692% 35 28-avr-12 7,4692% 36 28-oct-12 7,4692% 37 28-avr-13 7,4692% 38 28-oct-13 7,4692% 39 28-avr-14 7,4692% 40 28-oct-14 7,4692% ------------------------------------------------------------- 7 CRUISE VISION ONE EXHIBIT B : TERMINATION INDEMNITY, PURCHASE OPTION PRICE, EARLY TERMINATION PAYMENT
--------------------------------------------------------------------- WITH NO TRANSFER WITH TRANSFER WITH NO TRANSFER WITH TRANSFER OF EXPORT CREDIT OF EXPORT OF EXPORT CREDIT OF EXPORT CREDIT CREDIT - ------------------------------------------------------------------------------------------------------------------------------ POST-DELIVERY POST-DELIVERY POST-DELIVERY POST-DELIVERY POST-DELIVERY RENTAL PAYMENT TERMINATION PURCHASE EARLY EARLY EARLY TERMINATION EARLY TERMINATION TERMINATION TERMINATION DATE (A) INDEMNITY OPTION PRICE PAYMENT 1 PAYMENT 2 PAYMENT 3 PAYMENT 4 NO. Date (B) (C) (D) (E) (F) (G) - ------------------------------------------------------------------------------------------------------------------------------ 1 28-avr-95 103,0400% 100,1112% 97,0812% 99,1200% 96,1200% 2 28-oct-95 102,2546% 99,4252% 96,4962% 98,4408% 95,5408% 3 28-avr-96 101,1050% 98,4880% 95,8620% 97,5129% 94,9129% 4 28-oct-96 99,8363% 97,4986% 95,1756% 96,5332% 94,2332% 5 28-avr-97 98,7785% 96,5375% 94,4165% 95,5817% 93,4817% 6 28-oct-97 97,7848% 95,4336% 93,6156% 94,4887% 92,6887% 7 28-avr-98 96,6132% 94,3520% 92,7653% 93,4178% 91,8468% ---------------------------------------------------------------------------------------------------------------------- 8 28-oct-98 95,5046% 93,1977% 91,9076% 92,2749% 90,9976% 9 28-avr-99 94,3559% 92,0767% 90,9930% 91,1650% 90,0920% 10 28-oct-99 93,1400% 90,8902% 90,0007% 89,9902% 89,1096% 11 28-avr-00 91,8424% 89,6239% 88,9141% 88,7365% 88,0337% 12 28-oct-00 90,4721% 88,2867% 87,7401% 87,4125% 86,8713% 13 28-avr-01 88,9877% 86,8382% 86,4367% 85,9784% 85,5808% 14 28-oct-01 87,4180% 85,3064% 85,0313% 84,4617% 84,1894% 15 28-avr-02 85,7562% 83,6847% 83,5142% 82,8561% 82,6873% 16 28-oct-02 84,0067% 81,9775% 81,8892% 81,1658% 81,0784% 17 28-avr-03 82,1593% 80,1747% 80,1429% 79,3808% 79,3494% ---------------------------------------------------------------------------------------------------------------------- 18 28-oct-03 80,2233% 81,2025% 78,2855% 78,2833% 19 28-avr-04 78,1875% 79,2356% 76,2989% 76,2967% 20 28-oct-04 76,0826% 77,2018% 74,2448% 74,2448% 21 28-avr-05 73,9017% 75,0947% 72,1166% 72,1166% 22 28-oct-05 71,6581% 72,9270% 69,9272% 69,9272% 23 28-avr-06 69,3325% 70,6801% 67,6578% 67,6578% 24 28-oct-06 66,9544% 68,3823% 65,3371% 65,3371% 25 28-avr-07 64,4750% 65,9868% 62,9176% 62,9176% 26 28-oct-07 61,9146% 63,5130% 60,4190% 60,4190% 27 28-avr-08 59,2705% 60,9583% 57,8388% 57,8388% 28 28-oct-08 56,5569% 58,3364% 55,1907% 55,1907% 29 28-avr-09 53,7597% 55,6339% 52,4611% 52,4611% 30 28-oct-09 50,8878% 52,8591% 49,6586% 49,6586% 31 28-avr-10 47,3986% 50,0000% 46,2537% 46,2537% 32 28-oct-10 43,6816% 48,6323% 41,1631% 41,1631% 33 28-avr-11 38,9134% 43,8164% 36,3472% 36,3472% 34 28-oct-11 34,4221% 39,2802% 31,8110% 31,8110% 35 28-avr-12 30,1799% 34,9956% 27,5264% 27,5264% 36 28-oct-12 26,1619% 30,9374% 23,4682% 23,4682% 37 28-avr-13 22,3457% 27,0830% 19,6138% 19,6138% 38 28-oct-13 18,7111% 23,4121% 15,9429% 15,9429% 39 28-avr-14 15,2400% 19,9063% 12,4371% 12,4371% 40 28-oct-14 12,6208% 17,2609% 9,7917% 9,7917% 41 28-avr-15 10,0000% - ------------------------------------------------------------------------------------------------------------------------------
EX-1.4 5 LEASE AGREEMENT 1 EXHIBIT 1.4 Dated September 1998 (1) GIE CRUISE VISION TWO (2) ROYAL CARIBBEAN CRUISES LTD. - -------------------------------------------------------------------------------- Amendment No. 4 to a Lease Agreement ("credit-bail") dated 3 March 1993 relating to one passenger cruise vessel, yard number B31 - -------------------------------------------------------------------------------- 2 -2- AMENDMENT NO. 4 to the LEASE AGREEMENT ("CREDIT-BAIL") dated March 3, 1993 relating to one passenger cruise vessel yard number B31 BETWEEN (1) G.I.E. CRUISE VISION TWO, a French "Groupement d'Interet Economique" governed by Ordinance No. 67-821 of 23 September 1967, having its registered office at Tour Societe Generale (ENTR/OPE/Inv), 17 cours Valmy - 92800 PUTEAUX, France (the "Owner"), represented by its "administateur", Air-Bail, in turn represented by Diony LEBOT, being duly authorized, and (2) ROYAL CARIBBEAN CRUISES LTD., a company incorporated in Liberia and having its registered office at 80 Broad Street, Monrovia, Liberia (the "Charterer"), represented by Kenneth D. DUBBIN an officer being duly authorized, WHEREAS A) By a lease agreement ("Credit-Bail") dated 3 March 1993 as complemented by Amendments No. 1 dated 12 July 1994, No. 2 dated 17 January 1996 and No. 3 dated 20 February 1996 (together the "Lease Agreement") the Owner agreed to bareboat charter by way of credit-bail to the Charterer one passenger cruise vessel more particularly described therein (the "Vessel"). B) For the acquisition or continuing ownership of the Vessel, the Owner has been granted financial facilities by the Lenders (as defined in the Lease Agreement). It is a condition of the documentation relating to the said financial facilities that no amendment or modification to the Lease Agreement may be made without the consent of the Lenders. C) The parties wish to amend the Lease Agreement as hereafter appears. NOW, THEREFORE, IT IS AGREED AS FOLLOWS : 1. Expressions defined in the Lease Agreement shall have the same meaning when used in this Amendment No. 4. 2. The Owner declares and warrants that it has received the consent of the Lenders for the execution by it of this Amendment No. 4. 3. Clause 2 of the Lease Agreement is hereby amended as follows: - - the following sentence is hereby added at the end of the definition of "Rental Payments": "Each Rental Payment will be equal to the sum of the Fixed Amount and of the Variable Amount as defined in Clause 13.3 and Exhibit A". - - the following definition of "libor" shall be added to other definitions : "LIBOR" means in relation to any amount and for any period the offered rate for Dollar deposits for such amount and for such period which is: (i) the arithmetic mean as determined by the Lenders of the rates of interest published or reported by Reuters Limited (through its Reuters Monitor service by reference to the "LIBO" page) for the amount and period in question which 3 -3- appeared at or about 11:00 a.m. London time on the second banking day in London before the first day of such a period (the "Quotation Date"); or (ii) if the relevant page is not displayed on the Reuters Monitor service or the Reuters Monitor service is not operating at the relevant time or if no such offered rate appears on the Reuters Monitor service page, the rate per annum of the offered quotation for deposits in Dollars for the amount and period in question which appears on page 3750 of the Telerate screen (or such other page which may replace such page from time to time on the Telerate screen) at or about 11:00 a.m. London time on the Quotation Date; or (iii) if the relevant page is not displayed on the Telerate screen or the Telerate screen is not operating at the relevant time or if no such offered rate appears on the Telerate screen, the rate determined by the Lenders to be the mean of the rates (rounded up to four decimal places) at which deposits in Dollars and in an amount comparable with the amount in relation to which LIBOR is to be determined and for a period equal to the relevant period were being offered by first class banks in the London Interbank Market at or about 11:00 a.m. (London time) on the Quotation Date; 4. The first sentence of Clause 9.6 of the Lease Agreement is hereby amended to read as follows : " The Charterer may, by not more than six months', nor less than one month's, notice by registered letter, return receipt requested, or by letter delivered by "huissier" to the Owner, elect to purchase the Vessel on the eighteenth Rental Payment Date, or on any subsequent Rental Payment Date, for a price equal to the aggregate of (i) the Purchase Option Price and (ii) all other sums then due and unpaid under this Agreement excluding the Rental Payment on the date of payment of the Purchase Option Price, which such Rental Payment shall not be due and payable as a result of the purchase of the Vessel by the Charterer), (and, for this purpose, the amount then subject to the Pledge shall be set off against such obligation of the Charterer to pay the Purchase Option Price), payable in cash (OPTION D'ACHAT ANTICIPEE), under the same conditions (except for the price) as stated in Clause 9.2." 5. The first sentence of Clause 9.7 (I) (a) of the Lease Agreement is hereby amended to read as follows : " In the event that any of the Early Termination Events described in paragraph ( c ) occurs after Delivery, the Owner shall, whilst such Early Termination Event is continuing, be entitled, by notice in writing to the Charterer given not more than 30 days following the receipt by the Owner of written notice from the Charterer stating that such event has occured (and, for the avoidance of doubt, failure by the Owner to give such notice within such period shall result in the Owner having no further rights under this Clause in relation to the Early Termination Event in question), to terminate the Lease on the ninetieth (90th) day following the date of the Owner's notice whereupon the Charterer shall be obliged to pay (i) the relevant Early Termination Amount set out in column D or E of Appendix B together (if the Early Termination Amount does not become due on a Rental Payment Date) with accrued interest thereon (it being agreed however that no interest shall accrue on that portion of the Early Termination Amount as equals the amount of money then subject to the Pledge) from the Rental Payment Date immediately preceding the date on which the Early Termination Amount becomes due to the date of payment calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date at a rate equal to (A) (during the first 102 calendar months after the Delivery Date) the higher of (a) 8.442 % per annum or (b) the sum, as determined by the Owner, of (b1) 0,6 % (zero point six per cent) and (b2) the LIBOR applicable to the Variable Amount of the next following Rental Payment as defined in Clause 13.3.1or (B) 7.82 % per annum thereafter and (ii) if the Early Termination Amount is due on a Rental Payment Date, the relevant Rental Payment which falls due on that Rental Payment Date and (iii) all other sums then due and unpaid under this Agreement and (iv) (if the Early Termination Amount is not due on a Rental Payment Date) such additional amounts as may be necessary to compensate the Owner for any costs, losses or expenses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the 4 -4- costs to the Lenders of obtaining such funds until the next scheduled Rental Payment Date (and, for this purpose, an amount equal to the Instalments then subject to the Pledge shall be set off against the Early Termination Amount)." 6. Clause 9.7 (II) of the Lease Agreement is hereby amended in its entirety to read as follows : "In the event that, following Delivery there is a real risk that access of the Vessel to U.S. ports will be denied or restricted (to an extent which the Charterer, acting reasonably, deems material) by the enactment and implementation of U.S. federal or state law of general application to vessels or classes of vessels built, owned or controlled in France and, in the reasonable opinion of the Charterer, access of the Vessel to the U.S. ports would not or could not be fully restored by the fulfilment by the Shipyard of the provisions of Article XXII of the Shipbuilding Contract, the Charterer shall be entitled (but not bound), at any time thereafter but within eight and a half years after the Delivery Date if and whilst such threat continues, by not less than fifteen (15) days' prior written notice (which shall be revocable at any time prior to the fifth day before the date stated therein on which the Vessel is to be purchased) to the Owner, to purchase the Vessel upon the date specified in such notice in the manner provided in Clause 9.6 save and except that the price payable by the Charterer to the Owner for the Vessel on such date shall be a price equal to the aggregate of (i) the relevant Early Termination Amount specified in column F or G of Appendix B and (if the Vessel is not purchased on a Rental Payment Date) accrued interest thereon at the rate specified in Clause 9.7 (I)(a) from the Rental Payment Date immediately preceding the date on which the Vessel is purchased to the date of payment calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date (it being agreed however that no interest shall accrue on that portion of the Early Termination Amount as equals the amount of money then subject to the Pledge) and (ii) if the Vessel is purchased on a Rental Payment Date, the relevant Rental Payment which falls due on that Rental Payment Date and (iii) all other sums then due and unpaid under this Agreement and (iv) if the Vessel is not purchased on a Rental Payment Date such additional amounts as may be necessary to compensate the Owner for any costs, losses or expenses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the costs to the Lenders of obtaining such funds until the next scheduled Rental Payment Date (and for this purpose, an amount equal to the Instalments then subject to the Pledge shall be set off against the Early Termination Amount)." 7. The first sentence of clause 11.5 (a) of the Lease Agreement is hereby amended to read as follows : "Upon termination pursuant to Clause 11.4, the Charterer shall pay to the Owner (i) the Termination Indemnity, together (if the Termination Indemnity does not fall due on a Rental Payment Date) with accrued interest thereon, (it being agreed, however, that no interest shall accrue on that portion of the Termination Indemnity as equals the amount of money then subject to the Pledge) from the preceding Rental Payment Date to the date of payment calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date at a rate equal to (A) (during the first 102 calendar months after the Delivery Date) the higher of (a) 8.442 % per annum or (b) the sum, as determined by the Owner, of (b1) 0,6 % (zero point six per cent) and (b2) the LIBOR applicable to the Variable Amount of the next following Rental Payment as defined in Clause 13.3.1 or (B) 7.82 % per annum thereafter and (ii) if the Termination Indemnity is due on a Rental Payment Date, the relevant Rental Payment which falls due on that Rental Payment Date and (iii) any other amounts which have then become due under this Agreement and have not already been paid and (iv) (if the Termination Indemnity does not fall due on a Rental Payment Date) such additional amounts as may be necessary to compensate the Owner for any costs or losses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the cost to the Lenders of obtaining such funds until the next Rental Payment Date. 8. The first paragraph of Clause 13.3.1 shall be completed by the following : "Each Rental Payment will be the sum of a Fixed Amount and a Variable Amount as detailed in Exhibit A. The indicative Variable Amount given in Exhibit A has been calculated on the basis of a LIBOR equal to 6,00% per annum. For each Rental Payment, the amount corresponding to the Variable Amount will be 5 -5- determined by multiplying the Notional Amount (as specified in Exhibit A) for the corresponding Rental Payment Date, by a rate equal to 0,6% (zero point six per cent) plus the LIBOR published two Banking Days before the immediately preceding Rental Payment Date. The Variable Amount shall be computed on the basis of a 360 day year and on the exact number of days elapsed during a period starting on the preceding Rental Payment Date and ending on the corresponding Rental Payment Date (the "Interest Period"). For the purpose of the computation of the Variable Amount only, the exact number of days elapsed during the Interest Period shall be a period of six months starting on the 15th of March and ending on the 14th of September, or starting on the 15th of September and ending on the 14th of March, provided that : (a) the first Interest Period commences on the 16th March 1998; (b) each subsequent Interest Period shall commence upon the day following the last day of the preceding Interest Period; (c) any Interest Period ending on a day which is not a Banking Day shall end on the next following Banking Day; (d) if an Interest Period is lengthened by the application of (c ) above, the following Interest Period shall (without prejudice to the application of (c ) above) end on the day on which it would have ended if the preceding Interest Period had not been so lengthened; The applicable LIBOR will be notified by the Owner to the Charterer as soon as received from the Lenders. The Variable Amount will be notified by the Owner to the Charterer at least two months before the corresponding Rental Payment Date." 9. The first sentence of Clause 14.6 of the Lease Agreement is hereby amended to read as follows : "If the Lease shall terminate pursuant to Clause 14.4, the Charterer shall forthwith pay to the Owner (i) the Early Termination Amount set out in column D or E of Appendix B together (if the Early Termination Amount does not fall due on a Rental Payment Date) with accrued interest thereon (it being agreed however that no interest shall accrue on that portion of the Early Termination Amount as equals the amount of money then subject to the Pledge) from the preceding Rental Payment Date to the date of payment, calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date at a rate equal to (A) (during the first 102 calendar months after the Delivery Date) the higher of (a) 8.442 % per annum or (b) the sum, as determined by the Owner, of (b1) 0,6 % (zero point six per cent) and (b2) the LIBOR applicable to the Variable Amount of the next following Rental Payment as defined in Clause 13.3.1 or (B) 7.82 % per annum thereafter, and (ii) if the Early Termination Amount is due on a Rental Payment Date, the relevant Rental Payment which falls due on that Rental Payment Date, and (iii) any other amounts which have then become due under this Agreement and have not already been paid and (iv) if the Early Termination Amount does not fall due on a Rental Payment Date such additional amounts as may be necessary to compensate the Owner for any costs, losses or expenses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the cost to the Lenders of obtaining such funds until the next scheduled Rental Payment Date." 10. The third sentence of clause 18.2 of the Lease Agreement is hereby amended to read as follows : "In the event of termination after Delivery, the Charterer shall pay to the Owner in accordance with Clause 18.4 (i) all amounts due under this Agreement as shall be payable and remain outstanding, (ii) if the Termination Indemnity becomes due on a Rental Payment Date the Rental Payment payable on that date, (iii) the Termination Indemnity together (if the Termination Indemnity does not become due on a Rental Payment Date) with accrued interest thereon, (it being agreed however that no interest shall accrue on that portion of the Termination Indemnity as equals the money then subject to the Pledge) from the preceding Rental Payment Date to the date of payment calculated on the basis of the actual number of days elapsed since such preceding Rental Payment Date at a rate equal to (A) (during the first 102 calendar months after the Delivery Date) the higher of (a) 8.442 % per annum or (b) the sum, as determined by the Owner, of (b1) 0,6 % (zero point six per 6 -6- cent) and (b2) the LIBOR applicable to the Variable Amount of the next following Rental Payment as defined in Clause 13.3.1 or (B) 7.82 % per annum thereafter (provided always that the amount equal to the Instalments which is then subject to the Pledge shall be set off against and go to reduce the Charterer's obligation to pay the Termination Indemnity), (iv) if the Termination Indemnity does not become due on a Rental Payment Date, such additional amounts as may be necessary to compensate the Owner for any costs, losses or expenses incurred by the Owner as a result of the re-employment of funds by the Lenders at rates lower than the costs to the Lenders of obtaining such funds until the next scheduled Rental Payment Date, and (v) such additional amounts as may be necessary to compensate the Owner for any costs resulting from repossessing the Vessel. 11. The terms of Clause 21 of the Lease Agreement shall apply to the fees described in a letter of even date herewith from the Charterer to the Owner. 12. The Owners' address stated in Clause 22 of the Lease Agreement shall be replaced by the following : GIE CRUISE VISION TWO c/o Societe Generale (FINT/STR/Ing) Tour Societe Generale 92 972 PARIS - LA DEFENSE CEDEX Fax : 33 1 42.14.01.63 13. Exhibits A and B of the Lease Agreement are hereby amended in their entirety to read as set forth in Exhibits A and B hereto. 14. The Charterer confirms to the Owner, for its benefit and for the benefit of the Lenders, that all the terms of the Delegation signed by the Charterer on the 15 March 1996 shall apply mutatis mutandis to the sums due by the Charterer to the Owner under the provisions of this Amendment No. 4. 15. This Amendment No. 4 takes effect as from 15th March 1998 (not included). 16. All the terms and conditions of the Lease Agreement not amended by this Amendment No. 4 shall remain unaltered in full force and effect and shall apply to this Amendment No. 4 whenever consistent. Signed on September , 1998 in three originals. GIE CRUISE VISION TWO ROYAL CARIBBEAN CRUISES LTD. by : AIR BAIL (Administrateur) by : /s/ DIONY LEBOT by: /s/ KENNETH D. DUBBIN -------------------------------- ------------------------ DIONY LEBOT KENNETH D. DUBBIN (Vice-President and Treasurer) 7 CRUISE VISION TWO EXHIBIT A : RENTAL PAYMENTS
- --------------------------------------------------------------------------------------------------------------------------- AMOUNT OF RENTAL PAYMENT RENTAL PAYMENT (in % of Owner's Purchase Price) ------------------------ NOTIONAL DATE (A) Fixed Variable TOTAL Amount AMOUNT NO. Date Amount Amount * in USD - --------------------------------------------------------------------------------------------------------------------------- 1 15-mar-96 3,8800% 0,0000% 3,8800% 2 15-sep-96 3,8800% 0,0000% 3,8800% 3 15-mar-97 3,8800% 0,0000% 3,8800% 4 15-sep-97 3,8800% 0,0000% 3,8800% 5 15-mar-98 3,8800% 0,0000% 3,8800% -------------------------------------------------------------------------------------- 6 15-sep-98 1,3274113% 2,2972887% 3,6247000% 225 962 822 7 15-mar-99 1,4860462% 2,1385538% 3,6246000% 212 673 857 8 15-sep-99 1,5939235% 2,0307765% 3,6247000% 198 662 912 9 15-mar-00 1,7621567% 1,8624433% 3,6246000% 184 197 684 10 15-sep-00 1,8968100% 1,7277900% 3,6246000% 169 022 933 11 15-mar-01 2,0832782% 1,5413218% 3,6246000% 153 280 618 12 15-sep-01 2,2114925% 1,4131075% 3,6246000% 136 752 339 13 15-mar-02 2,4349424% 1,1896576% 3,6246000% 119 630 370 14 15-sep-02 2,5795981% 1,0450019% 3,6246000% 101 675 854 15 15-mar-03 2,7851019% 0,8395981% 3,6247000% 83 037 168 16 15-sep-03 2,9822151% 0,6424849% 3,6247000% 63 542 458 17 15-mar-04 3,1872404% 0,4373596% 3,6246000% 43 255 341 18 15-sep-04 3,3989560% 0,2256440% 3,6246000% 22 073 861 19 15-mar-05 3,6246000% 0,0000000% 3,6246000% 0 20 15-sep-05 3,6246000% 0,0000000% 3,6246000% 21 15-mar-06 3,6246000% 0,0000000% 3,6246000% 22 15-sep-06 3,6246000% 0,0000000% 3,6246000% 23 15-mar-07 3,6246000% 0,0000000% 3,6246000% 24 15-sep-07 3,6246000% 0,0000000% 3,6246000% 25 15-mar-08 3,6246000% 0,0000000% 3,6246000% 26 15-sep-08 3,6246000% 0,0000000% 3,6246000% 27 15-mar-09 3,6246000% 0,0000000% 3,6246000% 28 15-sep-09 3,6246000% 0,0000000% 3,6246000% 29 15-mar-10 3,6246000% 0,0000000% 3,6246000% 30 15-sep-10 3,6246000% 0,0000000% 3,6246000% 31 15-mar-11 7,4692000% 0,0000000% 7,4692000% 32 15-sep-11 7,4692000% 0,0000000% 7,4692000% 33 15-mar-12 7,4692000% 0,0000000% 7,4692000% 34 15-sep-12 7,4692000% 0,0000000% 7,4692000% 35 15-mar-13 7,4692000% 0,0000000% 7,4692000% 36 15-sep-13 7,4692000% 0,0000000% 7,4692000% 37 15-mar-14 7,4692000% 0,0000000% 7,4692000% 38 15-sep-14 7,4692000% 0,0000000% 7,4692000% 39 15-mar-15 7,4692000% 0,0000000% 7,4692000% 40 15-sep-15 7,4692000% 0,0000000% 7,4692000% - --------------------------------------------------------------------------------------------------------------------------- * Indicative, calculated with LIBOR = 6,00%
8 CRUISE VISION TWO EXHIBIT B: TERMINATION INDEMNITY, PURCHASE OPTION PRICE, EARLY TERMINATION PAYMENT
---------------------------------------------------------------------------- WITH NO TRANSFER WITH TRANSFER WITH NO TRANSFER WITH TRANSFER OF EXPORT CREDIT OF EXPORT CREDIT OF EXPORT CREDIT OF EXPORT CREDIT - -------------------------------------------------------------------------------------------------------------------------------- POST-DELIVERY POST-DELIVERY POST-DELIVERY POST-DELIVERY POST-DELIVERY RENTAL PAYMENT TERMINATION PURCHASE EARLY TERMINATION EARLY TERMINATION EARLY TERMINATION EARLY TERMINATION DATE (A) INDEMNITY OPTION PRICE* PAYMENT 1 PAYMENT 2 PAYMENT 3 PAYMENT 4 NO. Date (B) (C) (D) (E) (F) (G) - -------------------------------------------------------------------------------------------------------------------------------- 1 15-mar-96 103,0400% 100,1112% 97,0812% 99,1200% 96,1200% 2 15-sep-96 102,2546% 99,4746% 96,5456% 98,4897% 95,5897% 3 15-mar-97 101,1050% 98,4989% 95,8729% 97,5237% 94,9237% 4 15-sep-97 99,8363% 97,4879% 95,1649% 96,5227% 94,2227% 5 15-mar-98 99,3969% 96,9960% 94,4372% 96,0356% 93,5021% ------------------------------------------------------------------------------------------------------------------------ 6 15-sep-98 98,2040% 95,8319% 93,4234% 94,8830% 92,4984% 7 15-mar-99 96,9802% 94,6376% 92,3878% 93,7005% 91,4730% 8 15-sep-99 95,7338% 93,4213% 91,3354% 92,4963% 90,4310% 9 15-mar-00 94,4023% 92,1220% 90,2080% 91,2099% 89,3148% 10 15-sep-00 93,0364% 90,7891% 89,0532% 89,8901% 88,1714% 11 15-mar-01 91,5685% 89,3567% 87,8080% 88,4719% 86,9386% 12 15-sep-01 90,0963% 87,9200% 86,5653% 87,0495% 85,7082% 13 15-mar-02 88,4704% 86,3334% 85,1820% 85,4786% 84,3386% 14 15-sep-02 86,8427% 84,7450% 83,8047% 83,9059% 82,9749% 15 15-mar-03 85,1151% 83,0591% 82,3395% 82,2367% 81,5242% 16 15-sep-03 83,3228% 81,3101% 80,8202% 80,5050% 80,0200% 17 15-mar-04 81,4631% 79,4953% 79,2454% 78,7082% 78,4607% ------------------------------------------------------------------------------------------------------------------------ 18 15-sep-04 79,5535% 80,4879% 77,6319% 77,6319% 19 15-mar-05 77,5424% 78,5447% 75,6693% 75,6693% 20 15-sep-05 75,4977% 76,5691% 73,6740% 73,6740% 21 15-mar-06 73,3586% 74,5025% 71,5866% 71,5866% 22 15-sep-06 71,1757% 72,3933% 69,4564% 69,4564% 23 15-mar-07 68,8961% 70,1908% 67,2319% 67,2319% 24 15-sep-07 66,5810% 67,9540% 64,9727% 64,9727% 25 15-mar-08 64,1593% 65,6142% 62,6095% 62,6095% 26 15-sep-08 61,6585% 63,1979% 60,1691% 60,1691% 27 15-mar-09 59,0769% 60,7037% 57,6499% 57,6499% 28 15-sep-09 56,4277% 58,1441% 55,0647% 55,0647% 29 15-mar-10 53,6911% 55,5001% 52,3942% 52,3942% 30 15-sep-10 50,8924% 52,7960% 49,6631% 49,6631% 31 15-mar-11 47,3986% 50,0000% 46,2537% 46,2537% 32 15-sep-11 43,6816% 48,6323% 41,1631% 41,1631% 33 15-mar-12 38,9134% 43,8164% 36,3472% 36,3472% 34 15-sep-12 34,4221% 39,2802% 31,8110% 31,8110% 35 15-mar-13 30,1799% 34,9956% 27,5264% 27,5264% 36 15-sep-13 26,1619% 30,9374% 23,4682% 23,4682% 37 15-mar-14 22,3457% 27,0830% 19,6138% 19,6138% 38 15-sep-14 18,7111% 23,4121% 15,9429% 15,9429% 39 15-mar-15 15,2400% 19,9063% 12,4371% 12,4371% 40 15-sep-15 12,6208% 17,2609% 9,7917% 9,7917% 41 15-mar-16 10,0000% - --------------------------------------------------------------------------------------------------------------------------------
On the 15 September 2004, the Purchase Option Price will be reduced of an amount equal to the Variable Amount given in Exhibit A on the corresponding date and increased of the Variable Amount as defined in Clause 13.3.1 calculated on the LIBOR applicable for the Rental Payment due on the corresponding date EX-1.5 6 CONTRACT FOR HULL #T-31 1 EXHIBIT 1.5 AMENDMENT NO. 1 TO CONTRACT FOR HULL NUMBER T-31 Whereas, Royal Caribbean Cruises Ltd. (the "Shipowner") and Chantiers de l'Atlantique (the "Builder") have entered into a Contract for Hull Number T-31 dated 16 March 1998 (the "Contract") pursuant to which the Builder has agreed to construct the vessel having Builder's hull number T-31; and Whereas, the Contract provides that the Shipowner may, in its sole discretion, terminate the Contract upon notice to the Builder on or before January 31, 1999; and Whereas, the Shipowner has requested an extension of time to consider whether to exercise its option to proceed with the Contract; and Whereas, the Builder believes that it is in its best interest to grant such extension; Now, therefore, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Article XXII of the Contract is hereby amended to read as follows: The SHIPOWNER may, at its sole option to be exercised in its unfettered discretion, terminate this Contract upon notice to the Builder on or before February 20, 1999. In witness whereof, the parties have caused this Amendment No. 1 to be duly executed by their authorized representatives as of this 27th day of January, 1999. FOR THE SHIPOWNER FOR THE BUILDER Royal Caribbean Cruises Ltd. Chantiers de l'Atlantique By: RICHARD D. FAIN By: PATRICK BOISSIER ------------------------------ ---------------------- Chairman and Chief Executive Chairman & CEO Officer 2 AMENDMENT NO. 2 TO CONTRACT FOR HULL NUMBER T-31 DATED 19 FEBRUARY 1999 Whereas, Royal Caribbean Cruises Ltd. (the "Shipowner") and Chantiers de l'Atlantique (the "Builder") have entered into a Contract for Hull Number T-31 dated 16 March 1998 (the "Contract") pursuant to which the Builder has agreed to construct the vessel having Builder's hull number T-31 (the "Vessel"); and Whereas, the Shipowner and the Builder wish to amend the Contract to provide that the Vessel shall be equipped with a different type of machinery and contain a greater number of passengers cabins; Whereas the Shipowner and the Builder have taken into account the situation resulting from the variations of the dollar; Whereas the Shipowner has declared that the Vessel should be built as a Millennium Class Vessel; Now, therefore, in consideration of the premises, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Article I.1.A of the Contract is hereby amended by deleting the phrase "revised 11 March 1998" from the third and fourth lines thereof and inserting "revised 20 March 1998" in its place. Article I.1.A of the Contract is hereby further amended by deleting the phrase "revised 13 March 1998" from the sixth line thereof and inserting the phrase "revised 20 March 1998" in its place. 2. Article I.3.1 of the Contract is hereby amended by (i) increasing the Vessel's Life Saving Equipment capacity (total) from 3,350 persons to 3,450 persons, (ii) increasing the Vessel's number of passenger cabins from 975 cabins to 1,025 cabins, and (iii) increasing the Vessel's number of crew cabins from 502 cabins to 503 cabins. 3. Article I.3.2 of the Contract is hereby amended in its entirety to read as follows: 3.2 - MACHINERY The machinery to consist of two (2) gas turbine generator sets and one (1) steam turbine generator set (COGES type), having a total maximum continuous rating of 57,800 kW electric power under the reference conditions set forth in the Specifications, to supply power to two (2) electric propulsion motors and the remaining electric systems of the VESSEL as stipulated in the Specifications. 4. Article I.6 of the Contract is hereby amended in its entirety to read as follows: 6 - FUEL CONSUMPTION The fuel consumption of each of the VESSEL's two (2) gas turbine generator sets shall be determined on the test bed under conditions stipulated in the Specifications, and shall not exceed 242.2 grams per kW per hour when developing 100% of Maximum Continuous Rating. [PORTIONS OF THIS DOCUMENT HAVE BEEN 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] 3 5. Article IX.2.3 of the Contract is hereby amended in its entirety to read as follows: 2.3 - EXCESSIVE FUEL CONSUMPTION 2.3.1 - The BUILDER guarantees that the fuel consumption of each of the two (2) gas turbine generator sets at the test bed runs as stipulated in Article I.6 shall not exceed 242.2 grams per kW per hour. The Contract Price shall not be affected or changed if the actual fuel consumption of both generators is not greater than [ * ] above 242.2 grams per kW per hour. 2.3.2 - If the actual fuel consumption of either generator is over [ * ] greater than 242.2 grams per kW per hour, then, as sole compensation, the Contract Price shall be reduced by the sum of [ * ] for each full [ * ] increase in fuel consumption above said [ * ] (fractions of a percent to be prorated) for each generator. 2.3.3 - If such actual fuel consumption of either generator is more than [ * ] greater than 242.2 grams per kW per hour, then the SHIPOWNER may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract in accordance with the provisions of and with the consequences provided for in Article XII.2 hereof. 6. Article IX.I of the Contract is hereby amended (i) by amending the Contract Price to Three Hundred Forty-Nine Million Seventy-Nine Thousand Five Hundred United States Dollars (U.S $349,079,500), (ii) by deleting clause (ii) of the first sentence thereof and (iii) by deleting the second sentence thereof. 7. Article X.1- 1st installment - is hereby amended to read: An amount equal to 5% of the Contract price shall be paid by the SHIPOWNER to the BUILDER 1st installment within five (5) business days of the date of signing of this addendum. 8. Except as set forth herein, the Contract remains in full force and effect in accordance with its terms. In witness whereof, the parties have caused this Amendment No. 2 to be duly executed by their authorized representatives on this 19th day of February, 1999. FOR THE SHIPOWNER FOR THE BUILDER Royal Caribbean Cruises Ltd. Chantiers de l'Atlantique By: RICHARD D. FAIN By: PATRICK BOISSIER Chairman & CEO - ------- * TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED EX-1.6 7 CONTRACT FOR HULL #U-31 1 EXHIBIT 1.6 AMENDMENT NO. 1 TO CONTRACT FOR HULL NUMBER U-31 Whereas, Royal Caribbean Cruises Ltd. (the "Shipowner") and Chantiers de l'Atlantique (the "Builder") have entered into a Contract for Hull Number U-31 dated 16 March 1998 (the "Contract") pursuant to which the Builder has agreed to construct the vessel having Builder's hull number U-31; and Whereas, the Contract provides that the Shipowner may, in its sole discretion, terminate the Contract upon notice to the Builder on or before January 31, 1999; and Whereas, the Shipowner has requested an extension of time to consider whether to exercise its option to proceed with the Contract; and Whereas, the Builder believes that it is in its best interest to grant such extension; Now, therefore, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Article XXII of the Contract is hereby amended to read as follows: The SHIPOWNER may, at its sole option to be exercised in its unfettered discretion, terminate this Contract upon notice to the Builder on or before February 20, 1999. In witness whereof, the parties have caused this Amendment No. 1 to be duly executed by their authorized representatives as of this 27th day of January, 1999. FOR THE SHIPOWNER FOR THE BUILDER Royal Caribbean Cruises Ltd. Chantiers de l'Atlantique By: RICHARD D.FAIN By: PATRICK BOISSIER ----------------------------- ----------------------- Chairman and Chief Executive Chairman & CEO Officer 2 AMENDMENT NO. 2 TO CONTRACT FOR HULL NUMBER U-31 DATED 19 FEBRUARY 1999 Whereas, Royal Caribbean Cruises Ltd. (the "Shipowner") and Chantiers de l'Atlantique (the "Builder") have entered into a Contract for Hull Number U-31 dated 16 March 1998 (the "Contract") pursuant to which the Builder has agreed to construct the vessel having Builder's hull number U-31 (the "Vessel"); and Whereas, the Shipowner and the Builder wish to amend the Contract to provide that the Vessel shall be equipped with a different type of machinery and contain a greater number of passengers cabins; Whereas the Shipowner and the Builder have taken into account the situation resulting from the variations of the dollar; Whereas the Shipowner has declared that the Vessel should be built as a Millennium Class Vessel; Now, therefore, in consideration of the premises, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Article I.1.A of the Contract is hereby amended by deleting the phrase "revised 11 March 1998" from the third and fourth lines thereof and inserting "revised 20 March 1998" in its place. Article I.1.A of the Contract is hereby further amended by deleting the phrase "revised 13 March 1998" from the sixth line thereof and inserting the phrase "revised 20 March 1998" in its place. 2. Article I.3.1 of the Contract is hereby amended by (i) increasing the Vessel's Life Saving Equipment capacity (total) from 3,350 persons to 3,450 persons, (ii) increasing the Vessel's number of passenger cabins from 975 cabins to 1,025 cabins, and (iii) increasing the Vessel's number of crew cabins from 502 cabins to 503 cabins. 3. Article I.3.2 of the Contract is hereby amended in its entirety to read as follows: 3.2 - MACHINERY The machinery to consist of two (2) gas turbine generator sets and one (1) steam turbine generator set (COGES type), having a total maximum continuous rating of 57,800 kW electric power under the reference conditions set forth in the Specifications, to supply power to two (2) electric propulsion motors and the remaining electric systems of the VESSEL as stipulated in the Specifications. 4. Article I.6 of the Contract is hereby amended in its entirety to read as follows: 6 - FUEL CONSUMPTION The fuel consumption of each of the VESSEL's two (2) gas turbine generator sets shall be determined on the test bed under conditions stipulated in the Specifications, and shall not exceed 242.2 grams per kW per hour when developing 100% of Maximum Continuous Rating. [PORTIONS OF THIS DOCUMENT HAVE BEEN 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] 3 5. Article IX.2.3 of the Contract is hereby amended in its entirety to read as follows: 2.3 - EXCESSIVE FUEL CONSUMPTION 2.3.1 - The BUILDER guarantees that the fuel consumption of each of the two (2) gas turbine generator sets at the test bed runs as stipulated in Article I.6 shall not exceed 242.2 grams per kW per hour. The Contract Price shall not be affected or changed if the actual fuel consumption of both generators is not greater than [ * ] above 242.2 grams per kW per hour. 2.3.2 - If the actual fuel consumption of either generator is over [ * ] greater than 242.2 grams per kW per hour, then, as sole compensation, the Contract Price shall be reduced by the sum of [ * ] for each full [ * ] increase in fuel consumption above said [ * ] (fractions of a percent to be prorated) for each generator. 2.3.3 - If such actual fuel consumption of either generator is more than [ * ] greater than 242.2 grams per kW per hour, then the SHIPOWNER may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract in accordance with the provisions of and with the consequences provided for in Article XII.2 hereof. 6. Article IX.I of the Contract is hereby amended (i) by amending the Contract Price to Three Hundred Forty-Three Million Nine Hundred Ninety-Four Thousand Five Hundred United States Dollars (U.S. $343,994,500), (ii) by deleting clause (ii) of the first sentence thereof and (iii) by deleting the second sentence thereof. 7. Article X.1- 1st installment - is hereby amended to read: 1st installment: An amount equal to 5% of the Contract price shall be paid by the SHIPOWNER to the BUILDER within five (5) business days of the date of signing of this addendum. 8. Except as set forth herein, the Contract remains in full force and effect in accordance with its terms. In witness whereof, the parties have caused this Amendment No. 2 to be duly executed by their authorized representatives on this 19th day of February, 1999. FOR THE SHIPOWNER FOR THE BUILDER Royal Caribbean Cruises Ltd. Chantiers de l'Atlantique By: RICHARD D. FAIN By: PATRICK BOISSIER Chairman & CEO - ------- * TEXT OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED EX-1.7 8 CONTRACT FOR HULL #1344 1 EXHIBIT 1.7 AMENDMENT NO. 1 TO CONTRACT FOR CONSTRUCTION AND SALE OF HULL NO. 1344 This Amendment No. 1 to the Contract for Construction and Sale of Hull No. 1344, dated January 15, 1999, is by and between Kvaerner Masa-Yards Inc. (the "Builder") and Royal Caribbean Cruises Ltd. (the "Buyer"). WHEREAS, the Builder and the Buyer have entered into a Contract for Construction and Sale of Hull No. 1344, dated as of 7 January 1997 (the "Construction Contract"); and WHEREAS, the Construction Contract provides for a Delivery Date for the Vessel of 30 September 1999, subject to adjustment in certain circumstances including postponement for Permissible Delays; and WHEREAS, the Builder has provided the Buyer with various notices whereby it has informed the Buyer that it reserves the right to postpone the Delivery Date for the Vessel on the basis of force majeure; and WHEREAS, the Buyer has reserved its right to contest the postponement of the Delivery Date for the Vessel; and WHEREAS, the Buyer has requested the Builder to provide its best current estimate of the actual date on which the Vessel will be delivered to allow the Buyer to plan accordingly; and WHEREAS, the Builder has informed the Buyer that its best current estimate of the actual date on which the Vessel will be delivered is 14 October 1999; Now, therefore, in consideration of the premises, and for other good and valuable consideration the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. The first sentence of Article VII.1 is hereby amended by deleting "30th day of September 1999" therefrom and inserting "14th day of October 1999" in its place. 2 2. The Builder will not seek to postpone the new Delivery Date for the Vessel on the basis of force majeure with respect to any matter that has occurred on or before the date of this Amendment No. 1. Capitalized terms used herein shall have the meanings assigned to them in the Construction Contract. In witness whereof, the parties have cause this Amendment No. 1 to be duly executed by their authorized representatives as of the date first written above. Kvaerner Masa-Yards Inc. Royal Caribbean Cruises Ltd. By: /s/ (ILLEGIBLE) By: /s/ (ILLEGIBLE) --------------------------------- ------------------------------- By: /s/ (ILLEGIBLE) --------------------------------- 2 3 ADDENDUM NO. 1 BETWEEN: (1) ROYAL CARIBBEAN CRUISES LTD. (the "Buyer) (2) KVAERNER MASA-YARDS INC. (the "Builder") DATED: FEBRUARY 18, 1999 RELATING TO the Shipbuilding Contract between the parties dated 7 January 1997 (the "Contract") relating to Hull No. 1344. WHEREAS this Addendum records the agreement of the parties in relation to the payment by the Buyer of an intermediate instalment of the Contract Price on the terms herein mentioned. NOW IT IS HEREBY AGREED as follows: 1. Words and expressions defined in the Contract have the same meanings when used herein. 2. The Buyer shall within 10 days of signing this Addendum pay to the Builder an additional instalment of the Contract Price in an amount of US$30,000,000 (Thirty Million United States Dollars) (the "Intermediate Instalment"). 3. The Fourth Instalment of the Contract Price payable on delivery and acceptance of the Vessel under Article II.2(d) of the Contract shall be reduced PRO TANTO by: (a) the principal amount of the Intermediate Instalment; and (b) interest on the Intermediate Instalment which shall accrue from the date of payment at the rate of seven point five (7.5%) simple per annum. 4. That reduction shall be without prejudice to any other right of set off, reduction or other adjustment of the Contract Price provided for under the Contract or otherwise available to the Buyer. 5. The Intermediate Instalment shall (subject to paragraph 6 below) be in all respects (including, without limitation, for the purpose of calculating any refund payable to the Buyer) treated as an instalment of the Contract Price made pursuant to Article II of the Contract. 6. The provisions of Articles II.3 (second paragraph), XI.1 (a) and XI.2 of the Contract shall not apply in relation to the Intermediate Instalment. 7. Save only as expressly mentioned above, the Contract shall be and remain in full force and effect. 4 8. This Addendum shall be treated as an integral part of the Contract. IN WITNESS WHEREOF the parties have executed this Addendum the 18th day of February 1999. ROYAL CARIBBEAN CRUISES LTD. By: /s/ (ILLEGIBLE) Witness: /s/ (ILLEGIBLE) ------------------------ ----------------------- Title: Executive Vice President Vice President & Treasurer KVAERNER MASA-YARDS INC. By:/s/ Martin Saarikangas By: /s/ Taavi Soininvaara ------------------------ ---------------------------- Martin Saarikangas Taavi Soininvaara Title: Chairman and CEO Title: General Counsel Witness: /s/ (ILLEGIBLE) /s/ (ILLEGIBLE) Acknowledged and agreed, as at the date first mentioned above, by Kvaerner ASA as guarantor under the Kvaerner Guarantee: KVAERNER ASA By: Witness: ------------------------ ---------------------------- Title: Chief Financial Officer/Group Legal Director 5 ADDENDUM NO. 2 BETWEEN: (1) ROYAL CARIBBEAN CRUISES LTD. (the "Buyer") (2) KVAERNER MASA-YARDS INC. (the "Builder") DATED: 11 March 1999 RELATING TO the Shipbuilding Contract between the parties dated 7 January 1997 (as amended by Amendment No.1 dated 15 January 1999 and by Addendum No.1 dated 18 February 1999, the "Contract") relating to Hull No.1344. IT IS HEREBY AGREED as follows:- 1. INTERPRETATION. Words and expressions defined in the Contract have the same meanings when used herein. 2. THE INTERMEDIATE INSTALMENT. For the avoidance of doubt, unpaid interest accrued on the Intermediate Instalment paid pursuant to Addendum No.1 to the Contract shall also be applied in reduction of the balance, if any, of the unpaid portion of the Contract Price payable under final paragraph (a) of Article XI.5 of the Contract. 3. PREPAYMENT OF CONTRACT PRICE. Article II of the Contract shall be and is hereby deemed to be amended as follows: (a) In paragraph 2.(d), after "shall" is inserted the words "(subject to paragraph (e) below); and (b) The following new paragraph 2.(e) is added: "PREPAYMENT(S) OF CONTRACT PRICE In addition to the scheduled instalments payable under paragraphs (a) through (d) above, the Buyer shall be entitled (but not obliged) at any time, in each case with prior written notice to the Builder, to make one or more prepayments (each a "Voluntary Instalment") of all or part of the remainder of the Contract Price. Interest shall accrue on each Voluntary Instalment from the date of payment at the rate of seven point five per cent. (7.5%) per annum. The amount payable in respect of the remainder of the Contract Price in accordance with paragraph (d) above, or (as the case may be) the balance, if any, of the unpaid portion of the Contract Price payable under final paragraph (a) of Article XI.5 of the Contract, shall be reduced pro tanto by the amount of each Voluntary Instalment and unpaid accrued interest thereon up to the date of the delivery and acceptance of the Vessel, or (as the case may be) the date on which the said payment under Article XI.5 of the Contract falls due and payable. That reduction shall be without prejudice to any other right of set off, reduction or other adjustment of the Contract Price (or any part thereof) provided for under the Contract or otherwise available to the Buyer by operation of general law or otherwise.". 4. TREATMENT OF VOLUNTARY INSTALMENTS. Each Voluntary Instalment shall be in all respects (including, without limitation, for the purpose of calculating any refund and interest thereon payable to the Buyer) treated as an instalment of the Contract Price made pursuant to Article II of the Contract. 5. PLANS AND DRAWINGS. If, following a default by the Builder, the Buyer elects (pursuant to Article XI.5 of the Contract) to take possession of the Vessel and transfer her to another shipyard for completion, the Builder shall give the Buyer all such plans, diagrams, drawings and all such other documents, information and data in the possession of the 6 Builder and relating to the Contract (the "Information") that may reasonably be necessary for and/or relevant to the completion of the construction of the Vessel. The Builder hereby grants the Buyer (and, for the avoidance of doubt, at no cost to the Buyer) a non-exclusive irrevocable licence (with authority to grant sub-licences) to use the Information to complete the Vessel but on the basis that the Buyer shall procure that any third party who may need to use the Information in connection with the construction of the Vessel shall provide a confidentiality undertaking to the Buyer (for the benefit of itself and the Builder) regarding the use of that Information and shall use that Information for the sole purpose of completing the construction of the Vessel. The Builder shall indemnify the Buyer and keep the Buyer fully and effectively indemnified against all costs, claims, demands, expenses and liabilities of whatsoever nature arising out of or in connection with the Buyer's use of the Information including, without limitation, any damages (including costs) that may be awarded or agreed to be paid to any third party in respect of any claim or action that the use of the Information infringes the patent, copyright, registered design or trade mark rights of the said third party. 6. CONTINUING VALIDITY. Save only as expressly mentioned above, the Contract shall be and remain in full force and effect. This Addendum shall be treated as an integral part of the Contract. IN WITNESS WHEREOF the parties have executed this Addendum the 11th day of March 1999. ROYAL CARIBBEAN CRUISES LTD. By: /s/ (ILLEGIBLE) Witness: /s/ (ILLEGIBLE) Title: Vice President & Treasurer KVAERNER MASA-YARDS INC. By: /s/ (ILLEGIBLE) Witness: /s/ (ILLEGIBLE) Title: Attorney-in-fact Acknowledged and agreed, as at the date first mentioned above, by Kvaerner ASA as guarantor under the Kvaerner Guarantee: KVAERNER ASA By: /s/ (ILLEGIBLE) Witness: /s/ (ILLEGIBLE) Title: Attorney-in-fact EX-1.8 9 SECOND SUPPLEMENTAL AGREEMENT - ESKER 1 EXHIBIT 1.8 KREDITANSTALT FUR WIEDERAUFBAU (1) - and - ESKER MARINE SHIPPING INC. (2) --------------------------------------------- SECOND SUPPLEMENTAL AGREEMENT - TO - LOAN FACILITY AGREEMENT IN RESPECT OF M.V. "GALAXY" (EX YARD NO. 638 AT JOS. L. MEYER GMBH & CO.) F(W)751 --------------------------------------------- Sinclair Roche & Temperley London 2 INDEX
PAGE 1. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SECOND SUPPLEMENTAL AGREEMENT...................................................................2 2. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT............................................................3 2.1 Reduction of Margin Applicable to Loan B, Loan C and Loan D.................................3 2.2 Amendments to Loan C........................................................................4 2.3 Amendments to Asset Maintenance.............................................................4 2.4 Release of Assignments of Sub Earnings......................................................5 2.5 Other Amendments............................................................................7 3. LAW AND JURISDICTION................................................................................14 SCHEDULES 1. Form of Supplement to the Second Mortgage 2. Form of Supplement to the Second Assignment of Insurances 3. Form of Supplement to the Second Assignment of Charter Earnings 4. Form of Supplement to the Second Tripartite Agreement 5. Form of Addendum No. 2 to the Charter 6. Form of Supplement to Surplus Earnings Application Agreement 7. Form of Releases of First and Second Assignments of Sub-Earnings
3 THIS AGREEMENT made the 1st day of September 1998 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstra(beta)e 5-9, D-60325 Frankfurt am Main ("KfW"); and (2) ESKER MARINE SHIPPING INC a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("the Borrower") IS SUPPLEMENTAL TO a loan facility agreement dated 29 November 1993 as amended by an agreement supplemental thereto dated 30 November 1995 (together "the Original Loan Agreement"). WHEREAS:- (A) On 30 July 1997 Royal Caribbean Cruises Ltd ("RCCL"), a Liberian corporation, indirectly acquired the beneficial ownership of all of the issued shares of Fantasia Cruising Inc. ("Fantasia"), Zenith Shipping Corporation ("Zenith"), Blue Sapphire Marine Inc. ("Blue Sapphire"), the Borrower, Seabrook Maritime Inc. ("Seabrook") and Celebrity Cruises Inc. ("CCI"); (B) In consequence of the said change in beneficial ownership, by a Memorandum dated 12 December 1997 ("the Memorandum") issued by KfW and countersigned by Fantasia, Zenith, Blue Sapphire, the Borrower, Seabrook, CCI and RCCL, KfW has agreed (inter alia):- (i) to reduce the loan to be advanced by KfW to Seabrook for the financing of m.v. "MERCURY"; (ii) to advance the loan to Seabrook on the basis of a new credit agreement dated 12 December 1997 ("the Seabrook New Credit Agreement") made between 4 -2- Seabrook and KfW and a letter of guarantee from RCCL to KfW dated 12 December 1997; (iii) to release Seabrook from all guarantees issued by Seabrook in favour of KfW in respect of the loans made by KfW to finance the acquisition of m.v.'s "HORIZON", "ZENITH", "CENTURY" and "GALAXY". (C) By a letter dated 17 December 1997 addressed by KfW to Fantasia, Zenith, Blue Sapphire, the Borrower, Seabrook, CCI and RCCL, KfW in accordance with Clause 1.4 of the Memorandum has (inter alia) released:- (i) Seabrook from all its obligations to KfW under the guarantee dated 30 November 1995 executed by Seabrook in favour of KfW in respect of the obligations of the Borrower under the Original Loan Agreement; and (ii) the Borrower from all its obligations to KfW under the guarantee dated 30 November 1995 executed by the Borrower in favour of KfW in respect of the obligations of Seabrook under the Seabrook Loan Agreement (as defined under the Original Loan Agreement); (D) In order to give further effect to the Memorandum KfW and the Borrower have agreed to enter into this Second Supplemental Agreement. NOW IT IS HEREBY MUTUALLY AGREED by and between the parties thereto as follows:- 1. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SECOND SUPPLEMENTAL --------------------------------------------------------------------- AGREEMENT --------- 1.1 The following shall be effected concurrently with the execution of this Second Supplemental Agreement:- (A) the execution by the Borrower and the registration at the office of the Deputy Commissioner of Maritime Affairs of the Republic of Liberia at the port of New York of a Supplement No.1 to the Second Mortgage in the form and upon the 5 -3- terms and conditions of the draft set out in the First Schedule to this Second Supplemental Agreement; (B) the execution of the Borrower and CCI and delivery to KfW of a supplement to the Second Assignment of Insurances in the form and upon the terms and conditions of the draft set out in the Second Schedule to this Second Supplemental Agreement; (C) the execution by the Borrower and delivery to KfW of a supplement to the Second Assignment of Charter Earnings duly executed by the Borrower in the form and upon the terms and conditions of the draft set out in the Third Schedule to this Second Supplemental Agreement; (D) the execution by the Borrower and CCI and delivery to KfW of a supplement to the Second Tripartite Agreement in the form and upon the terms and conditions of the draft set out in the Fourth Schedule to this Second Supplement Agreement; (E) the execution by the Borrower and CCI of an addendum No. 2 to the Charter in the form and upon the terms and conditions of the draft set out in the Fifth Schedule to this Second Supplemental Agreement; (F) the execution by Fantasia, Zenith, Blue Sapphire, the Borrower, Seabrook and CCI of a supplement to the Surplus Earnings Application Agreement in the form and upon the terms and conditions of the draft set out in the Sixth Schedule to this Second Supplemental Agreement. 2. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT ----------------------------------------- 2.1 REDUCTION OF MARGIN APPLICABLE TO LOAN B, LOAN C AND LOAN D As and with effect from 12 December 1997 (being the date of the Memorandum referred to in Recital B to this Second Supplemental Agreement) the Margin applicable to each of Loan B, Loan C and Loan D will be deemed to have been reduced to forty-five basis points (0.45%) per annum. 6 -4- 2.2 AMENDMENTS TO LOAN C The following amendments to the Original Loan Agreement in respect of Loan C shall be deemed to be effective as from the date of this Second Supplemental Agreement:- (A) Notwithstanding any provision in Clause 4 of the Original Loan Agreement to the contrary, no Advance in respect of Loan C may be requested by the Borrower (nor will any such Advance be made by KfW) either in the remainder of the year 1998 or in the year 1999. (B) The maximum amount of Loan C is hereby reduced to USD72,634,748 of which USD18,158,687 has been advanced by KfW to the Borrower (and has subsequently been prepaid by the Borrower on 20 November 1997) and USD54,476,061 (being the equivalent of three (3) Deferrals (namely three (3) whole Repayment Instalments of Loan A plus three (3) whole Repayment Instalments of Loan B plus three (3) whole Repayment Instalments of Loan D) remains available to be drawn down by the Borrower in or after the year 2000 in accordance with the provisions of the Original Loan Agreement (as amended by this Second Supplemental Agreement). 2.3 AMENDMENTS TO ASSET MAINTENANCE As and with effect from the date of this Second Supplemental Agreement:- (A) Clause 14.1 shall be amended in line 1 by the deletion of "1 June 1996" and the substitution therefor of "1 January 2000" and the deletion in full of the proviso to Clause 14.1; (B) Clause 14.3 shall be amended by the deletion in lines 6-11 of the words in brackets commencing "(after deducting from the said principal balances ..." and ending with the words "... in accordance with the requirements of (i), (ii) and (iii) of the said Clause 2.5(B))"; 7 -5- (C) Clause 14.4 shall be amended by the deletion in the last line of "(other than the Second Assignment of Sub Earnings)"; (D) Clause 14.5 shall be deleted in full. 2.4 RELEASE OF ASSIGNMENTS OF SUB EARNINGS (A) Subject to:- (i) the Borrower and CCI first executing (and delivering a certified copy thereof to KfW) an addendum No. 2 to the Charter whereby the daily rate of hire under the Charter of the Vessel shall be increased to USD155,500 per day in 1998 and thereafter shall be at a daily rate sufficient to enable the Borrower to meet the repayment instalments of principal and the payments of interest in respect of the Loans as and when they fall due under the Original Loan Agreement (as amended by this Second Supplement Agreement); and (ii) the Borrower first procuring the execution (and delivery of the certified copies of KfW) by Fantasia, Zenith and Blue Sapphire and by CCI of addenda to the respective bareboat charterers of m.v.'s "HORIZON", "ZENITH" and "CENTURY" whereby the daily rate of hire thereunder is increased to USD37,100 per day for "HORIZON", USD51,500 per day for "ZENITH", USD149,700 per day for "CENTURY" in 1998 and thereafter shall be at a daily rate sufficient to enable Fantasia, Zenith and Blue Sapphire to meet their respective obligations as to the repayment instalments of principal and the payments of interest in respect of the loans as and when they fall due under the terms of Collateral Vessel Loan Agreement, the Zenith Loan Agreement and the First Newbuilding Loan Agreement THEN KfW will execute releases of all first and second assignments of Sub Earnings of the Vessel and m.v.'s "HORIZON", "ZENITH" and "CENTURY" in the form of the drafts set out in the Seventh Schedule to this Second Supplemental Agreement which once executed will be deemed effective as from 17 December 1997; 8 -6- (B) As and with effect from the date of this Second Supplemental Agreement KfW will permit the cash flow generated by the Vessel and m.v.'s "HORIZON", "ZENITH" and "CENTURY" to be centrally managed by RCCL unless and until the quarterly rating of Standard & Poor in respect of RCCL falls below "B Long Term" whereupon the Borrower will procure that:- (1) such central cash flow management by RCCL shall cease and the cash flow generated by the Vessel and m.v.'s "HORIZON", "ZENITH" and "CENTURY" will thereafter be paid to and managed separately and directly by CCI; and (2) any monies then owed by RCCL (or any member of the RCCL Group) to CCI shall be immediately paid to CCI. (C) As and with effect from the date of this Second Supplemental Agreement Clause 15 shall be amended as follows:- (1) Clause 15.1(A), Clause 15.1(B) and 15.1(C) shall be deleted in full and the following substituted therefor:- "(A) The Borrower will procure that RCCL furnishes to KfW as soon as the same become available its unaudited financial statements for each financial quarter of each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.1(A) shall be on Form 6-K (or any successor form) as filed with the U.S. Securities Exchange Commission and shall be prepared in accordance with U.S. generally accepted accounting principles subject to normal year end adjustments; (B) The Borrower will procure that RCCL furnishes to KfW as soon as the same become available its audited consolidated financial statements for each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.1(B) shall be 9 -7- prepared on Form 20-F (or any successor form) as filed with the U.S. Securities Exchange Commission and shall be in accordance with U.S. generally accepted accounting principles. (C) The Borrower will furnish to KfW not later than 120 days after the end of each financial year the unaudited financial statements in respect of each Obligor for each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.1(C) shall be in accordance with U.S. generally accepted accounting principles and certified as to their correctness by the chief financial officer of the relevant Obligor." (ii) Clause 15.2(A) and (B) and (C) shall be deleted in full; (iii) Clause 15.2(D) shall be amended by the deletion in line 3 of "international" and the substitution of "US". 2.5 OTHER AMENDMENTS As and with effect from the date of this Second Supplemental Agreement the Original Loan Agreement shall be further amended as follows:- (A) Definitions ----------- The definition of "Additional Securities" shall be amended by the deletion therefrom of "Seabrook Cross Securities"; The definition "Assignment of Sub Earnings" shall be deleted in full; The definition "Blue Sapphire Cross Securities" shall be amended by the deletion therefrom of paragraph (D); The definition "Borrower's Cross Securities" shall be amended by the deletion therefrom of "the Second Assignment of Sub Earnings"; 10 -8- The definition "Charter" shall be amended to read "means, in respect of the Vessel, the revised 'BARECON 89' charter dated 29 November 1993 as amended by Addendum No. 1 dated 30 November 1995 and Addendum No. 2 dated 1 September 1998 whereby the Borrower has bareboat chartered the Vessel to CCI for a minimum period of ten (10) years from the Delivery Date upon the terms and conditions therein contained;" The definition "Collateral Vessel Loan Agreement" shall be amended by the insertion after "29 January 1993" of "30 November 1995 and 1 September 1998"; The definition of "Cross Collateral Guarantees" shall be amended by the deletion therefrom in line 7 of "and Seabrook under the Seabrook Loan Agreement"; The definition "Deferral" shall be amended in line 1 by the deletion of "five (5)" and the substitution therefor of "four (4)"; The definition "Fantasia Cross Securities" shall be amended by the deletion therefrom of the reference to "(x)"; The definition "First Newbuilding Loan Agreement" shall be amended in line 2 by the insertion after "herewith" of "as amended by agreements supplemental thereto dated 30 November 1995 and 1 September 1998"; The definition "KfW Facility Agreements" shall be amended by the deletion therefrom of "and the Seabrook Loan Agreement"; The definition "Margin" shall be deemed to have been amended in accordance with the provisions of Clause 2.1; The definitions "Operating Reserve" and "Operating Reserve Bank" shall be deleted in full; A new definition "RCCL Group" shall be introduced as follows:- 11 -9- "RCCL GROUP" means group of companies consisting of RCCL and any company or corporation which is now or hereafter becomes a subsidiary of RCCL and "member of the RCCL group" shall be construed accordingly; The definition "Seabrook Cross Securities" shall be deleted in full; The definition "Seabrook Loan Agreement" shall be deleted in full; The definitions of "Second Assignment of Charter Earnings", "Second Assignment of Insurances" "Second Mortgage" and "Second Tripartite Agreement" shall each be deemed to include therein the respective supplements to each such security referred to in Clause 1.2; The definition "Second Assignment of Sub Earnings" shall be deleted in full; The definition "Shareholder Distribution" shall be amended to read:- ""Shareholder Distribution" means any dividend or other shareholder distribution but shall exclude (i) any payment made by the Borrower as part of the central cash flow management by RCCL of the cash flow generated by the Vessel so long as such central cash flow management is permitted pursuant to this Agreement and (ii) any repayment of principal and payment of interest on any intra Group loan to the Borrower;". The definition "Sub Earnings on Assignment" shall be deleted in full; The definition "Surplus Earnings Application Agreement" shall be deemed to include the supplement thereto referred to in Clause 1.2; The definition "Temporary Cash Flow Advance" shall be deleted in full; The definition "Zenith Cross Securities" shall be amended by the deletion therefrom of the reference to "(v)"; 12 -10- The definition "ZENITH Loan Agreement" shall be amended by the insertion after "31 March 1995" of "30 November 1995 and 1 September 1998". (B) Clause 11 Clause 11.1 shall be amended by the insertion of "; or" at the end of paragraph (C) and the insertion of a new paragraph "(D)" reading as follows:- "(D) at any time it becomes unlawful for any Obligor to perform any or all of its obligations under this Agreement, the Charter or any of the Security Documents to which any of them is a party and any such event shall continue unremedied for fifteen (15) days after notice thereof has been given to the Borrower by KfW;" Clause 11.3: in the formula "a + b - c" the definition of 'b' shall be amended to read: "b = such amount of interest calculated at 8% p.a. (or whatever rate is applicable to Loan A at the date of the relevant prepayment) as would have accrued, but for the prepayment on the amount of the prepayment of Loan A for the Remaining Period;" (C) Clause 13 --------- (i) Clause 13.1(J) shall be amended in lines 7-8 by the deletion of "5th August 1988 made between the United States Customs Service and Chandris Incorporated" and the substitution therefor of "made or to be made between the United States Customs Service and Celebrity Cruises Inc."; (ii) Clause 13.1(K) shall be amended by the deletion in line 3 of "Sub Earnings'"; 13 -11- (iii) Clause 13.1(M) shall be deleted in full; (iv) Clause 13.1(O) shall be amended by the deletion therefrom of the references to "Seabrook"; (v) Clause 13.2(D) shall be amended to read:- "(D) make any loans (save in the ordinary course of business) or grant any credit (save in the ordinary course of business);" (vi) Clause 13.2(F) shall be amended to read:- "(F) purchase or own any ship other than the Vessel;" (vii) Clause 13.3(D) shall be amended to read:- "carry on any business other than the ownership, operation and chartering of the Vessel and business relating thereto" (viii) Clause 13.3(E) shall be amended to read:- "(without prejudice to the central cash flow management by RCCL of the cash flow generated by the Vessel permitted pursuant to this Agreement and intra Group loans to the Borrower) save for the Subordinated Loan borrow any money or raise any funds save by borrowings which: (i) may from time to time be required to assist the Borrower in financing the ownership, operation and chartering of the Vessel; (ii) have received KfW's prior approval; and 14 -12- (iii) are unsecured and subordinated to all sums due to KfW under this Agreement by a document or documents in form and substance in all respects satisfactory to and approved by KfW". (ix) Clause 13.2(G) shall be amended by the addition of the following words at the end of the paragraph:- "or any set of articles of incorporation and bye-laws which, subject as provided in Clause 13.2(I) may be adopted in the future" (x) Clause 13.4 shall be deleted in full; (xi) Clause 13.6 shall be amended by the deletion therefrom of paragraph (B). (D) Clause 16.1, 16.2 and 16.3 shall be amended so as to delete -------------------------- therefrom all references to "CCI"; but the provisions in relation to Shareholder Distributions by the Borrower shall remain in full force and effect, with "Surplus Vessel Cash Flow" being amended to mean "(being the balance of the total Net Sub Earnings of the Vessel for that Financial Year less the instruments of principal and interest of the Loans which the Borrower is requested to pay to KfW in that Financial Year)"; (E) Clause 17 (i) Clause 17.2(E), line 2, shall be amended by the deletion of "fourteen (14) days" and the substitution of "thirty (30) days"; (ii) Clause 17.2(G) shall be deleted in full; (iii) Clause 17.2(H) shall be amended in line 4 by the insertion after "Borrowers" of "and such breach remains unremedied for thirty (30) days"; 15 -13- (iv) Clause 17.2(J) shall be amended to read:- "any judgment or order for the payment of money in excess of USD10,000,000 shall be rendered against the Borrower by a court of competent jurisdiction and the Borrower shall have failed to satisfy such judgment and either: (a) enforcement proceedings in respect of any material assets of the Borrower shall have been commenced by any creditor upon such judgment or order and shall not have been stayed or enjoined within five (5) Business Days after the commencement of such enforcement proceedings; or (b) there shall be a period of ten (10) consecutive Business Days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect." (v) In Clause 17.2(Q) and reference to "Seabrook" shall be deleted; (vi) Clause 17.2(R)(iv) shall be amended by the deletion of "the Seabrook Loan Agreement" and the substitution therefor of "the New Seabrook Credit Agreement"; (vii) Clause 17.2(S) shall be deleted in full; (viii) Clause 17.2(T) shall be amended by the insertion in line 6 after "made" of the words:- 16 -14- "and such incorrectness shall continue unremedied for at least five (5) Business Days after notice thereof shall have been given to the Borrower by KfW (or, if (a) such incorrectness is capable of being remedied within fifteen (15) days (commencing on the first day of such five (5) Business Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such incorrectness shall continue unremedied for at least fifteen (15) days; or" (ix) Clause 17.2(V) shall be amended to read:- "during the Security Period without the prior written consent of KfW, RCCL ceases to own beneficially (whether directly or indirectly) at least 51% of the issued stock carrying voting rights of the Borrower, Fantasia, Zenith, Blue Sapphire, Seabrook and CCI; or" (x) Clause 17.2(Z), Clause 17.2(AA) and Clause 17.2(AD) shall each be deleted; (xi) In Clause 17.2(AG) all references to "Seabrook" shall be deleted. 2.6 KfW hereby confirms that the Borrower has been released with effect from 1 June 1998 from any obligation under the Original Agreement and the Security Documents to effect and maintain or to reimburse KfW the cost of KfW effecting and maintaining mortgagees interest insurance and mortgagees additional perils (pollution) cover in respect of the Vessel and m.v.s "HORIZON", "ZENITH" and "CENTURY" in the case of the mortgagees interest insurance with effect from 1 June 1998 and in the case of the mortgagees additional perils (pollution cover) with effect from 1 January 1998. 2.7 For the purpose of all notice clauses contained in the Original Agreement or any of the Security Documents to which the Borrower is a party, all notices to the Borrower shall henceforward be sent to the Borrower: 17 -15- c/o Celebrity Cruises Inc. 1050 Caribbean Way Miami Florida 33132-2096 USA Telefax No: 305-539-0562 Attention: Vice President & Treasurer with copy to Vice President & General Counsel 2.8 All references in the Original Agreement to "this Agreement" "hereunder" "hereof"or "herein" shall be deemed to refer to the Original Loan Agreement as amended by this Second Supplemental Agreement. 2.9 Save as amended by Clause 2.1 to 2.6 (both inclusive) the Original Loan Agreement shall remain unchanged and in full force and effect. 1.1 3. LAW AND JURISDICTION -------------------- The provisions of Clauses 29 (Law) and 30 (Jurisdiction) of the Original Loan Agreement shall apply to this Second Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. SIGNED by ) /s/ ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) /s/ SIGNED by ) ) for and on behalf of ) /s/ ESKER MARINE SHIPPING INC ) in the presence of:- ) /s/ Don K. Kick /s/ ------------------------------------ Don K. Kick Notary Public State of New York No. 41-4958845 18 THE FIRST SCHEDULE SUPPLEMENT NO. 1 -TO- SECOND PREFERRED MORTGAGE -ON- "GALAXY" SUPPLEMENT NO. 1 dated 1998 ("this Supplement No. 1") to a second preferred mortgage dated 20 November 1996 ("the Mortgage") by ESKER MARINE SHIPPING INC. a Liberian corporation ("the Owner") in favour of KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose registered office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("the Mortgagee") recorded on 20 November 1996 at 10.17 A.M. E.S.T. in Book PM48 at Page 1025. WHEREAS:- A. The Owner is the registered and beneficial owner of the whole of the Liberian flag cruise vessel "GALAXY" ("the Vessel"): official number "10527" of 76,522 gross and 43,108 net tons; or thereabouts, duly documented in the name of the Owner under the laws of the Republic of Liberia, with her home port at Monrovia, Liberia; B. Words and expressions defined in the Mortgage shall, unless stated herein to the contrary, bear the same meanings when used in this Supplement No. 1; C. By a letter dated 17 December 1997 addressed by the Mortgagee to (inter alios) the Owner the Mortgagee has (inter alia) released the Owner from all of its obligations under the Guarantee dated 30 November 1995 in respect of the Seabrook Loan Agreement; D. At the date of this Supplement No. 1 the aggregate of possible advances that may be made by the Mortgagee to Fantasia pursuant to the Horizon Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 1) is eight million three hundred and eighty seven thousand four hundred and eighty United States Dollars (USD8,387,480) (of which USD7,455,536 is Fantasia Loan A, USD931,944 is Fantasia Loan B, zero is Fantasia Loan C and zero is Fantasia Loan D; E. At the date of this Supplement No. 1 the aggregate of all possible advances that may be made by the Mortgagee to Zenith pursuant to the Zenith Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 1) is one hundred and five million nine hundred and eighty-four thousand two hundred and twenty-five United States Dollars and thirty-six cents (USD105,984,225.36) (of which USD45,694,112 is Zenith Loan A, USD58,856,706.13 is Zenith Loan B, USD1,433,407.23 is Zenith Loan C and zero is Zenith Loan D; F. By an agreement dated 1998 supplemental to the Blue Sapphire Loan Agreement it has been agreed by Blue Sapphire with the Mortgagee that the maximum amount of Blue Sapphire Loan C available to be advanced by the Mortgagee shall be reduced to USD35,493,844 Dollars and at the date of this Supplement No. 1 the aggregate of all possible advances that may be made by the Mortgagee to Blue Sapphire 19 EXHIBIT 1.5 -2- pursuant to the Blue Sapphire Loan Agreement is two hundred and forty-eight million four hundred and fifty six thousand nine hundred and eight Dollars (USD248,456,908) United States Dollars (of which USD179,261,284 is Blue Sapphire Loan A, USD22,407,660 is Blue Sapphire Loan B, USD35,493,844 is Blue Sapphire Loan C and USD11,294,120 is Blue Sapphire Loan D; G. The Owner and the Mortgagee wish by this Supplement No. 1 to amend the Recording Clause of the Mortgage so as to reflect the transactions referred to in Recitals C, D, E and F. NOW THEREFORE, in consideration of the premises and other good and valuable consideration the receipt and sufficiency whereof are hereby acknowledged by the Owner and the Mortgagee, the Owner and the Mortgagee hereby covenant and agree as follows:- 1. As and with effect from 17 December 1997 the Mortgage shall cease to secure Seabrook Loan A, Seabrook Loan B, Seabrook Loan C and Seabrook Loan D. 2. For the purpose of recording this Supplement No. 1 as required by Chapter 3 of Title 22 of the Liberian Code of Law of 1956, as amended, this Supplement No. 1 amends the total amount secured by the Mortgage. The total amount of the Mortgage is amended to three hundred and sixty two million eight hundred and twenty-eight thousand six hundred and thirteen Dollars and thirty-six cents (USD362,828,613.36) (of which USD8,387,480 is the aggregate of Fantasia Loan A, Fantasia Loan B, Fantasia Loan C and Fantasia Loan D, USD105,984,225.36 is the aggregate of Zenith Loan A, Zenith Loan B, Zenith Loan C and Zenith Loan D and USD248,456,908 is the aggregate of Blue Sapphire Loan A, Blue Sapphire Loan B, Blue Sapphire Loan C and Blue Sapphire Loan D) and interest and performance of mortgage covenants. The date of maturity is on demand. There is no separate discharge amount. IN WITNESS whereof the Owner and the Mortgagee have executed this Supplement No. 1 the date and year first before written. ESKER MARINE SHIPPING INC. By: ------------------------------------ Title: KREDITANSTALT FUR WIEDERAUFBAU By: ----------------------------------- Title: Attorney-in-Fact 20 ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1998 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 1 who, being by me duly sworn, did depose and say that he resides at ; that he is of Esker Marine Shipping Inc., a Liberian corporation, the entity described in and which executed the foregoing Supplement No. 1; that he signed his name thereto pursuant to authority granted to him by the Board of Directors of the said entity; and he further acknowledged that the said Supplement No. 1 is the act and deed of the said entity. ----------------------------------- NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 21 ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the _____ day of ____________________ 1998 before me personally came ______________, to me known, and known to me to be the person who executed the foregoing Supplement No. 1 who, being by me duly sworn, did depose and say that he/she resides at ______________________; that he/she is Attorney-in-Fact for Kreditanstalt fur Wiederaufbau the corporation described in and which executed the foregoing Supplement No. 1; that he/she signed his/her name thereto pursuant to authority granted to him/her by a Power of Attorney of the said entity; and he/she further acknowledged that the said Supplement No. 1 is the act and deed of the said entity. ------------------------------ NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 22 -1- THE SECOND SCHEDULE THIS DEED dated the day of 1998 made between: (1) ESKER MARINE SHIPPING INC. ("the Owner") (2) CELEBRITY CRUISES INC. ("the Charterer") and (3) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a deed of second assignment of insurances of the Liberian flag cruise vessel m.v. "GALAXY" dated 20 November 1996 ("the Original Assignment"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed; B. By a letter dated 17 December 1997 addressed by the Assignee to (inter alios) the Owner the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Owner in favour of the Assignee in respect of the obligations of Seabrook Maritime Inc. under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Owner under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 23 -2- 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 12 (Governing Law) and Clause 13 (Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by ESKER MARINE SHIPPING INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 24 - 1 - THE THIRD SCHEDULE THIS DEED dated the day of 1998 made between: (1) ESKER MARINE SHIPPING INC. ("the Assignor") and (2) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a deed of second assignment of Charter Earnings, Owner's Requisition Compensation and Earnings of the Liberian flag cruise vessel m.v. "GALAXY" dated 20 November 1996 ("the Original Assignment"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed; B. By a letter dated 17 December 1997 addressed by the Assignee to (inter alios) the Assignor the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Assignor in favour of the Assignee in respect of the obligations of Seabrook Maritime Inc under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Assignor under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Assignor under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 25 -2- 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 12 (Governing Law) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by ESKER MARINE SHIPPING INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 26 THE FOURTH SCHEDULE THIS AGREEMENT dated the day of 1998 made between: (1) ESKER MARINE SHIPPING INC. ("the Owner") (2) CELEBRITY CRUISES INC. ("the Charterer") and (3) KREDITANSTALT FUR WIEDERAUFBAU ("the Mortgagee") IS SUPPLEMENTAL TO a second tripartite agreement in respect of the Liberian flag cruise vessel m.v. "GALAXY" dated 30 November 1995 ("the Original Agreement") WHEREAS:- A. Words and expressions defined in the Original Agreement shall bear the same meanings when used in this Supplemental Agreement; B. By a letter dated 17 December 1997 addressed by the Mortgagee to (inter alios) the Owner and the Charterer the Mortgagee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Owner in favour of the Mortgagee in respect of the obligations of Seabrook Maritime Inc under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Agreement in order that the Original Agreement shall cease to stand as security for the obligations of the Owner under the Released Guarantee; C. By a Supplement No. 1 of even date herewith to the Second Mortgage the Owner and the Mortgagee have agreed that as and with effect from 17 December 1997 the Second Mortgagee shall cease to stand as security for the Released Guarantee. NOW it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Agreement shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Agreement:- (A) the expression "Guarantees" shall exclude the Released Guarantee; (B) the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; (C) the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 27 -2- D. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 8 (Applicable Law and Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Agreement has been executed by the parties hereto on the day and year first before written. SIGNED ) by ESKER MARINE SHIPPING INC. ) acting by ) ) in the presence of:- ) SIGNED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of:- ) SIGNED ) by ) KREDITANSTALT FUR WIEDERAUFBAU ) acting by ) ) in the presence of:- ) 28 THE FIFTH SCHEDULE ADDENDUM NO. 2 DATED 1998 TO THE MODIFIED "BARECON '89" BAREBOAT CHARTER DATED 29 NOVEMBER 1993 AS AMENDED BY ADDENDUM NO. 1 DATED 30 NOVEMBER 1995 (TOGETHER "THE CHARTER") BETWEEN ESKER MARINE SHIPPING INC. ("THE OWNERS") AND CELEBRITY CRUISES INC. ("THE CHARTERERS") IN RESPECT OF M.V. "GALAXY" ("THE VESSEL") WHEREAS: A. Words and expressions defined in the Charter shall have the same meanings when used in this Addendum No. 2; B. The Owners and Charterers are desirous of amending the Charter upon the terms of this Addendum No. 2. NOW IT IS HEREBY AGREED:- 1. As and with effect from 199 the Charter is hereby amended as follows:- (A) CLAUSE 28: In respect of the period from 199 until 31 December 1998 the daily rate of hire shall be amended to USD155,500 per calendar day SAVE THAT:- (i) if there is any prepayment of principal under the KfW Loan Agreement prior to December 31, 1998, the daily rate of hire shall be adjusted immediately after that prepayment so as to be such rate per calendar day which is required to enable the Owners to meet their obligations under the KfW Loan Agreement as to the repayment of principal and the payment of interest for the balance of the year ended December 31, 1998 (after taking account of such prepayment) as shall be agreed between the Owners and the Charterers (and approved by the Mortgagees); (ii) for the year ended December 31, 1999 and each subsequent year of the Charter period (inclusive if the Option is exercised of the further two and one half (2 1/2) years which will commence upon expiry of the initial ten (10) year period), the daily rate of hire shall be such rate which is 29 -2- required to enable the Owners to meet their obligations under the KfW Loan Agreement as to the repayment of principal and the payment of interest during each such year, as shall be agreed between the Owners and the Charterers (and approved by of the Mortgagees) and adjusted as necessary thereafter by reason of any prepayment of principal under the KfW Loan Agreement. Such hire shall be payable semi-annually in arrears on the same dates as principal and interest are due under the KfW Loan Agreement (or at such other intervals as shall from time to time be agreed between the Owners and the Charterers) to such account as shall from time to time be specified by the Owners/Mortgagees. (B) CLAUSE 29: Lines 10-13 to be amended to read: "favour of the Mortgagees as security for the Cross Collateral Guarantees (as defined in the KfW Loan Agreement)". (C) CLAUSE 30.01 shall be amended by: (i) amending sub-paragraph (c) by deleting the words "a petition is presented or"; and (ii) by deleting sub-paragraphs (d), (e), (f), (g) and (h); and (iii) by re-lettering sub-paragraph (i) as sub-paragraph (d) and amending it by replacing "(h)" in the last line with "(c)". (D) CLAUSE 31 shall be deleted in full. (E) All references in the Charter to "the KfW Loan Agreement" shall be deemed to include the supplemental agreement dated 1998 made between the Mortgagees and the Owners. 2. Save as amended by this Addendum No. 2 the Charter shall remain unchanged and in full force and effect. 3. The provisions of Clause 26 (Law and Arbitration) of the Charter shall apply to this Addendum No. 2 mutatis mutandis. SIGNED by ) ) for and on behalf of ) ESKER MARINE SHIPPING INC. ) SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) 30 -1- THE SIXTH SCHEDULE THIS AGREEMENT dated the day of 1998 BETWEEN:- (1) FANTASIA CRUISING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Fantasia"); (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Zenith"); (3) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Blue Sapphire"); (4) ESKER MARINE SHIPPING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Esker"); (5) SEABROOK MARITIME INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Seabrook"); (6) CELEBRITY CRUISES INC. a corporation incorporated under the laws of the Republic of Liberia whose principal place of business is at 95 Akti Miaouli, Piraeus, Greece ("CCI"); and (7) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KfW") 31 -2- IS SUPPLEMENTAL TO an agreement dated 30 November 1995 (known as the 'Surplus Earnings Application Agreement') made between the same parties. WHEREAS:- Pursuant to a memorandum dated 12 December 1997 signed by KfW and countersigned by each of the other parties hereto and by Royal Caribbean Cruises Ltd. ("RCCL") it was (inter alia) agreed that KfW would enter into an agreement supplemental to the Original Agreement so as to release Seabrook from being a party thereto and to delete therefrom the provisions relating to the application of Sub Earnings or Net Sub Earnings of each Vessel (as each such expression is defined in the Original Agreement) by reason of the release by KfW pursuant to the said memorandum of each of the assignments of the said Sub Earnings and Net Sub Earnings referred to in Recital G to the Original Agreement. NOW IT IS HEREBY AGREED by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 ("the Effective Date"), KfW hereby releases Seabrook from any further obligations and liabilities under the Original Agreement and Seabrook shall cease to be a party to the Original Agreement. 2. As and with effect from the Effective Date:- 3. Clause 2 of the Original Agreement shall cease to apply and shall be deemed to have been deleted from the Original Agreement; 4. Clause 3 of the Original Agreement shall be amended as follows:- 1. Clause 3.1(E) and Clause 3.2(E) shall each be deleted in full; 2. Throughout Clause 3 all references to "639", "639 Loans" and "the Seabrook Loan Agreement" (sometimes also referred to as "the 639 Loan Agreement") shall be deleted; 32 -3- 3. Throughout Clause 3 all references to "637 Loan Agreement" and "638 Loan Agreement" shall be deemed to refer to the Blue Sapphire Loan Agreement and the Esker Loan Agreement respectively. 1. Save as amended hereby the Original Agreement shall remain unchanged and in full force and effect. 2. Each of the Owners (other than Seabrook) and CCI hereby acknowledge towards KfW that notwithstanding the said release of Seabrook they shall remain bound by the Original Agreement (as amended and supplemented by this Supplemental Agreement). 3. The provisions of Clause 5 (Applicable Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. 33 -4- IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written SIGNED by ) ) for and on behalf of ) FANTASIA CRUISING INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ESKER MARINE SHIPPING INC. ) in the presence of:- ) 34 -5- SIGNED by ) ) for and on behalf of ) SEABROOK MARITIME INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 35 THE SEVENTH SCHEDULE THIS DEED OF REASSIGNMENT is made the day of 1988 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU of Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("KfW"); (2) ESKER MARINE SHIPPING INC. a corporation duly incorporated under the laws of the Republic of Liberia having its registered office at 80 Broad Street, Monrovia, Republic of Liberia ("the Owner"); and (3) CELEBRITY CRUISES INC. a corporation duly incorporated under the laws of the Republic of Liberia having its registered office at 80 Broad Street, Monrovia, Republic of Liberia ("CCI"). WHEREAS:- A. By a deed of assignment dated 20 November 1996 ("the Original Assignment") the Owner assigned to KfW all the rights, title and interest of the Owner under a first general assignment of sub-earnings of the Liberian cruise vessel "GALAXY" dated 20 November 1996 ("the CCI Assignment") granted by CCI to the Owner; B. Words and expressions defined in the Original Assignment shall have the same meanings when used in this Deed of Reassignment; C. On 30 July 1997 Royal Caribbean Cruises Ltd. ("RCCL"), a Liberian corporation, indirectly acquired the beneficial ownership of all of the issued shares of Fantasia Cruising Inc. ("Fantasia"), Zenith Shipping Corporation ("Zenith"), Blue Sapphire Marine Inc. ("Blue Sapphire"), Esker Marine Shipping Inc. ("Esker"), Seabrook Maritime Inc. ("Seabrook") and CCI; D. Pursuant to a memorandum dated 12 December 1997 ("the Memorandum") issued by KfW and countersigned by Fantasia, Zenith, Blue Sapphire, Esker, Seabrook, CCI and RCCL, KfW has (inter alia) agreed to enter into this Deed of Reassignment. 36 -2- NOW THIS DEED WITNESSETH as follows: 1. Pursuant to the Memorandum and in consideration of the premises and other good and valuable consideration (the receipt and sufficiency whereof KfW hereby acknowledges) KfW (without any warranty on the part of KfW and without recourse of KfW) hereby reassigns to the Owner absolutely all KfW's rights, title and interest in and to the benefit of the CCI Assignment and all Net Sub Earnings of the said cruise vessel which were assigned to KfW pursuant to the Original Assignment. The said reassignment shall be deemed to have taken effect as from 17 December 1997. 2. CCI by its signature to this Deed of Reassignment hereby acknowledges notice of the said reassignment hereby effected by KfW to the Owner without the necessity for KfW to give a separate notice of such reassignment to CCI. 3. This Deed of Reassignment shall be governed by and construed in accordance with the laws of England. IN WITNESS whereof KfW and CCI have executed this Deed of Reassignment the day and year first before written. SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) CELEBRITY CRUISES INC ) in the presence of:- ) EX-1.9 10 SECOND SUPPLEMENTAL AGREEMENT - BLUE SAPPHIRE 1 EXHIBIT 1.9 KREDITANSTALT FUR WIEDERAUFBAU (1) - and - BLUE SAPPHIRE MARINE INC. (2) SECOND SUPPLEMENTAL AGREEMENT - TO - LOAN FACILITY AGREEMENT IN RESPECT OF M.V. "CENTURY" (EX YARD NO. 637 AT JOS. L. MEYER GMBH & CO.) F(W)750 Sinclair Roche & Temperley London 2 INDEX
CLAUSE SUBJECT PAGE 1. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SECOND SUPPLEMENTAL AGREEMENT..............................................................2 2. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT............................................................3 2.1 Reduction of Fixed Interest for Loan A and of Margin Applicable to Loan B, Loan C and Loan D.....................................................3 2.2 Amendments to Loan C........................................................................4 2.3 Amendments to Asset Maintenance.............................................................4 2.4 Release of Assignments of Sub Earnings......................................................5 2.5 Other Amendments............................................................................7 3. LAW AND JURISDICTION................................................................................14 SCHEDULES: 1. Form of Supplement to the Second Mortgage 2. Form of Supplement to the Second Assignment of Insurances 3. Form of Supplement to the Second Assignment of Charter Earnings 4. Form of Supplement to the Second Tripartite Agreement 5. Form of Addendum No. 2 to the Charter 6. Form of Supplement to Surplus Earnings Application Agreement 7. Form of Releases of First and Second Assignments of Sub-Earnings
3 THIS AGREEMENT made the 1st day of September 1998 BETWEEN: (1) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstra(beta)e 5-9, D-60325 Frankfurt am Main ("KfW"); and (2) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("the Borrower") IS SUPPLEMENTAL TO a loan facility agreement dated 29 November 1993 as amended by an agreement supplemental thereto dated 30 November 1995 (together "the Original Loan Agreement"). WHEREAS:- (A) On 30 July 1997 Royal Caribbean Cruises Ltd. ("RCCL"), a Liberian corporation, indirectly acquired the beneficial ownership of all of the issued shares of Fantasia Cruising Inc. ("Fantasia"), Zenith Shipping Corporation ("Zenith"), the Borrower, Esker Marine Shipping Inc. ("Esker"), Seabrook Maritime Inc. ("Seabrook") and Celebrity Cruises Inc. ("CCI"); (B) In consequence of the said change in beneficial ownership, by a memorandum dated 12 December 1997 ("the Memorandum") issued by KfW and countersigned by Fantasia, Zenith, the Borrower, Esker, Seabrook, CCI and RCCL, KfW has agreed (inter alia):- (i) to reduce the loan to be advanced by KfW to Seabrook for the financing of m.v. "MERCURY"; (ii) to advance the loan to Seabrook on the basis of a new credit agreement dated 12 December 1997 ("the Seabrook New Credit Agreement") made between 4 -2- Seabrook and KfW and a letter of guarantee from RCCL to KfW dated 12 December 1997; (iii) to release Seabrook from all guarantees issued by Seabrook in favour of KfW in respect of the loans made by KfW to finance the acquisition of m.v.'s "HORIZON", "ZENITH", "CENTURY" and "GALAXY". (C) By a letter dated 17 December 1997 addressed by KfW to Fantasia, Zenith, the Borrower, Esker, Seabrook, CCI and RCCL, KfW in accordance with Clause 1.4 of the Memorandum has (inter alia) released:- (i) Seabrook from all its obligations to KfW under the guarantee dated 30 November 1995 executed by Seabrook in favour of KfW in respect of the obligations of the Borrower under the Original Loan Agreement; and (ii) the Borrower from all its obligations to KfW under the guarantee dated 30 November 1995 executed by the Borrower in favour of KfW in respect of the obligations of Seabrook under the Seabrook Loan Agreement (as defined under the Original Loan Agreement); (D) In order to give further effect to the Memorandum KfW and the Borrower have agreed to enter into this Second Supplemental Agreement. NOW IT IS HEREBY MUTUALLY AGREED by and between the parties thereto as follows:- 1. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SECOND SUPPLEMENTAL AGREEMENT 1.1 The following shall be effected concurrently with the execution of this Second Supplemental Agreement:- (A) the execution by the Borrower and the registration at the office of the Deputy Commissioner of Maritime Affairs of the Republic of Liberia at the port of New York of a Supplement No.1 to the Second Mortgage in the form and upon the 5 - 3 - terms and conditions of the draft set out in the First Schedule to this Second Supplemental Agreement; (2) the execution of the Borrower and CCI and delivery to KfW of a supplement to the Second Assignment of Insurances in the form and upon the terms and conditions of the draft set out in the Second Schedule to this Second Supplemental Agreement; (3) the execution by the Borrower and delivery to KfW of a supplement to the Second Assignment of Charter Earnings duly executed by the Borrower in the form and upon the terms and conditions of the draft set out in the Third Schedule to this Second Supplemental Agreement; (4) the execution by the Borrower and CCI and delivery to KfW of a supplement to the Second Tripartite Agreement in the form and upon the terms and conditions of the draft set out in the Fourth Schedule to this Second Supplement Agreement; (5) the execution by the Borrower and CCI of an addendum No. 2 to the Charter in the form and upon the terms and conditions of the draft set out in the Fifth Schedule to this Second Supplemental Agreement; (6) the execution by Fantasia, Zenith, the Borrower, Esker, Seabrook and CCI of a supplement to the Surplus Earnings Application Agreement in the form and upon the terms and conditions of the draft set out in the Sixth Schedule to this Second Supplemental Agreement. 2. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT 2.1 REDUCTION OF FIXED INTEREST FOR LOAN A AND OF MARGIN APPLICABLE TO LOAN B, LOAN C AND LOAN D As and with effect from 12 December 1997 (being the date of the Memorandum referred to in Recital B to this Second Supplemental Agreement) the fixed interest payable on Loan A will be reduced to 7.65% per annum (and as and with effect from 9 April 1998 will be further reduced to 6.73%) and the Margin applicable to each of 6 -4- Loan B, Loan C and Loan D will be deemed to have been reduced to forty-five basis points (0.45%) per annum. 2.2 AMENDMENTS TO LOAN C The following amendments to the Original Loan Agreement in respect of Loan C shall be deemed to be effective as from the date of this Second Supplemental Agreement:- (A) Notwithstanding any provision in Clause 4 of the Original Loan Agreement to the contrary, no Advance in respect of Loan C may be requested by the Borrower (nor will any such Advance be made by KfW) either in the remainder of the year 1998 or in the year 1999. (B) The maximum amount of Loan C is hereby reduced to USD70,987,688 of which USD35,493,844 has been advanced by KfW to the Borrower prior to the date of this Second Supplement Agreement (and has subsequently been prepaid by the Borrower on 2 June 1998) and USD35,493,844 (being the equivalent of two (2) Deferrals (namely two (2) whole Repayment Instalments of Loan A plus two ---- (2) whole Repayment Instalments of Loan B plus two (2) whole Repayment Instalments of Loan D) remains available to be drawn down by the Borrower in or after the year 2000 in accordance with the provisions of the Original Loan Agreement (as amended by this Second Supplemental Agreement). 2.3 AMENDMENTS TO ASSET MAINTENANCE As and with effect from the date of this Second Supplemental Agreement:- (A) Clause 14.1 shall be amended in line 1 by the deletion of "1 June 1996" and the substitution therefor of "1 January 2000" and the deletion in full of the proviso to Clause 14.1; (B) Clause 14.3 shall be amended by the deletion in lines 6-11 of the words in brackets commencing "(after deducting from the said principal balances ..." and 7 -5- ending with the words "... in accordance with the requirements of (i), (ii) and (iii) of the said Clause 2.5(B))"; (C) Clause 14.4 shall be amended by the deletion in the last line of "(other than the Second Assignment of Sub Earnings)"; (1) (D) Clause 14.5 shall be deleted in full. 2.4 RELEASE OF ASSIGNMENTS OF SUB EARNINGS (A) Subject to:- (i) the Borrower and CCI first executing (and delivering a certified copy thereof to KfW) an addendum No. 2 to the Charter whereby the daily rate of hire under the Charter of the Vessel shall be increased to USD149,700 per day in 1998 and thereafter shall be at a daily rate sufficient to enable the Borrower to meet the repayment instalments of principal and the payments of interest in respect of the Loans as and when they fall due under the Original Loan Agreement (as amended by this Second Supplement Agreement); and (ii) the Borrower first procuring the execution (and delivery of the certified copies of KfW) by Fantasia, Zenith and Esker and by CCI of addenda to the respective bareboat charterers of m.v.'s "HORIZON", "ZENITH" and "GALAXY" whereby the daily rate of hire thereunder is increased to USD37,100 per day for "HORIZON", USD51,500 per day for "ZENITH", USD155,500 per day for "GALAXY" in 1998 and thereafter shall be at a daily rate sufficient to enable Fantasia, Zenith and Esker to meet their respective obligations as to the repayment instalments of principal and the payments of interest in respect of the loans as and when they fall due under the terms of the Collateral Vessel Loan Agreement, the "ZENITH" Loan Agreement and the Second Newbuilding Loan Agreement THEN KfW will execute releases of all first and second assignments of Sub Earnings of the Vessel and m.v.'s "HORIZON", "ZENITH" and "GALAXY" 8 -6- in the form of the drafts set out in the Seventh Schedule to this Second Supplemental Agreement, which once executed will be deemed effective as from 17 December 1997; (B) As and with effect from the date of this Second Supplemental Agreement KfW will permit the cash flow generated by the Vessel and m.v.'s "HORIZON", "ZENITH" and "GALAXY" to be centrally managed by RCCL unless and until the quarterly rating of Standard & Poor in respect of RCCL falls below "B Long Term" whereupon the Borrower will procure that:- (1) such central cash flow management by RCCL shall cease and the cash flow generated by the Vessel and m.v.'s "HORIZON", "ZENITH" and "GALAXY" will thereafter be paid to and managed separately and directly by CCI; and (2) any monies then owed by RCCL (or any member of the RCCL Group) to CCI shall be immediately paid to CCI. (C) As and with effect from the date of this Second Supplemental Agreement Clause 15 shall be amended as follows:- (i) Clause 15.1(A), Clause 15.1(B) and 15.1(C) shall be deleted in full and the following substituted therefor:- "(A) The Borrower will procure that RCCL furnishes to KfW as soon as the same become available its unaudited financial statements for each financial quarter of each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.1(A) shall be on Form 6-K (or any successor form) as filed with the U.S. Securities Exchange Commission and shall be prepared in accordance with U.S. generally accepted accounting principles subject to normal year end adjustments; 9 -7- (B) The Borrower will procure that RCCL furnishes to KfW as soon as the same become available its audited consolidated financial statements for each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.1(B) shall be prepared on Form 20-F (or any successor form) as filed with the U.S. Securities Exchange Commission and shall be in accordance with U.S. generally accepted accounting principles. (C) The Borrower will furnish to KfW not later than 120 days after the end of each financial year the unaudited financial statements in respect of each Obligor for each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.1(C) shall be in accordance with U.S. generally accepted accounting principles and certified as to their correctness by the chief financial officer of the relevant Obligor." (ii) Clause 15.2(A), (B) and (C) shall be deleted in full; (iii) Clause 15.2(D) shall be amended by the deletion in line 3 of "international" and the substitution of "US". 2.5 OTHER AMENDMENTS As and with effect from the date of this Second Supplemental Agreement the Original Loan Agreement shall be further amended as follows:- (A) Definitions ----------- The definition of "Additional Securities" shall be amended by the deletion therefrom of "Seabrook Cross Securities"; The definition "Assignment of Sub Earnings" shall be deleted in full; 10 -8- The definition "Borrower's Cross Securities" shall be amended by the deletion therefrom of "the Second Assignment of Sub Earnings"; The definition "Charter" shall be amended to read "means, in respect of the Vessel, the revised 'BARECON 89' charter dated 29 November 1993 as amended by Addendum No.1 dated 30 November 1995 and Addendum No. 2 dated 1 September 1998 whereby the Borrower has bareboat chartered the Vessel to CCI for a minimum period of ten (10) years from the Delivery Date upon the terms and conditions therein contained;" The definition "Collateral Vessel Loan Agreement" shall be amended by the insertion after "29 January 1993" of "30 November 1995 and 1 September 1998"; The definition of "Cross Collateral Guarantees" shall be amended by the deletion therefrom in line 7 of "and Seabrook under the Seabrook Loan Agreement"; The definition "Deferral" shall be amended in line 1 by the deletion of "five (5)" and the substitution therefor of "four (4)"; The definition "Esker Cross Securities" shall be amended by the deletion therefrom of paragraph (D); The definition "Fantasia Cross Securities" shall be amended by the deletion therefrom of the reference to "(x)"; The definition "KfW Facility Agreements" shall be amended by the deletion therefrom of "and the Seabrook Loan Agreement"; The definition "Margin" shall be deemed to have been amended in accordance with the provisions of Clause 2.1; The definitions "Operating Reserve" and "Operating Reserve Bank" shall be deleted in full; 11 -9- A new definition "RCCL Group" shall be introduced as follows:- "RCCL GROUP" means group of companies consisting of RCCL and any company or corporation which is now or hereafter becomes a subsidiary of RCCL and "member of the RCCL group" shall be construed accordingly; The definition "Seabrook Cross Securities" shall be deleted in full; The definition "Seabrook Loan Agreement" shall be deleted in full; The definitions of "Second Assignment of Charter Earnings", "Second Assignment of Insurances" "Second Mortgage" and "Second Tripartite Agreement" shall each be deemed to include therein the respective supplements to each such security referred to in Clause 1.2; The definition "Second Newbuilding Agreement" shall be amended in line 2 by the insertion after "herewith" of "as amended by agreements supplemental thereto dated 30 November 1995 and 1 September 1998"; The definition "Second Assignment of Sub Earnings" shall be deleted in full; The definition "Shareholder Distribution" shall be amended to read:- ""Shareholder Distribution" means any dividend or other shareholder distribution but shall exclude (i) any payment made by the Borrower as part of the central cash flow management by RCCL of the cash flow generated by the Vessel so long as such central cash flow management is permitted pursuant to this Agreement and (ii) any repayment of principal and payment of interest on any intra Group loan to the Borrower;". The definition "Sub Earnings on Assignment" shall be deleted in full; The definition "Surplus Earnings Application Agreement" shall be deemed to include the supplement thereto referred to in Clause 1.2; 12 -10- The definition "Temporary Cash Flow Advance" shall be deleted in full; The definition "Zenith Cross Securities" shall be amended by the deletion therefrom of the reference to "(v)"; The definition "ZENITH Loan Agreement" shall be amended by the insertion after "31 March 1995" of "30 November 1995 and 1 September 1998". (B) Clause 7 -------- Clause 7.1 shall be amended in line 4 by the deletion of "eight per centum (8%) per annum" and the substitution therefor of "six point seven three per centum (6.73%) per annum". (C) Clause 11 --------- Clause 11.1 shall be amended by the insertion of "; or" at the end of paragraph (C) and the insertion of a new paragraph "(D)" reading as follows:- "(D) at any time it becomes unlawful for any Obligor to perform any or all of its obligations under this Agreement, the Charter or any of the Security Documents to which any of them is a party and any such event shall continue unremedied for fifteen (15) days after notice thereof has been given to the Borrower by KfW;" Clause 11.3: in the formula "a + b - c" the definition of 'b' shall be amended to read: "b = such amount of interest calculated at 6.23% per annum (6.73% less the 0.50% margin) (or whatever rate is applicable to Loan A at the date of the relevant prepayment) as would have accrued, but for the prepayment, on the amount of the prepayment of Loan A for the Remaining Period;" 13 -11- (D) Clause 13 --------- (i) Clause 13.1(J) shall be amended in lines 7-8 by the deletion of "5th August 1988 made between the United States Customs Service and Chandris Incorporated" and the substitution therefor of "made or to be made between the United States Customs Service and Celebrity Cruises Inc."; (ii) Clause 13.1(K) shall be amended by the deletion in line 3 of "Sub Earnings'"; (1) (iii) Clause 13.1(M) shall be deleted in full; (iv) Clause 13.1(O) shall be amended by the deletion therefrom of the references to "Seabrook"; (v) Clause 13.2(D) shall be amended to read:- "(D) make any loans (save in the ordinary course of business) or grant any credit (save in the ordinary course of business);" (vi) Clause 13.2(F) shall be amended to read:- "(F) purchase or own any ship other than the Vessel;" (vii) Clause 13.3(D) shall be amended to read:- "carry on any business other than the ownership, operation and chartering of the Vessel and business relating thereto" (viii) Clause 13.3(E) shall be amended to read:- 14 -12- "(without prejudice to the central cash flow management by RCCL of the cash flow generated by the Vessel permitted pursuant to this Agreement and intra Group loans to the Borrower) save for the Subordinated Loan borrow any money or raise any funds save by borrowings which: (i) may from time to time be required to assist the Borrower in financing the ownership, operation and chartering of the Vessel; (ii) have received KfW's prior approval; and (iii) are unsecured and subordinated to all sums due to KfW under this Agreement by a document or documents in form and substance in all respects satisfactory to and approved by KfW." (ix) Clause 13.2(G) shall be amended by the addition of the following words at the end of the paragraph:- "or any set of articles of incorporation and bye-laws which, subject as provided in Clause 13.2(I) may be adopted in the future" (x) Clause 13.4 shall be deleted in full; (xi) Clause 13.6 shall be amended by the deletion therefrom of paragraph (B). (E) Clause 16.1, 16.2 and 16.3 shall be amended so as to delete therefrom all references to "CCI"; but the provisions in relation to Shareholder Distributions by the Borrower shall remain in full force and effect, with "Surplus Vessel Cash Flow" being amended to mean "(being the balance of the total Net Sub Earnings of the Vessel for that Financial Year less the instalments of principal and interest 15 -13- of the Loans which the Borrower is required to pay to KfW in that Financial Year)". (F) Clause 17 --------- (i) Clause 17.2(E), line 2, shall be amended by the deletion of "fourteen (14) days" and the substitution of "thirty (30) days"; (ii) Clause 17.2(G) shall be deleted in full; (iii) Clause 17.2(H) shall be amended in line 4 by the insertion after "Borrowers" of "and such breach remains unremedied for thirty (30) days"; (iv) Clause 17.2(J) shall be amended to read:- "any judgment or order for the payment of money in excess of USD10,000,000 shall be rendered against the Borrower by a court of competent jurisdiction and the Borrower shall have failed to satisfy such judgment and either: (a) enforcement proceedings in respect of any material assets of the Borrower shall have been commenced by any creditor upon such judgment or order and shall not have been stayed or enjoined within five (5) Business Days after the commencement of such enforcement proceedings; or (b) there shall be a period of ten (10) consecutive Business Days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect." 16 -14- (v) In Clause 17.2(Q) and reference to "Seabrook" shall be deleted; (vi) Clause 17.2(R)(iv) shall be amended by the deletion of "the Seabrook Loan Agreement" and the substitution therefor of "the New Seabrook Credit Agreement"; (vii) Clause 17.2(S) shall be deleted in full; (viii) Clause 17.2(T) shall be amended by the insertion in line 6 after "made" of the words:- "and such incorrectness shall continue unremedied for at least five (5) Business Days after notice thereof shall have been given to the Borrower by KfW (or, if (a) such incorrectness is capable of being remedied within fifteen (15) days (commencing on the first day of such five (5) Business Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such incorrectness shall continue unremedied for at least fifteen (15) days; or" (ix) Clause 17.2(V) shall be amended to read:- "during the Security Period without the prior written consent of KfW, RCCL ceases to own beneficially (whether directly or indirectly) at least 51% of the issued stock carrying voting rights of the Borrower, Fantasia, Zenith, Esker, Seabrook and CCI; or" (x) Clause 17.2(Z), Clause 17.2(AA) and Clause 17.2(AD) shall each be deleted; (xi) In Clause 17.2(AG) all references to "Seabrook" shall be deleted. 17 -15- 2.6 KfW hereby confirms that the Borrower has been released from any obligation under the Original Agreement and the Security Documents to effect and maintain or to reimburse KfW the cost of KfW effecting and maintaining mortgagees interest insurance and mortgagees additional perils (pollution) cover in respect of the Vessel and m.v.s "HORIZON", "ZENITH" and "GALAXY" in the case of the mortgagees interest insurance with effect from 1 June 1 1998 and in the case of the mortgagees additional perils (pollution cover) with effect from 1 January 1998. 2.7 For the purpose of all notice clauses contained in the Original Agreement or any of the Security Documents to which the Borrower is a party, all notices to the Borrower shall henceforward be sent to the Borrower: c/o Celebrity Cruises Inc. 1050 Caribbean Way Miami Florida 33132-2096 USA Telefax No: [305-539-0562] Attention: Vice President & Treasurer with copy to Vice President & General Counsel 2.8 All references in the Original Agreement to "this Agreement" "hereunder" "hereof"or "herein" shall be deemed to refer to the Original Loan Agreement as amended by this Second Supplemental Agreement. 2.9 Save as amended by Clause 2.1 to 2.6 (both inclusive) the Original Loan Agreement shall remain unchanged and in full force and effect. 3. LAW AND JURISDICTION The provisions of Clauses 29 (Law) and 30 (Jurisdiction) of the Original Loan Agreement shall apply to this Second Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. 18 -16- SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC ) in the presence of: ) 19 THE FIRST SCHEDULE SUPPLEMENT NO. 1 -TO- SECOND PREFERRED MORTGAGE -ON- "CENTURY" SUPPLEMENT NO. 1 dated _____________ 1998 ("this Supplement No. 1") to a second preferred mortgage dated 30 November 1995 ("the Mortgage") by BLUE SAPPHIRE MARINE INC. a Liberian corporation ("the Owner") in favour of KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose registered office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("the Mortgagee") recorded on 30 November 1995 at 9.04 A.M. E.S.T. in Book PM47 at Page 902. WHEREAS:- A. The Owner is the registered and beneficial owner of the whole of the Liberian flag cruise vessel "CENTURY" ("the Vessel"): official number "10084" of 70,606 gross and 39,002 net tons; or thereabouts, duly documented in the name of the Owner under the laws of the Republic of Liberia, with her home port at Monrovia, Liberia; B. Words and expressions defined in the Mortgage shall, unless stated herein to the contrary, bear the same meanings when used in this Supplement No. 1; C. By a letter dated 17 December 1997 addressed by the Mortgagee to (inter alios) the Owner the Mortgagee has (inter alia) released the Owner from all of its obligations under the Guarantee dated 30 November 1995 in respect of the Seabrook Loan Agreement; D. At the date of this Supplement No. 1 the aggregate of possible advances that may be made by the Mortgagee to Fantasia pursuant to the Horizon Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 1) is eight million three hundred and eighty-seven thousand four hundred and eighty United States Dollars (USD8,387,480) (of which USD7,455,536 is Fantasia Loan A and USD931,944 is Fantasia Loan B zero is Fantasia Loan C and zero is Fantasia Loan D; E. At the date of this Supplement No. 1 the aggregate of all possible advances that may be made by the Mortgagee to Zenith pursuant to the Zenith Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 1) is one hundred and five million nine hundred and eighty-four thousand two hundred and twenty-five United States Dollars and thirty-six cents (USD105,984,225.36) (of which USD45,694,112 is Zenith Loan A, USD58,856,706.13 is Zenith Loan B, USD1,433,407.23 is Zenith Loan C and zero is Zenith Loan D; F. By an agreement dated 1998 supplemental to the Esker Loan Agreement it has been agreed by Esker with the Mortgagee that the maximum amount of Esker Loan C available to be advanced by the Mortgagee shall be reduced to USD54,476,061 Dollars and at the date of this Supplement No. 1 the aggregate of all possible advances that may be made by the Mortgagee to Esker pursuant to the Esker Loan Agreement is three hundred and eight million six hundred and ninety-seven thousand six hundred and 20 -2- seventy-four United States Dollars (USD308,697,674) (of which USD202,549,932 is Esker Loan A, USD25,318,740 is Esker Loan B, USD54,476,061 is Esker Loan C and USD26,352,941 is Esker Loan D; G. The Owner and the Mortgagee wish by this Supplement No. 1 to amend the Recording Clause of the Mortgage so as to reflect the transactions referred to in Recitals C, D, E and F. NOW THEREFORE, in consideration of the premises and other good and valuable consideration the receipt and sufficiency whereof are hereby acknowledged by the Owner and the Mortgagee, the Owner and the Mortgagee hereby covenant and agree as follows:- 1. As and with effect from 17 December 1997 the Mortgage shall cease to secure Seabrook Loan A, Seabrook Loan B, Seabrook Loan C and Seabrook Loan D. 2. For the purpose of recording this Supplement No. 1 as required by Chapter 3 of Title 22 of the Liberian Code of Law of 1956, as amended, this Supplement No. 1 amends the total amount secured by the Mortgage. The total amount of the Mortgage is amended to four hundred and twenty three million and sixty-nine thousand three hundred and seventy-nine Dollars and thirty-six cents (USD423,069,379.36) (of which USD8,387,480 is the aggregate of Fantasia Loan A, Fantasia Loan B, Fantasia Loan C and Fantasia Loan D, USD105,984,225.36 is the aggregate of Zenith Loan A, Zenith Loan B, Zenith Loan C and Zenith Loan D and USD308,697,674 is the aggregate of Esker Loan A, Esker Loan B, Esker Loan C and Esker Loan D) and interest and performance of mortgage covenants. The date of maturity is on demand. There is no separate discharge amount. IN WITNESS whereof the Owner and the Mortgagee have executed this Supplement No. 1 the date and year first before written. BLUE SAPPHIRE MARINE INC. By: ....................................... Title: KREDITANSTALT FUR WIEDERAUFBAU By: ....................................... Title: Attorney-in-Fact 21 ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ________ day of _________________1998 before me personally came _________________, to me known, and known to me to be the person who executed the foregoing Supplement No. 1 who, being by me duly sworn, did depose and say that he resides at ______________________; that he is _____________________ of Blue Sapphire Marine Inc., a Liberian corporation, the entity described in and which executed the foregoing Supplement No. 1; that he signed his name thereto pursuant to authority granted to him by the Board of Directors of the said entity; and he further acknowledged that the said Supplement No. 1 is the act and deed of the said entity. ------------------------------------- NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 22 ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the ________________ day of _____________________ 1998 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 1 who, being by me duly sworn, did depose and say that he/she resides at _____________________; that he/she is Attorney-in-Fact for Kreditanstalt fur Wiederaufbau the corporation described in and which executed the foregoing Supplement No. 1; that he/she signed his/her name thereto pursuant to authority granted to him/her by a Power of Attorney of the said entity; and he/she further acknowledged that the said Supplement No. 1 is the act and deed of the said entity. ------------------------ NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 23 THE SECOND SCHEDULE THIS DEED dated the day of 1998 made between: (1) BLUE SAPPHIRE MARINE INC. ("the Owner") (2) CELEBRITY CRUISES INC. ("the Charterer") and (3) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a deed of second assignment of insurances of the Liberian flag cruise vessel m.v. "CENTURY" dated 30 November 1995 ("the Original Assignment"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed; B. By a letter dated 17 December 1997 addressed by the Assignee to (inter alios) the Owner the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Owner in favour of the Assignee in respect of the obligations of Seabrook Maritime Inc. under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Owner under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 24 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 12 (Governing Law) and Clause 13 (Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by BLUE SAPPHIRE MARINE INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 25 - 1 - THE THIRD SCHEDULE THIS DEED dated the day of 1998 made between: (1) BLUE SAPPHIRE MARINE INC. ("the Assignor") and (2) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a deed of second assignment of Charter Earnings, Owner's Requisition Compensation and Earnings of the Liberian flag cruise vessel m.v. "CENTURY" dated 30 November 1995 ("the Original Assignment"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed; B. By a letter dated 17 December 1997 addressed by the Assignee to (inter alios) the Assignor the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Assignor in favour of the Assignee in respect of the obligations of Seabrook Maritime Inc under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Assignor under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Assignor under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 26 - 2 - 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 12 (Governing Law) shall apply mutatis mutandis to this Supplemental Deed. In witness whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by BLUE SAPPHIRE MARINE INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 27 THE FOURTH SCHEDULE THIS AGREEMENT dated the day of 1998 made between: (1) BLUE SAPPHIRE MARINE INC. ("the Owner") (2) CELEBRITY CRUISES INC. ("the Charterer") and (3) KREDITANSTALT FUR WIEDERAUFBAU ("the Mortgagee") IS SUPPLEMENTAL TO a second tripartite agreement in respect of the Liberian flag cruise vessel m.v. "CENTURY" dated 30 November 1995 ("the Original Agreement") WHEREAS:- A. Words and expressions defined in the Original Agreement shall bear the same meanings when used in this Supplemental Agreement; B. By a letter dated 17 December 1997 addressed by the Mortgagee to (inter alios) the Owner and the Charterer the Mortgagee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Owner in favour of the Mortgagee in respect of the obligations of Seabrook Maritime Inc under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Agreement in order that the Original Agreement shall cease to stand as security for the obligations of the Owner under the Released Guarantee; C. By a Supplement No. 1 of even date herewith to the Second Mortgage the Owner and the Mortgagee have agreed that as and with effect from 17 December 1997 the Second Mortgagee shall cease to stand as security for the Released Guarantee. NOW it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Agreement shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Agreement:- (A) the expression "Guarantees" shall exclude the Released Guarantee; (B) the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; (C) the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 28 - 2 - (D) the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 8 (Applicable Law and Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Agreement has been executed by the parties hereto on the day and year first before written. SIGNED ) by BLUE SAPPHIRE MARINE INC. ) acting by ) ) in the presence of:- ) SIGNED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of:- ) SIGNED ) by ) KREDITANSTALT FUR WIEDERAUFBAU ) acting by ) ) in the presence of:- ) 29 THE FIFTH SCHEDULE ------------------ ADDENDUM NO. 2 DATED 1998 TO THE MODIFIED "BARECON '89" BAREBOAT CHARTER DATED 29 NOVEMBER 1993 AS AMENDED BY ADDENDUM NO. 1 DATED 30 NOVEMBER 1995 (TOGETHER "THE CHARTER") BETWEEN BLUE SAPPHIRE MARINE INC. ("THE OWNERS") AND CELEBRITY CRUISES INC. ("THE CHARTERERS") IN RESPECT OF M.V. "CENTURY" ("THE VESSEL") WHEREAS: A. Words and expressions defined in the Charter shall have the same meanings when used in this Addendum No. 2; B. The Owners and Charterers are desirous of amending the Charter upon the terms of this Addendum No. 2. NOW IT IS HEREBY AGREED:- (1) As and with effect from 199 the Charter is hereby amended as follows:- (A) CLAUSE 28: In respect of the period from 199 until 31 December 1998 the daily rate of hire shall be amended to USD149,700 per calendar day SAVE THAT:- (i) if there is any prepayment of principal under the KfW Loan Agreement prior to December 31, 1998, the daily rate of hire shall be adjusted immediately after that prepayment so as to be such rate per calendar day which is required to enable the Owners to meet their obligations under the KfW Loan Agreement as to the repayment of principal and the payment of interest for the balance of the year ended December 31, 1998 (after taking account of such prepayment) as shall be agreed between the Owners and the Charterers (and approved by the Mortgagees); (ii) for the year ended December 31, 1999 and each subsequent year of the Charter period (inclusive if the Option is exercised of the further two and one half (2 1/2) years which will commence upon expiry of the initial ten (10) year period), the daily rate of hire shall be such rate which is 30 - 2 - required to enable the Owners to meet their obligations under the KfW Loan Agreement as to the repayment of principal and the payment of interest during each such year, as shall be agreed between the Owners and the Charterers (and approved by of the Mortgagees) and adjusted as necessary thereafter by reason of any prepayment of principal under the KfW Loan Agreement. Such hire shall be payable semi-annually in arrears on the same dates as principal and interest are due under the KfW Loan Agreement (or at such other intervals as shall from time to time be agreed between the Owners and the Charterers) to such account as shall from time to time be specified by the Owners/Mortgagees. (B) CLAUSE 29: Lines 10-13 to be amended to read: "favour of the Mortgagees as security for the Cross Collateral Guarantees (as defined in the KfW Loan Agreement)". (C) CLAUSE 30.01 shall be amended by: (i) amending sub-paragraph (c) by deleting the words "a petition is presented or"; and (ii) by deleting sub-paragraphs (d), (e), (f), (g) and (h); and (iii) by re-lettering sub-paragraph (i) as sub-paragraph (d) and amending it by replacing "(h)" in the last line with "(c)". (D) CLAUSE 31 shall be deleted in full. (E) All references in the Charter to "the KfW Loan Agreement" shall be deemed to include the supplemental agreement dated 1998 made between the Mortgagees and the Owners. (2) Save as amended by this Addendum No. 2 the Charter shall remain unchanged and in full force and effect. (3) The provisions of Clause 26 (Law and Arbitration) of the Charter shall apply to this Addendum No. 2 mutatis mutandis. SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC. ) SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) 31 - 1 - THE SIXTH SCHEDULE THIS AGREEMENT dated the day of 1998 BETWEEN:- (1) FANTASIA CRUISING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Fantasia"); (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Zenith"); (3) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Blue Sapphire"); (4) ESKER MARINE SHIPPING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Esker"); (5) SEABROOK MARITIME INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Seabrook"); (6) CELEBRITY CRUISES INC. a corporation incorporated under the laws of the Republic of Liberia whose principal place of business is at 95 Akti Miaouli, Piraeus, Greece ("CCI"); and (7) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KfW") 32 - 2 - IS SUPPLEMENTAL TO an agreement dated 30 November 1995 (known as the 'Surplus Earnings Application Agreement') made between the same parties. WHEREAS:- Pursuant to a memorandum dated 12 December 1997 signed by KfW and countersigned by each of the other parties hereto and by Royal Caribbean Cruises Ltd. ("RCCL") it was (inter alia) agreed that KfW would enter into an agreement supplemental to the Original Agreement so as to release Seabrook from being a party thereto and to delete therefrom the provisions relating to the application of Sub Earnings or Net Sub Earnings of each Vessel (as each such expression is defined in the Original Agreement) by reason of the release by KfW pursuant to the said memorandum of each of the assignments of the said Sub Earnings and Net Sub Earnings referred to in Recital G to the Original Agreement. NOW IT IS HEREBY AGREED by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 ("the Effective Date"), KfW hereby releases Seabrook from any further obligations and liabilities under the Original Agreement and Seabrook shall cease to be a party to the Original Agreement. 2. As and with effect from the Effective Date:- 3. Clause 2 of the Original Agreement shall cease to apply and shall be deemed to have been deleted from the Original Agreement; 4. Clause 3 of the Original Agreement shall be amended as follows:- 1. Clause 3.1(E) and Clause 3.2(E) shall each be deleted in full; 1. Clause 3.1(E) and Clause 3.2(E) shall each be deleted in full; 2. Throughout Clause 3 all references to "639", "639 Loans" and "the Seabrook Loan Agreement" (sometimes also referred to as "the 639 Loan Agreement") shall be deleted; 33 - 3 - 3. Throughout Clause 3 all references to "637 Loan Agreement" and "638 Loan Agreement" shall be deemed to refer to the Blue Sapphire Loan Agreement and the Esker Loan Agreement respectively. 1. Save as amended hereby the Original Agreement shall remain unchanged and in full force and effect. 2. Each of the Owners (other than Seabrook) and CCI hereby acknowledge towards KfW that notwithstanding the said release of Seabrook they shall remain bound by the Original Agreement (as amended and supplemented by this Supplemental Agreement). 3. The provisions of Clause 5 (Applicable Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. 34 - 4 - IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written SIGNED by ) ) for and on behalf of ) FANTASIA CRUISING INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ESKER MARINE SHIPPING INC. ) in the presence of:- ) 35 - 5 - SIGNED by ) ) for and on behalf of ) SEABROOK MARITIME INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 36 THE SEVENTH SCHEDULE THIS DEED OF REASSIGNMENT is made the day of 1998 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU of Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("KfW"); (2) BLUE SAPPHIRE MARINE INC. a corporation duly incorporated under the laws of the Republic of Liberia having its registered office at 80 Broad Street, Monrovia, Republic of Liberia ("the Owner"); and (3) CELEBRITY CRUISES INC. a corporation duly incorporated under the laws of the Republic of Liberia having its registered office at 80 Broad Street, Monrovia, Republic of Liberia ("CCI"). WHEREAS:- A. By a deed of assignment dated 30 November 1995 ("the Original Assignment") the Owner assigned to KfW all the rights, title and interest of the Owner under a first general assignment of sub-earnings of the Liberian cruise vessel "CENTURY" dated 30 November 1995 ("the CCI Assignment") granted by CCI to the Owner; B. Words and expressions defined in the Original Assignment shall have the same meanings when used in this Deed of Reassignment; C. On 30 July 1997 Royal Caribbean Cruises Ltd. ("RCCL"), a Liberian corporation, indirectly acquired the beneficial ownership of all of the issued shares of Fantasia Cruising Inc. ("Fantasia"), Zenith Shipping Corporation ("Zenith"), Blue Sapphire Marine Inc. ("Blue Sapphire"), Esker Marine Shipping Inc. ("Esker"), Seabrook Maritime Inc. ("Seabrook") and CCI; D. Pursuant to a memorandum dated 12 December 1997 ("the Memorandum") issued by KfW and countersigned by Fantasia, Zenith, Blue Sapphire, Esker, Seabrook, CCI and RCCL, KfW has (inter alia) agreed to enter into this Deed of Reassignment. 37 - 2 - NOW THIS DEED WITNESSETH as follows: 1. Pursuant to the Memorandum and in consideration of the premises and other good and valuable consideration (the receipt and sufficiency whereof KfW hereby acknowledges) KfW (without any warranty on the part of KfW and without recourse to KfW) hereby reassigns to the Owner absolutely all KfW's rights, title and interest in and to the benefit of the CCI Assignment and all Net Sub Earnings of the said cruise vessel which were assigned to KfW pursuant to the Original Assignment. The said reassignment shall be deemed to have taken effect as from 17 December 1997. 2. CCI by its signature to this Deed of Reassignment hereby acknowledges notice of the said reassignment hereby effected by KfW to the Owner without the necessity for KfW to give a separate notice of such reassignment to CCI. 3. This Deed of Reassignment shall be governed by and construed in accordance with the laws of England. IN WITNESS whereof KfW and CCI have executed this Deed of Reassignment the day and year first before written. SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) CELEBRITY CRUISES INC ) in the presence of:- ) EX-1.10 11 SIXTH SUPPLEMENTAL AGREEMENT - ZENITH 1 EXHIBIT 1.10 KREDITANSTALT FUR WIEDERAUFBAU (1) - and - ZENITH SHIPPING CORPORATION (2) ------------------------------------------------- SIXTH SUPPLEMENTAL AGREEMENT - TO - LOAN FACILITY AGREEMENT IN RESPECT OF M.V. "ZENITH" (EX YARD NO. S.620 AT JOS. L. MEYER GMBH & CO.) F(W) 709 ------------------------------------------------- Sinclair Roche & Temperley London 2 INDEX
PAGE 1. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SIXTH SUPPLEMENTAL AGREEMENT....................................................................2 2. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT............................................................4 2.1 Reduction of Margin Applicable to Loan B and Loan C.........................................4 2.2 Amendments to Asset Maintenance.............................................................4 2.3 Release of Assignments of Sub Earnings......................................................5 2.5 Other Amendments............................................................................7 3. LAW AND JURISDICTION................................................................................14
SCHEDULES 1. Form of Supplement to the Second Mortgage 2. Form of Supplement to the Second Assignment of Insurances 3. Form of Supplement to the Second Assignment of Charter Earnings 4. Form of Supplement to the Second Tripartite Agreement 5. Form of Addendum No. 2 to the Charter 6. Form of Supplement to Surplus Earnings Application Agreement 7. Form of Supplement to UCH / KfW Subordination Agreement 8. Form of Supplement to Subordination Agreement 9. Form of Releases of First and Second Assignments of Sub Earnings 3 THIS AGREEMENT made the 1st day of September 1998 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstra(beta)e 5-9, D-60325 Frankfurt am Main ("the Lender"); and (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("the Borrower") IS SUPPLEMENTAL TO a loan facility agreement dated 21 June 1990 as amended by agreements supplemental thereto dated 25 February 1992, 21 October 1992, 29 January 1993, 31 March 1995 and 30 November 1995 (together "the Original Loan Agreement"). WHEREAS:- (A) On 30 July 1997 Royal Caribbean Cruises Ltd. ("RCCL"), a Liberian corporation, indirectly acquired the beneficial ownership of all of the issued shares of Fantasia Cruising Inc ("Fantasia"), the Borrower, Blue Sapphire Marine Inc. ("Blue Sapphire"), Esker Marine Shipping Inc. ("Esker"), Seabrook Maritime Inc. ("Seabrook") and Celebrity Cruises Inc. ("CCI"); (B) In consequence of the said change in beneficial ownership, by a Memorandum dated 12 December 1997 ("the Memorandum") issued by the Lender and countersigned by Fantasia, the Borrower, Blue Sapphire, Esker, Seabrook, CCI and RCCL, the Lender has agreed (inter alia):- (i) to reduce the loan to be advanced by the Lender to Seabrook for the financing of m.v. "MERCURY"; (ii) to advance the loan to Seabrook on the basis of a new credit agreement dated 12 December 1997 ("the Seabrook New Credit Agreement") made between 4 -2- Seabrook and the Lender and a letter of guarantee from RCCL to the Lender dated 12 December 1997; (iii) to release Seabrook from all guarantees issued by Seabrook in favour of the Lender in respect of the loans made by the Lender to finance the acquisition of m.v.'s "HORIZON", "ZENITH", "CENTURY" and "GALAXY"; (C) By a letter dated 17 December 1997 addressed by the Lender to Fantasia, the Borrower, Blue Sapphire, Esker, Seabrook, CCI and RCCL, the Lender in accordance with Clause 1.4 of the Memorandum has (inter alia) released:- (i) Seabrook from all its obligations to the Lender under the guarantee dated 30 November 1995 executed by Seabrook in favour of the Lender in respect of the obligations of the Borrower under the Original Loan Agreement; and (ii) the Borrower from all its obligations to the Lender under the guarantee dated 30 November 1995 executed by the Borrower in favour of the Lender in respect of the obligations of Seabrook under the Seabrook Loan Agreement (as defined under the Original Loan Agreement); (D) In order to give further effect to the Memorandum the Lender and the Borrower have agreed to enter into this Sixth Supplemental Agreement; (E) Loan D has been repaid in full. NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SIXTH SUPPLEMENTAL -------------------------------------------------------------------- AGREEMENT --------- 1.1 The following shall be effected concurrently with the execution of this Sixth Supplemental Agreement:- 5 -3- (A) the execution by the Borrower and the registration at the office of the Deputy Commissioner of Maritime Affairs of the Republic of Liberia at the port of New York of a Supplement No. 1 to the Second Mortgage in the form and upon the terms and conditions of the draft set out in the First Schedule to this Sixth Supplemental Agreement; (B) the execution of the Borrower and CCI and delivery to the Lender of a supplement to the Second Assignment of Insurances in the form and upon the terms and conditions of the draft set out in the Second Schedule to this Sixth Supplemental Agreement; (C) the execution by the Borrower and delivery to the Lender of a supplement to the Second Assignment of Charter Earnings duly executed by the Borrower in the form and upon the terms and conditions of the draft set out in the Third Schedule to this Sixth Supplemental Agreement; (D) the execution by the Borrower and CCI and delivery to the Lender of a supplement to the Second Tripartite Agreement in the form and upon the terms and conditions of the draft set out in the Fourth Schedule to this Sixth Supplement Agreement; (E) the execution by the Borrower and CCI of an addendum No. 2 to the Charter in the form and upon the terms and conditions of the draft set out in the Fifth Schedule to this Sixth Supplemental Agreement; (F) the execution by Fantasia, the Borrower, Blue Sapphire, Esker, Seabrook and CCI of a supplement to the Surplus Earnings Application Agreement in the form and upon the terms and conditions of the draft set out in the Sixth Schedule to this Sixth Supplemental Agreement; (G) the execution by UCH of a second supplement to the subordination agreement dated 31 March 1995 made between (1) Universal Cruise Holdings Limited and (2) the Lender in the form and upon the terms and conditions of the draft set out in the Seventh Schedule to this Sixth Supplemental Agreement; 6 -4- (H) the execution by the Borrower of a second supplement to the Subordination Agreement in the form and upon the terms and conditions of the draft set out in the Eighth Schedule to this Sixth Supplemental Agreement. 2. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT 2.1 REDUCTION OF MARGIN APPLICABLE TO LOAN B AND LOAN C As and with effect from 12 December 1997 (being the date of the Memorandum referred to in Recital B to this Sixth Supplemental Agreement) the Margin applicable to each of Loan B and Loan C will be deemed to have been reduced to forty-five basis points (0.45%) per annum. 2.2 AMENDMENTS TO ASSET MAINTENANCE As and with effect from the date of this Sixth Supplemental Agreement:- (A) Clause 14.01 shall be amended in line 1 by the deletion of "1 June 1996" and the substitution therefor of "1 January 2000" and the deletion in full of the proviso to Clause 14.01; (B) Clause 14.03 shall be amended by the deletion in lines 6-11 of the words in brackets commencing "(after deducting from the said principal balances ..." and ending with the words "... in accordance with the requirements of (i), (ii) and (iii) of the said Clause 2.5(B))"; (C) Clause 14.04 shall be amended by the deletion in the last line of "(other than the Second Assignment of Sub Earnings)"; (D) Clause 14.05 shall be deleted in full. 7 -5- 2.3 RELEASE OF ASSIGNMENTS OF SUB EARNINGS (A) Subject to:- (i) the Borrower and CCI first executing (and delivering a certified copy thereof to the Lender) an addendum No. 2 to the Charter whereby the daily rate of hire under the Charter of the Vessel shall be increased to USD51,500 per day in 1998 and thereafter shall be at a daily rate sufficient to enable the Borrower to meet its obligations as to the repayment instalments of principal and the payments of interest in respect of the Loans as and when they fall due under the terms of the Original Loan Agreement (as amended by this Sixth Supplemental Agreement); and (ii) the Borrower first procuring the execution (and delivery of certified copies to the Lender) by Fantasia, Blue Sapphire and Esker and by CCI of addenda to the respective bareboat charters of m.v.'s "HORIZON", "CENTURY" and "GALAXY" whereby the daily rate of hire thereunder is increased to USD37,100 per day for "HORIZON", USD149,700 per day for "CENTURY" and USD155,500 per day for "GALAXY" respectively in 1998 and thereafter shall be at a daily rate sufficient to enable Fantasia, Blue Sapphire and Esker to meet their respective obligations as to the repayment instalments of principal and the payments of interest in respect of the loans as and when they fall due under the terms of the Horizon Loan Agreement, the Blue Sapphire Loan Agreement and the Esker Loan Agreement respectively THEN the Lender will execute releases of all first and second assignments of Sub Earnings of the Vessel and m.v.'s "HORIZON", "CENTURY", "GALAXY" in the form of the drafts set out in the Ninth Schedule to this Sixth Supplemental Agreement, which once executed will be deemed effective as from 17 December 1997. (B) As and with effect from the date of this Sixth Supplemental Agreement the Lender will permit the cash flow generated by the Vessel and m.v.'s "HORIZON", "CENTURY" and "GALAXY" to be centrally managed by RCCL unless and until 8 -6- the quarterly rating of Standard & Poor in respect of RCCL falls below "B Long Term" whereupon the Borrower will procure that:- (1) such central cash flow management by RCCL shall cease and the cash flow generated by the Vessel and m.v.'s "HORIZON", "CENTURY" and "GALAXY" will thereafter be paid to and managed separately and directly by CCI; and (2) any monies then owed by RCCL (or any member of the RCCL Group) to CCI shall be immediately paid to CCI. (C) As and with effect from the date of this Sixth Supplemental Agreement:- (i) Clauses 17.01(i), 17.01(ii), 17.01(iii) and 17.01(iv) shall be deleted in full and the following substituted therefor:- "(i) The Borrower will procure that RCCL furnishes to the Lender as soon as the same become available its unaudited financial statements for each financial quarter of each of its financial years. Each set of financial statements delivered pursuant to this Clause 17.01(i) shall be on Form 6-K (or any successor form) as filed with the U.S. Securities Exchange Commission and shall be prepared in accordance with U.S. generally accepted accounting principles subject to normal year end adjustments; (ii) The Borrower will procure that RCCL furnishes to the Lender as soon as the same become available its audited consolidated financial statements for each of its financial years. Each set of financial statements delivered pursuant to this Clause 17.01(ii) shall be prepared on Form 20-F (or any successor form) as filed with the U.S. Securities Exchange Commission and shall be in accordance with U.S. generally accepted accounting principles; 9 -7- (iii) The Borrower will furnish to the Lender not later than 120 days after the end of each financial year the unaudited financial statements in respect of each Obligor for each of its financial years. Each set of financial statements delivered pursuant to this Clause 17.01(iii) shall be in accordance with U.S. generally accepted accounting principles and certified as to their correctness by the chief financial officer of the relevant Obligor." (ii) Clauses 17.01(v) and 17.01(vi) shall be relettered 17.01(iv) and 17.01(v) (iii) Clause 17.02(i),(ii) and (iii) shall be deleted in full. 2.4 PREFERENCE SHARES As and with effect from the date of this Sixth Supplemental Agreement:- (A) The definition "Preference Shares" shall be deleted; and (B) Clause 18 shall be deleted in full. 2.5 OTHER AMENDMENTS As and with effect from the date of this Sixth Supplemental Agreement the Original Loan Agreement shall be further amended as follows:- (A) Definitions The definition of "Additional Securities" shall be amended by the deletion therefrom of "Seabrook Cross Securities"; The definitions "Assignment of Sub Earnings" and "Assignment of Sub Earnings Supplement" shall be deleted in full; 10 -8- The definition "Blue Sapphire Cross Securities" shall be amended by the deletion therefrom of paragraph (D); The definition of "Blue Sapphire Loan Agreement" shall be amended by the deletion of "the 637 Supplement" and the substitution therefor of "supplements dated 30 November 1995 and 1 September 1998"; The definition "Borrower's Cross Securities" shall be amended by the deletion therefrom of "the Second Assignment of Sub Earnings"; The definition "Charter" shall be amended to read "means, in respect of the Vessel, the revised 'BARECON 89' charter dated 29 November 1993 as amended by Addendum No.1 dated 30 November 1995 and Addendum No. 2 dated February 1998 whereby the Borrower has bareboat chartered the Vessel to CCI for an initial period as and with effect from 1 January 1993 up to 31 March 2008 upon the terms and conditions therein contained;" The definition of "Cross Collateral Guarantees" shall be amended by the deletion therefrom in lines 4 and 5 of "and Seabrook under the Seabrook Loan Agreement"; The definition "Deferral" shall be amended in line 1 by the deletion of "five (5)" and the substitution therefor of "four (4)"; The definition of "Esker Cross Securities" shall be amended by the deletion therefrom of paragraph (D); The definition of "Esker Loan Agreement" shall be amended by the deletion of "the 638 Supplement" and the substitution therefor of "supplements dated 30 November 1995 and 1 September 1998"; The definition "Horizon Cross Securities" shall be amended by the deletion therefrom of the reference to "(v)"; 11 -9- The definition "Horizon Loan Agreement" shall be amended in line 5 by the deletion of "the Horizon Supplement" and the insertion of "a fifth agreement supplemental thereto dated 30 November 1995 and a sixth agreement supplemental thereto dated 1 September 1998"; The definition "KfW Facility Agreements" shall be amended by the deletion therefrom of "and the Seabrook Loan Agreement"; The definition "Margin" shall be deemed to have been amended in accordance with the provisions of Clause 2.1; A new definition "RCCL Group" shall be introduced as follows:- "RCCL GROUP" means group of companies consisting of RCCL and any company or corporation which is now or hereafter becomes a subsidiary of RCCL and "member of the RCCL group" shall be construed accordingly; The definition "Seabrook Cross Securities" shall be deleted in full; The definition "Seabrook Loan Agreement" shall be deleted in full; The definitions of "Second Assignment of Charter Earnings", "Second Assignment of Insurances", "Second Mortgage" and "Second Tripartite Agreement" shall each be deemed to include therein the respective supplements to each such security referred to in Clause 1.2; The definition "Shareholder Distribution" shall be amended to read: ""Shareholder Distribution" means any dividend or other shareholder distribution but shall exclude (i) any payment made by the Borrower as part of the central cash flow management by RCCL of the cash flow generated by the Vessel so long as such central cash flow is permitted pursuant to this Agreement and (ii) any repayment of principal and payment of interest on any intra Group loan to the Borrower;" 12 -10- The definition "Second Assignment of Sub Earnings" shall be deleted in full; The definition "Surplus Earnings Application Agreement" shall be deemed to include the supplement thereto referred to in Clause 1.2; (B) Clause 11 Clause 11.1 shall be amended by the insertion of "; or" at the end of Clause 11.01(iii) and the insertion of a new paragraph (iv) reading as follows:- "(iv) at any time it becomes unlawful for any Obligor to perform any or all of its obligations under this Agreement, the Charter or any of the Security Documents to which any of them is a party and any such event shall continue unremedied for fifteen (15) days after notice thereof has been given to the Borrower by the Lender". Clause 11.03: in the formula "a + b - c" the definition of 'b' shall be amended to read: "b such amount of interest calculated at 8% p.a. (or whatever rate is applicable to Loan A at the date of the relevant prepayment) as would have accrued, but for the prepayment, on the amount of the prepayment of Loan A for the Remaining Period;" (C) Clause 13 (i) Clause 13.01(ix) shall be deleted in full; (ii) Clause 13.01(xii) shall be amended in lines 11-12 by the deletion of "5th August 1988 made between the United States Customs Service and Chandris Inc" and the substitution therefor of "made or to be made between United States Customs Service and Celebrity Cruises Inc."; 13 -11- (iii) Clause 13.01(xiv)(c) shall be deleted in full; (iv) Clause 13.01(xv) shall be amended by the deletion therefrom of the references to "Seabrook"; (v) Clause 13.03(i) shall be amended so that the first 2 lines thereof reads: "(i) make any loans (save in the ordinary course of business) or grant any credit (save in the ordinary course of business) or (save in the ...". (vi) Clause 13.03(vi) shall be amended to read:- "(vi) purchase or own any ship other than the Vessel". (vii) Clause 13.03(vii) shall be amended to read:- "(vii) effect any material changes to the form of its articles of incorporation and bye-laws as at the date of this Agreement or which may be adopted in the future;". (viii) Clause 13.03(viii) shall be amended by the deletion therefrom of "save for redemption of the Preference Shares if and to the extent the said redemption is permitted under Clause 18" and the substitution therefor of "or any set of articles of incorporation and bye-laws which, subject as provided in Clause 13.03(vii), may be adopted in the future". (ix) Clause 13.04(i) shall be amended by the deletion of "matters" and the substitution therefor of "business"; (x) Clause 13.04(v) shall be amended to read: "(without prejudice to the central cash flow management by RCCL of the cash flow generated by the Vessel permitted pursuant to this Agreement 14 -12- and any intra-Group loans to the Borrower), borrow any money or raise any funds save by borrowings which (i) have received the Lender's prior approval; and (ii) are unsecured and subordinated (by a document or documents in form and upon terms satisfactory to it and approved by the Lender) to the Outstanding Indebtedness". (D) Clause 13.06 shall be deleted in full; (E) Clause 17.03(A), (B) and (C) shall be amended so as to delete therefrom all references to "CCI"; but the provisions in relation to Shareholder Distributions by the Borrower shall remain in full force and effect, with "Surplus Vessel Cash Flow" being amended to mean "(being the balance of the total Net Sub Earnings of the Vessel for that Financial Year less the instalments of principal and interest of the Loans which the Borrower is required to pay to the Lender in that Financial Year)"; (F) Clause 19 shall be amended as follows:- (i) Clause 19.02(ii) shall be deleted in full. (ii) Clause 19.02(vii) shall be amended to read:- "any judgment or order for the payment of money in excess of USD10,000,000 shall be rendered against the Borrower by a court of competent jurisdiction and the Borrower shall have failed to satisfy such judgment and either: (a) enforcement proceedings in respect of any material assets of the Borrower shall have been commenced by any creditor upon such judgment 15 -13- or order and shall not have been stayed or enjoined within five (5) Business Days after the commencement of such enforcement proceedings; or (b) there shall be a period of ten (10) consecutive Business Days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect." (iii) Clause 19.02(ix) shall be deleted in full; (iv) Clause 19.02(xi) and Clause 19.02(xiv) shall each be deleted in full; (v) Clause 19.02(xiii) shall be amended to read:- "during the Security Period without the prior written consent of the Lender, RCCL ceases to own beneficially (whether directly or indirectly) at least 51% of the issued stock carrying voting rights of the Borrower, Fantasia, Blue Sapphire, Esker, Seabrook and CCI; or" (vi) Clause 19.02(xviii) shall be amended by the insertion in line 11 after "made" of the words:- "and such incorrectness shall continue unremedied for at least five (5) Business Days after notice thereof shall have been given to the Borrower by the Lender (or, if (a) such incorrectness is capable of being remedied within fifteen (15) days (commencing on the first day of such five (5) Business Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such incorrectness shall continue unremedied for at least fifteen (15) days; or" 16 -14- (vii) Clause 19.02(xix), Clause 19.02(xxv), Clause 19.02 (xxvi) and Clause 19.02(xxix) shall each be deleted in full; (viii) Clause 19.02(xxviii) shall be deleted in full; (ix) Clause 19.02(xxxiii) shall be deleted in full; (x) Clause 19.02(xxxv) shall be amended by the deletion of "the Seabrook Loan Agreement" and the substitution therefor of "the New Seabrook Credit Agreement". 2.6 The Lender hereby confirms that the Borrower has been released from any obligation under the Original Agreement and the Security Documents to effect and maintain or to reimburse the Lender the cost of the Lender effecting and maintaining mortgagees interest insurance and mortgagees additional perils (pollution) cover in respect of the Vessel and m.v.s "HORIZON", "CENTURY" and "GALAXY" in the case of the mortgagees interest insurance with effect from 1 June 1998 and in the case of the mortgagees additional perils (pollution cover) with effect from 1 January 1998. 2.7 For the purpose of all notice clauses contained in the Original Agreement or any of the Security Documents to which the Borrower is a party, all notices to the Borrower shall henceforward be sent to the Borrower: c/o Celebrity Cruises Inc. 1050 Caribbean Way Miami Florida 33132-2096 USA Telefax No: [305-539-0562] ATT: Vice President & Treasurer with copy to Vice President & General Counsel 2.8 All references in the Original Agreement to "this Agreement", "hereunder", "hereof"or "herein" shall be deemed to refer to the Original Loan Agreement as amended by this Sixth Supplemental Agreement. 2.9 Save as amended by Clause 2.1 to 2.5 (both inclusive) the Original Loan Agreement shall remain unchanged and in full force and effect. 3. LAW AND JURISDICTION 17 -15- 3.1 The provisions of Clauses 31 (Law) and 32 (Jurisdiction) of the Original Loan Agreement shall apply to this Sixth Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. SIGNED by ) /s/ ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) /s/ SIGNED by ) ) for and on behalf of ) /s/ ZENITH SHIPPING CORPORATION ) in the presence of:- ) /s/ Don K. Kick Don K. Kick ----------------- Notary Public 18 THE FIRST SCHEDULE SUPPLEMENT NO. 1 -TO- SECOND PREFERRED MORTGAGE -ON- "ZENITH" SUPPLEMENT NO. 1 dated 1998 ("this Supplement No. 1") to a second preferred mortgage dated 30 November 1995 ("the Mortgage") by ZENITH SHIPPING CORPORATION a Liberian corporation ("the Owner") in favour of KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose registered office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("the Mortgagee") recorded on 30 November 1995 at 9.03 A.M. E.S.T. in Book PM47 at Page 901. WHEREAS:- A. The Owner is the registered and beneficial owner of the whole of the Liberian flag cruise vessel "ZENITH" ("the Vessel"): official number "9660" of 47,255 gross and 24,560 net tons; or thereabouts, duly documented in the name of the Owner under the laws of the Republic of Liberia, with her home port at Monrovia, Liberia; B. Words and expressions defined in the Mortgage shall, unless stated herein to the contrary, bear the same meanings when used in this Supplement No. 1; C. By a letter dated 17 December 1997 addressed by the Mortgagee to (inter alios) the Owner the Mortgagee has (inter alia) released the Owner from all of its obligations under the Guarantee dated 30 November 1995 in respect of the Seabrook Loan Agreement; D. At the date of this Supplement No. 1 the aggregate of possible advances that may be made by the Mortgagee to Fantasia pursuant to the Horizon Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 1) is eight million three hundred and eighty-seven thousand four hundred and eighty Dollars (USD8,387,480) (of which USD7,455,536 is Fantasia Loan A, USD931,944 is Fantasia Loan B, zero is Fantasia Loan C and zero is Fantasia Loan D; E. By an agreement dated 1998 supplemental to the Blue Sapphire Loan Agreement it has been agreed by Blue Sapphire with the Mortgagee that the maximum amount of Blue Sapphire Loan C available to be advanced by the Mortgagee shall be reduced to USD35,493,844 Dollars and at the date of this Supplement No. 1 the aggregate of all possible advances that may be made by the Mortgagee to Blue Sapphire pursuant to the Blue Sapphire Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 1) is two hundred and forty-eight million four hundred and fifty-six thousand nine hundred and eight United States Dollars (USD248,456,908) (of which USD179,261,284 is Blue Sapphire Loan A, USD22,407,660 is Blue Sapphire Loan B, USD35,493,844 is Blue Sapphire Loan C and USD11,294,120 is Blue Sapphire Loan D; 19 -2- F. By an agreement dated 1998 supplemental to the Esker Loan Agreement it has been agreed by Esker with the Mortgagee that the maximum amount of Esker Loan C available to be advanced by the Mortgagee shall be reduced to USD54,476,061 Dollars and at the date of this Supplement No. 1 the aggregate of all possible advances that may be made by the Mortgagee to Esker pursuant to the Esker Loan Agreement is three hundred and eight million six hundred and ninety seven thousand six hundred and seventy-four United States Dollars (USD308,697,674) (of which USD202,549,932 is Esker Loan A, USD25,318,740 is Esker Loan B, USD54,476,061 is Esker Loan C and USD26,352,941 is Esker Loan D; G. The Owner and the Mortgagee wish by this Supplement No. 1 to amend the Recording Clause of the Mortgage so as to reflect the transactions referred to in Recitals C, D, E and F. NOW THEREFORE, in consideration of the premises and other good and valuable consideration the receipt and sufficiency whereof are hereby acknowledged by the Owner and the Mortgagee, the Owner and the Mortgagee hereby covenant and agree as follows:- 1. As and with effect from 17 December 1997 the Mortgage shall cease to secure Seabrook Loan A, Seabrook Loan B, Seabrook Loan C and Seabrook Loan D. 2. For the purpose of recording this Supplement No. 1 as required by Chapter 3 of Title 22 of the Liberian Code of Law of 1956, as amended, this Supplement No. 1 amends the total amount secured by the Mortgage. The total amount of the Mortgage is amended to five hundred and sixty-five million five hundred and forty-two thousand and sixty-two United States Dollars (USD565,542,062) (of which USD8,387,480 is the aggregate of Fantasia Loan A, Fantasia Loan B, Fantasia Loan C and Fantasia Loan D, USD248,456,908 is the aggregate of Blue Sapphire Loan A, Blue Sapphire Loan B, Blue Sapphire Loan C and Blue Sapphire Loan D and USD308,697,674 is the aggregate of Esker Loan A, Esker Loan B, Esker Loan C and Esker Loan D) and interest and performance of mortgage covenants. The date of maturity is on demand. There is no separate discharge amount. IN WITNESS whereof the Owner and the Mortgagee have executed this Supplement No. 1 the date and year first before written. ZENITH SHIPPING CORPORATION By: ....................................... Title: 20 -3- KREDITANSTALT FUR WIEDERAUFBAU By: ....................................... Title: Attorney-in-Fact 21 ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1998 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 1 who, being by me duly sworn, did depose and say that he resides at ; that he is of Zenith Shipping Corporation, a Liberian corporation, the entity described in and which executed the foregoing Supplement No. 1; that he signed his name thereto pursuant to authority granted to him by the Board of Directors of the said entity; and he further acknowledged that the said Supplement No. 1 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 22 ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1998 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 1 who, being by me duly sworn, did depose and say that he/she resides at ; that he/she is Attorney-in-Fact for Kreditanstalt fur Wiederaufbau the corporation described in and which executed the foregoing Supplement No. 1; that he/she signed his/her name thereto pursuant to authority granted to him/her by a Power of Attorney of the said entity; and he/she further acknowledged that the said Supplement No. 1 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 23 - 1 - THE SECOND SCHEDULE THIS DEED dated the day of 1998 made between: (1) ZENITH SHIPPING CORPORATION ("the Owner") (2) CELEBRITY CRUISES INC. ("the Charterer") and (3) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a deed of second assignment of insurances of the Liberian flag cruise vessel m.v. "ZENITH" dated 30 November 1995 ("the Original Assignment"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed; B. By a letter dated 17 December 1997 addressed by the Assignee to (inter alios) the Owner the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Owner in favour of the Assignee in respect of the obligations of Seabrook Maritime Inc. under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Owner under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 24 -2- 5 . the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 12 (Governing Law) and Clause 13 (Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by ZENITH SHIPPING CORPORATION ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 25 -1- THE THIRD SCHEDULE THIS DEED dated the day of 1998 made between: (1) ZENITH SHIPPING CORPORATION ("the Assignor") and (2) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a deed of second assignment of Charter Earnings, Owner's Requisition Compensation and Earnings of the Liberian flag cruise vessel m.v. "ZENITH" dated 30 November 1995 ("the Original Assignment"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed; B. By a letter dated 17 December 1997 addressed by the Assignee to (inter alios) the Assignor the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Assignor in favour of the Assignee in respect of the obligations of Seabrook Maritime Inc under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Assignor under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Assignor under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 26 -2- 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 12 (Governing Law) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by ZENITH SHIPPING CORPORATION ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 27 -1- THE FOURTH SCHEDULE THIS AGREEMENT dated the day of 1998 made between: (1) ZENITH SHIPPING CORPORATION ("the Owner") (2) CELEBRITY CRUISES INC. ("the Charterer") and (3) KREDITANSTALT FUR WIEDERAUFBAU ("the Mortgagee") IS SUPPLEMENTAL TO a second tripartite agreement in respect of the Liberian flag cruise vessel m.v. "ZENITH" dated 30 November 1995 ("the Original Agreement") WHEREAS:- A. Words and expressions defined in the Original Agreement shall bear the same meanings when used in this Supplemental Agreement; B. By a letter dated 17 December 1997 addressed by the Mortgagee to (inter alios) the Owner and the Charterer the Mortgagee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Owner in favour of the Mortgagee in respect of the obligations of Seabrook Maritime Inc under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Agreement in order that the Original Agreement shall cease to stand as security for the obligations of the Owner under the Released Guarantee; C. By a Supplement No. 1 of even date herewith to the Second Mortgage the Owner and the Mortgagee have agreed that as and with effect from 17 December 1997 the Second Mortgagee shall cease to stand as security for the Released Guarantee. NOW it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Agreement shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Agreement:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 28 -2- 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 7 (Applicable Law and Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Agreement has been executed by the parties hereto on the day and year first before written. SIGNED ) by ZENITH SHIPPING CORPORATION ) acting by ) ) in the presence of: ) SIGNED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED ) by ) KREDITANSTALT FUR WIEDERAUFBAU ) acting by ) ) in the presence of: ) 29 THE FIFTH SCHEDULE ADDENDUM NO. 2 DATED 1998 TO THE MODIFIED "BARECON '89" BAREBOAT CHARTER DATED 29 JANUARY 1993 AS AMENDED BY ADDENDUM NO. 1 DATED 30 NOVEMBER 1995 (TOGETHER "THE CHARTER") BETWEEN ZENITH SHIPPING CORPORATION ("THE OWNERS") AND CELEBRITY CRUISES INC. ("THE CHARTERERS") IN RESPECT OF M.V. "ZENITH" ("THE VESSEL") WHEREAS: A. Words and expressions defined in the Charter shall have the same meanings when used in this Addendum No. 2; B. The Owners and Charterers are desirous of amending the Charter upon the terms of this Addendum No. 2; NOW IT IS HEREBY AGREED:- 1. As and with effect from 199 the Charter is hereby amended as follows:- (A) CLAUSE 28: As and with effect from 199 until December 31, 1998 the daily rate of hire shall be amended to USD51,500 per calendar day SAVE THAT:- (i) if there is any prepayment of principal under the KfW Loan Agreement prior to December 31, 1998, the daily rate of hire shall be adjusted immediately after that prepayment so as to be such rate per calendar day which is required to enable the Owners to meet their obligations under the KfW Loan Agreement as to the repayment of principal and the payment of interest for the balance of the year ended December 31, 1998 (after taking account of such prepayment) as shall be agreed between the Owners and the Charterers (and approved by the Mortgagees); (ii) for the year ended December 31, 1999 and each subsequent year of the Charter period, the daily rate of hire shall be such rate which is required to enable the Owners to meet their obligations under the KfW Loan 30 -2- Agreement as to the repayment of principal and the payment of interest during each such year, as shall be agreed between the Owners and the Charterers (and approved by of the Mortgagees) and adjusted as necessary thereafter by reason of any prepayment of principal under the KfW Loan Agreement. Such hire shall be payable semi-annually in arrears on the same dates as principal and interest are due under the KfW Loan Agreement (or at such other intervals as shall from time to time be agreed between the Owners and the Charterers) to such account as shall from time to time be specified by the Owners/Mortgagees. (B) CLAUSE 29: to be amended to read as follows:- "29. MORTGAGES The Vessel chartered under this Charter is financed by a loan from Kreditanstalt fur Wiederaufbau (the "Mortgagees") under a loan facility agreement dated 21 June, 1990 as amended by supplemental agreements dated 25 February, 1992, 21 October, 1992, 29 January, 1993, 31 March, 1995, 30 November, 1995 and , 1998 (together, the "KfW Loan Agreement") secured by, inter alia, a first preferred mortgage (the "First Mortgage") dated 2 March, 1992 (as amended). The Vessel is also subject to a second preferred mortgage (the "Second Mortgage" and together with the First Mortgage, the "Mortgages") dated 30 November, 1995 in favour of the Mortgagees as security for the Cross Collateral Guarantees (as defined in the KfW Loan Agreement). The Charterers having been supplied copies of the KfW Loan Agreement, the Cross Collateral Guarantees and the Mortgages (the "KfW Mortgage Documents") they have acquainted themselves with all terms and conditions and provisions thereof. The Charterers undertake that they will comply with all such instructions or directions in regard to employment, insurances, reports and maintenance of the Vessel, etc as laid down in the KfW Mortgage Documents or as may be directed from time to time during the currency of the Charter by the Mortgagees in conformity with the KfW Mortgage Documents. (C) CLAUSE 30.01 shall be amended by: (i) amending sub-paragraph (c) by deleting the words "a petition is presented or"; and (ii) by deleting sub-paragraphs (d), (e), (f), (g) and (h); and (iii) by re-lettering sub-paragraph (i) as sub-paragraph (d) and amending it by replacing "(h)" in the last line with "(c)" and by deleting the reference to "and/or the B1 Loan Documents" in line 4. (D) CLAUSE 31 shall be deleted in full. 31 -3- (E) All references in the Charter to "the KfW Loan Agreement" shall be deemed to include the supplemental agreement dated , 1998 made between the Mortgagees and the Owners. 2. Save as amended by this Addendum No. 2 the Charter shall remain unchanged and in full force and effect. 3. The provisions of Clause 26 (Law and Arbitration) of the Charter shall apply to this Addendum No. 2 mutatis mutandis. 32 -4- SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) 33 -1- THE SIXTH SCHEDULE THIS AGREEMENT dated the day of 1998 BETWEEN:- (1) FANTASIA CRUISING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Fantasia"); (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Zenith"); (3) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Blue Sapphire"); (4) ESKER MARINE SHIPPING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Esker"); (5) SEABROOK MARITIME INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Seabrook"); (6) CELEBRITY CRUISES INC. a corporation incorporated under the laws of the Republic of Liberia whose principal place of business is at 95 Akti Miaouli, Piraeus, Greece ("CCI"); and (7) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KfW") 34 -2- IS SUPPLEMENTAL TO an agreement dated 30 November 1995 (known as the 'Surplus Earnings Application Agreement') made between the same parties. WHEREAS:- Pursuant to a memorandum dated 12 December 1997 signed by KfW and countersigned by each of the other parties hereto and by Royal Caribbean Cruises Ltd. ("RCCL") it was (inter alia) agreed that KfW would enter into an agreement supplemental to the Original Agreement so as to release Seabrook from being a party thereto and to delete therefrom the provisions relating to the application of Sub Earnings or Net Sub Earnings of each Vessel (as each such expression is defined in the Original Agreement) by reason of the release by KfW pursuant to the said memorandum of each of the assignments of the said Sub Earnings and Net Sub Earnings referred to in Recital G to the Original Agreement. NOW IT IS HEREBY AGREED by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 ("the Effective Date"), KfW hereby releases Seabrook from any further obligations and liabilities under the Original Agreement and Seabrook shall cease to be a party to the Original Agreement. 2. As and with effect from the Effective Date:- 3. Clause 2 of the Original Agreement shall cease to apply and shall be deemed to have been deleted from the Original Agreement; 4. Clause 3 of the Original Agreement shall be amended as follows:- 1. Clause 3.1(E) and Clause 3.2(E) shall each be deleted in full; 2. Throughout Clause 3 all references to "639", "639 Loans" and "the Seabrook Loan Agreement" (sometimes also referred to as "the 639 Loan Agreement") shall be deleted; 35 -3- 3. Throughout Clause 3 all references to "637 Loan Agreement" and "638 Loan Agreement" shall be deemed to refer to the Blue Sapphire Loan Agreement and the Esker Loan Agreement respectively. 1. Save as amended hereby the Original Agreement shall remain unchanged and in full force and effect. 2. Each of the Owners (other than Seabrook) and CCI hereby acknowledge towards KfW that notwithstanding the said release of Seabrook they shall remain bound by the Original Agreement (as amended and supplemented by this Supplemental Agreement). 3. The provisions of Clause 5 (Applicable Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. 36 -4- IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written SIGNED by ) ) for and on behalf of ) FANTASIA CRUISING INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ESKER MARINE SHIPPING INC. ) in the presence of:- ) 37 -5- SIGNED by ) ) for and on behalf of ) SEABROOK MARITIME INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 38 THE SEVENTH SCHEDULE THIS AGREEMENT dated the day of 1998 made between: 1. UNIVERSAL CRUISE HOLDINGS LIMITED a company incorporated under the laws of the British Virgin Islands whose registered office is at present at Craigmuir Chambers, Road Town, Tortola, British Virgin Islands ("UCH") and 2. KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KfW") IS SUPPLEMENTAL TO a subordination agreement dated 31 March 1995 as amended by an agreement supplemental thereto dated 30 November 1995 (together "the Original Agreement") made between the same parties. WHEREAS:- A. Words and expressions defined in the Original Agreement shall have the same meanings when used in this Supplemental Agreement; B. By a letter dated 17 December 1997 addressed by KfW to (inter alios) Zenith Shipping Corporation KfW has (inter alia) released Zenith Shipping Corporation from all of its obligations to KfW under the Zenith Guarantee in respect of the obligations of Seabrook under the Seabrook Loan Agreement. NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 all references in the Original Agreement to "the Borrower's Cross Securities" shall be deemed to exclude the Zenith Guarantee referred to in Recital B to this Supplemental Agreement and the expression "the KfW Facility Agreements" shall be deemed to exclude the Seabrook Loan Agreement. 2. Save as amended hereby the Original Agreement shall remain unamended and in full force and effect. 3. The provisions of Clause 8 (Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written SIGNED by ) ) for and on behalf of ) UNIVERSAL CRUISE HOLDINGS LIMITED ) in the presence of:- ) 39 -2- SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) 40 THE EIGHTH SCHEDULE THIS AGREEMENT dated the day of 1998 BETWEEN:- (1) UNIVERSAL CRUISE HOLDINGS LIMITED a company incorporated under the law of the British Virgin Islands whose registered at Craigmuir Chambers, Road Town, Tortola, British Virgin Islands (the "Corporation") and (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered at present at 80 Broad Street, Monrovia, Republic of Liberia (the "Borrower"). IS SUPPLEMENTAL TO a subordination agreement dated 31 March 1995 as amended by an agreement supplemental thereto dated 30 November 1995 (together the "Original Agreement"). WHEREAS:- (A) Words and expressions defined in the Original Agreement shall bear the same meanings when used in this Supplemental Agreement; (B) By a letter dated 17 December 1997 addressed by KfW to (inter alios) the Borrower KfW has (inter alia) released the Borrower from all further obligations to KfW under the Zenith Guarantee. NOW IT IS HEREBY mutually agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the expression "the Borrower's Cross Securities" shall be deemed to exclude the Zenith Guarantee. 2. Save as amended hereby, the Original Agreement shall remain unchanged and in full force and effect. 3. Clause 5 (Law and Jurisdiction) of the Original Agreement shall apply to this Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. SIGNED by ) ) for and on behalf of ) UNIVERSAL CRUISE HOLDINGS ) LIMITED in the presence of:- ) SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) in the presence of:- ) 41 NINTH SCHEDULE THIS DEED OF REASSIGNMENT is made the _____ day of ___________ 1998 BETWEEN - (1) KREDITANSTALT FUR WIEDERAUFBAU of Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("KfW"); and (2) CELEBRITY CRUISES INC. a corporation duly incorporated under the laws of the Republic of Liberia having its registered office at 80 Broad Street, Monrovia, Republic of Liberia ("CCI"). WHEREAS: - A. By a deed of assignment dated 29 January 1993 as amended by a deed supplemental thereto dated 30 November 1995 (together "the Original Assignment") CCI assigned to KfW all the rights, title and interest of CCI to (inter alia) all sub-earnings of the Liberian cruise vessel "ZENITH"; B. Words and expressions defined in the Original Assignment shall have the same meanings when used in this Deed of Reassignment; C. On 30 July 1997 Royal Caribbean Cruises Ltd. ("RCCL"), a Liberian corporation, indirectly acquired the beneficial ownership of all of the issued shares of Fantasia Cruising Inc. ("Fantasia"), Zenith Shipping Corporation ("Zenith"), Blue Sapphire Marine Inc. ("Blue Sapphire"), Esker Marine Shipping Inc. ("Esker"), Seabrook Maritime Inc. ("Seabrook") and CCI; D. Pursuant to a memorandum dated 12 December 1997 ("the Memorandum") issued by KfW and countersigned by Fantasia, Zenith, Blue Sapphire, Esker, Seabrook, CCI and RCCL, KfW has (inter alia) agreed to enter into this Deed of Reassignment. NOW THIS DEED WITNESSETH as follows: 1. Pursuant to the Memorandum and in consideration of the premises and other good and valuable consideration (the receipt and sufficiency whereof KfW hereby acknowledges) 42 -2- KfW (without any warranty on the part of KfW and without recourse to KfW) hereby reassigns to CCI absolutely all KfW's rights, title and interest in and to the benefit of (A) all Long Term Charters in respect of the said cruise vessel which may have been entered into by CCI (B) all Sub Earnings of the said cruise vessel and (C) all other monies which were assigned to KfW pursuant to the Original Assignment. The said reassignment shall be deemed to have taken effect as from 17 December 1997. 2. This Deed of Reassignment shall be governed by and construed in accordance with the laws of England. IN WITNESS whereof KfW has executed this Deed of Reassignment the day and year first before written. SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: - ) EX-1.11 12 SIXTH SUPPLEMENTAL AGREEMENT - FANTASIA 1 EXHIBIT 1.11 KREDITANSTALT FUR WIEDERAUFBAU (1) - and - FANTASIA CRUISING INC. (2) SIXTH SUPPLEMENTAL AGREEMENT - TO - LOAN FACILITY AGREEMENT IN RESPECT OF M.V. "HORIZON" (EX YARD NO. S.619 AT JOS. L. MEYER GMBH & CO.) F(W) 678 Sinclair Roche & Temperley London 2 INDEX
PAGE 1. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SIXTH SUPPLEMENTAL AGREEMENT..............................................2 2. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT......................................4 2.1 Reduction of Margin Applicable to Loan B and Loan C...................4 2.2 Amendments to Asset Maintenance.......................................4 2.3 Release of Assignments of Sub Earnings................................4 2.4 Other Amendments......................................................7 3. LAW AND JURISDICTION..........................................................14
SCHEDULES 1. Form of Supplement to the Second Mortgage 2. Form of Supplement to the Second Assignment of Insurances 3. Form of Supplement to the Second Assignment of Charter Earnings 4. Form of Supplement to the Second Tripartite Agreement 5. Form of Addendum No. 3 to the Charter 6. Form of Supplement to Surplus Earnings Application Agreement 7. Form of Supplement to Subordination Agreement 8. Form of Releases of First and Second Assignments of Sub Earnings 3 THIS AGREEMENT made the 1st day of September 1998 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstra(beta)e 5-9, D-60325 Frankfurt am Main ("the Lender"); and (2) FANTASIA CRUISING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("the Borrower") IS SUPPLEMENTAL TO a loan facility agreement dated 6 March 1989 as amended by agreements supplemental thereto dated 30 April 1990, 21 October 1992, 29 January 1993, 29 November 1993 and 30 November 1995 (together "the Original Loan Agreement"). WHEREAS:- (A) On 30 July 1997 Royal Caribbean Cruises Ltd ("RCCL"), a Liberian corporation, indirectly acquired the beneficial ownership of all of the issued shares of the Borrower, Zenith Shipping Corporation ("Zenith"), Blue Sapphire Marine Inc. ("Blue Sapphire"), Esker Marine Shipping Inc. ("Esker"), Seabrook Maritime Inc. ("Seabrook") and Celebrity Cruises Inc. ("CCI"); (B) In consequence of the said change in beneficial ownership, by a Memorandum dated 12 December 1997 ("the Memorandum") issued by the Lender and countersigned by the Borrower, Zenith, Blue Sapphire, Esker, Seabrook, CCI and RCCL, the Lender has agreed (inter alia):- (i) to reduce the loan to be advanced by the Lender to Seabrook for the financing of m.v. "MERCURY"; (ii) to advance the loan to Seabrook on the basis of a new credit agreement dated 12 December 1997 ("the Seabrook New Credit Agreement") made between 4 -2- Seabrook and the Lender and a letter of guarantee from RCCL to the Lender dated 12 December 1997; (iii) to release Seabrook from all guarantees issued by Seabrook in favour of the Lender in respect of the loans made by the Lender to finance the acquisition of m.v.'s "HORIZON", "ZENITH", "CENTURY" and "GALAXY"; (C) By a letter dated 17 December 1997 addressed by the Lender to the Borrower, Zenith, Blue Sapphire, Esker, Seabrook, CCI and RCCL, the Lender in accordance with Clause 1.4 of the Memorandum has (inter alia) released:- (i) Seabrook from all its obligations to the Lender under the guarantee dated 30 November 1995 executed by Seabrook in favour of the Lender in respect of the obligations of the Borrower under the Original Loan Agreement; and (ii) the Borrower from all its obligations to the Lender under the guarantee dated 30 November 1995 executed by the Borrower in favour of the Lender in respect of the obligations of Seabrook under the Seabrook Loan Agreement (as defined under the Original Loan Agreement); (D) In order to give further effect to the Memorandum the Lender and the Borrower have agreed to enter into this Sixth Supplemental Agreement; (E) Loan D has been repaid in full. NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SIXTH SUPPLEMENTAL -------------------------------------------------------------------- AGREEMENT --------- 1.1. The following shall be effected concurrently with the execution of this Sixth Supplemental Agreement:- 5 -3- A. the execution by the Borrower and the registration at the office of the Deputy Commissioner of Maritime Affairs of the Republic of Liberia at the port of New York of a Supplement No.1 to the Second Mortgage in the form and upon the terms and conditions of the draft set out in the First Schedule to this Sixth Supplemental Agreement; B. the execution of the Borrower and CCI and delivery to the Lender of a supplement to the Second Assignment of Insurances in the form and upon the terms and conditions of the draft set out in the Second Schedule to this Sixth Supplemental Agreement; C. the execution by the Borrower and delivery to the Lender of a supplement to the Second Assignment of Charter Earnings duly executed by the Borrower in the form and upon the terms and conditions of the draft set out in the Third Schedule to this Sixth Supplemental Agreement; D. the execution by the Borrower and CCI and delivery to the Lender of a supplement to the Second Tripartite Agreement in the form and upon the terms and conditions of the draft set out in the Fourth Schedule to this Sixth Supplement Agreement; E. the execution by the Borrower and CCI of an addendum No. 3 to the Charter in the form and upon the terms and conditions of the draft set out in the Fifth Schedule to this Sixth Supplemental Agreement; F. the execution by the Borrower, Zenith, Blue Sapphire, Esker, Seabrook and CCI of a supplement to the Surplus Earnings Application Agreement in the form and upon the terms and conditions of the draft set out in the Sixth Schedule to this Sixth Supplemental Agreement; G. the execution by Cruise Mar Investment Inc. of a second supplement to a subordination agreement dated 30 April 1990 made between Cruise Mar Investments Inc. and the Lender in the form and upon the terms and conditions 6 -4- of the draft set out in the Seventh Schedule to this Sixth Supplemental Agreement. 2. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT 2.1. REDUCTION OF MARGIN APPLICABLE TO LOAN B AND LOAN C As and with effect from 12 December 1997 (being the date of the Memorandum referred to in Recital B to this Sixth Supplemental Agreement) the Margin applicable to each of Loan B and Loan C will be deemed to have been reduced to forty-five basis points (0.45%) per annum. 2.2. Amendments to Asset Maintenance As and with effect from the date of this Sixth Supplemental Agreement:- (A) Clause 30.01 shall be amended in line 1 by the deletion of "1 June 1996" and the substitution therefor of "1 January 2000" and the deletion in full of the proviso to Clause 30.01; (B) Clause 30.03 shall be amended by the deletion in lines 6-11 of the words in brackets commencing "(after deducting from the said principal balances ..." and ending with the words "... in accordance with the requirements of (i), (ii) and (iii) of the said Clause 2.5(B))"; (C) Clause 30.04 shall be amended by the deletion in the last line of "(other than the Second Assignment of Sub Earnings)"; (D) Clause 30.05 shall be deleted in full. 2.3. RELEASE OF ASSIGNMENTS OF SUB EARNINGS (A) Subject to:- 7 -5- (i) the Borrower and CCI first executing (and delivering a certified copy thereof to the Lender) an addendum No. 3 to the Charter whereby the daily rate of hire under the Charter of the Vessel shall be increased to USD37,100 per day in 1998 and thereafter shall be at a daily rate sufficient to enable the Borrower to meet its obligations as to the repayment instalments of principal and the payments of interest in respect of the Loans as and when they fall due under the terms of the Original Loan Agreement (as amended by this Sixth Supplemental Agreement); and (ii) the Borrower first procuring the execution (and delivery of certified copies to the Lender) by Zenith, Blue Sapphire and Esker and by CCI of addenda to the respective bareboat charters of m.v.'s "ZENITH", "CENTURY" and "GALAXY" whereby the daily rate of hire thereunder is increased to USD51,500 per day for "ZENITH" USD149,700 per day for "CENTURY" and USD155,500 per day for "GALAXY" respectively in 1998 and thereafter shall be at a daily rate sufficient to enable Zenith, Blue Sapphire and Esker to meet their respective obligations as to the repayment instalments of principal and the payments of interest in respect of the loans as and when they fall due under the terms of the Zenith Loan Agreement, the Blue Sapphire Loan Agreement and the Esker Loan Agreement respectively THEN the Lender will execute releases of all first and second assignments of Sub Earnings of the -- Vessel and m.v.'s "ZENITH", "CENTURY", "GALAXY" in the form of the drafts set out in the Eighth Schedule to this Sixth Supplemental Agreement, which once executed will be deemed effective as from 17 December 1997. (B) As and with effect from the date of this Sixth Supplemental Agreement the Lender will permit the cash flow generated by the Vessel and m.v.'s "ZENITH", "CENTURY" and "GALAXY" to be centrally managed by RCCL unless and until the quarterly rating of Standard & Poor in respect of RCCL falls below "B Long Term" whereupon the Borrower will procure that:- 8 -6- (1) such central cash flow management by RCCL shall cease and the cash flow generated by the Vessel and m.v.'s "ZENITH", "CENTURY" and "GALAXY" will thereafter be paid to and managed separately and directly by CCI; and (2) any monies then owed by RCCL (or any member of the RCCL Group) to CCI shall be immediately paid to CCI. (C) As and with effect from the date of this Sixth Supplemental Agreement:- (i) Clauses 15.01(i) and 15.01(ii) shall be deleted in full and the following substituted therefor:- "15.01 (i) The Borrower will procure that RCCL furnishes to the Lender as soon as the same become available its unaudited financial statements for each financial quarter of each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.01(i) shall be on Form 6-K (or any successor form) as filed with the U.S. Securities Exchange Commission and shall be prepared in accordance with U.S. generally accepted accounting principles subject to normal year end adjustments; (ii) The Borrower will procure that RCCL furnishes to the Lender as soon as the same become available its audited consolidated financial statements for each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.01(ii) shall be prepared on Form 20-F (or any successor form) as filed with the U.S. Securities Exchange Commission and shall be in accordance with U.S. generally accepted accounting principles. 9 -7- (iii) The Borrower will furnish to the Lender not later than 120 days after the end of each financial year the unaudited financial statements in respect of each Obligor for each of its financial years. Each set of financial statements delivered pursuant to this Clause 15.01(iii) shall be in accordance with U.S. generally accepted accounting principles and certified as to their correctness by the chief financial officer of the relevant Obligor." (ii) Clause 15.02 (i), (ii) and (iii) shall be deleted in full. 2.4. OTHER AMENDMENTS As and with effect from the date of this Sixth Supplemental Agreement the Original Loan Agreement shall be further amended as follows:- (A) Definitions ----------- The definition of "Additional Securities" shall be amended by the deletion therefrom of "Seabrook Cross Securities"; The definitions "Assignment of Sub Earnings" and "Assignment of Sub Earnings Supplement" shall be deleted in full; The definition "Blue Sapphire Cross Securities" shall be amended by the deletion therefrom of paragraph (D); The definition of "Blue Sapphire Loan Agreement" shall be amended by the deletion of "the 637 Supplement" and the substitution therefor of "supplements dated 30 November 1995 and 1 September 1998"; The definition "Borrower's Cross Securities" shall be amended by the deletion therefrom of "the Second Assignment of Sub Earnings"; 10 -8- The definition "Charter" shall be amended to read "means, in respect of the Vessel, the revised 'BARECON 89' charter dated 29 November 1993 as amended by Addendum No.1 dated 29 November 1993, Addendum No. 2 dated 30 November 1995 and Addendum No. 3 dated 1 September 1998 whereby the Borrower has bareboat chartered the Vessel to CCI for an initial period commencing as and with effect from 1 January 1993 up to 30 April 2001 upon the terms and conditions therein contained;" The definition of "Cross Collateral Guarantees" shall be amended by the deletion therefrom in lines 10/11 of "and Seabrook under the Seabrook Loan Agreement"; The definition "Deferral" shall be amended in line 1 by the deletion of "five (5)" and the substitution therefor of "four (4)"; The definition "Esker Loan Agreement" shall be amended by the deletion of "the 638 Supplement" and the substitution therefor of "supplements dated 30 November 1995 and 1 September 1998"; The definition "Esker Cross Securities" shall be amended by the deletion therefrom of paragraph (D); The definition "KfW Facility Agreements" shall be amended by the deletion therefrom of "and the Seabrook Loan Agreement"; The definition "Margin" shall be deemed to have been amended in accordance with the provisions of Clause 2.1; The definitions "Operating Reserve" and "Operating Reserve Bank" shall be deleted in full; 11 -9- A new definition "RCCL Group" shall be introduced as follows:- "RCCL GROUP" means group of companies consisting of RCCL and any company or corporation which is now or hereafter becomes a subsidiary of RCCL and "member of the RCCL group" shall be construed accordingly; The definition "Seabrook Cross Securities" shall be deleted in full; The definition "Seabrook Loan Agreement" shall be deleted in full; The definitions of "Second Assignment of Charter Earnings", "Second Assignment of Insurances" "Second Mortgage" and "Second Tripartite Agreement" shall each be deemed to include therein the respective supplements to each such security referred to in Clause 1.2; The definition "Shareholder Distribution" shall be amended to read:- ""Shareholder Distribution" means any dividend or other shareholder distribution but shall exclude (i) any payment made by the Borrower as part of the central cash flow management by RCCL of the cash flow generated by the Vessel so long as such central cash flow management is permitted pursuant to this Agreement and (ii) any repayment of principal and payment of interest on any intra Group loan to the Borrower;". The definition "Second Assignment of Sub Earnings" shall be deleted in full; The definition "Sub Earnings on Assignment" shall be deleted in full; The definition "Surplus Earnings Application Agreement" shall be deemed to include the supplement thereto referred to in Clause 1.2; The definition "Temporary Cash Flow Advance" shall be deleted in full; 12 -10- The definition "Zenith Cross Securities" shall be amended by the deletion therefrom of the reference to "(v)"; The definition "ZENITH Loan Agreement" shall be amended by the deletion in line 5 of "the ZENITH Supplement" and by the insertion after "31 March 1995" of "a Fifth Agreement supplemental thereto dated 30 November 1995 and a Sixth Agreement supplemental thereto dated 1 September 1998" (B) Clause 12 --------- Clause 12.01 shall be amended by the insertion of "; or" at the end of paragraph (iii) and the insertion of a new paragraph "(iv)" reading as follows:- "(iv) at any time it becomes unlawful for any Obligor to perform any or all of its obligations under this Agreement, the Charter or any of the Security Documents to which any of them is a party and any such event shall continue unremedied for fifteen (15) days after notice thereof has been given to the Borrower by KfW;" Clause 12.03: in the formula "a + b - c" the definition of 'b' shall be amended to read: "b = such amount of interest calculated at 8% p.a. (or whatever rate is applicable to Loan A at the date of the relevant prepayment) as would have accrued, but for the prepayment, on the amount of the prepayment of Loan A for the Remaining Period". (C) Clause 14 --------- (i) Clause 14.01(xii) shall be amended in lines 11-13 by the deletion of "5th August 1988 made between the United States Customs Service and Chandris Incorporated" and the substitution therefor of "made or to be 13 -11- made between United States Customs Service and Celebrity Cruises Inc."; (ii) Clause 14.01(ix) shall be deleted in full; (iii) Clause 14.01(xiv)(c) shall be deleted in full; (iv) Clause 14.01(xv) shall be amended by the deletion therefrom of references to "Seabrook"; (v) Clause 14.02(iii) shall be amended so that the first 2 lines thereof reads: "(iii) make any loans (save in the ordinary course of business) or grant any credit (save in the ordinary course of business) or (save in the ....". (vi) Clause 14.02(viii) shall be amended to read:- "(viii) purchase or own any ship other than the Vessel;" (vii) Clause 14.02(ix) shall be amended to read:- "carry on any business other than the ownership, operation and chartering of the Vessel and business relating thereto" (viii) Clause 14.02(x) shall be amended to read:- "(without prejudice to the central cash flow management by RCCL of the cash flow generated by the Vessel permitted pursuant to this Agreement and intra Group loans to the Borrower) save for the Subordinated Loan borrow any money or raise any funds save by borrowings which: 14 -12- (a) may from time to time be required to assist the Borrower in financing the ownership, operation and chartering of the Vessel; (b) have received the Lender's prior approval; and (c) are unsecured and subordinated to all sums due to the Lender under this Agreement by a document or documents in form and substance in all respects satisfactory to and approved by the Lender." (ix) Clause 14.02(xi) shall be amended to read "effect any material change to the form of its articles of incorporation and by-laws as at the date of this Agreement or which may be adopted in the future"; (x) Clause 14.05 shall be deleted in full. (D) Clause 15.04(A), (B) and (C) shall be amended so as to delete therefrom all references to CCI; but the provisions in relation to Shareholder Distributions by the Borrower shall remain in full force and effect, with "Surplus Vessel Cash Flow" being amended to mean "(being the balance of the total Net Sub Earnings of the Vessel for that Financial Year less the instalments of principal and interest of the Loan which the Borrower is required to pay to the Lender in that Financial Year)". (E) Clause 16 (i) Clause 16.02(vi) shall be amended to read:- "any judgment or order for the payment of money in excess of USD10,000,000 shall be rendered against the Borrower by a court of competent jurisdiction and the 15 -13- Borrower shall have failed to satisfy such judgment and either: (a) enforcement proceedings in respect of any material assets of the Borrower shall have been commenced by any creditor upon such judgment or order and shall not have been stayed or enjoined within five (5) Business Days after the commencement of such enforcement proceedings; or (b) there shall be a period of ten (10) consecutive Business Days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect." (ii) Clause 16.02(xii) shall be amended by the insertion in line 10 after "made" of the words:- "and such incorrectness shall continue unremedied for at least five (5) Business Days after notice thereof shall have been given to the Borrower by the Lender (or, if (a) such incorrectness is capable of being remedied within fifteen (15) days (commencing on the first day of such five (5) Business Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such incorrectness shall continue unremedied for at least fifteen (15) days; or" 16 -14- (iii) Clause 16.02(xxii), Clause 16.02(xxiii) and 16.02 (xxvii) shall each be deleted in full; (iv) Clause 16.02(xxxi) shall be deleted in full; (v) Clause 16.02(xxxii) shall be amended to read:- "during the Security Period without the prior written consent of KfW, RCCL ceases to own beneficially (whether directly or indirectly) at least 51% of the issued stock carrying voting rights of the Borrower, Zenith, Blue Sapphire, Esker, Seabrook and CCI; or" (vi) Clause 16.02(xxxiii) shall be amended by the deletion of "the Seabrook Loan Agreement" and the substitution therefor of "the New Seabrook Credit Agreement". 2.5. The Lender hereby confirms that the Borrower has been released from any obligation under the Original Agreement and the Security Documents to effect and maintain or to reimburse the Lender the cost of the Lender effecting and maintaining mortgagees interest insurance and mortgagees additional perils (pollution) cover in respect of the Vessel and m.v.'s "ZENITH", "CENTURY" and "GALAXY" in the case of the mortgagees interest insurance with effect from 1 June 1998 and in the case of the mortgagees additional perils (pollution cover) with effect from 1 January 1998. 2.6. For the purpose of all notice clauses contained in the Original Agreement or any of the Security Documents to which the Borrower is a party, all notices to the Borrower shall henceforward be sent to the Borrower: c/o Celebrity Cruises Inc. 1050 Caribbean Way Miami Florida 33132-2096 USA Telefax No. 305-539-0562 ATT: Vice President & Treasurer With Copy To: Vice President & General Counsel 17 -15- 2.7. All references in the Original Agreement to "this Agreement", "hereunder", "hereof"or "herein" shall be deemed to refer to the Original Loan Agreement as amended by this Sixth Supplemental Agreement. 2.8. Save as amended by Clause 2.1 to 2.5 (both inclusive) the Original Loan Agreement shall remain unchanged and in full force and effect. 3. LAW AND JURISDICTION 3.1. The provisions of Clauses 28 (Law) and 29 (Jurisdiction) of the Original Loan Agreement shall apply to this Sixth Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. SIGNED by ) ) /s/ for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) /s/ SIGNED by ) ) for and on behalf of ) /s/ FANTASIA CRUISING INC. ) in the presence of:-Don K. Kick ) /s/ Don K. Kick ---------------- Notary Public 18 THE FIRST SCHEDULE SUPPLEMENT NO. 1 -TO- SECOND PREFERRED MORTGAGE -ON- "HORIZON" SUPPLEMENT NO. 1 dated 1998 ("this Supplement No. 1") to a second preferred mortgage dated 30 November 1995 ("the Mortgage") by FANTASIA CRUISING INC a Liberian corporation ("the Owner") in favour of KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose registered office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("the Mortgagee") recorded on 30 November 1995 at 9.02 A.M. E.S.T. in Book PM47 at Page 900. WHEREAS:- A. The Owner is the registered and beneficial owner of the whole of the Liberian flag cruise vessel "HORIZON" ("the Vessel"): official number "9341" of 46,811 gross and 24,471 net tons; or thereabouts, duly documented in the name of the Owner under the laws of the Republic of Liberia, with her home port at Monrovia, Liberia; B. Words and expressions defined in the Mortgage shall, unless stated herein to the contrary, bear the same meanings when used in this Supplement No. 1; C. By a letter dated 17 December 1997 addressed by the Mortgagee to (inter alios) the Owner the Mortgagee has (inter alia) released the Owner from all of its obligations under the Guarantee dated 30 November 1995 in respect of the Seabrook Loan Agreement; D. At the date of this Supplement No. 1 the aggregate of possible advances that may be made by the Mortgagee to Zenith pursuant to the Zenith Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 1) is one hundred and five million nine hundred and eighty-four thousand two hundred and twenty-five United States Dollars and thirty-six cents (USD105,984,225.36) (of which USD45,694,112 is Zenith Loan A, USD58,856,706.13 is Zenith Loan B, USD1,433,407.23 is Zenith Loan C and zero is Zenith Loan D; E. By an agreement dated 1998 supplemental to the Blue Sapphire Loan Agreement it has been agreed by Blue Sapphire with the Mortgagee that the maximum amount of Blue Sapphire Loan C available to be advanced by the Mortgagee shall be reduced to USD35,493,844 Dollars and at the date of this Supplement No. 1 the aggregate of all possible advances that may be made by the Mortgagee to Blue Sapphire pursuant to the Blue Sapphire Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 1) is two hundred and forty-eight million four hundred and fifty-six thousand nine hundred and eight United States Dollars (USD248,456,908) (of which USD179,261,284 is Blue Sapphire Loan A, USD22,407,660 is Blue Sapphire Loan B, USD35,493,844 is Blue Sapphire Loan C and USD11,294,120 is Blue Sapphire Loan D; 19 -2- F. By an agreement dated 1998 supplemental to the Esker Loan Agreement it has been agreed by Esker with the Mortgagee that the maximum amount of Esker Loan C available to be advanced by the Mortgagee shall be reduced to USD54,476,061 Dollars and at the date of this Supplement No. 1 the aggregate of all possible advances that may be made by the Mortgagee to Esker pursuant to the Esker Loan Agreement is three hundred and eight million six hundred and ninety seven thousand six hundred and seventy four United States Dollars (USD308,697,674) (of which USD202,549,932 is Esker Loan A, USD25,318,740 is Esker Loan B, USD54,476,061 is Esker Loan C and USD26,352,941 is Esker Loan D; G. The Owner and the Mortgagee wish by this Supplement No. 1 to amend the Recording Clause of the Mortgage so as to reflect the transactions referred to in Recitals C, D, E and F. NOW THEREFORE, in consideration of the premises and other good and valuable consideration the receipt and sufficiency whereof are hereby acknowledged by the Owner and the Mortgagee, the Owner and the Mortgagee hereby covenant and agree as follows:- 1. As and with effect from 17 December 1997 the Mortgage shall cease to secure Seabrook Loan A, Seabrook Loan B, Seabrook Loan C and Seabrook Loan D. 2. For the purpose of recording this Supplement No. 1 as required by Chapter 3 of Title 22 of the Liberian Code of Law of 1956, as amended, this Supplement No. 1 amends the total amount secured by the Mortgage. The total amount of the Mortgage is amended to six hundred and sixty-three million one hundred and thirty eight thousand eight hundred and seven Dollars and thirty-six cents (USD663,138,807.36) (of which USD105,984,225.36 is the aggregate of Zenith Loan A, Zenith Loan B, Zenith Loan C and Zenith Loan D, USD248,456,908 is the aggregate of Blue Sapphire Loan A, Blue Sapphire Loan B, Blue Sapphire Loan C and Blue Sapphire Loan D and USD308,697,674 is the aggregate of Esker Loan A, Esker Loan B, Esker Loan C and Esker Loan D) and interest and performance of mortgage covenants. The date of maturity is on demand. There is no separate discharge amount. IN WITNESS whereof the Owner and the Mortgagee have executed this Supplement No. 1 the date and year first before written. FANTASIA CRUISING INC. By: ....................................... Title: KREDITANSTALT FUR WIEDERAUFBAU By: ....................................... Title: Attorney-in-Fact 20 ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1998 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 1 who, being by me duly sworn, did depose and say that he resides at ; that he is of Fantasia Cruising Inc., a Liberian corporation, the entity described in and which executed the foregoing Supplement No. 1; that he signed his name thereto pursuant to authority granted to him by the Board of Directors of the said entity; and he further acknowledged that the said Supplement No. 1 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 21 ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1998 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 1 who, being by me duly sworn, did depose and say that he/she resides at ; that he/she is Attorney-in-Fact for Kreditanstalt fur Wiederaufbau the corporation described in and which executed the foregoing Supplement No. 1; that he/she signed his/her name thereto pursuant to authority granted to him/her by a Power of Attorney of the said entity; and he/she further acknowledged that the said Supplement No. 1 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 22 -1- THE SECOND SCHEDULE THIS DEED dated the day of 1998 made between: (1) FANTASIA CRUISING INC. ("the Owner") (2) CELEBRITY CRUISES INC. ("the Charterer") and (3) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a deed of second assignment of insurances of the Liberian flag cruise vessel m.v. "HORIZON" dated 30 November 1995 ("the Original Assignment") WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed; B. By a letter dated 17 December 1997 addressed by the Assignee to (inter alios) the Owner and the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Owner in favour of the Assignee in respect of the obligations of Seabrook Maritime Inc. under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Owner under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 23 -2- 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 12 (Governing Law) and Clause 13 (Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by FANTASIA CRUISING INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 24 -1- THE THIRD SCHEDULE THIS DEED dated the day of 1998 made between: (1) FANTASIA CRUISING INC. ("the Assignor") and (2) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a deed of second assignment of Charter Earnings, Owner's Requisition Compensation and Earnings of the Liberian flag cruise vessel m.v. "HORIZON" dated 30 November 1995 ("the Original Assignment"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed; B. By a letter dated 17 December 1997 addressed by the Assignee to (inter alios) the Assignor the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Assignor in favour of the Assignee in respect of the obligations of Seabrook Maritime Inc under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Assignor under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Assignor under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 25 -2- 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 12 (Governing Law) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by FANTASIA CRUISING INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 26 -1- THE FOURTH SCHEDULE THIS AGREEMENT dated the day of 1998 made between: (1) FANTASIA CRUISING INC. ("the Owner") (2) CELEBRITY CRUISES INC. ("the Charterer") and (3) KREDITANSTALT FUR WIEDERAUFBAU ("the Assignee") IS SUPPLEMENTAL TO a second tripartite agreement in respect of the Liberian flag cruise vessel m.v. "HORIZON" dated 30 November 1995 ("the Original Agreement") WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Agreement; B. By a letter dated 17 December 1997 addressed by the Mortgagee to (inter alios) the Owner and the Charterer and Mortgagee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("the Released Guarantee") issued by the Owner in favour of the Mortgagee in respect of the obligations of Seabrook Maritime Inc. under the Seabrook Loan Agreement and has further agreed to enter into this Supplemental Agreement in order that the Original Agreement shall cease to stand as security for the obligations of the Owner under the Released Guarantee; C. By a Supplement No. 1 of even date herewith to the Second Mortgage the Owner and the Mortgagee have agreed that as and with effect from 17 December 1997 the Second Mortgagee shall cease to stand as security for the Released Guarantee. NOW it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Seabrook Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from 17 December 1997 the following further amendments shall be deemed to have been made to the Original Assignment:- 3. the expression "Guarantees" shall exclude the Released Guarantee; 27 -2- 4. the expression "Borrowers" shall be amended by the deletion therefrom of "Seabrook"; 5. the expression "Loan Agreements" shall be amended by the deletion therefrom of "the Seabrook Loan Agreement"; 6. the expression "Loans" shall be amended by the deletion therefrom of "the Seabrook Loans". 7. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 8. The provisions of Clause 7 (Applicable Law and Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Agreement has been executed by the parties hereto on the day and year first before written. SIGNED ) by FANTASIA CRUISING INC. ) acting by ) ) in the presence of: ) SIGNED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED ) by ) KREDITANSTALT FUR WIEDERAUFBAU ) acting by ) ) in the presence of: ) 28 THE FIFTH SCHEDULE ADDENDUM NO. 3 DATED 1998 TO THE MODIFIED "BARECON '89" BAREBOAT CHARTER DATED 29 JANUARY 1993 AS AMENDED BY ADDENDUM NO. 1 DATED 29 NOVEMBER 1993 AND ADDENDUM NO. 2 DATED 30 NOVEMBER 1995 (TOGETHER "THE CHARTER") BETWEEN FANTASIA CRUISING INC. ("THE OWNERS") AND CELEBRITY CRUISES INC. ("THE CHARTERERS") IN RESPECT OF M.V. "HORIZON" ("THE VESSEL") WHEREAS: A. Words and expressions defined in the Charter shall have the same meanings when used in this Addendum No. 3; B. The Owners and Charterers are desirous of amending the Charter upon the terms of this Addendum No. 3; NOW IT IS HEREBY AGREED:- 1. As and with effect from 199 the Charter is hereby amended as follows:- (A) CLAUSE 28: As and with effect from 199 until December 31, 1998 the daily rate of hire shall be amended to USD37,100 per calendar day SAVE THAT:- (i) if there is any prepayment of principal under the KfW Loan Agreement prior to December 31, 1998, the daily rate of hire shall be adjusted immediately after that prepayment so as to be such rate per calendar day which is required to enable the Owners to meet their obligations under the KfW Loan Agreement as to the repayment of principal and the payment of interest for the balance of the year ended December 31, 1998 (after taking account of such prepayment) as shall be agreed between the Owners and the Charterers (and approved by the Mortgagees); (ii) for the year ended December 31, 1999 and each subsequent year of the Charter period, the daily rate of hire shall be such rate which is required 29 -2- to enable the Owners to meet their obligations under the KfW Loan Agreement as to the repayment of principal and the payment of interest during each such year, as shall be agreed between the Owners and the Charterers (and approved by of the Mortgagees) and adjusted as necessary thereafter by reason of any prepayment of principal under the KfW Loan Agreement. Such hire shall be payable semi-annually in arrears on the same dates as principal and interest are due under the KfW Loan Agreement (or at such other intervals as shall from time to time be agreed between the Owners and the Charterers) to such account as shall from time to time be specified by the Owners/Mortgagees. (B) CLAUSE 29: Lines 10-13 to be amended to read "favour of the Mortgagees as security for the Cross Collateral Guarantees (as defined in the KfW Loan Agreement)". (C) CLAUSE 30.01 shall be amended by: (i) amending sub-paragraph (c) by deleting the words "a petition is presented or"; and (ii) by deleting sub-paragraphs (d), (e), (f), (g) and (h); and (iii) by re-lettering sub-paragraph (i) as sub-paragraph (d) and amending it by replacing "(h)" in the last line with "(c)". (D) CLAUSE 31 shall be deleted in full. (E) All references in the Charter to "the KfW Loan Agreement" shall be deemed to include the supplemental agreement dated 1998 made between the Mortgagees and the Owners. 2. Save as amended by this Addendum No. 3 the Charter shall remain unchanged and in full force and effect. 3. The provisions of Clause 26 (Law and Arbitration) of the Charter shall apply to this Addendum No. 3 mutatis mutandis. SIGNED by ) ) for and on behalf of ) FANTASIA CRUISING INC. ) SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) 30 -1- THE SIXTH SCHEDULE THIS AGREEMENT dated the day of 1998 BETWEEN:- (1) FANTASIA CRUISING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Fantasia"); (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Zenith"); (3) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Blue Sapphire"); (4) ESKER MARINE SHIPPING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Esker"); (5) SEABROOK MARITIME INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("Seabrook"); (6) CELEBRITY CRUISES INC. a corporation incorporated under the laws of the Republic of Liberia whose principal place of business is at 95 Akti Miaouli, Piraeus, Greece ("CCI"); and (7) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KfW") 31 -2- IS SUPPLEMENTAL TO an agreement dated 30 November 1995 (known as the 'Surplus Earnings Application Agreement') made between the same parties. WHEREAS:- Pursuant to a memorandum dated 12 December 1997 signed by KfW and countersigned by each of the other parties hereto and by Royal Caribbean Cruises Ltd. ("RCCL") it was (inter alia) agreed that KfW would enter into an agreement supplemental to the Original Agreement so as to release Seabrook from being a party thereto and to delete therefrom the provisions relating to the application of Sub Earnings or Net Sub Earnings of each Vessel (as each such expression is defined in the Original Agreement) by reason of the release by KfW pursuant to the said memorandum of each of the assignments of the said Sub Earnings and Net Sub Earnings referred to in Recital G to the Original Agreement. NOW IT IS HEREBY AGREED by and between the parties hereto as follows:- 1. As and with effect from 17 December 1997 ("the Effective Date"), KfW hereby releases Seabrook from any further obligations and liabilities under the Original Agreement and Seabrook shall cease to be a party to the Original Agreement. 2. As and with effect from the Effective Date:- 3. Clause 2 of the Original Agreement shall cease to apply and shall be deemed to have been deleted from the Original Agreement; 4. Clause 3 of the Original Agreement shall be amended as follows:- 1. Clause 3.1(E) and Clause 3.2(E) shall each be deleted in full; 2. Throughout Clause 3 all references to "639", "639 Loans" and "the Seabrook Loan Agreement" (sometimes also referred to as "the 639 Loan Agreement") shall be deleted; 32 -3- 3. Throughout Clause 3 all references to "637 Loan Agreement" and "638 Loan Agreement" shall be deemed to refer to the Blue Sapphire Loan Agreement and the Esker Loan Agreement respectively. 1. Save as amended hereby the Original Agreement shall remain unchanged and in full force and effect. 2. Each of the Owners (other than Seabrook) and CCI hereby acknowledge towards KfW that notwithstanding the said release of Seabrook they shall remain bound by the Original Agreement (as amended and supplemented by this Supplemental Agreement). 3. The provisions of Clause 5 (Applicable Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. 33 -4- IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written SIGNED by ) ) for and on behalf of ) FANTASIA CRUISING INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ESKER MARINE SHIPPING INC. ) in the presence of:- ) 34 -5- SIGNED by ) ) for and on behalf of ) SEABROOK MARITIME INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 35 THE SEVENTH SCHEDULE THIS AGREEMENT dated the day of 1998 BETWEEN:- (1) CRUISE MAR INVESTMENT INC. of Liberia ("CMI"); and (2) KREDITANSTALT FUR WIEDERAUFBAU of Frankfurt ("KfW") IS SUPPLEMENTAL TO a subordination agreement dated 30 April 1990 as amended by an agreement supplemental thereto dated 30 November 1995 (together "the Original Agreement") both made between the same parties. WHEREAS:- Words and expressions defined in the Original Agreement shall have the same meanings when used in this Supplemental Agreement. IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. The amendment to lines 8-10 of Clause 4(b) effected by the supplement dated 30 November 1995 to the Original Agreement shall be revised to omit the reference to "Seabrook" and to read:- "the Borrower, Zenith, Blue Sapphire or Esker in favour of KfW in accordance with the terms of the KfW Facility Agreements" 2. Save as amended hereby the Original Agreement shall remain in full force and effect. 3. The provisions of Clause 8 (Law and Jurisdiction) of the Original Agreement shall apply to this Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. SIGNED by ) ) for and on behalf of ) CRUISE MAR INVESTMENT INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) 36 THE EIGHTH SCHEDULE THIS DEED OF REASSIGNMENT is made the day of 1998 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU of Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("KfW"); and (2) CELEBRITY CRUISES INC. a corporation duly incorporated under the laws of the Republic of Liberia having its registered office at 80 Broad Street, Monrovia, Republic of Liberia ("CCI"). WHEREAS:- A. By a deed of assignment dated 29 January 1993 as amended by a deed supplemental thereto dated 30 November 1995 (together "the Original Assignment") CCI assigned to KfW all the rights, title and interest of CCI to (inter alia) all sub-earnings of the Liberian cruise vessel "HORIZON"; B. Words and expressions defined in the Original Assignment shall have the same meanings when used in this Deed of Reassignment; C. On 30 July 1997 Royal Caribbean Cruise Ltd. ("RCCL"), a Liberian corporation, indirectly acquired the beneficial ownership of all of the issued shares of Fantasia Cruising Inc. ("Fantasia"), Zenith Shipping Corporation ("Zenith"), Blue Sapphire Marine Inc. ("Blue Sapphire"), Esker Marine Shipping Inc. ("Esker"), Seabrook Maritime Inc. ("Seabrook") and CCI; D. Pursuant to a memorandum dated 12 December 1997 ("the Memorandum") issued by KfW and countersigned by Fantasia, Zenith, Blue Sapphire, Esker, Seabrook, CCI and RCCL, KfW has (inter alia) agreed to enter into this Deed of Reassignment. NOW THIS DEED WITNESSETH as follows: 1. Pursuant to the Memorandum and in consideration of the premises and other good and valuable consideration (the receipt and sufficiency whereof KfW hereby acknowledges) KfW (without any warranty on the part of KfW and without recourse to KfW) hereby reassigns to CCI absolutely all KfW's rights, title and interest in and to the benefit of (A) all Long Term Charters in respect of the said cruise vessel which may have been entered into by CCI (B) all Sub Earnings of the said cruise vessel and (C) all other monies which were assigned to KfW pursuant to the Original Assignment. The said reassignment shall be deemed to have taken effect as from 17 December 1997. 2. This Deed of Reassignment shall be governed by and construed in accordance with the laws of England. IN WITNESS whereof KfW has executed this Deed of Reassignment the day and year first before written. SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) EX-2.3 13 RESTATED BY-LAWS 1 EXHIBIT 2.3 BY-LAWS OF ROYAL CARIBBEAN CRUISES LTD. (a Liberian Corporation) ARTICLE I Offices SECTION 1.01. REGISTERED ADDRESS The registered address of the Corporation shall be at 80 Broad Street, Monrovia, Liberia and its registered agent at such address shall be The International Trust Company of Liberia. SECTION 1.02. OTHER OFFICES The Corporation may also have and maintain an office or offices at such other places within or without the Republic of Liberia as the Board of Directors may from time to time determine or the business of the Corporation requires. ARTICLE II Meetings of Shareholders SECTION 2.01. PLACE OF MEETING All meetings of the Shareholders of the Corporation shall be held at such place or places within or outside the Republic of Liberia as shall be designated by the Board of Directors in the notice of such meeting. SECTION 2.02. ANNUAL MEETING The Board of Directors may fix the date and time of the Annual Meeting of the Shareholders but if no such date and time is fixed by the Board of Directors, the meeting for any calendar year shall be held on the first Thursday in May in such year, if not a legal holiday, and if a legal holiday then on the next succeeding business day, at 11:00 a.m. and at such meeting the Shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. SECTION 2.03. SPECIAL MEETINGS Special Meetings of the Shareholders of the Corporation for any purpose or purposes for which meetings may lawfully be called, may be called at any time for any purposes by the resolution of the Board of Directors or by the Chief Executive Officer and shall be called by the Secretary at the request of the Shareholders owning shares having at least 50 per cent of the votes entitled to be cast at meetings of the Shareholders. At any time, upon written request of any of the foregoing persons who have duly called a Special Meeting, which written request shall state the purpose or purposes of the meeting, it shall be the duty of the Secretary to fix a date and time for such meeting to be held being not less than fifteen (15) nor more than sixty (60) days after the receipt of the request unless otherwise provided by statute, and also the place of the meeting and to give due notice thereof. If the Secretary shall neglect or refuse to fix the time, date or place of such meeting and give notice thereof, the person or persons calling the meeting may do so in accordance with the provisions of Section 2.04 hereof. Special Meetings in default of the annual meeting may be called as provided by statute. 2 SECTION 2.04. NOTICE OF MEETINGS Written notice of all meetings of the Shareholders stating the purpose or purposes for which the meeting is called, the name of the person or persons at whose direction the notice is being given, the date and time when and the place where it is to be held, shall be given at least fifteen (15) but not more than sixty (60) days before such meeting, to each Shareholder of record entitled to vote at such meeting and to each member of the Board of Directors. Notice of a meeting need not be given to any such person who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting prior to the conclusion thereof of the lack of notice to him. SECTION 2.05. QUORUM, MANNER OF ACTING AND ADJOURNMENT The presence in person or by proxy at any meeting of the Shareholder or Shareholders holding between them shares having a majority of the votes entitled to be cast shall constitute a quorum for the transaction of business at such meeting except as otherwise required by statute, the Articles of Incorporation or these By-Laws. If a quorum shall not be present or represented at any meeting of the Shareholders within one hour of the time appointed for the meeting, the meeting shall be adjourned ("the First Adjournment"). The Secretary of the Corporation shall then issue a notice of the adjourned meeting stating the time and place that the adjourned meeting shall be reconvened. The notice shall be issued within two (2) days of the First Adjournment and no fewer than five (5) days prior to the reconvening of the adjourned meeting and shall be given to each Shareholder of record entitled to vote at such meeting in the same manner as is provided for in these By-Laws for giving notice of the original meeting. The notice shall state that the only business which may be transacted is that which might have been transacted on the original date of the meeting. If a quorum shall not be present or represented at the reconvened meeting of the Shareholders within one hour of the time appointed for the reconvened meeting, the meeting shall be adjourned ("the Second Adjournment"). The Secretary of the Corporation shall then issue a notice of the adjourned meeting stating the time and place that the adjourned meeting shall be reconvened. The notice shall be issued within two (2) days of the Second Adjournment and no fewer than five (5) days prior to the reconvening of the adjourned meeting and shall be given to each Shareholder of record entitled to vote at such meeting in the same manner as is provided for in these By-Laws for giving notice of the original meeting. The notice shall state that the only business which may be transacted is that which might have been transacted on the original date of the meeting. At such reconvened meeting, if a quorum comprising Shareholders holding shares having one third of the votes entitled to be cast at such meeting is not or has not been present within one hour of the time for the commencement of the adjourned meeting, the meeting shall be dissolved. When a quorum for the transaction of business is present at any meeting, a majority of the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on such question shall decide such question brought before such meeting, unless the question is one upon which, by express provision of any applicable statute or of the Articles of Incorporation, a different vote or result is required in which case such express provision shall govern and control the decision of such question. The Shareholders present in person or by proxy at a duly convened meeting can continue to transact business until adjournment, notwithstanding withdrawal of Shareholders so as to leave fewer than a quorum present. SECTION 2.06. ORGANIZATION At every meeting of the Shareholders, the Chairman of the Board, if there be one, or in the case of vacancy in the office or absence of the Chairman of the Board, one of the 2 3 following persons present in the order stated: the vice chairman of the Board, if there be one or in their order of rank or seniority if there be more than one, the Chief Executive Officer, the President, the vice presidents in their order of rank or seniority, a chairman designated by those members of the Board of Directors present at the meeting or a chairman chosen by the Shareholders in the manner provided in Section 2.05 of this Article; shall act as chairman, and the Secretary, or in his absence, an assistant secretary, or in the absence of the Secretary and assistant secretaries, a person appointed by the Chairman, shall act as secretary. SECTION 2.07. VOTING BY PROXY Each Shareholder entitled to vote at a meeting of the Shareholders may authorize any person to act for him by proxy. To be valid, a proxy must comply in form and substance with all applicable provisions of Liberian law, including, without limiting the generality of the foregoing, the following provisions. No proxy shall be valid after 11 months from its date, unless the proxy provides otherwise. Every proxy shall be signed by the Shareholder or by his attorney-in-fact and filed (together, in the case of any proxy executed by an attorney-in-fact, with a copy of such power of attorney) with the Secretary of the Corporation. A proxy, unless expressly stated to be irrevocable as provided in this Section, shall be revocable at the pleasure of the Shareholder, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the Corporation. A duly executed proxy shall be irrevocable if it is entitled "irrevocable proxy" and states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient to support an irrevocable power, including any of the circumstances set forth in Section 7.6(6) of the Business Corporation Act, and shall cease to be irrevocable upon the circumstance set forth in Section 7.6(7) and (8) of the Business Corporation Act. The giving of a proxy by any Shareholder to any other person shall not exempt such Shareholder from compliance with any requirement of any applicable statute, the Articles of Incorporation or these By-Laws relating to the conditions under which such shares may be voted. SECTION 2.08. ACTION BY SHAREHOLDERS WITHOUT A MEETING Any action which is required to be or which may be taken at any Annual or Special Meeting of Shareholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all the Shareholders entitled to vote with respect to the subject matter thereof. SECTION 2.09. VOTING LISTS A list of Shareholders of record who are entitled to vote on each item of business to be transacted, together with the number of votes which they are entitled to vote certified by the Secretary shall be produced at any meeting of Shareholders upon request of any Shareholder at the meeting or prior thereto. If the right to vote, or the number of votes which may be cast is challenged, the inspector or inspectors of election, or person presiding thereat, shall require the list of Shareholders to be produced as evidence of the right of the persons challenged to vote and all persons who appear from the list to be Shareholders entitled to vote may vote on such item at such meeting, and may cast the number of votes which the list shows that such person may cast. SECTION 2.10. INSPECTORS OF ELECTION In advance of any meeting of Shareholders, the Board of Directors may appoint inspectors of election, who need not be Shareholders, to act at such meeting or any adjournment thereof. If inspectors of election are not so appointed, the person presiding at any such meeting may, and on the request of any Shareholder entitled to vote at the meeting and before voting begins shall, appoint inspectors of election. The number of inspectors shall be either one or three, as determined, in the case of inspectors appointed upon demand of 3 4 a Shareholder, by the Shareholders in the manner provided in Section 2.05 hereof, and otherwise by the Board of Directors or the person presiding at the meeting, as the case may be. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting, or at the meeting by the person presiding at the meeting. Each inspector, before entering upon the discharge of his duties, shall take an oath faithfully to execute the duties of inspector at such meeting. If inspectors of election are appointed as aforesaid, they shall determine from the lists referred to in Section 2.09 hereof the number of shares outstanding, the shares represented at the meeting, the existence of a quorum, and the voting power of shares represented at the meeting, determine the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote or the number of votes which may be cast, count and tabulate all votes or ballots, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all Shareholders entitled to vote thereat. If there be three inspectors of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. Unless waived by vote of the Shareholders conducted in the manner provided in Section 2.05 hereof, the inspectors shall make a report in writing of any challenge or question or matter determined by them, and execute a sworn certificate of any fact found by them. SECTION 2.11 ELECTION OF DIRECTORS Elections of directors need not be by written ballot. Cumulative voting for directors shall not be permitted. ARTICLE III Board of Directors SECTION 3.01. POWERS All powers of the Corporation, except those specifically reserved or granted to the Shareholders by statute, the Articles of Incorporation or these By-Laws, are hereby granted to and vested in the Board of Directors; all such powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed by, the Board of Directors. SECTION 3.02. NUMBER AND TERM OF OFFICE The Board of Directors shall consist of twelve directors. Each director shall serve until the next Annual Meeting of Shareholders and until his successor shall have been elected and qualified. SECTION 3.03. VACANCIES Vacancies on the Board of Directors shall be filled by a majority of the directors then in office, even though less than a quorum. Directors chosen to fill vacancies shall hold office for the unexpired terms of their respective predecessors and until their successors are duly elected and shall qualify. SECTION 3.04. RESIGNATION OF DIRECTORS Any director of the Corporation may resign at any time by giving written notice to the Secretary. Such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 4 5 SECTION 3.05. ORGANIZATION At every meeting of the Board of Directors, the Chairman of the Board, if there be one, or, in the case of a vacancy in the office or absence of the Chairman of the Board, one of the following officers present in the order stated: the vice chairman of the Board, if there be one or in their order of rank and seniority if more than one, the Chief Executive Officer, the President, the vice presidents in their order of rank and seniority, or a chairman chosen by a majority of the directors present, shall preside, and the Secretary, or, in his absence, an assistant secretary, or in the absence of the Secretary and the assistant secretaries, any person appointed by the chairman of the meeting shall act as secretary. SECTION 3.06. PLACE OF MEETING The Board of Directors may hold its meetings, both regular and special, at such place or places within or outside the Republic of Liberia as the Board of Directors may from time to time appoint, or as may be designated in the notice calling the meeting. SECTION 3.07. REGULAR MEETINGS Regular meetings of the Board of Directors may be held without notice at such time and place as shall be designated from time to time by resolution of the Board of Directors. At such meetings, the directors may transact such business as may properly be brought before the meeting. SECTION 3.08. SPECIAL MEETINGS Special Meetings of the Board of Directors shall be held whenever called by the Chief Executive Officer or by two or more of the directors. Notice of each such meeting shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone) or 48 hours (in the case of notice by telegraph, cablegram, telex, facsimile or teleprinter) or 10 days (in the case of notice by mail) before the time at which the meeting is to be held. Each such notice shall state the time and place of the meeting to be so held, and shall also state the purpose or purposes of the meeting. SECTION 3.09. VOTING BY PROXY Each director may authorize another director to act for him by proxy at meetings of the Board of Directors, at meetings of committees of the Board of which he is a member and giving a written consent in lieu of meetings of the Board of Directors and such committees on behalf of his appointor. A proxy to a director shall be given in an instrument in writing including a telegram, cable, telex, teleprinter, facsimile or similar communication equipment and shall be produced to the first meeting at which it is used or otherwise delivered to the Secretary of the Corporation. A proxy shall be conclusive evidence of its validity until notice of revocation of such proxy in writing including a telegraph, cable, telex, teleprinter or similar communications equipment has been delivered to the Secretary of the Corporation. SECTION 3.10. QUORUM, MANNER OF ACTING, ADJOURNMENT AND ACTION WITHOUT MEETING At all meetings of the Board of Directors the presence, in person or by proxy, of a simple majority of the total number of directors shall constitute a quorum for the transaction of business except as may be otherwise specifically provided by the Business Corporation Act, by Article SEVENTH of, or otherwise by, the Articles of Incorporation or by these By-Laws. The act of a simple majority of the directors present in person or by proxy at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by the Business Corporation Act, by Article SEVENTH of, or otherwise by, the Articles of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors 5 6 present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Any person who is himself a director and acting as a proxy for any other director shall be entitled to have one vote for each capacity in which he so acts (in addition to any vote he may have as a director). Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if all of the members of the Board of Directors or committee (or other proxies) consent thereto in writing, and the writings are filed with the minutes of proceedings of the Board of Directors or committee. SECTION 3.11. CONFERENCE TELEPHONE MEETINGS One or more directors may participate in a meeting of the Board of Directors, or of a committee of the Board, by means of conference telephone or similar communications equipment by means of which all persons can hear each other. Participation in a meeting pursuant to this Section shall constitute presence in person at such meeting. SECTION 3.12. EXECUTIVE AND OTHER COMMITTEES OF THE BOARD The Board of Directors may, by resolutions adopted by a majority vote of the entire Board of Directors, designate from among its members an executive committee and one or more other committees (having such name or names as may be determined from time to time by resolution adopted by the Board of Directors), each committee to consist of two or more directors. The Board of Directors shall designate the chairman of each such committee, and may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The executive committee and any other committee designated by the Board of Directors shall have and may exercise such powers and authorities as shall be provided in the resolution of the Board of Directors establishing such committee; but no committee of the Board of Directors shall have the power or authority in reference to the submission to Shareholders of any action that requires Shareholders' authorization under the Business Corporation Act or the Articles of Incorporation, the filling of vacancies in the Board of Directors or in a committee, the fixing of the compensation of the directors for serving on the Board of Directors or on any committee, the amendment or repeal of the By-Laws or the adoption of new By-Laws, or the amendment or repeal of any resolution of the Board of Directors other than one which is by its terms so amendable or repealable. Meetings of committees shall be called in the manner provided in the resolution of the Board of Directors establishing such committee or as otherwise determined by such committee. Unless otherwise so provided, meetings of any committee may be called by the chairman of such committee, or by the secretary of such committee on the request of any two (2) members of such committee, on the same notice to each member as is required by Section 3.08 hereof. Unless otherwise provided in the resolution of the Board of Directors establishing a committee, two-thirds of the directors in the office designated to any committee (but in all events not less than two (2) such directors) shall be present at each meeting to constitute a quorum for the transaction of business, and the acts of such committee. Each committee so formed shall fix its own rules of proceeding, appoint its own secretary, keep regular minutes of its meetings and report the same to the Board of Directors when required. SECTION 3.13. COMPENSATION OF DIRECTORS The Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid a fixed annual fee as director, in addition to or in lieu of a fixed 6 7 sum for attendance at each meeting of the Board of Directors. Directors may also be remunerated separately for specific projects undertaken or services rendered on behalf of the Corporation at the request of the Board of Directors, and shall be reimbursed for their expenses incurred in performing their duties as directors, including attendance at meetings and specific projects undertaken or services rendered on behalf of the Corporation. No such payment shall preclude any directors from serving the Corporation in any other capacity and receiving compensation and reimbursement of expenses thereof. SECTION 3.14. PREFERRED DIRECTORS. Notwithstanding anything else contained herein, whenever the holders of one or more classes or series of preferred stock shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filling of vacancies, removal and other features of such directorships shall be governed by the terms of the resolutions applicable thereto adopted by the Board of Directors pursuant to the Articles of Incorporation. SECTION 3.15. SPECIFIC AND GENERAL POWERS OF DIRECTORS Subject to any regulations from time to time made by the Shareholders, the Board of Directors shall have the management of the affairs, business and property of the Corporation and may do all such acts as are not prohibited by law, by the Articles of Incorporation, or by these By-Laws, and as are not reserved to the Shareholders. ARTICLE IV Officers SECTION 4.01. NUMBER, QUALIFICATIONS AND DESIGNATION The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chief Executive Officer, a President, one or more vice presidents, a Secretary, a Treasurer, and such other officers as may be elected or appointed in accordance with the provisions of Section 4.03. Officers may be of any nationality and need not be residents or citizens of the Republic of Liberia. One person may hold more than one office. Officers may be, but need not be, directors or Shareholders of the Corporation. SECTION 4.02. ELECTION AND TERM OF OFFICE The officers of the Corporation, except those appointed by delegated authority pursuant to Section 4.03, shall be elected annually by the Board of Directors, and each such officer shall hold his office until his successor shall have been elected or appointed and qualified, or until his earlier death, resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected by the Board of Directors or appointed by delegated authority may be removed by the Board of Directors or by the appointing authority with or without cause. The removal of an officer without cause shall be without prejudice to his contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. SECTION 4.03. OTHER OFFICERS, SUBORDINATE OFFICERS, NON-BOARD COMMITTEES AND AGENTS The Board of Directors may from time to time elect such other officers and appoint such employees or other agents, or such committees (not constituting committees of the Board of Directors), as it deems necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as are provided in these By-Laws, or as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer or committee of the Board referred to in Section 3.12 the power to appoint subordinate officers and to retain or appoint employees or other agents, or committees (not constituting committees of the Board of Directors) and to prescribe the 7 8 authority, duties and compensation of such subordinate officers, committees, employees or other agents. SECTION 4.04. THE CHAIRMAN OF THE BOARD The Chairman of the Board shall preside at all meetings of the Shareholders and of the Board of Directors, and shall perform such other duties as may from time to time be assigned to him by the Board of Directors. The Chairman may also be the Chief Executive Officer and/or the President of the Corporation. SECTION 4.05. THE CHIEF EXECUTIVE OFFICER The Chief Executive Officer shall have general supervision over the affairs of the Corporation. The Chief Executive Officer shall have the power to sign, execute and acknowledge, in the name of the Corporation, deeds, mortgages, bonds, contracts or other instruments, shall make reports to the Board of Directors and the Shareholders, shall have like powers to those of the President, and, in general, shall perform all duties incident to the office of Chief Executive Officer. SECTION 4.06. THE PRESIDENT The President shall have the power to sign, execute and acknowledge, in the name of the Corporation, deeds, mortgages, bonds, contracts or other instruments, as authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors, or by these By-Laws or by statute, to some other officer or agent of the Corporation and, in general, shall perform such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 4.07. THE VICE PRESIDENTS The vice presidents shall perform such duties as may from time to time be assigned to them by the Board of Directors, the Chief Executive Officer or the President. SECTION 4.08. THE SECRETARY The Secretary, or an assistant secretary, shall attend all meetings of the Shareholders and of the Board of Directors and shall record the proceedings of the Shareholders and of the directors in a book or books to be kept for that purpose; see that notices are given and records and reports are properly kept and filed by the Corporation as required by law, the Articles of Incorporation or these By-Laws; be the custodian of the seal of the Corporation; and, in general, perform all duties incident to the office of Secretary, and such other duties as may from time to time be assigned to him by the Board of Directors, the Chief Executive Officer or the President. Except as otherwise required by law, the Secretary's signature shall not be required to bind the Corporation. SECTION 4.09. THE TREASURER The Treasurer or assistant treasurer shall have or provide for the custody of the funds or other property of the Corporation and shall keep a separate book of account of the same to his credit as Treasurer; collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the Corporation; deposit all funds in his custody as Treasurer in such banks or other places of deposit as the Board of Directors may from time to time designate; whenever so required by the Board of Directors, render an account showing his transactions as Treasurer and the financial condition of the Corporation; and, in general, discharge such other duties as may from time to time be assigned to him by the Board of Directors, the Chief Executive Officer or the President. SECTION 4.10. OFFICERS' BONDS No officer of the Corporation need provide a bond to guarantee the faithful discharge of his duties unless the Board of Directors shall by resolution so require, in which event such 8 9 officer shall give the Corporation a bond (which shall be renewed if and as required) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office. SECTION 4.11. SALARIES OF ELECTED OFFICERS The salaries of the officers of the Corporation elected by the Board of Directors shall be fixed from time to time by the Board of Directors or pursuant to authority conferred by the Board of Directors. ARTICLE V Certificates of Stock, Transfer, Etc. SECTION 5.01. ISSUE Each Shareholder shall be entitled to a certificate or certificates for shares of the Corporation owned by him upon his request thereof. All share certificates of the Corporation shall be numbered and registered in the share ledger and transfer books of the Corporation as they are issued. They shall be signed by the President or a vice president and by the Secretary or an assistant secretary or the Treasurer or an assistant treasurer, and may bear the corporate seal, which may be a facsimile. The signatures of the officers upon such certificate may be facsimiles, if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employees. In case any officer who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer before the certificate is issued it may be issued or delivered with the same effect as if he were such officer at the date of its issue or delivery. The Corporation shall keep a record containing the names and addresses of all registered Shareholders, the number and class of shares held by each and the date when they respectively became the owners of record thereof. SECTION 5.02. TRANSFER Transfer of shares issued in the name of a holder of record shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted and upon surrender of and cancellation of the certificate therefor. Every transfer of shares by holders of record shall be entered on the stock book of the Corporation. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for registered shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Transfer of shares of the Corporation that are subject to the restrictions contained in the Shareholders Agreement dated as of February 1, 1993 between A. Wilhelmsen AS. and Cruise Associates (the "Shareholders Agreement"), a copy of which is on file with the Secretary of the Corporation, shall only be made in accordance with the terms of the Shareholders Agreement. The Corporation shall be entitled to rely upon a written certificate of the Shareholder concerning the compliance with such conditions. The Secretary of the Corporation shall not register the transfer of shares that are subject to the restrictions of the Shareholders Agreement if either A. Wilhelmsen AS. or Cruise Associates notifies the Secretary that such transfer would violate the terms of the Shareholders Agreement. Any applicant to transfer shares shall pay to the Corporation any stamp or other duties or taxes payable in respect of the transfer, together with any charges imposed by the Corporation in respect of such transfer, all prior to and as a condition precedent to the issuance of any new certificates to such applicant. 9 10 SECTION 5.03. SHARE CERTIFICATES Share certificates of the Corporation shall be in such form as is provided by statute and approved by the Board of Directors. Shares that are subject to the restrictions of the Shareholders Agreement shall bear the legend required by Section 18 of the Shareholders Agreement. The holders of shares bearing the legend required by Section 18 of the Shareholders Agreement may obtain share certificates without legends in connection with a transfer of the shares represented by such certificates by providing a written certification to the Corporation to the effect that the transfer is being made in compliance with the terms of the Shareholders Agreement to a person who is not a party to, and who is not becoming a party to, the Shareholders Agreement. The share record books and the blank share certificates shall be kept by the Secretary or by any agency designated by the Board of Directors for that purpose. SECTION 5.04. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES The Board of Directors may direct a new certificate or new certificates to be issued in place of any certificate or certificates previously issued by the Corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issue of a new certificate or new certificates, the Board of Directors may, in its discretion and as a condition precedent to the issue thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and to give the Corporation a bond in such sum as the Board of Directors may direct as indemnity against any claims that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 5.05. RECORD HOLDER OF SHARES The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of registered shares to receive dividends, to vote and to exercise any other rights in respect of the shares held as the owner thereof. The Corporation shall not be bound to recognize any equitable or other claim to or interest in any registered share or shares on the part of any person other than a person registered on its books as the owner of such registered share or shares whether or not it shall have express or other notice thereof. SECTION 5.06. DETERMINATION OF SHAREHOLDERS OF RECORD In order that the Corporation may determine the holders of registered shares entitled to notice of meeting of Shareholders, or entitled to express consent to or dissent from any proposed corporate action without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of shares or for the purposes of any other action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 15 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of registered Shareholders of record entitled to notice of or to vote at a meeting of Shareholders shall apply to any adjournment of the meeting; except that the Board of Directors may fix a new record date for an adjourned meeting. ARTICLE VI Notices SECTION 6.01. NOTICE PROVISIONS Whenever, under the provisions of the statutes of the Republic of Liberia or the Articles of Incorporation or these By-Laws, any notice, request, demand or other communication is required to be or may be given or made to any officer, director, or registered Shareholder, 10 11 it shall not be construed to mean that such notice, request, demand or other communication must be given or made in person but the same may be given or made in person, by mail, telegraph, cablegram, telex, facsimile or teleprinter to such officer, director or registered Shareholder and shall be considered to have been properly given or made, in the case of mail, telegraph or cable, when deposited in the mail or delivered to the appropriate office for telegraph or cable transmission, and in other cases when transmitted by the party giving or making the same, directed to the officer or director or to a registered Shareholder at his address as it appears on the records of the Corporation, or, if the Shareholder shall have filed with the secretary of the Corporation a written request that notice to him be mailed to some other address, then directed to the Shareholder at such other address. Notice to directors may also be given in accordance with Section 3.08. Any notice dispatched by mail shall be sent by first class air mail or other fast postal service and shall be properly stamped prior to deposit in the mail. SECTION 6.02. NOTICE TO CORPORATION Whenever, under the provisions of the statutes of the Republic of Liberia or the Articles of Incorporation or these By-Laws, any notice, request, demand or other communication is required to be or may be given or made to the Corporation, it shall also not be construed to mean that such notice, request, demand or other communication must be given or made in person, but the same may be given or made to the Corporation by mail, telegraph, cablegram, telex, facsimile or teleprinter. Any such notice, request, demand or other communication shall be considered to have been properly given or made, in the case of mail, telegram or cable, when deposited in the mail or delivered to the appropriate office for telegraph or cable transmission, and in other cases when transmitted by the party giving or making the same, directed to the Corporation at its then registered address, provided that a copy of the same is sent by like medium of communication to the attention of the secretary at the Corporation's then principal place of business. SECTION 6.03. WAIVER OF NOTICE Whenever any written notice is required to be given under the provision of the Articles of Incorporation, these By-Laws or by statute, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Shareholders, directors, or members of a committee of directors need be specified in any written waiver of notice of such meeting. Attendance of a person, either in person or by proxy, at any meeting, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice of such meeting. ARTICLE VII Indemnification SECTION 7.01. GENERAL The Corporation shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (as hereinafter defined) as provided in this Article VII and to the fullest extent permitted by applicable law. SECTION 7.02. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION Indemnitee shall be entitled to the rights of indemnification provided in this Section 7.02 if, by reason of his Corporate Status (as hereinafter defined), he was or is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Corporation to procure a 11 12 judgment in its favor. Pursuant to this Section 7.02, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. SECTION 7.03. PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION Indemnitee shall be entitled to the rights of indemnification provided in this Section 7.03 if, by reason of his Corporate Status, he was or is, or is threatened to be made, a party to any threatened, pending or completed Proceeding brought by or in the right of the Corporation to procure a judgment in its favor. Pursuant to this Section, Indemnitee shall be indemnified against Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation. Notwithstanding the foregoing, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Corporation for negligence or misconduct in the performance of his duty to the Corporation if applicable law prohibits such indemnification; provided, however, that, if applicable law so permits, indemnification against Expenses shall nevertheless be made by the Corporation in such event if and only to the extent that the Court of competent jurisdiction in which such Proceeding shall have been brought or is pending, shall determine. SECTION 7.04. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL Notwithstanding any other provision of this Article VII, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Corporation shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 7.04 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal or voluntary action, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. SECTION 7.05. INDEMNIFICATION FOR EXPENSES OF A WITNESS Notwithstanding any other provision of this Article VII, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding in which he is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. SECTION 7.06. ADVANCEMENT OF EXPENSES The Corporation shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within twenty (20) days after the receipt by the Corporation of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. 12 13 SECTION 7.07. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION (a) To obtain indemnification under this Article VII, Indemnitee shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Corporation shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 7.07(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred, by Independent Counsel (as hereinafter defined) (unless Indemnitee shall request that such determination be made by the Board of Directors, in which case by the person or persons or in the manner provided for in clauses (ii) or (iii) of this Section 7.07(b)) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined) or (B) if such quorum is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (iii) as provided in Section 7.08(b) of this Article; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Corporation (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Corporation hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7.07(b) of this Article VII, the Independent Counsel shall be selected as provided in this Section 7.07(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Corporation shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Corporation advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Corporation, as the case may be, may, within seven (7) days after such written notice of selection shall have been given, deliver to the Corporation or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 7.13 of this Article VII, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a Court has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant 13 14 to Section 7.07(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or Indemnitee may petition any Court of competent jurisdiction for resolution of any objection which shall have been made by the Corporation or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Independent Counsel under Section 7.07(b) hereof. The Corporation shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 7.07(b) hereof, and the Corporation shall pay all reasonable fees and expenses incident to the procedures of this Section 7.07(c), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 7.09(a)(iii) of this Article VII, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). SECTION 7.08. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS (a) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Article if Indemnitee has submitted a request for indemnification in accordance with Section 7.07(a) of this Article, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. (b) If the person, persons or entity empowered or selected under Section 7.07 of this Article VII to determine whether Indemnitee is entitled to indemnification shall not have made such determination within sixty (60) days after receipt by the Corporation of the request therefore, the requisite determination of entitlement to indemnification shall be deemed to have been made in favor of Indemnitee and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; PROVIDED, HOWEVER, that such sixty (60) day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluation of documentation and/or information relating thereto; and PROVIDED, FURTHER, that the foregoing provisions of this Section 7.08(b) shall not apply if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7.07(b) of this Article VII. (c) The termination of any Proceeding or of any claim, issue or matter therein by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not (except as otherwise expressly provided in this Article VII) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner in which he reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. 14 15 SECTION 7.09. REMEDIES OF INDEMNITEE (a) In the event that (i) a determination is made pursuant to Section 7.07 of this Article VII that Indemnitee is not entitled to indemnification under this Article VII, (ii) advancement of Expenses is not timely made pursuant to Section 7.06 of this Article VII, (iii) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7.07(b) of this Article VII and such determination shall not have been made and delivered in a written opinion within ninety (90) days after receipt by the Corporation of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 7.05 of this Article VII within ten (10) days after receipt by the Corporation of a written request therefore, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 7.08 of this Article VII, Indemnitee shall be entitled to an adjudication in any Court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within one hundred eighty (180) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7.09(a). The Corporation shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration. (b) In the event that a determination shall have been made pursuant to Section 7.07 of this Article VII that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 7.09 shall be conducted in all respects as a DE NOVO trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding or arbitration commencing pursuant to this Section 7.09 the Corporation shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (c) If a determination shall have been made or deemed to have been made pursuant to Section 7.07 or 7.08 of this Article VII that Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 7.09, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, or (ii) a prohibition of such indemnification under applicable law. (d) The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 7.09 that the procedure and presumptions of this Article VII are not valid, binding and enforceable and shall stipulate in any such Court or before any such arbitrator that the Corporation is bound by all the provisions of this Article VII unless prohibited by law. (e) In the event that Indemnitee, pursuant to this Section 7.09, seeks a judicial adjudication of or an award in arbitration to enforce his rights under or to recover damages for breach of, this Article VII, Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 7.13 of this Article VII) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or 15 16 advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. SECTION 7.10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION (a) The rights of indemnification and to receive advancement of Expenses as provided by this Article VII shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Articles of Incorporation (including, but not limited to, Article Ninth thereof, which provides a separate right of indemnification), the By-Laws, any agreement, a vote of Shareholders or a resolution of directors or otherwise. No amendment, alteration or repeal of this Article VII or of any provision hereof shall be effective as to any Indemnitee with respect to any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. The provisions of this Article VII shall continue as to an Indemnitee whose Corporate Status has ceased and shall inure to the benefit of his heirs, executors and administrators. (b) The Corporation may purchase and maintain insurance on behalf of any person specified in Section 6.13 of the Business Corporation Act, or any person specified in this Article VII, against liability asserted against him and incurred by him, whether or not the Corporation would have power to indemnify him against such liability under the provisions of the aforesaid Section 6.13. To the extent that the Corporation maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Corporation, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Article VII, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights. (d) The Corporation shall not be liable under this Article VII to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. SECTION 7.11. SEVERABILITY If any provision or provisions of this Article VII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article VII (including without limitation, each portion of any Section of this Article VII containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VII (including, without limitation, each portion of any Section of this Article VII containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 16 17 SECTION 7.12. CERTAIN PERSONS NOT ENTITLED TO INDEMNIFICATION OR ADVANCEMENT OF EXPENSES Notwithstanding any other provision of this Article VII, no person shall be entitled to indemnification or advancement of Expenses under this Article VII with respect to any Proceeding, or any claim therein, brought or made by him against the Company except as provided in Section 7.09. SECTION 7.13. DEFINITIONS For purposes of this Article VII: (a) "Change in Control" means a change in control of the Corporation occurring after the Effective Date of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or not the Corporation is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Corporation representing twenty five percent (25%) or more of the combined voting power of the Corporation's then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. (b) "Corporate Status" describes the status of a person who is or was a director or officer of the Corporation or any direct or indirect subsidiary thereof or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Corporation. (c) "Disinterested Director" means a director of the Corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (d) "Effective Date" means April 22, 1993. (e) "Expenses" shall include all reasonable attorneys' costs and fees, investigative costs and fees, accountants costs and fees, expert witnesses' costs and fees, retainers, court costs, transcript costs, costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding. (f) "Indemnitee" includes any person who is, or is threatened to be made, a witness in or a party to any Proceeding as described in Sections 7.02, 7.03, 7.04 or 7.05 of this Article VII by reason of his Corporate Status and the heirs, executors and administrators of any such person. 17 18 (g) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither presently is, nor in the past five years has been, retained to represent: (i) the Corporation or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Corporation or Indemnitee in an action to determine Indemnitee's rights under this Article VII. (h) "Proceeding" includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative. SECTION 7.14. NOTICES Any notice, request or other communication required or permitted to be given to the Corporation under this Article VII shall be in writing and either delivered in person or sent by telex, telegram or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary. SECTION 7.15. MISCELLANEOUS Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. SECTION 7.16. INDEMNIFICATION OF ADDITIONAL PARTIES In addition to the foregoing, the Corporation may, but shall not be required to, indemnify, and advance Expenses to, any person who is, or is threatened to be made, a witness in or party to any Proceeding as described in Sections 7.02, 7.03, 7.04 or 7.05 of this Article VII by reason of the status of such person as an employee, agent or fiduciary of the Corporation or any direct or indirect subsidiary thereof or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Corporation, provided, however, that no such person shall be entitled to indemnification by virtue of this Section 7.16 unless such indemnification is authorized by action of the Board of Directors. ARTICLE VIII General Provisions SECTION 8.01. DIVIDENDS Dividends upon the capital stock of the Corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock of the Corporation, subject to the provisions of the Articles of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as the Board of Directors shall think conducive to the interests of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. The Corporation or other person paying any dividend or issuing any right on behalf of the Corporation shall be entitled to withhold therefrom any taxes required to be withheld 18 19 by the laws and regulations of any taxing authority having jurisdiction in the circumstances. SECTION 8.02. CONTRACTS Except as otherwise provided in these By-Laws, the Board of Directors may authorize any officer or officers or any agent or agents, to enter into any contract or to execute or deliver any instrument on behalf of the Corporation and such authority may be general or confined to specific instances. SECTION 8.03. CHEQUES AND DEPOSITS All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositories as the Board of Directors may approve or designate, and all such funds shall be withdrawn only upon cheques signed by such one or more officers, employees or agents of the Corporation as the Board of Directors shall from time to time determine. All notes, bills of exchange or other orders in writing shall be signed by such person or persons as the Board of Directors may from time to time designate. SECTION 8.04. CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Liberia". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. SECTION 8.05. CORPORATE RECORDS Every Shareholder shall, upon written demand stating the purpose thereof, have a right to inspect, in person or by agent or attorney, during the usual hours of business, for a purpose reasonably related to his interests as a Shareholder, the share register, books of account, and minutes of all proceedings, and make copies or extracts therefrom. SECTION 8.06. AMENDMENT OF BY-LAWS These By-Laws may be altered, amended or repealed and new By-Laws may be adopted, by the Board of Directors as provided in these By-Laws and the Articles of Incorporation, including Article SEVENTH thereof. SECTION 8.07. EFFECTIVE DATE Any amendment to or any amendment and restatement of these By-Laws shall govern the affairs of the Corporation from and after the date stated in the resolution adopting the same. -- END -- 19 EX-2.30 14 CONTRACT FOR HULL #S-655 1 EXHIBIT 2.30 ADDENDUM NO. 2 TO CONTRACT FOR CONSTRUCTION AND SALE OF HULL NO. S-655 With reference to the Contract for Construction and Sale of Hull No. S-655 (the "Contract") dated 9th April, 1998 between the undersigned it is agreed as follows: 1. The definition of "Specification" on page 1 of the Contract is hereby amended by inserting ", revised 26th April 1998" at the end of the definition. 2. Article I.2.1 of the Contract is hereby amended by (i) increasing the Vessel's number of passenger cabins from 1,048 cabins to 1,070 cabins, (ii) decreasing the Vessel's number of crew cabins from 477 cabins to 472 cabins, and (iii) increasing the Vessel's deadweight from 8,500 metric tons to 8,900 metric tons 3. Article I.2.2 of the Contract is hereby amended in its entirety to read as follows: 2.2. MACHINERY The machinery to consist of two (2) gas turbine generator sets and one (1) steam turbine generator set (COGES type), having a total maximum continuous rating of 57,800 kW electric power under the reference conditions set forth in the GE S&S-specification for this plant, to supply power to two (2) electric propulsion motors and the remaining electric systems of the Vessel as stipulated in the Specification. 4. Article I.4 of the Contract the deadweight has to be changed from "eight thousand five hundred (8,500) metric tons" to "eight thousand nine hundred (8,900) metric tons" 5. Article I.5 of the Contract is hereby amended in its entirety to read as follows: 5. FUEL CONSUMPTION The fuel consumption of each of the Vessel's two (2) gas turbine generator sets shall be determined on the test bed under conditions stipulated in the GE S&S-specification for this plant, and shall not exceed 242.2 grams per kW per hour when developing 100% of Maximum Continuous Rating. 6. Article II of the Contract is hereby amended as follows: The Contract Price under Article II.1 shall be increased by US$6,200,000 (United States Dollars six million two hundred thousand) The Terms of Payment for this amount shall be the same as for the Contract Price as stipulated in Article II.2 of the Contract. [PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES ACT OF 1934, AS AMENDED] 2 7. Article III.3 of the Contract is hereby amended in its entirety to read as follows: 3. EXCESSIVE FUEL CONSUMPTION The Builder guarantees that the fuel consumption of each of the two (2) gas turbine generator sets at the test bed runs as stipulated in Article I.5 shall not exceed 242.2 grams per kW per hour. The Contract Price shall not be affected or changed if the actual fuel consumption of both generators is not greater than [*] above 242.2 grams per kW per hour. If the actual fuel consumption of either generator is over [*] greater than 242.2 grams per kW per hour, then, as sole compensation, the Contract Price shall be reduced by the sum of [*] for each full [*] increase in fuel consumption above said [*] (fractions of a percent to be prorated) for each generator. If such actual fuel consumption of either generator is more than [*] greater than 242.2 grams per kW per hour, then the Buyer may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract. The remaining provisions of the Contract shall be unaffected hereby. The provisions of Articles XIII and XIX of the Contract shall be deemed incorporated herein. All conditions other than those modified by this Addendum No. 2 shall remain unchanged and in full force and effect. In witness whereof, the parties have caused this Addendum No. 2 to be duly executed the 26th day of April, 1998. For and on behalf of For and on behalf of the Buyer the Builder ROYAL CARIBBEAN CRUISES LTD. JOS. L. MEYER GMBH & CO. By: /s/ Jack Williams By: /s/ Bernard Meyer ----------------- -------------------- Jack Williams Bernard Meyer President Managing Partner - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 3 ADDENDUM NO. 1 TO THE CONTRACT FOR CONSTRUCTION AND SALE OF HULL NO. S-655 With reference to the Contract for Construction and Sale of Hull No. S-655 (the "Contract") dated 9th April, 1998 between the undersigned it is agreed as follows: Based on the finally agreed Specification including the declaration of options by the Buyer as of the date hereof the Contract Price shall be increased by US$6,500,000 (United States Dollars Six Million Five Hundred Thousand). The Terms of Payment for this amount shall be the same as for the Contract Price as stipulated in Article II of the Contract. The remaining provisions of the Contract shall be unaffected hereby. The provisions of Articles XIII and XIX of the Contract shall be deemed incorporated herein. All conditions other than those modified by this Addendum No. 1 shall remain unchanged and in full force and effect. IN WITNESS WHEREOF the parties have caused this Addendum No. 1 to be duly executed the 9th day of April, 1998. For and on behalf of For and on behalf of the Buyer the Builder ROYAL CARIBBEAN CRUISES LTD. JOS. L. MEYER GMBH & CO. By: /s/ Richard D. Fain By: /s/ Bernard Meyer ------------------- -------------------- Richard D. Fain Bernard Meyer Chairman and Chief Managing Partner Executive Officer 4 CONTRACT FOR CONSTRUCTION AND SALE OF HULL NO. S-655 BETWEEN ROYAL CARIBBEAN CRUISES LTD. AS BUYER AND JOS. L. MEYER GMBH & CO. AS BUILDER [PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED PURSUANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 UNDER THE SECURITES EXCHANGE ACT OF 1934, AS AMENDED.] 5 INDEX PAGE ARTICLE I - Description and Class 2 1. Description 2. Dimensions and Characteristics 2.1 Hull 2.2 Machinery (Diesel-Electric) 3. Speed 4. Deadweight 5. Fuel Consumption 6. Quality Standards 7. Classification, Rules and Regulations 8. Makers and Suppliers 9. Registration 10. Design Obligations ARTICLE II - Contract Price and Terms of Payment 6 1. Contract Price 2. Terms of Payment 3. Method of Payment 4. Installment Guarantees ARTICLE III - Adjustment of Contract Price 8 1. Delayed Delivery 2. Insufficient Speed 3. Excessive Fuel Consumption 4. Insufficient Deadweight 5. Excessive Vibration and Sound Levels 6. Exclusion of Other Liabilities ARTICLE IV - Approval of Plans and Drawings and Inspection 12 during Construction 1. Approval of Plans and Drawings 2. Appointment of Buyer's Representatives 3. Inspection by Representatives 4. Facilities 5. Buyer's Liability to the Representatives 6. Responsibility of Buyer 7. Interior Design 6 ARTICLE V - Modifications; Workmanship and Construction 16 1. Voluntary Modifications 2. Changes in Class, etc. 3. Substitution of Materials 4. Information 5. Pricing of Modifications and Changes ARTICLE VI - Trials 18 1. Notice 2. Weather Conditions 3. How Conducted 4. Method of Acceptance or Non-acceptance 5. Effect of Acceptance 6. Correction of Causes for Non-acceptance 7. Disposition of Surplus Consumable Stores ARTICLE VII - Delivery 21 1. Time and Place 2. When and How Effected 3. Documents to be Delivered to the Buyer 4. Title and Risk 5. Removal of Vessel ARTICLE VIII - Delays and Extensions of Time for Delivery 23 (Force Majeure) 1. Causes of Delay 2. Notice of Delays 3. Permissible Delays 4. Right to Rescind for Excessive Delay ARTICLE IX - Warranty of Quality 25 1. Guarantee 2. Notice of Defects 3. Remedy of Defects 4. Extent of Builder's Responsibility 5. Guarantee Engineer 7 ARTICLE X - Rescission by Buyer 28 1. Notice 2. Refund by Builder 3. Discharge of Obligations ARTICLE XI - Buyer's Default; Builder's Default 29 1. Definition of Buyer's Default 2. Interest and Charges 3. Effect of Default 4. Sale of Vessel 5. Default by Builder ARTICLE XII - Builder's Insurance 34 1. Extent of Builder's Insurance Coverage 2. Application of Recovered Amounts 3. Termination of Builder's Obligation to Insure ARTICLE XIII - Dispute and Arbitration 36 1. Technical Disputes 2. Other Disputes ARTICLE XIV - Right of Assignment 37 1. Assignment of Benefits ARTICLE XV - Taxes and Duties 37 1. Taxes and Duties in Germany, etc. 2. Taxes and Duties Outside Germany, etc. ARTICLE XVI - Patents, Trademarks, Copyrights, etc. 38 1. Patents, Trademarks and Copyrights etc. 2. Design of Vessel ARTICLE XVII - Buyer's Supplies 39 1. Responsibility of Buyer 2. Responsibility of the Builder 8 ARTICLE XVIII - Notice 40 1. Addresses ARTICLE XIX - Interpretation 41 1. Law Applicable 2. Discrepancies 3. Entire Agreement 4. Language 5. Effectiveness APPENDICES A. Form of Installment Guarantee 9 THIS CONTRACT, made as of this 9th day of April 1998 by and between JOS. L. MEYER GMBH & CO., a corporation organized and existing under the laws of Germany, having its principal office at Industriegebiet Sud, D-26871, Papenburg, Germany (hereinafter called the "Builder") and ROYAL CARIBBEAN CRUISES LTD., a corporation organized and existing under the laws of Liberia, having its principal office at 1050 Caribbean Way, Miami, Florida 33132 (hereinafter called the "Buyer"). WITNESSETH THAT In consideration of the mutual covenants herein contained, the Builder agrees to design, construct, equip and substantially complete at its shipyard in Papenburg, Germany (hereinafter called the "Shipyard"), finally complete and sell and deliver to the Buyer one (1) passenger cruise vessel more fully described in Article I hereof (hereinafter called the "Vessel"), and the Buyer agrees to purchase and take delivery of the Vessel from the Builder and to pay for the same, all upon the terms and conditions hereinafter set forth. In this Contract the following terms, when capitalized, shall have the meanings defined below: "Banking Days" shall mean days on which banks are customarily open for business in each of London, New York and Frankfurt; "Contract Price" shall bear the meaning assigned thereto in Article II.1; "Effective Date" shall bear the meaning assigned thereto in Article XIX.5; "General Arrangement Plan" shall mean the Builder's general arrangement plan, Project No. 8235-97 dated and initialled 27 February 1998; "Specification" shall mean Specification Project No. 8235-97 dated and initialled 27 February 1998. "Transfer Agreement" shall mean the Transfer Agreement dated the date of this Contract and entered into between the Builder and the Buyer. Other terms of this Contract are defined hereinafter. References to the "Vessel" shall, except where the context otherwise requires, be deemed to 10 include her hull and all machinery, equipment, gear and outfittings installed on, or appropriated to, the Vessel. ARTICLE I - DESCRIPTION AND CLASS 1. DESCRIPTION The Vessel shall have the Builder's Hull Number S-655 and shall be designed, constructed, equipped and completed in accordance with the provisions of this Contract, the Specification and the General Arrangement Plan signed by each of the parties hereto for identification and delivered herewith and made an integral part hereof. 2. DIMENSIONS AND CHARACTERISTICS 2.1 HULL
The Vessel shall have the following dimensions and characteristics: Type: Passenger Cruise Vessel Length, overall: About 292 meters Length between perpendiculars: 263.5 meters Breadth moulded at waterline: 32.2 meters Design draft moulded: 8 meters Scantling draft moulded: Min. 8.2 meters Depth deck 1 (subdivision deck) 10.7m Deadweight at Design Draft moulded: 8,500 metric tons Gross tonnage: About 85,000 GT Number of passenger cabins: 1,048 cabins Number of crew cabins: 477 cabins Total No. of persons (lifesaving capacity) 3,360 persons
2.2 MACHINERY (DIESEL-ELECTRIC) The machinery to consist of five (5) diesel engines of medium speed type, having a total maximum continuous rating of 63,000 kW driving five (5) electric generators of same maximum continuous rating (corrected for generator efficiency) to supply power to two (2) electric pod type propulsion motors and the remaining electric systems of the Vessel as stipulated in the Specification. 3. SPEED The Builder guarantees that the Vessel shall achieve a trial speed of not less than twenty four (24) knots averaged over two continuous runs (in opposite directions) on a measured course of not less than one nautical 2 11 mile, at the moulded Design Draft at an output of 87% of the maximum continuous output of the electric propulsion motor shafts in calm sea and deep water with clean bottom, as further described in the Specification. In case the Vessel's trials shall be made at a different draft from the above defined draft, the speed at such draft shall be evaluated by using the method described in the Specification. 4. DEADWEIGHT The Vessel, when completed, shall have a deadweight of eight thousand five hundred (8,500) metric tons as stipulated in the Specification. The term "Deadweight" as used in this Contract shall signify the difference between the displacement on even keel at the moulded Design Draft in salt water of 1.025 specific gravity on the basis of hydrostatic curves of the Vessel and the lightweight as specified in the Specification. The actual Deadweight of the Vessel shall be based on the measurements and calculations by the Builder and approved by the Buyer's Representative and the Classification Society. 5. FUEL CONSUMPTION The average fuel consumption of the five (5) diesel engines of the Vessel shall be determined on the test bed under conditions stipulated in the Specification, using a fuel oil having a lower calorific value of 10,200 kcal per kg, and shall not exceed 183 grams per kWh in ISO 3046/1 conditions without driven pumps, when developing 85% of Maximum Continuous Rating. 6. QUALITY STANDARDS Notwithstanding anything contained in this Contract or the Specification to the contrary, the complexity (unless specified to the contrary in the Specification), quality of workmanship, quality of materials and interior design of the passenger cabins and passenger public spaces shall not be of a lower standard than on the RHAPSODY OF THE SEAS as built. Notwithstanding anything contained in this Contract or the Specification to the contrary, the quality of workmanship, quality of materials, components, equipment, machinery, function and performance of systems for the remainder of the Vessel shall not be of a lower standard than on the MERCURY as built unless otherwise specifically set forth in the Specification. 3 12 7. CLASSIFICATION, RULES AND REGULATIONS The Vessel shall be constructed in accordance with the rules (the edition and amendments thereto being in force as of the Effective Date or as announced as of the Effective Date as intended thereafter to enter into force) and under special survey of Det Norske Veritas (herein called the "Classification Society") and shall at delivery and acceptance hereunder have achieved the Classification Society's notation: "+ 1A1 Passenger Ship ECO, RP" clean and free of all recommendations or qualifications (i) requiring amendment or modification(s) to the Vessel or (ii) otherwise affecting the ability of the Vessel upon delivery to commence immediate operations as a passenger cruise ship. Decisions of the Classification Society as to compliance or non-compliance with the requirements of the Classification Society shall be final and binding upon both parties hereto. The Vessel shall also comply with the rules, regulations and requirements of other regulatory bodies as expressly described in the Specification in effect as of the Effective Date or as announced as at the Effective Date as intended thereafter to enter into force. The Builder shall arrange with the Classification Society for the assignment by said Society of a representative or representatives (hereinafter referred to as the "Classification Surveyor") to the Vessel during construction. All fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for the account of the Builder. It is also expressly agreed that the Builder shall assume exclusive responsibility for the correct interpretation and application of the rules, regulations and requirements of the Classification Society and the regulatory bodies expressly described in the Specification. 8. MAKERS AND SUPPLIERS MAKERS' LIST The Specification contains a list (herein called the "Makers' List") of potential makers and suppliers of major items of machinery and 4 13 equipment, the names included therein having been agreed by the Builder and the Buyer. Where the Makers' List contains the name of more than one maker or supplier in relation to any item of machinery or equipment, the Builder shall nominate its choice of maker or supplier as early as possible to enable the Buyer to consider such choice. In connection with such nomination, the Builder shall provide the Buyer with such maker's or supplier's technical specifications and allow the Buyer sufficient time (up to, but not to exceed 10 working days) to review such specifications prior to the Buyer's acceptance or non-acceptance of the Builder's choice. The Buyer shall have the right not to accept the Builder's choice but itself to choose from the Makers' List the maker or supplier of the relevant item of machinery or equipment, provided the Buyer's choice does not materially affect the Builder's construction schedule or other terms and conditions of this Contract and the Specification. In the case where the Buyer's choice of maker or supplier prevails the Contract Price shall be adjusted upwards or downwards to reflect the difference in cost to the Builder (as reasonably substantiated by the Builder at the time the Buyer confirms its choice) of purchasing and incorporating in the Vessel the item of machinery or equipment supplied by the maker or supplier chosen by the Buyer (as compared with the cost which would have applied had the Builder's choice of maker or supplier prevailed). If the Buyer wishes the Builder to select a maker or supplier not listed on the Makers' List, the difference, if any, between that maker's or supplier's price and the price of the equivalent maker or supplier named in the Maker's List, together with any other related consequential costs, shall be added to or deducted from the Contract Price subject to the requirements set forth in the previous paragraph. GENERAL The Builder shall, before purchasing any important machinery or equipment not on the Makers' List, inform the Buyer about the proposed maker or supplier (and supply to the Buyer the relevant maker's or supplier's technical specification) and the Buyer shall comment on Builder's proposal within seven (7) days following receipt of such information. Upon the parties agreeing, the Builder shall place the particular order. It shall be open to the parties to modify, by agreement, the Makers' List to take advantage of the latest developments in techniques. Either party shall be entitled to make proposals to the other party in this connection to 5 14 which the other party will always give reasonable consideration provided that the implementation of any such proposal does not adversely affect the other party's obligations under this Contract. 9. REGISTRATION The Vessel shall, concurrently with the delivery of the Vessel to the Buyer pursuant to Article VII hereof, be registered in Liberia. If Buyer determines in its reasonable opinion that the circumstances warrant, the Buyer may change its selection pursuant to the provisions of Article V hereof. All fees and charges incidental to the registration of the Vessel shall be for the account of the Buyer. Prior to the delivery of the Vessel to the Buyer pursuant to Article VII hereof, the Vessel shall be registered in the name of the Buyer in accordance with the provisions of the Transfer Agreement. 10. DESIGN OBLIGATIONS Notwithstanding (i) that elements of the Vessel's design are to be provided to the Builder by the Buyer or its subcontractors and (ii) that test results, plans and drawings for the Vessel are (as detailed in the Specification) to be submitted to, and approved by, the Classification Society and the Buyer, it is expressly understood and agreed that the Builder shall be solely responsible for the design of the Vessel. ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT 1. CONTRACT PRICE The fixed purchase price of the Vessel is US$350,000,000 (Three Hundred and Fifty Million United States Dollars) (the "Contract Price"), which is exclusive of the Buyer's Supplies as provided in Article XVII hereof and shall be subject to upward or downward adjustment, if any, only as hereinafter set forth in this Contract. 2. TERMS OF PAYMENT The Contract Price shall be paid by the Buyer to the Builder in installments as follows: 6 15 (a) FIRST INSTALLMENT The First Installment, amounting to US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars) shall be paid within two (2) Banking Days of the Effective Date. (b) SECOND INSTALLMENT The Second Installment, amounting to US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars) shall be paid on 15 February 1999. (c) THIRD INSTALLMENT The Third Installment, amounting to US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars) shall be paid on 16 August 1999. (d) FOURTH INSTALLMENT The remainder of the Contract Price shall be paid upon delivery and acceptance of the Vessel. 3. METHOD OF PAYMENT Any and all payments, whether by the Buyer to the Builder or vice-versa, under this Contract shall be made in United States Dollars. Each of the respective installments shall be remitted by telegraphic transfer to the account of the Builder to be nominated by the Builder by at least five (5) Banking Days prior written notice. With the exception of the installment due upon delivery and acceptance of the Vessel and strictly without prejudice to the Buyer's rights under Article XIII, it is understood and agreed upon that no payments under the provisions of this Article shall be delayed or withheld by the Buyer due to any dispute of whatever nature arising between the parties hereto save in the case of the valid rescission by the Buyer or other valid termination of the Contract. 4. INSTALLMENT GUARANTEES Notwithstanding the foregoing, the Buyer shall not be obligated to make any of the First, Second or Third Installments until the Builder provides it 7 16 with a guarantee for the repayment of such installment, issued by a first class international bank or insurance company reasonably acceptable to the Buyer, in the form set forth as Appendix A attached hereto. ARTICLE III - ADJUSTMENT OF CONTRACT PRICE The Contract Price shall be subject to adjustment, as hereafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction is by way of liquidated damages only and not by way of penalty). 1. DELAYED DELIVERY In the event that the Vessel is delivered after the Delivery Date, the Builder shall pay to the Buyer, upon delivery and acceptance of the Vessel, the following liquidated damages: [*] days or fraction thereof of delay: [*] Thereafter for each [*] days or fraction thereof of delay:[*] For this purpose, the delivery of the Vessel shall be deemed to be delayed when and if the Vessel is not delivered by the Delivery Date. However, if the delay in delivery of the Vessel continues for a period of more than [*] days after the Delivery Date then, in such event, the Buyer may, at its option, rescind this Contract by serving upon the Builder written notice of rescission. The Builder may at any time after the expiration of the aforementioned [*] days period of delay in delivery, if the Buyer has not served notice of rescission as above provided, propose a future date for delivery of the Vessel and require in writing that the Buyer make an election, in which case the Buyer shall, within thirty (30) days after such demand is received by the Buyer, either notify the Builder of its intention to rescind this Contract or consent to delivery of the Vessel at the specified future date, it being understood by the parties that, if the Vessel is not delivered by such date, the Buyer's right of rescission shall be reinstated with immediate effect. - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 8 17 2. INSUFFICIENT SPEED If the Vessel on sea trials at her design draft and even keel and under the sea and weather conditions as stipulated in this Contract and Specification does not attain a speed of 24 knots at 87% of maximum continuous output of the electric propulsion motor shafts, then, as sole compensation, the Contract Price shall be reduced according to the following: For the first [*] of a knot [*] For each further complete [*] of a [*] of the Contract Price, knot up to [*] of a knot For each further complete [*] of a [*] of the Contract Price knot However, if the Vessel shall not achieve a speed of [*] knots, then the Buyer may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract. 3. EXCESSIVE FUEL CONSUMPTION The Builder guarantees that the average fuel consumption of the 5 diesel engines at the test bed trial runs shall be 183 grams per kW (Kilowatt) per hour, using fuel oil which has a lower calorific value of 10,200 kcal per kg as stipulated in Article I.5. The Contract Price shall not be affected or changed, if the actual average fuel consumption is not greater than [*] above 183 grams per kW (Kilowatt) per hour, using fuel oil which has a lower calorific value of 10,200 kcal per kg. If the actual average fuel consumption is over [*] greater than 183 grams per kW (Kilowatt) per hour, using fuel oil which has a lower calorific value of 10,200 kcal per kg, then as sole compensation, the Contract Price shall be reduced by the sum of [*] for each full [*] increase in fuel consumption, above said [*] (fractions of a percent to be prorated). If such actual average fuel consumption is more than [*], greater than 183 grams per kW (Kilowatt) per hour, using fuel oil which has a lower calorific value of 10,200 kcal per kg, then the Buyer may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract. - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 9 18 4. INSUFFICIENT DEADWEIGHT If the deadweight as stipulated in Article I.4 hereof is not attained, then the Contract Price shall be reduced as follows: In case such deficiency [*] is not more than [*] tons below the aforesaid figure: In case such deficiency [*] for each full ton of is more than [*] deficiency in tons below the deadweight in excess of the aforesaid figure: aforesaid [*] tons, In case such deficiency is greater than [*] tons below the deadweight stipulated in Article I.4 hereof then the Buyer may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract. 5. EXCESSIVE VIBRATION AND SOUND LEVELS (a) The Contractual Vibration Levels (CVL) in the passenger cabins and passenger public spaces are the single peak values as stated in the Specification taking into account the margins specified in the Specification. The Measured Vibration Levels (MVL) are the single peak levels derived from RMS values by using the measurement procedure described in G5.2.2 of the Specification. If in any cabin or any passenger public space which affects more than [*], the MVL exceeds the CVL, the Builder is to make the necessary changes before delivery to reduce those levels to CVL figures. If after changes made by the Builder, the final MVL exceed the CVL by [*] or more, the Contract Price will be reduced by [*] for each passenger cabin and/or passenger public space affected provided, however, that such reduction shall in no event exceed [*]. The Buyer will have the right, at its option, to rescind this Contract if more than [*] of passenger cabins and/or if more than [*] of the aggregated area of passenger public spaces are affected. (b) For each passenger cabin and passenger public space, the Contractual Sound Level (CSL) is the upper limits of noise level as - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 10 19 per G5.2.1 of the Specification taking into account the margins specified in the Specification. If Measured Sound Levels (MSL) to be taken into consideration as per the Specification exceed the CSL, the Builder is to make the necessary changes before the delivery to reduce those levels to the CSL figures. If after the changes made by the Builder, the final MSL exceed the CSL, the Contract Price shall be reduced for each passenger cabin or passenger public space as follows: from [*] dBA above contractual level: [*] from [*] dBA above contractual level: [*] from [*] dBA above contractual level: [*] from [*] dBA and above: [*] In no event shall such reduction exceed an aggregate of U.S.$[*]. The Buyer will have the right, at its option, to rescind the Contract if either: - the MSL in more than [*] of the passenger cabins exceeds the CSL by more than [*], - the average value of MSL in more than [*] of the aggregate area of passenger public spaces exceeds the CSL by more than [*]. (c) the Builder will use all reasonable efforts to take corrective measures so as to ensure that the standards set forth in this Article III.5 are met. 6. EXCLUSION OF OTHER LIABILITIES The liquidated damages payable by the Builder hereunder shall represent the sole and exclusive financial compensation payable to the Buyer in respect of the breaches of contract to which they relate provided, however, that such limitation shall not apply where any such breach shall have been willful on the part of the Builder. - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 11 20 ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION 1. APPROVAL OF PLANS AND DRAWINGS The Builder shall, within sixty (60) days after the Effective Date, present to the Buyer for its approval a list of typical drawings, schematic diagrams and other documents, with their preliminary time schedules to be presented to the Buyer for the Buyer's information. The Builder shall at the same time present to the Buyer the Builder's system of identifying drawings and diagrams. Plans, drawings and other documents sent to the Buyer for approval shall be issued in quadruplicate, two sets shall be sent to RCCL A/S in Oslo, Norway, one set to the Buyer's local Inspection Office at the Builder's Shipyard and one set to the Buyer's office in Miami. For the architectural drawings and documents, two sets shall be sent to the Buyer's consulting architect (as advised by the Buyer) for the actual room(s) and public spaces, one set to the Buyer's Technical Department and one set to the Buyer's office in Miami. All approvals will be given through RCCL A/S Oslo, unless otherwise advised by the Buyer. Unless otherwise agreed, the Buyer shall send to the Builder its comments to the received plans, drawings, diagrams and documents within fifteen (15) working days after having received the same for approval. The Buyer may request an extension of such approval period, which such approval shall not be unreasonably withheld by the Builder. In the event that the Buyer or the Representatives shall fail to respond with the Buyer's comments within such time limit, the Builder shall notify the Buyer in writing of the Buyer's failure to respond. In the event the Buyer still fails to respond with the Buyer's comments within three (3) working days of receipt of the Builder's notice to the Buyer of the Buyer's failure to respond, the relevant plans and drawings shall be deemed to have been automatically approved by the Buyer without any comment. Unless otherwise agreed, the Builder shall send its answers to the Buyer's comments within fifteen (15) working days after having received the Buyer's comments. The Builder may request an extension of such response period, which such approval shall not be unreasonably withheld. If no response is received from the Builder within the above time limit, the Builder will not be able to rely upon schedule considerations to refuse the Buyer's comments to the extent that they are within the provisions of the Specification. 12 21 Any deemed approval of plans, drawings or other documents pursuant to this paragraph 1 shall be strictly without prejudice to the obligations of the Builder hereunder, in particular (but without limitation) to complete and deliver the Vessel in accordance with this Contract and the Specification. 2. APPOINTMENT OF BUYER'S REPRESENTATIVES The Buyer may send to and maintain at the Shipyard, at the Buyer's own cost and expense, one or more representatives (herein called the "Representatives") who may act on behalf of the Buyer in connection with any matters in relation to supervision of the construction of the Vessel at the Shipyard, as specifically authorized in writing by the Buyer. The Buyer shall deliver a letter to the Builder describing the scope of authority of the Representatives prior to the arrival of the Representatives at the Shipyard. The Builder shall be entitled to rely upon such letter until it receives notice that such letter has been amended or revoked. The Builder will assist the Buyer in obtaining any necessary German permissions or authorizations for the Representatives to carry out their duties. 3. INSPECTION BY REPRESENTATIVES The necessary inspections and tests of the Vessel shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the Builder throughout the entire period of construction, in order to ensure that the construction of the Vessel is duly performed in accordance with this Contract and the Specification. The Representatives shall, during construction of the Vessel, have the right to attend all such tests and inspections of the Vessel, its machinery and equipment. On the Representatives' arrival at the Shipyard, without prejudice to their right to attend all tests, the Builder shall identify the kinds of tests it will conduct and will agree with the Representatives as to which of such kinds of tests they wish to attend. The Builder shall give a notice to the Representatives reasonably in advance of the date and place of such tests and inspections to be attended by them. In the case of inspections at the Shipyard, such notice shall be given at least twenty-four (24) hours prior to the commencement of such tests, and in the case of tests to be conducted away from the Shipyard, such notice shall be given at least seven (7) days prior to the 13 22 commencement of such tests. Failure of the Representative to be present at such tests and inspections after due notice to him as above provided and without proper cause shall be deemed to be a waiver of his right to be present. In the event that the Representative discovers any construction or material or workmanship which does not conform to the requirements of this Contract and/or the Specification, the Representative shall promptly give the Builder a notice in writing as to such non-conformity. Upon receipt of such notice from the Representative, the Builder shall proceed with due diligence to correct any actual non-conformity. At all times during the construction of the Vessel until delivery and acceptance thereof, provided that the normal progress of the construction is not thereby affected, the Representatives shall be given free and ready access to the Vessel and to any other place where work is being done, or materials are being processed or stored by the Builder or any of its subcontractors or suppliers, in connection with the construction of the Vessel. The inspections exercised by the Buyer's Representatives under this Article or otherwise under this Contract shall not diminish the Builder' obligations under this Contract, including, but not limited to, the Builder's responsibility under this Contract with respect to time of delivery of the Vessel hereunder, workmanship, design or material. 4. FACILITIES The Builder shall furnish promptly, without additional charge, such reasonable facilities and materials at the Shipyard, including suitably furnished offices with telephone, desks, drawing tables, and filing cabinets, as are necessary for the safe and convenient supervision of the Vessel's construction by the Representatives. Provided, however, that the Buyer shall reimburse to the Builder the cost of the Representatives' use of telephone, fax and telex facilities. 5. BUILDER'S LIABILITY TO THE REPRESENTATIVES The Representatives shall, at all times, be deemed to be employees of the Buyer. The Builder shall be under no liability whatsoever to the Buyer or to its Representatives or employees or agents for personal injuries, including death, to such Representatives, employees or agents, or any of them during the time they, or any of them, are on the Vessel or within the premises of the Builder or its subcontractors or are otherwise engaged in 14 23 and about the construction of the Vessel unless, however, such personal injuries, including death, were caused by the negligence of the Builder or of its employees or agents. Nor shall the Builder be under any liability whatsoever for damage to, or loss or destruction of property of, the Buyer or its Representatives, employees or agents in Germany or elsewhere, unless such damage, loss or destruction was caused by the negligence of the Builder or of its employees or agents. 6. RESPONSIBILITY OF BUYER The Builder may request the recall of any or all of the Representatives who are deemed unsuitable or unsatisfactory. If after investigations, the Buyer is satisfied that the request is justified, then it will within thirty (30) days after such request is received effect such recall and if it so desires, may provide replacements thereof simultaneously, or if not so satisfied, it will advise the Builder accordingly within above same period. 7. INTERIOR DESIGN The Buyer will work directly with certain interior designers in connection with the design of certain areas of the Vessel. The Builder and the Buyer shall, within sixty (60) days after the Effective Date, agree on the detailed scope of this work. The Builder shall provide the Buyer and such interior designers with such drawings, schematic diagrams and other information as may be required in connection with the development of such designs in a timely manner so as to allow such schedule to be adhered to. Any delays in the receipt of such information from the Builder shall result in a corresponding delay in the schedule for the development of such designs. Unless otherwise agreed, the Builder shall send to the Buyer and the relevant interior designer its comments to received plans, drawings, diagrams and documents within fifteen (15) working days after having received the same for approval. The Builder may request an extension of such response period, which such approval shall not be unreasonably withheld. In the event that the Builder shall fail to respond with the Builder's comments within such time limit, the Buyer shall notify the Builder of the Builder's failure to respond. In the event the Builder still fails to respond with the Builder's comments within three (3) working days of receipt of the Buyer's notice to the Builder of the Builder's failure to respond, the relevant plans and drawings shall be deemed to have been automatically approved by the Builder without any comment. 15 24 ARTICLE V - MODIFICATIONS; WORKMANSHIP AND CONSTRUCTION 1. VOLUNTARY MODIFICATIONS The Specification may be modified and/or changed at the request of the Buyer provided that such modifications and/or changes or an accumulation thereof will not in the Builder's reasonable judgment materially and adversely affect the Builder's ability to meet its other commitments, and provided, further, that the parties shall first agree, before such modifications and/or changes are carried out, to reasonable alterations, if any, in the Contract Price, the Delivery Date and other terms and conditions of this Contract and Specification directly occasioned by or resulting from such modifications and/or changes. Such agreement may be effected by exchange of letters signed by the authorized representatives of the parties hereto which shall constitute amendments to this Contract and/or the Specification. The Builder acknowledges that the design of a cruise vessel requires a great deal of flexibility and agrees to use all reasonable efforts to accommodate all reasonable requests by the Buyer so that said changes and/or modifications will be made at a reasonable cost reflecting the Builder's actual incremental cost or savings for carrying out such changes and/or modifications, if any, and within the shortest period of time reasonably possible. 2. CHANGES IN CLASS, ETC. In the event that after the Effective Date of this Contract the requirements of the Classification Society or any other rule or regulations to which the construction of the Vessel is required to conform should be altered or changed from those (a) in effect at the Effective Date or (b) as announced as at the Effective Date as intended thereafter to enter into force, the following provisions shall apply: COMPULSORY CHANGES If such alterations or changes are compulsory for the Vessel, either of the parties hereto, upon receipt of such information from the Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the Builder shall thereupon incorporate such alterations or changes into the construction of the Vessel, provided that the Buyer shall first agree to any adjustments reasonably required by the Builder in the Contract Price, the Delivery Date and other terms and 16 25 conditions of this Contract and the Specification directly occasioned by or resulting from such alterations or changes. Agreements as to such alterations or changes under this Paragraph shall be made in the same manner as provided in Article V.1 for modifications or changes to the Specification. NON-COMPULSORY CHANGES If such alterations or changes are not compulsory for the Vessel, but the Buyer desires to incorporate such alterations or changes into the construction of the Vessel, then, the Buyer shall notify the Builder of such intention. The Builder shall accept such alterations or changes, and provided, further, that the Buyer shall first agree to any adjustments reasonably required by the Builder in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the Specification directly occasioned by or resulting from such alterations or changes. CHANGES IN INTERPRETATION OF EXISTING RULES ETC. It is expressly agreed and understood that, should there occur any alteration in the interpretation by the Classification Society or other relevant regulatory bodies of any of their rules, regulations and requirements from that applied at the Effective Date, the Builder shall, at its own cost and without reference to the provisions of this Article, make appropriate changes to the Specification to implement the same. 3. SUBSTITUTION OF MATERIALS In the event that, notwithstanding the exercise of reasonable diligence on the part of the Builder, any of the materials required by the Specification or otherwise under this Contract for the construction of the Vessel cannot be procured in time or are in short supply to maintain the Delivery Date of the Vessel, the Builder may, provided that the Buyer shall so agree in writing (which agreement shall not be unreasonably withheld), supply other materials of comparable quality capable of meeting the requirements of the Classification Society and of the rules, regulations and requirements with which the construction of the Vessel must comply. 4. INFORMATION When requested by the Buyer, the Builder will provide reasonable information relating to the basis and method of formulating any adjustment referred to in this Article. 17 26 5. PRICING OF MODIFICATIONS AND CHANGES Any increase or decrease in the Contract Price resulting from any change or modification shall be priced in United States Dollars. ARTICLE VI - TRIALS 1. NOTICE The Buyer shall receive from the Builder at least thirty (30) days' preliminary prior notice in writing and seven (7) days' final prior notice in writing of the time and place of the Vessel's trials, and the Buyer shall promptly acknowledge receipt of such notice. At the time of trials, the Vessel shall be substantially completed so as to enable the test program to be performed as specified. The Buyer shall have its Representatives on board the Vessel to witness the trials. Failure in attendance of the Representatives of the Buyer at the trials of the Vessel for any reason whatsoever after due notice to the Buyer as above provided shall be deemed to be a waiver by the Buyer of its right to have its Representatives on board of the Vessel at the trials, and the Builder may conduct the trials without the Buyer's Representatives being present, and in such case the Buyer shall be obliged to accept the Vessel on the basis of a certificate of the Builder and of the Classification Society that the Vessel, upon her trials, is found to conform to this Contract and the Specification and is satisfactory in all respects. 2. WEATHER CONDITIONS The trials shall be carried out under weather conditions which are deemed favorable enough in the reasonable judgment of the Builder, in deep water, with clean bottom and in a ballast condition, all as set out in the Specification. In the event of unfavorable weather on the date specified for the trials, the same shall take place on the first available day thereafter that the weather conditions permit. It is agreed that, if during the trials of the Vessel, the weather should suddenly become so unfavorable that orderly conduct of the trials can no longer be continued, the trials shall be discontinued and postponed until the first favorable day next following, unless the Buyer shall assent in writing to acceptance of the Vessel on the basis of the trials already made before such discontinuance has occurred. In the event that the commencement of trials is postponed or the trials are discontinued by reason of unfavorable weather conditions as aforesaid and the number of days thereafter during which the trials cannot be 18 27 undertaken exceed four (4) in total, any further days during which the weather conditions remain unfavorable for the holding of the trials will count as permissible delay within the meaning of this Contract, provided the delivery of the Vessel is actually delayed thereby. 3. HOW CONDUCTED All expenses in connection with the trials are to be for the account of the Builder and the Builder shall provide at its own expense the required quantities of ballast water (if any), freshwater, fuel oil, lubricating oil, greases and ship's stores, as well as the necessary crew to comply with conditions of safe navigation. The trials shall be conducted in the manner prescribed in the Specification, and shall prove fulfillment of the performance requirements for the Vessel as set forth in the Specification. The course of the trials shall be determined by the Builder. 4. METHOD OF ACCEPTANCE OR NON-ACCEPTANCE Within two (2) days of receipt from the Builder of the results of the Vessel's trials, the Buyer shall notify the Builder in writing of its acceptance of the Vessel or its non-acceptance of the Vessel. 5. EFFECT OF ACCEPTANCE Acceptance of the Vessel as above provided shall be final and binding in so far as conformity of the Vessel (as the Vessel is then built and equipped) to this Contract as demonstrated on the trials is concerned and shall preclude the Buyer from refusing to take delivery of the Vessel as hereinafter provided, if the Builder completes the Vessel in accordance with the provisions of the Contract and otherwise complies with all other requirements for delivery as provided in this Contract. It is agreed in this context that the Buyer shall not have the right to refuse to accept the Vessel by reason of minor defects which do not affect the normal operation of the Vessel provided that the Builder agrees in writing to remedy such defects at its own cost as soon as possible after the delivery of the Vessel. 6. CORRECTION OF CAUSES FOR NON-ACCEPTANCE In the event that the Buyer shall notify the Builder of its non-acceptance of the Vessel, the Buyer's notice to such effect shall advise the Builder in writing in what particular or particulars the Vessel, as she is then built and equipped, does not conform to this Contract. 19 28 If the Builder is in agreement with the Buyer's determination as to such non-conformity, the Builder shall forthwith make such alterations and/or corrections as may be necessary to remedy such non-conformity to the satisfaction of the Buyer. Promptly after completion of the necessary alterations and/or corrections, and the giving of notice to such effect by the Builder to the Buyer, the Buyer shall inspect the Vessel and shall within two (2) days thereafter notify the Builder of its acceptance or non-acceptance of the Vessel; where the same is reasonably necessary to prove the Vessel's compliance with the requirements of this Contract, the Buyer may alternatively (by notice to the Builder in writing or by telecopy), demand that new tests or trials be undertaken, in which event the Buyer's notification to the Builder of its acceptance or non-acceptance of the Vessel shall be issued to the Builder promptly after completion of such tests and trials. In the event of the Buyer's non-acceptance of the Vessel, its notice to the Builder shall again indicate in what particular or particulars the Vessel, as she is then built and equipped, does not conform to this Contract. In the event that the Buyer fails to notify the Builder as aforesaid of the acceptance or non-acceptance of the Vessel, together with the reason therefor, within the periods as provided above, the Buyer shall be deemed to have accepted her. The above process shall be repeated as necessary until the earlier of (a) the Buyer's acceptance of the Vessel or (b) the valid and proper rescission of this Contract by either party. 7. DISPOSITION OF SURPLUS CONSUMABLE STORES Should any fuel oil, lubricating oil, greases and ship's stores, including fresh water (except, if the Builder determines, in its sole discretion, to use any fresh water for ballast) furnished by the Builder for the trials remain on board the Vessel at the time of acceptance thereof by the Buyer, the Buyer agrees to buy the same from the Builder at a reasonable price not to exceed that paid by the Builder, and payment by the Buyer shall be effected upon the delivery of the Vessel. 20 29 ARTICLE VII - DELIVERY 1. TIME AND PLACE The Vessel shall be delivered by the Builder to the Buyer at a safe berth with unimpeded access to international waters on 15 February 2001, except that, in the event of delays in the construction of the Vessel or any performance required under this Contract due to (i) agreed changes to the Delivery Date pursuant to Article V or (ii) permissible delays pursuant to Articles VI.2 or VIII, which under the terms of this Contract permit postponement of the date for delivery ("Permissible Delays"), the aforementioned date shall be postponed accordingly. The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to the terms of this Contract as set forth in the preceding sentence, is herein called the "Delivery Date." The Builder shall notify the Buyer of the estimated date of actual delivery of the Vessel at least six (6) months prior thereto. 2. WHEN AND HOW EFFECTED Provided that the Buyer shall have fulfilled all of its obligations stipulated in Article II of this Contract, delivery of the Vessel shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the Protocol of Delivery and Acceptance, acknowledging delivery of the Vessel by the Builder and acceptance thereby by the Buyer. 3. DOCUMENTS TO BE DELIVERED TO THE BUYER Acceptance of the Vessel by the Buyer shall be conditional upon receipt by the Buyer of the following duly authenticated documents which shall accompany the aforementioned Protocol of Delivery and Acceptance: A) PROTOCOL OF TRIALS of the Vessel made pursuant to this Contract; B) PROTOCOL OF INVENTORY of the equipment of the Vessel including spare parts and the like; C) PROTOCOL OF STORES OF CONSUMABLE NATURE such as fuel oil, lubricating oils and greases, fresh water and the like including the purchase price thereof; 21 30 D) ALL DRAWINGS AND PLANS pertaining to the Vessel as stipulated in the Specification and which shall be furnished to the Buyer at no additional cost; E) ALL CERTIFICATES required to be furnished upon delivery of the Vessel pursuant to the Contract and Specification and according to customary shipbuilding practice in the cruise vessel sector; F) DECLARATION OF WARRANTY of the Builder that the Vessel is delivered to the Buyer free and clean of any liens, charges, claims, mortgages or other encumbrances upon the Buyer's title thereto and in particular that the Vessel is free from any burden in the nature of imposts, taxes or charges imposed by the state or country of the port of delivery, as well as all liabilities of the Builder to its subcontractors, employees and crew and of all liabilities arising from the operation of the Vessel in trial runs, or otherwise , prior to delivery, except as otherwise provided under this Contract; G) COMMERCIAL INVOICE; and H) BUILDER'S CERTIFICATE. 4. TITLE AND RISK (a) Title to, and ownership of, the Vessel during construction from keel laying shall pass to the Buyer in accordance with the provisions of the Transfer Agreement. (b) Such transfer of title and ownership is strictly without prejudice to any and all of the obligations of the Builder under or in connection with this Contract, including (but without limitation) the Builder's obligation to complete and deliver the Vessel in accordance with the provisions of this Contract. (c) Notwithstanding the provisions of the Transfer Agreement, all risk of loss of, or damage to, the Vessel shall pass to the Buyer only upon delivery and acceptance of the Vessel having taken place in accordance with the foregoing provisions of this Article VII; it being expressly understood that, until such delivery and acceptance is effected, all risk of loss of, or damage to, the Vessel shall rest exclusively with the Builder. (d) Upon acceptance of the Vessel hereunder the Builder shall transfer to the Buyer physical possession of the Vessel. 22 31 5. REMOVAL OF VESSEL The Buyer shall take possession of the Vessel immediately upon delivery and acceptance thereof and, where appropriate and if so requested, shall remove the Vessel from the premises of the shipyard within seven (7) days after delivery thereof is effected. ARTICLE VIII - DELAYS AND EXTENSIONS OF TIME FOR DELIVERY (FORCE MAJEURE) 1. CAUSES OF DELAY The Delivery Date is subject to force majeure reservations. Force majeure shall occur if at any time either the construction of the Vessel or any performance required hereunder as a prerequisite of delivery of the Vessel is delayed due to acts of princes or rulers, war, blockade, revolution, insurrections, mobilization, civil commotions, riots, strikes, lockouts, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, earthquakes, tidal waves, typhoons, hurricanes or by destruction of, or severe damage to, the Vessel or of the works of the Builder or its subcontractors for important parts of the Vessel by fire or flood, defects in materials and equipment (including casting or forging or machining rejects or the like) which could not have been detected by the Builder using reasonable care, or other causes of similar type and quality. Force majeure shall moreover be regarded as occurring if the delivery is prevented or delayed by delayed deliveries of major parts or important performances by subcontractors, where the cause of the delay would be force majeure under this Article if it had affected the Builder, provided that such circumstances shall not constitute force majeure if they arise within two months of the Delivery Date. No event shall be considered to be force majeure unless it is reasonably beyond the control of the Builder or its subcontractors and could not reasonably have been anticipated by the Builder when signing this Contract. In force majeure circumstances, the Builder may (subject as hereinafter provided) require an extension of the Delivery Date by as many working days as the delivery has been delayed on account of such circumstances. However, up to five (5) force majeure events giving rise to delay(s) lasting for only one (1) working day or less shall not be considered as permissible delay. For the purposes of this Article, if any series of force majeure events occur which are due to a single cause, then, in such case, all such events shall be regarded as one event. 23 32 In all events the Builder undertakes to take all reasonable steps to minimize the effects of such delay. 2. NOTICE OF DELAYS Within five (5) days from the date of commencement of any delay on account of which the Builder claims that he is entitled under this Contract to an extension of the Delivery Date, the Builder shall advise the Buyer in writing the date such delay commenced and the reasons therefor. Likewise, within ten (10) days after such delay ends, the Builder shall advise the Buyer in writing the date that such delay ended and also shall specify the period of time it claims the Delivery Date is extended by reason of such delay. Failure of the Builder to give notice as aforesaid shall constitute a waiver of its right to extension of the Delivery Date. Failure of the Buyer to acknowledge the Builder's notification of any claim for extension of the Delivery Date within ten (10) days after receipt by the Buyer of such notification in writing shall be deemed to be a waiver of its right to object to such extension. The Builder shall promptly advise the Buyer of the status of any pending delay upon the request of the Buyer. 3. PERMISSIBLE DELAYS Delays on account of the foregoing causes shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the price of the Vessel, may be subject to adjustment or liquidated damages payable as provided in Article III hereof. 4. RIGHT TO RESCIND FOR EXCESSIVE DELAY If the total accumulated time of all delays for any reason (except only for delays due to default by the Buyer) amounts to Two Hundred and Forty (240) days or more beyond 15 February 2001 then in such event, the Buyer may, at its option, rescind this Contract. Such right of rescission shall be exercised by appropriate notice to the Builder within thirty (30) days from the lapse of such period of Two Hundred and Forty (240) days and is exercisable regardless of any other provision of this Contract, including, but not limited to, the provisions of Article III.1 hereof. 24 33 ARTICLE IX - WARRANTY OF QUALITY 1. GUARANTEE Subject to the provisions hereinafter set forth, the Builder undertakes to remedy, free of charge to the Buyer, any defects in the Vessel which are due to defective design and/or material and/or workmanship provided that the defects are discovered within a period of twelve (12) months after the date of delivery of the Vessel, as such period may be extended as provided below, and a notice thereof is duly given to the Builder as hereinafter provided. In addition, the Builder shall secure the extension to the Buyer of the full benefit of all guarantees of greater than twelve months' duration which the Builder may be given by subcontractors and suppliers, if any, and shall assist the Buyer in securing performance thereunder. For the purpose of this Article, the Vessel excludes any parts for the Vessel which have been supplied by the Buyer. This guarantee extends to installation of the Buyer's Supplies only if such installation is done by the Builder or its subcontractors. Any parts repaired or replaced by the Builder pursuant to this Article shall be guaranteed on similar terms for a period of twelve months from the date of such replacement or repair but subject to an overall time limit of twenty-four (24) months (thirty-six months in the case of those major components as listed in the Specification) counted from the date of actual delivery of the Vessel. 2. NOTICE OF DEFECTS The Buyer shall notify the Builder in writing of any defects for which claim is made under this guarantee as promptly as practical after discovery thereof. For purposes of this Article, notice to the Guarantee Engineer shall be deemed to be notice to the Builder. The Buyer's written notice shall describe the nature and extent of the defects. The Builder shall have no obligation for any defects, even if discovered prior to the expiry date of the said guarantee period, unless notice of such defects is received by the Builder not later than thirty (30) days after such expiry date. Notwithstanding the foregoing, in the case of defects which could only be discovered on dry docking of the Vessel the Builder will be liable under this guarantee in relation thereto if the Buyer gives notice thereof to the Builder as soon as possible after the first dry docking of the Vessel after delivery to the Buyer hereunder (whether or not such notice is given prior 25 34 to the expiration of the said thirty day period) provided that such dry docking occurs within four (4) years after the delivery of the Vessel. 3. REMEDY OF DEFECTS (a) The Builder shall remedy, at its expense, any defects, against which the Vessel is guaranteed under this Article, by making all necessary repairs or replacements. (b) In the event that the Buyer proposes to cause the necessary repairs or replacements to be made to the Vessel under its own direction, the Buyer shall first give the Builder notice in writing or by telecopy confirmed in writing of the time and place such repairs are intended to be made by it. Prior to commencement of such repair work, provided that the Vessel is not thereby delayed or her operation or working schedule is not thereby impaired, the Builder shall have the right to verify by its own representative(s) the nature and extent of the defects complained of. The Builder shall, in such case, promptly advise the Buyer by telecopy, after such examination has been completed, of its acceptance or rejection of the defects as covered by the guarantee herein provided. Upon the Builder's acceptance of the defects as justifying remedy under this Article, or upon award of the arbitration so determining, the Builder shall immediately pay to the Buyer the actual cost for such repairs or replacements. The Buyer shall use the normal diligence and business practices of a competent shipowner to minimize such cost of repairs or replacements. The Builder shall also reimburse the Buyer for the travel costs charged to the Buyer by contractors carrying out guarantee works on board the Vessel, provided, however, that no such claim by the Buyer shall be paid unless the Buyer shall reasonably demonstrate that the works in question could not have been carried out by either (a) the Vessel's crew or (b) a suitably qualified contractor carrying on business at the Vessel's location during the repairs. In the event that it is necessary to forward the replacement for the defective part under the Builder's guarantee, the Builder shall forward same by sea, road or railfreight at its own expense. However, if the Buyer requires the part to be sent by air, the Buyer shall meet the difference in cost but shall be entitled to reimbursement from the Builder in circumstances in which the Buyer can reasonably demonstrate that provision of an immediate replacement was vital to the continued operation of the Vessel. 26 35 (c) Any dispute under this Article shall be referred to arbitration in accordance of Article XIII hereof. 4. EXTENT OF BUILDER'S RESPONSIBILITY (a) The liability of the Builder under this provision shall be limited to defects directly caused by defective design and/or material and/or workmanship as above provided. If the defect has led to damage to the Vessel or any part thereof, the repair obligation is limited to the repair or renewal of the defective part and/or of the Vessel's part or parts that has (have) been damaged as a direct and immediate consequence of the defect. (b) The Builder shall be under no obligation with respect to defects discovered after the expiration of the period of guarantee specified above nor in any event shall the Builder be liable for any consequential damage or expense occasioned by any defect or for any loss of time in operating the Vessel or for any loss of time due to repair, or both, caused by any defect. (c) In no event shall there be any liability for defects in the Vessel, or any part or equipment thereof, caused by perils of the sea, rivers or navigation or normal wear and tear or fire or accidents at sea or elsewhere or by mismanagement, accidents, negligence, willful neglect, alteration or addition on the part of the Buyer, its employees or agents or any person other than employees or agents of the Builder, on or doing work on the Vessel, including the Vessel's officers, crew and passengers. (d) Likewise, the Builder shall not be liable for defects in the Vessel or any part or equipment thereof that are due to repairs which were made at the direction of the Buyer as hereinabove provided unless such repairs were made by the Builder or with the approval of the Builder. 5. GUARANTEE ENGINEER The Builder shall appoint a Guarantee Engineer to serve on the Vessel as its representative for the full guarantee period unless otherwise agreed by the parties hereto. The Buyer will give reasonable consideration to requests of the Builder for earlier release of the Guarantee Engineer. The Buyer and its employees shall give the Guarantee Engineer full cooperation in carrying out his duties as the representative of the Builder 27 36 on board the Vessel. The Buyer shall accord the Guarantee Engineer treatment comparable to the Vessel's Chief Engineer and shall provide him with a reasonable passenger cabin and subsistence at no cost to the Builder and/or the Guarantee Engineer. All other expenses for the Guarantee Engineer, including wages and traveling expenses, shall be for Builder's account. The Buyer shall be under no liability whatsoever to the Guarantee Engineer or the Builder for personal injuries, including death or loss or damage to the Guarantee Engineer's property unless the same shall have been caused by the negligence of the Buyer, its subcontractors or its employees or agents acting within the scope of their employment. ARTICLE X - RESCISSION BY BUYER 1. NOTICE The payments to be made by the Buyer prior to the delivery of the Vessel shall be in the nature of advances to the Builder. In the event that the Buyer shall exercise its right of rescission of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the Buyer to do so, then the Buyer shall notify the Builder in writing, and such rescission shall be effective as of the date notice thereof is received by the Builder. 2. REFUND BY BUILDER Thereupon the Builder shall within ten (10) days after receipt of such notice refund to the Buyer the full amount of all sums paid by the Buyer to the Builder on account of the Vessel, unless the Builder disputes the Buyer's rescission and proceeds to the arbitration under the provisions of Article XIII hereof within such ten (10) day period. Any such refund shall be sent by telegraphic transfer to the Buyer at a Bank to be designated by the Buyer. In such event the Builder shall also pay the Buyer interest at the rate of eight percent (8%) per annum on the amount required herein to be refunded to the Buyer, computed from the respective dates on which such sums were paid by the Buyer to the Builder to the date of remittance by transfer of such refund to the Buyer by the Builder. In addition, the Builder shall return all Buyer's Supplies to the Buyer or, to the extent not so returned, pay to the Buyer the original cost of such items. 28 37 3. DISCHARGE OF OBLIGATIONS Upon such performance by the Builder of its obligations hereunder to the Buyer, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged, and such title to the Vessel as has been vested in the Buyer under the Transfer Agreement shall revert to the Builder, unless the rescission by the Buyer arose out of a willful breach of the Contract by the Builder. ARTICLE XI - BUYER'S DEFAULT; BUILDER'S DEFAULT 1. DEFINITION OF BUYER'S DEFAULT The Buyer shall be deemed to be in default of performance of its obligations under this Contract in the following cases: (a) The Buyer fails to pay any of the First, Second, Third or Fourth Installments of the Contract Price to the Builder when such Installment becomes due and payable under the provisions of Article II hereof and fails to remedy such default within three (3) Banking Days of receipt of notice of such nonpayment from the Builder; or (b) The Buyer fails to take delivery of the Vessel, when the Vessel is duly tendered for delivery by the Builder under the provisions of Article VII hereof; or (c) The Buyer becomes or is declared, either by effective resolution of the Buyer or by order of any court of competent jurisdiction, insolvent or bankrupt; or (d) The Buyer files a voluntary petition, or an effective resolution is passed, for winding-up or dissolution of the Buyer, save for the purposes of amalgamation or reorganization not involving or arising out of insolvency, or the Buyer enters into an arrangement or composition with its creditors generally; or (e) A receiver, trustee or liquidator of the Buyer is appointed and such appointment is not terminated within thirty (30) days; or (f) Any bona fide petition for the winding-up of the Buyer is filed and not dismissed within thirty (30) days. 29 38 2. INTEREST AND CHARGES If the Buyer is in default of payment as to any Installment as provided in Paragraph 1(a) of this Article, the Buyer shall pay interest on such Installment at the rate of eight percent (8%) per annum from the due date thereof to the date of payment to the Builder of the full amount including interest; in case the Buyer shall fail to take delivery of the Vessel as provided in paragraph 1(b) of this Article, the Buyer shall be deemed in default as regards the whole of the Fourth Installment of the Contract Price and shall pay interest thereon at the same rate as aforesaid from and including the day on which the Vessel is duly tendered for delivery by the Builder. 3. EFFECT OF DEFAULT (a) If any default by the Buyer occurs as provided hereinbefore, the Delivery Date shall be automatically postponed for a period of continuance of such default by the Buyer provided, however, that if the Buyer cures such default within five (5) days, then no such postponement shall occur. (b) Except as set forth in Paragraph 3(c) of this Article, if any default by the Buyer continues for a period of thirty (30) days after notice of such default is given by the Builder to the Buyer in writing, the Builder may, at its option, rescind this Contract by giving notice of such effect to the Buyer by facsimile confirmed in writing. Upon receipt by the Buyer of such notice of rescission, this Contract shall forthwith become null and void and such title to the Vessel as shall have vested in the Buyer under the Transfer Agreement, together with any of the Buyer's Supplies which have become permanently affixed to the Vessel, shall revert to and become the sole property of the Builder and the Buyer shall return any Installment Guarantee to the Guarantor marked "Cancelled". In the event of such rescission of this Contract, the Builder shall be entitled to retain any Installment or Installments theretofore paid by the Buyer to the Builder on account of this Contract to the extent of proven damages and losses including costs and expenses permitted by English law. (c) In the event that Kreditanstalt fur Wiederaufbau fails for any reason to make available the funds to pay the Fourth Installment of the Contract Price pursuant to the Credit Terms and the Buyer fails 30 39 to pay the Fourth Installment to the Builder when due, then the Buyer and the Builder shall meet in good faith to attempt to resolve the situation to the mutual satisfaction of the Buyer and the Builder. In the event the Buyer and the Builder are unable to come to an agreement to resolve the situation within thirty (30) days, then either party may, upon written notice to the other party, rescind this Contract, whereupon the Builder and the Buyer shall enter into a joint venture for the sole purpose of finding a third party to whom the Vessel may be disposed in an attempt to realize the highest practical value for the Vessel. Upon entering into the joint venture, the Buyer will transfer to the Builder, at the Builder's expense, such title to the Vessel as shall have vested in the Buyer under the Transfer Agreement and return any Installment Guarantee to the Guarantor marked "Cancelled". All decisions to be made by such joint venture shall require the consent of both the Builder and the Buyer and the proceeds from the disposition of the Vessel shall be distributed 85% to the Builder and 15% to the Buyer. In the event the Buyer and the Builder are unable to mutually agree upon any decision required to be made by the joint venture, either party may refer the dispute to arbitration pursuant to Article XIII. Except as set forth in this Paragraph (c), neither party shall have any further obligations, duties or liabilities to the other party in the event of a rescission as set forth in this Paragraph (c). The term "Credit Terms" shall mean financing of 80% of the Contract Price over a term of 8 1/2 years, repayable in 17 semi-annual installments, in arrears, bearing interest at a market rate not to exceed 8% per annum and provided on an unsecured basis with no financial covenants. 4. SALE OF VESSEL The following is applicable only in the case of a rescission effected pursuant to Paragraph 3 (b) above. (a) In the event rescission by the Builder of this Contract as provided in Article XI.3(b), the Builder shall have full right and power either to complete or not to complete the Vessel as it deems fit, and to sell the Vessel at public or private sale on such terms and conditions as the Builder thinks fit. (b) In the event of the sale of the Vessel in its completed state, the proceeds of the sale received by the Builder shall be applied firstly to payment of all proven damages and losses permitted by English 31 40 law attending such sale, and then to payment of all unpaid Installments of the Contract Price and interest on such Installments at the rate of eight percent (8%) per annum from the respective due dates thereof to the date of application. (c) In the event of sale of the Vessel in its uncompleted state, the proceeds of sale received by the Builder shall be applied firstly to all proven damages and losses permitted by English law attending such sale, and then to payment of all costs of construction of the Vessel and compensation to the Builder for a loss of reasonable profit due to the rescission of this Contract together with the appropriate interest at the rate of eight percent (8%) per annum, less the Installments retained by the Builder. (d) In either of the above events of sale, if the proceeds of sale exceed the total of amounts to which such proceeds are to be applied as aforesaid, the Builder shall promptly pay the excess to the Buyer without interest. (e) If the proceeds of sale are insufficient to pay to the Builder such total amounts payable as aforesaid, the Buyer shall promptly pay the deficiency to the Builder upon request. 5. DEFAULT BY BUILDER The Buyer shall be entitled but not bound to declare the Builder in default in any one of the following cases: (a) The Builder becomes or is declared, either by effective resolution of the Builder or by order of any court of competent jurisdiction, insolvent or bankrupt; or (b) The Builder files a voluntary petition, or an effective resolution is passed, for winding-up or dissolution of the Builder, save for the purposes of amalgamation or reorganization not involving or arising out of insolvency, or the Builder enters into an arrangement or composition with its creditors generally; or (c) A receiver, trustee or liquidator of the Builder is appointed and such appointment is not terminated within thirty (30) days; or (d) Any bona fide petition for the winding-up of the Builder is filed and not dismissed within thirty (30) days; or 32 41 (e) Any of the circumstances set out in (a) - (d) above (inclusive) or anything analogous thereto arises under the laws of Germany; or (f) Any of the circumstances set out in (a) - (d) above (inclusive) or anything analogous thereto under the laws of the country of its incorporation or domicile arises in relation to any party providing an installment guarantee pursuant to Article II.4 hereof, and such guarantee is not replaced by another guarantee issued by another first class international bank or insurance company reasonably acceptable to the Buyer within thirty (30) days; or (g) The Builder, without prior written consent of the Buyer, removes the Vessel from the Shipyard or assigns, sub-lets or subcontracts performance of the whole or substantial part of its obligations, except as provided for in this Contract and the Specification; or (h) The Builder fails to comply with its obligations under the Transfer Agreement in any material way; or (i) The Builder fails, without due cause, to proceed with the construction of the Vessel in accordance with usual international shipbuilding standards such that in the Buyer's reasonable opinion she cannot be delivered to the Buyer on or before Delivery Date and, after receipt of written notification from the Buyer, the Builder does not forthwith initiate appropriate corrective measures to cure such failure. Upon the occurrence of any of the above events and following the Buyer's declaration as aforesaid, the Buyer shall be entitled to exercise the following remedies (at its option): (a) to complete the Vessel in accordance with the Specification, and for this purpose to enter the Shipyard, to take possession of the Vessel in its then state of completion together with all other property transferred to the Buyer pursuant to the Transfer Agreement and Buyer's Supplies, and transfer the Vessel, all such other property and Buyer's Supplies to another shipyard to complete her. The Buyer shall also be entitled to exercise its rights under the subcontractor assignments referred to in the Transfer Agreement and to exercise its rights in the Expectancies therein defined. In such event, the reasonable expenses incurred by the Buyer in so completing the Vessel shall be deducted from, and go to reduce, the unpaid portion of the Contract Price (and, for the avoidance of doubt, any part of the Contract Price paid to the Builder's bank 33 42 in accordance with Clause 3.4 of the Bank Undertaking referred to in the Transfer Agreement shall be regarded as having been paid for this purpose). The balance, if any, of the unpaid portion of the Contract Price remaining after such reduction shall be paid by the Buyer to the Builder upon completion of the Vessel and the placement of the Vessel in the Buyer's service. In the event that any such costs and expenses cannot be offset in this manner against the unpaid portion of the Contract Price, then the Builder shall pay such remaining amount upon the completion of the Vessel and the placement of the Vessel in the Buyer's service out of the Installments of the Contract Price previously paid to the Builder by the Buyer under this Contract; or (then or at any time thereafter) (b) to rescind this Contract, in which event the Builder shall make immediate refundment by the Builder of all previously paid installments of the Contract Price, together with interest thereon at the rate of eight percent (8%) per annum from the date of payment by the Buyer, and upon such repayment, such title to the Vessel as shall have vested in the Buyer pursuant to the Transfer Agreement shall revert to the Builder, and the Builder may freely dispose of the Vessel free of claim by the Buyer of any sort; provided, however, that the Builder shall additionally pay the Buyer the costs of the Buyer's Supplies delivered by the Buyer to the Shipyard for inclusion in the Vessel. ARTICLE XII - BUILDER'S INSURANCE The following provisions of this Article XII shall apply notwithstanding the transfer of title to, and ownership of, the Vessel to the Buyer under the Transfer Agreement. 1. EXTENT OF BUILDER'S INSURANCE COVERAGE From the date on which erection of the Vessel is commenced in the building dock until the Vessel is delivered to and accepted by the Buyer, the Builder shall, at its own cost and expense, keep the Vessel and all Buyer's Supplies delivered to the Builder insured under Builder's Risk Policies, in accordance with the ILU "Institute Clauses for Builders Risks" with first-class insurance companies. From the date of her launching, the Vessel shall also be insured for war risks in accordance with the ILU "Institute Clauses for Builders Risks". A copy of the Builder's broker's cover notes evidencing such coverages shall be provided by the Builder to the Buyer within twenty (20) days of the commencement of keel-laying of the Vessel. 34 43 The amount of such insurance shall not be less than (a) the value from time to time of the Buyer's Supplies delivered to the Builder and (b) the Contract Price, which latter element shall be increased to one hundred and ten percent (110%) of the Contract Price at the latest three (3) months before the scheduled date of delivery. The additional 10% shall be covered as owner's interest. The policies referred to herein shall be taken out in the joint names of the Builder and the Buyer as their respective interests may appear, with no liability of the Buyer for any premiums, and all losses under such policies shall be payable to the Builder and the Buyer as their respective interests may appear. 2. APPLICATION OF RECOVERED AMOUNTS PARTIAL LOSSES Should the Vessel be damaged prior to delivery to the Buyer and such does not constitute an actual or constructive total loss of the Vessel under the insurance policies thereon, the Builder shall apply any amount recovered under the insurance policies to the repair of such damage, satisfactory to the Classification Society and the Buyer's Representatives, without remarks, exceptions or recommendations. TOTAL LOSS In the event that the Vessel is agreed by the Underwriters subscribing to the Builder's policies of insurance to be an actual or constructive total loss, the Builder may decide either: (i) Proceed in accordance with the terms of this Contract, in which event the amount recovered under the said insurance cover shall be applied to the reconstruction and/or repair of the Vessel, provided the parties hereto shall first have agreed in writing as to such reasonable postponement of the Delivery Date as may be reasonably necessary for the completion of such reconstruction and/or repair; or (ii) Refund immediately to the Buyer the aggregate of (1) all Installments paid to the Builder under this Contract and (2) interest thereon at eight per cent (8%) from the date of payment to the date of refundment. The Builder shall also pay to the Buyer a sum equivalent to the value at the date of the loss of any Buyer's 35 44 Supplies delivered to the Builder. Upon payment in full as aforesaid this Contract shall be deemed to be at an end on the basis that all rights, duties, liabilities and obligations of each of the parties towards the other shall terminate immediately. The Builder will, unless agreed by the Buyer, exercise the first alternative unless it is unable to do so as a result of capacity restrictions resulting from other fixed commitments. 3. TERMINATION OF BUILDER'S OBLIGATION TO INSURE The Builder's obligation to insure the Vessel hereunder shall cease and terminate forthwith upon delivery and acceptance thereof by the Buyer. ARTICLE XIII - DISPUTE AND ARBITRATION 1. TECHNICAL DISPUTES Should any dispute of a technical nature arise between the parties hereto it may, by mutual agreement, be referred to the decision of the Classification Society (or such other third party as the parties hereto shall mutually agree) which shall act in determining such dispute as an expert (rather than an arbitrator) and whose views in relation to that dispute shall be binding upon the parties hereto. 2. OTHER DISPUTES All other disputes arising in connection with the interpretation and the performance of this Contract which cannot be amicably resolved shall be referred to arbitration under the Rules applicable at the time of commencement of the arbitration proceedings of the London Maritime Arbitrators' Association in London, which rules shall apply subject to the provisions of this Article XIII.2. Unless the parties agree, within seven (7) days from the receipt of the notice to arbitrate by the other party, upon arbitration before a sole arbitrator and on his identity, the dispute shall be settled by a panel of three arbitrators, with one arbitrator to be appointed by each party within a further period of seven (7) days. The arbitrators so appointed shall within seven (7) days from the later of their appointments appoint the third arbitrator, failing which the third arbitrator shall be appointed within a further period of seven (7) days by the Secretary for the time being of the London Maritime Arbitrators' Association. The third arbitrator shall act as the Chairman of the panel. If either party fails to 36 45 appoint an arbitrator as aforementioned, the appointment shall be made by the Secretary for the time being of the London Maritime Arbitrators' Association within seven (7) days from any such request by the other party. If either of the appointed arbitrators refuses to act or is incapable of acting, the party who appointed him shall, within seven (7) days from notice having been received by the other party of the refusal or incapacity respectively appoint a new arbitrator in his place. If no new arbitrator has been appointed within that seven day period, he shall be appointed by the Secretary for the time being of the London Maritime Arbitrators' Association within seven (7) days from any such request by the other party. The arbitrator or arbitrators shall have the power to award costs. The decision or award of the arbitrators shall be final and binding upon both parties, the parties waiving in advance and in any case the right of appeal against decision or award. Judgment on any decision or award may be entered in any court of competent jurisdiction. In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the Vessel, the award may include any postponement of the Delivery Date which the arbitration tribunal may deem appropriate to reflect any delay caused by such reference. ARTICLE XIV - RIGHT OF ASSIGNMENT 1. ASSIGNMENT OF BENEFITS The Buyer may (a) transfer its rights and obligations under this Contract to another Royal Caribbean Cruises Ltd. subsidiary or affiliate upon condition that the Buyer guarantees the obligations of such transferee hereunder in a manner reasonably satisfactory to the Builder or (b) assign the benefit, but not obligations, of this Contract to any bank or financial institution involved in the provision of finance for the Vessel's purchase by the Buyer. Neither of the parties hereto may otherwise assign this Contract without the prior written consent thereto of the other party. 37 46 This Contract shall inure to the benefit of and shall be binding upon the lawful successors or the legitimate assigns of either of the parties hereto. ARTICLE XV - TAXES AND DUTIES 1. TAXES AND DUTIES IN GERMANY, ETC. The Builder shall bear and pay all taxes, duties and similar impositions imposed in Germany, and in the country in which the Vessel is delivered to the Buyer, in connection with execution and/or performance of this Contract. 2. TAXES AND DUTIES OUTSIDE GERMANY, ETC. The Buyer shall bear and pay all taxes, duties and similar impositions imposed outside Germany, or the country in which the Vessel is delivered to the Buyer, in connection with execution and/or performance of this Contract other than those imposed upon machinery, equipment and supplies (other than Buyer's Supplies) purchased in connection with the construction of the Vessel. ARTICLE XVI - PATENTS, TRADEMARKS, COPYRIGHTS, ETC. 1. PATENTS, TRADEMARKS AND COPYRIGHTS ETC. For a period of fifteen (15) years from the delivery of the Vessel, the Builder shall defend any claim, suit or proceeding brought against the Buyer alleging that any design, process, device, apparatus, plans or specifications or the method of construction employed by the Builder hereunder or the tools or implements used by the Builder in the performance of this Contract constitutes an infringement of any patent, trademark or copyright. The Builder shall compensate the Buyer for any security provided to release the Vessel from any arrest brought in pursuance of such a claim and shall indemnify and save the Buyer harmless from any judgment rendered against the Buyer or the Vessel as a result of such claim and the costs and expenses to be incurred by the Buyer in resisting the same. The Buyer shall promptly notify the Builder in writing of any such claim, suit or proceeding and shall take steps, at Builder's expense to defend against such claim and permit the Builder to control the conduct and settlement of such claim, suit or proceeding provided, however, that no settlement shall be entered into without the Buyer's consent which purports to acknowledge on the Buyer's behalf the validity of any patent, 38 47 trademark or copyright. The Buyer shall provide information and assistance to the Builder, as may be reasonably necessary to aid in the conduct and settlement of the claim, suit or proceeding and shall cooperate with Builder in limiting the effects of such claim. The Buyer shall be entitled to participate in the conduct and settlement of such claim, suit or proceeding through its selected representatives and attorneys. The Builder's indemnity hereinabove does not extend to Buyers Supplies provided to the Builder in accordance with Article XVII below. 2. DESIGN OF VESSEL All Intellectual Property Rights in the design of the Vessel in as far as the Builder has rights to such Intellectual Property Rights shall belong to the Buyer and the Builder shall sign any documents as are necessary or desirable to evidence Buyer's ownership of the Intellectual Property Rights. "Intellectual Property Rights" means all patents, registered trade marks, trade and business names, copyrights, design rights and registered designs, know-how and all applications for patents and trade marks and registered designs and all other forms of protection of a similar nature which may subsist in any part of the world for the full term of such rights including any extensions and renewals. ARTICLE XVII - BUYER'S SUPPLIES 1. RESPONSIBILITY OF BUYER (a) The Buyer shall, at its own risk, cost and expense, supply and deliver to the Builder all of the items to be furnished by the Buyer as specified in the Specification (herein called the "Buyer's Supplies") on board the Vessel or at a warehouse or other storage area of the Shipyard in the proper condition ready for installation in or on the Vessel, in accordance with the time schedule designated by the Builder, provided that the Builder shall give to the Buyer adequate prior notice of the schedule. Each shipment of Buyer's Supplies shall be identified as such and shall be plainly marked with the Hull number of the Vessel. (b) In order to facilitate installation by the Builder of the Buyer's Supplies in or on the Vessel, the Buyer shall furnish the Builder with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the applicable 39 48 rules and regulations. The Buyer, if reasonably requested by the Builder, shall, without any charge to the Builder, cause the representatives of the manufacturers of the Buyer's Supplies to advise the Builder on installation thereof in or on the Vessel or to make repairs to or adjustments thereof at the Shipyard. (c) Any and all of the Buyer's Supplies shall be subject to the Builder's reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation. However, if so requested by the Buyer, the Builder may repair or adjust the Buyer's Supplies without prejudice to the Builder's other rights hereunder and without being responsible for any consequences therefrom. In such case, the Buyer shall reimburse the Builder for all costs and expenses incurred by the Builder in such repair or adjustment. The Buyer shall bear the expenses of any manufacturer's representatives for Buyer's Supplies. (d) Should the Buyer fail to deliver any of the Buyer's Supplies within the time designated, and such delay results in delay of the construction of the Vessel, the Delivery Date shall be automatically extended for a period of such delay in construction. If delay in the delivery of any of the Buyer's Supplies exceeds thirty (30) days beyond the time designated, then the Builder shall be entitled to proceed with construction of the Vessel without installation thereof in or on the Vessel, without prejudice to the Builder's other rights as hereinabove provided, and the Buyer shall accept and take delivery of the Vessel so construed. 2. RESPONSIBILITY OF THE BUILDER The Builder, at its own cost and expense, shall be responsible for storing and handling the Buyer's Supplies with reasonable care after delivery thereof at the Shipyard, and shall install them in or on the Vessel, unless otherwise provided herein or agreed by the parties hereto, provided always that the Builder shall not be responsible for quality, efficiency and/or performance of any of the Buyer's Supplies. The Builder shall, however, be responsible for proper installation of the Buyer's Supplies by the Builder or its subcontractors, unless otherwise expressly agreed. All Buyer's Supplies shall be identified as soon as reasonably possible after such equipment has been delivered to the Shipyard by being plainly marked either with the Hull number or other appropriate markings or symbols or identification. 40 49 ARTICLE XVIII - NOTICES 1. ADDRESSES Any and all notices and communications in connection with this Contract shall be in writing addressed as follows (or such other address as either party may from time to time notify the other party); To the Buyer: Royal Caribbean Cruises Ltd. 1050 Caribbean Way Miami, Florida 33132 Attention: Richard D. Fain Chairman and Chief Executive Officer Fax# 305-372 0441 Copy to: Michael J. Smith General Counsel Fax# 305-539 0562 To the Builder: Jos. L. Meyer GmbH & Co. Industriegebiet Sud D-26871 Papenburg Germany Attention: Mr. Bernard Meyer Managing Owner Fax# 011-49-4961-81-300 Copy to: Mr. Peter Motikat Fax# 011-49-4961-81-300 Any and all notices and communications in connection with this Contract shall be written in the English language and shall be effective upon receipt in person or by fax at the above locations. 41 50 ARTICLE XIX - INTERPRETATION 1. LAW APPLICABLE The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof (other than the Transfer Agreement) shall be governed by the laws of England. 2. DISCREPANCIES All general language or requirements embodied in the Specification are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. The Specification and the General Arrangement Plan are also intended to explain each other, and anything shown on the General Arrangement Plan and not stipulated in the Specification or stipulated in the Specification and not shown on the General Arrangement Plan shall be deemed and considered as if embodied in both. In the event of conflict between the Specification and the General Arrangement Plan, the Specification shall prevail and govern. 3. ENTIRE AGREEMENT This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertakings and agreements on any subject matter of this Contract. 4. LANGUAGE Any and all notices, communications and correspondence in connection with this Contract shall be in the English language. 5. EFFECTIVENESS This Contract shall become effective immediately and the Effective Date hereof shall be the date of execution hereof by the parties. 42 51 IN WITNESS WHEREOF the parties hereto have caused this Contract to be duly executed in two original copies, on the date first above written. ROYAL CARIBBEAN CRUISES LTD. JOS. L. MEYER GMBH & CO. By: /s/ Richard D. Fain By: /s/ Bernard Meyer ------------------- -------------------- Richard D. Fain Bernard Meyer Chairman and Chief Managing Partner Executive Officer 43 52 Appendix A Form of Installment Guarantee Royal Caribbean Cruises Ltd. 1050 Caribbean Way Miami, FL 33132 Dear Sirs: Reference is made to the Contract for Construction and Sale of Hull No. S-655 dated as of ___ April 1998 (the "Contract") between Royal Caribbean Cruises Ltd. (the "Buyer") and Jos. L. Meyer GmbH & Co. (the "Builder"). For good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the undersigned, referred to herein as the "Guarantor", hereby unconditionally and irrevocably guarantees the due and prompt repayment to the Buyer of the _________________ Installment under the Contract, amounting to US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars), together with interest thereon as specified in the Contract, (such _________________ Installment plus interest being referred to herein as the "Obligations"), upon receipt by the Guarantor of a certificate executed on behalf of the Buyer stating the event giving rise to the demand and the amount due and setting forth the method of calculation provided, however, that in the event the Builder is engaged in arbitration to dispute the Buyer's right to receive a refund of such Installment, the Guarantor shall not be required to pay the Obligation to the Buyer until the Buyer's right to receive a refund of such Installment has been established in such arbitration. The Guarantor's liability under this Guarantee shall be unconditional and shall not be discharged or impaired by any event other than payment in full of the Obligations to the Buyer, including, but not limited to (a) any granting of time or other indulgence to the Builder or any other failure by the Buyer to pursue collection of the amounts guaranteed from the Builder or any other party; (b) any amendment or other modification of the Contract; (c) the existence or validity of any other security taken by the Buyer in relation to the Contract or any enforcement of, failure to enforce or the release of any such security; (d) any insolvency, bankruptcy, reorganization, dissolution or similar events affecting the Builder. 44 53 Any discharge of the obligations of the Guarantor under this Guarantee as a result of the repayment of the Obligations to the Buyer shall be deemed to be made subject to the condition that it will be void if any payment which the Buyer may receive or has received is set aside or proves invalid for whatever reason. This Guarantee is continuing security and is in addition to and not in substitution for any other security which the Buyer may now or hereafter hold for the obligations of the Builder under or in connection with the Contract and may be called and/or enforced without the Buyer first having recourse to the Builder or any other security party. All payments to be made by or on behalf of the Guarantor to the Buyer pursuant to this Guarantee shall be made (a) without any set-off, counterclaim or condition whatsoever and (b) free and clear of and without deduction for or on account of, any present or future taxes unless the Guarantor is required by law or regulation to make any such payment subject to any taxes in which event the Guarantor shall pay such increased amount as will ensure that the Buyer receives, after the deduction, a net amount equal to the gross amount which it would otherwise have received. The Guarantor will on demand reimburse the Buyer for all costs and expenses incurred by the Buyer in preserving or enforcing its rights under this Guarantee after the making of a demand by the Buyer. This Guarantee shall expire upon the earlier of (i) the payment in full by the Guarantor to the Buyer of the Obligations and any other amounts owing hereunder, (ii) the execution by the Buyer and the Builder of the Protocol of Delivery and Acceptance under the Contract or (iii) the valid rescission of the Contract by the Buyer in accordance with Article XI.3 thereof, whereupon the Buyer will return this Guarantee to the Guarantor marked "Cancelled". The terms of this Guarantee shall be governed by and construed in accordance with English law and the Guarantor submits to the exclusive jurisdiction of the English Courts in connection with any claim hereunder. 45 EX-2.31 15 CONTRACT FOR HULL #S-656 1 EXHIBIT 2.31 ADDENDUM NO. 2 TO CONTRACT FOR CONSTRUCTION AND SALE OF HULL NO. S-656 With reference to the Contract for Construction and Sale of Hull No. S-656 (the "Contract") dated 9th April, 1998 between the undersigned it is agreed as follows: 1. The definition of "Specification" on page 1 of the Contract is hereby amended by inserting ", revised 26th April 1998" at the end of the definition. 2. Article I.2.1 of the Contract is hereby amended by (i) increasing the Vessel's number of passenger cabins from 1,048 cabins to 1,070 cabins, (ii) decreasing the Vessel's number of crew cabins from 477 cabins to 472 cabins, and (iii) increasing the Vessel's deadweight from 8,500 metric tons to 8,900 metric tons 3. Article I.2.2 of the Contract is hereby amended in its entirety to read as follows: 2.2. MACHINERY The machinery to consist of two (2) gas turbine generator sets and one (1) steam turbine generator set (COGES type), having a total maximum continuous rating of 57,800 kW electric power under the reference conditions set forth in the GE S&S-specification for this plant, to supply power to two (2) electric propulsion motors and the remaining electric systems of the Vessel as stipulated in the Specification. 4. Article I.4 of the Contract the deadweight has to be changed from "eight thousand five hundred (8,500) metric tons" to "eight thousand nine hundred (8,900) metric tons" 5. Article I.5 of the Contract is hereby amended in its entirety to read as follows: 5. FUEL CONSUMPTION The fuel consumption of each of the Vessel's two (2) gas turbine generator sets shall be determined on the test bed under conditions stipulated in the GE S&S-specification for this plant, and shall not exceed 242.2 grams per kW per hour when developing 100% of Maximum Continuous Rating. 6. Article II of the Contract is hereby amended as follows: The Contract Price under Article II.1 shall be increased by US$6,200,000 (United States Dollars six million two hundred thousand) The Terms of Payment for this amount shall be the same as for the Contract Price as stipulated in Article II.2 of the Contract. [PORTIONS OF THIS DOCUMENT HAVE BEEN 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]. 2 7. Article III.3 of the Contract is hereby amended in its entirety to read as follows: 3. EXCESSIVE FUEL CONSUMPTION The BUILDER guarantees that the fuel consumption of each of the two (2) gas turbine generator sets at the test bed runs as stipulated in Article I.5 shall not exceed 242.2 grams per kW per hour. The Contract Price shall not be affected or changed if the actual fuel consumption of both generators is not greater than [*] above 242.2 grams per kW per hour. If the actual fuel consumption of either generator is over [*] greater than 242.2 grams per kW per hour, then, as sole compensation, the Contract Price shall be reduced by the sum of [*] for each full [*] increase in fuel consumption above said [*] (fractions of a percent to be prorated) for each generator. If such actual fuel consumption of either generator is more than [*] greater than 242.2 grams per kW per hour, then the Buyer may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract. The remaining provisions of the Contract shall be unaffected hereby. The provisions of Articles XIII and XIX of the Contract shall be deemed incorporated herein. All conditions other than those modified by this Addendum No. 2 shall remain unchanged and in full force and effect. In witness whereof, the parties have caused this Addendum No. 2 to be duly executed the 26th day of April, 1998. For and on behalf of For and on behalf of the Buyer the Builder ROYAL CARIBBEAN CRUISES LTD. JOS. L. MEYER GMBH & CO. By: /s/ Jack Williams By: /s/ Bernard Meyer ----------------- -------------------- Jack Williams Bernard Meyer President Managing Partner - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 3 ADDENDUM NO. 1 TO THE CONTRACT FOR CONSTRUCTION AND SALE OF HULL NO. S-656 With reference to the Contract for Construction and Sale of Hull No. S-656 (the "Contract") dated ___ April, 1998 between the undersigned it is agreed as follows: Based on the finally agreed Specification including the declaration of options by the Buyer as of the date hereof the Contract Price shall be increased by US$6,500,000 (United States Dollars Six Million Five Hundred Thousand). The Terms of Payment for this amount shall be the same as for the Contract Price as stipulated in Article II of the Contract. The remaining provisions of the Contract shall be unaffected hereby. The provisions of Articles XIII and XIX of the Contract shall be deemed incorporated herein. All conditions other than those modified by this Addendum No. 1 shall remain unchanged and in full force and effect. IN WITNESS WHEREOF the parties have caused this Addendum No. 1 to be duly executed the 9th day of April, 1998. For and on behalf of For and on behalf of the Buyer the Builder ROYAL CARIBBEAN CRUISES LTD. JOS. L. MEYER GMBH & CO. By: /s/ Richard D. Fain By: /s/ Bernard Meyer ------------------- -------------------- Richard D. Fain Bernard Meyer Chairman and Chief Managing Partner Executive Officer 4 CONTRACT FOR CONSTRUCTION AND SALE OF HULL NO. S-656 BETWEEN ROYAL CARIBBEAN CRUISES LTD. AS BUYER AND JOS. L. MEYER GMBH & CO. AS BUILDER [PORTIONS OF THIS DOCUMENT HAVE BEEN 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.] 5 INDEX PAGE ARTICLE I - Description and Class 2 1. Description 2. Dimensions and Characteristics 2.1 Hull 2.2 Machinery (Diesel-Electric) 3. Speed 4. Deadweight 5. Fuel Consumption 6. Quality Standards 7. Classification, Rules and Regulations 8. Makers and Suppliers 9. Registration 10. Design Obligations ARTICLE II - Contract Price and Terms of Payment 6 1. Contract Price 2. Terms of Payment 3. Method of Payment 4. Installment Guarantees ARTICLE III - Adjustment of Contract Price 8 1. Delayed Delivery 2. Insufficient Speed 3. Excessive Fuel Consumption 4. Insufficient Deadweight 5. Excessive Vibration and Sound Levels 6. Exclusion of Other Liabilities ARTICLE IV - Approval of Plans and Drawings and Inspection 12 during Construction 1. Approval of Plans and Drawings 2. Appointment of Buyer's Representatives 3. Inspection by Representatives 4. Facilities 5. Buyer's Liability to the Representatives 6. Responsibility of Buyer 7. Interior Design 6 ARTICLE V - Modifications; Workmanship and Construction 16 1. Voluntary Modifications 2. Changes in Class, etc. 3. Substitution of Materials 4. Information 5. Pricing of Modifications and Changes ARTICLE VI - Trials 18 1. Notice 2. Weather Conditions 3. How Conducted 4. Method of Acceptance or Non-acceptance 5. Effect of Acceptance 6. Correction of Causes for Non-acceptance 7. Disposition of Surplus Consumable Stores ARTICLE VII - Delivery 21 1. Time and Place 2. When and How Effected 3. Documents to be Delivered to the Buyer 4. Title and Risk 5. Removal of Vessel ARTICLE VIII - Delays and Extensions of Time for Delivery 23 (Force Majeure) 1. Causes of Delay 2. Notice of Delays 3. Permissible Delays 4. Right to Rescind for Excessive Delay ARTICLE IX - Warranty of Quality 25 1. Guarantee 2. Notice of Defects 3. Remedy of Defects 4. Extent of Builder's Responsibility 5. Guarantee Engineer 7 ARTICLE X - Rescission by Buyer 28 1. Notice 2. Refund by Builder 3. Discharge of Obligations ARTICLE XI - Buyer's Default; Builder's Default 29 1. Definition of Buyer's Default 2. Interest and Charges 3. Effect of Default 4. Sale of Vessel 5. Default by Builder ARTICLE XII - Builder's Insurance 34 1. Extent of Builder's Insurance Coverage 2. Application of Recovered Amounts 3. Termination of Builder's Obligation to Insure ARTICLE XIII - Dispute and Arbitration 36 1. Technical Disputes 2. Other Disputes ARTICLE XIV - Right of Assignment 37 1. Assignment of Benefits ARTICLE XV - Taxes and Duties 37 1. Taxes and Duties in Germany, etc. 2. Taxes and Duties Outside Germany, etc. ARTICLE XVI - Patents, Trademarks, Copyrights, etc. 38 1. Patents, Trademarks and Copyrights etc. 2. Design of Vessel ARTICLE XVII - Buyer's Supplies 39 1. Responsibility of Buyer 2. Responsibility of the Builder 8 ARTICLE XVIII - Notice 40 1. Addresses ARTICLE XIX - Interpretation 41 1. Law Applicable 2. Discrepancies 3. Entire Agreement 4. Language 5. Effectiveness ARTICLE XX - Right of Cancellation 42 APPENDICES A. Form of Installment Guarantee 9 THIS CONTRACT, made as of this 9th day of April 1998 by and between JOS. L. MEYER GMBH & CO., a corporation organized and existing under the laws of Germany, having its principal office at Industriegebiet Sud, D-26871, Papenburg, Germany (hereinafter called the "Builder") and ROYAL CARIBBEAN CRUISES LTD., a corporation organized and existing under the laws of Liberia, having its principal office at 1050 Caribbean Way, Miami, Florida 33132 (hereinafter called the "Buyer"). WITNESSETH THAT In consideration of the mutual covenants herein contained, the Builder agrees to design, construct, equip and substantially complete at its shipyard in Papenburg, Germany (hereinafter called the "Shipyard"), finally complete and sell and deliver to the Buyer one (1) passenger cruise vessel more fully described in Article I hereof (hereinafter called the "Vessel"), and the Buyer agrees to purchase and take delivery of the Vessel from the Builder and to pay for the same, all upon the terms and conditions hereinafter set forth. In this Contract the following terms, when capitalized, shall have the meanings defined below: "Banking Days" shall mean days on which banks are customarily open for business in each of London, New York and Frankfurt; "Contract Price" shall bear the meaning assigned thereto in Article II.1; "Effective Date" shall bear the meaning assigned thereto in Article XIX.5; "General Arrangement Plan" shall mean the Builder's general arrangement plan, Project No. 8235-97 dated and initialled 27 February 1998; "Specification" shall mean Specification Project No. 8235-97 dated and initialled 27 February 1998. "Transfer Agreement" shall mean the Transfer Agreement dated the date of this Contract and entered into between the Builder and the Buyer. Other terms of this Contract are defined hereinafter. References to the "Vessel" shall, except where the context otherwise requires, be deemed to 10 include her hull and all machinery, equipment, gear and outfittings installed on, or appropriated to, the Vessel. ARTICLE I - DESCRIPTION AND CLASS 1. DESCRIPTION The Vessel shall have the Builder's Hull Number S-656 and shall be designed, constructed, equipped and completed in accordance with the provisions of this Contract, the Specification and the General Arrangement Plan signed by each of the parties hereto for identification and delivered herewith and made an integral part hereof. The Vessel shall be constructed, equipped and completed as a sister ship to Hull number S-655. 2. DIMENSIONS AND CHARACTERISTICS 2.1 HULL
The Vessel shall have the following dimensions and characteristics: Type: Passenger Cruise Vessel Length, overall: About 292 meters Length between perpendiculars: 263.5 meters Breadth moulded at waterline: 32.2 meters Design draft moulded: 8 meters Scantling draft moulded: Min. 8.2 meters Depth deck 1 (subdivision deck) 10.7m Deadweight at Design Draft moulded: 8,500 metric tons Gross tonnage: About 85,000 GT Number of passenger cabins: 1,048 cabins Number of crew cabins: 477 cabins Total No. of persons (lifesaving capacity) 3,360 persons
2.2 MACHINERY (DIESEL-ELECTRIC) The machinery to consist of five (5) diesel engines of medium speed type, having a total maximum continuous rating of 63,000 kW driving five (5) electric generators of same maximum continuous rating (corrected for generator efficiency) to supply power to two (2) electric pod type propulsion motors and the remaining electric systems of the Vessel as stipulated in the Specification. 2 11 3. SPEED The Builder guarantees that the Vessel shall achieve a trial speed of not less than twenty four (24) knots averaged over two continuous runs (in opposite directions) on a measured course of not less than one nautical mile, at the moulded Design Draft at an output of 87% of the maximum continuous output of the electric propulsion motor shafts in calm sea and deep water with clean bottom, as further described in the Specification. In case the Vessel's trials shall be made at a different draft from the above defined draft, the speed at such draft shall be evaluated by using the method described in the Specification. 4. DEADWEIGHT The Vessel, when completed, shall have a deadweight of eight thousand five hundred (8,500) metric tons as stipulated in the Specification. The term "Deadweight" as used in this Contract shall signify the difference between the displacement on even keel at the moulded Design Draft in salt water of 1.025 specific gravity on the basis of hydrostatic curves of the Vessel and the lightweight as specified in the Specification. The actual Deadweight of the Vessel shall be based on the measurements and calculations by the Builder and approved by the Buyer's Representative and the Classification Society. 5. FUEL CONSUMPTION The average fuel consumption of the five (5) diesel engines of the Vessel shall be determined on the test bed under conditions stipulated in the Specification, using a fuel oil having a lower calorific value of 10,200 kcal per kg, and shall not exceed 183 grams per kWh in ISO 3046/1 conditions without driven pumps, when developing 85% of Maximum Continuous Rating. 6. QUALITY STANDARDS Notwithstanding anything contained in this Contract or the Specification to the contrary, the complexity (unless specified to the contrary in the Specification), quality of workmanship, quality of materials and interior design of the passenger cabins and passenger public spaces shall not be of a lower standard than on the RHAPSODY OF THE SEAS as built. Notwithstanding anything contained in this Contract or the Specification to the contrary, the quality of workmanship, quality of materials, components, equipment, machinery, function and performance of systems 3 12 for the remainder of the Vessel shall not be of a lower standard than on the MERCURY as built unless otherwise specifically set forth in the Specification. 7. CLASSIFICATION, RULES AND REGULATIONS The Vessel shall be constructed in accordance with the rules (the edition and amendments thereto being in force as of the Effective Date or as announced as of the Effective Date as intended thereafter to enter into force) and under special survey of Det Norske Veritas (herein called the "Classification Society") and shall at delivery and acceptance hereunder have achieved the Classification Society's notation: "+ 1A1 Passenger Ship ECO, RP" clean and free of all recommendations or qualifications (i) requiring amendment or modification(s) to the Vessel or (ii) otherwise affecting the ability of the Vessel upon delivery to commence immediate operations as a passenger cruise ship. Decisions of the Classification Society as to compliance or non-compliance with the requirements of the Classification Society shall be final and binding upon both parties hereto. The Vessel shall also comply with the rules, regulations and requirements of other regulatory bodies as expressly described in the Specification in effect as of the Effective Date or as announced as at the Effective Date as intended thereafter to enter into force. The Builder shall arrange with the Classification Society for the assignment by said Society of a representative or representatives (hereinafter referred to as the "Classification Surveyor") to the Vessel during construction. All fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for the account of the Builder. It is also expressly agreed that the Builder shall assume exclusive responsibility for the correct interpretation and application of the rules, regulations and requirements of the Classification Society and the regulatory bodies expressly described in the Specification. 4 13 8. MAKERS AND SUPPLIERS MAKERS' LIST The Specification contains a list (herein called the "Makers' List") of potential makers and suppliers of major items of machinery and equipment, the names included therein having been agreed by the Builder and the Buyer. Where the Makers' List contains the name of more than one maker or supplier in relation to any item of machinery or equipment, the Builder shall nominate its choice of maker or supplier as early as possible to enable the Buyer to consider such choice. In connection with such nomination, the Builder shall provide the Buyer with such maker's or supplier's technical specifications and allow the Buyer sufficient time (up to, but not to exceed 10 working days) to review such specifications prior to the Buyer's acceptance or non-acceptance of the Builder's choice. The Buyer shall have the right not to accept the Builder's choice but itself to choose from the Makers' List the maker or supplier of the relevant item of machinery or equipment, provided the Buyer's choice does not materially affect the Builder's construction schedule or other terms and conditions of this Contract and the Specification. In the case where the Buyer's choice of maker or supplier prevails the Contract Price shall be adjusted upwards or downwards to reflect the difference in cost to the Builder (as reasonably substantiated by the Builder at the time the Buyer confirms its choice) of purchasing and incorporating in the Vessel the item of machinery or equipment supplied by the maker or supplier chosen by the Buyer (as compared with the cost which would have applied had the Builder's choice of maker or supplier prevailed). If the Buyer wishes the Builder to select a maker or supplier not listed on the Makers' List, the difference, if any, between that maker's or supplier's price and the price of the equivalent maker or supplier named in the Maker's List, together with any other related consequential costs, shall be added to or deducted from the Contract Price subject to the requirements set forth in the previous paragraph. GENERAL The Builder shall, before purchasing any important machinery or equipment not on the Makers' List, inform the Buyer about the proposed maker or supplier (and supply to the Buyer the relevant maker's or supplier's technical specification) and the Buyer shall comment on 5 14 Builder's proposal within seven (7) days following receipt of such information. Upon the parties agreeing, the Builder shall place the particular order. It shall be open to the parties to modify, by agreement, the Makers' List to take advantage of the latest developments in techniques. Either party shall be entitled to make proposals to the other party in this connection to which the other party will always give reasonable consideration provided that the implementation of any such proposal does not adversely affect the other party's obligations under this Contract. 9. REGISTRATION The Vessel shall, concurrently with the delivery of the Vessel to the Buyer pursuant to Article VII hereof, be registered in the Norwegian International Ship Registry (NIS). If Buyer determines in its reasonable opinion that the circumstances warrant, the Buyer may change its selection pursuant to the provisions of Article V hereof. All fees and charges incidental to the registration of the Vessel shall be for the account of the Buyer. Prior to the delivery of the Vessel to the Buyer pursuant to Article VII hereof, the Vessel shall be registered in the name of the Buyer in accordance with the provisions of the Transfer Agreement. 10. DESIGN OBLIGATIONS Notwithstanding (i) that elements of the Vessel's design are to be provided to the Builder by the Buyer or its subcontractors and (ii) that test results, plans and drawings for the Vessel are (as detailed in the Specification) to be submitted to, and approved by, the Classification Society and the Buyer, it is expressly understood and agreed that the Builder shall be solely responsible for the design of the Vessel. ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT 1. CONTRACT PRICE The fixed purchase price of the Vessel is US$350,000,000 (Three Hundred and Fifty Million United States Dollars) (the "Contract Price"), which is exclusive of the Buyer's Supplies as provided in Article XVII hereof and shall be subject to upward or downward adjustment, if any, only as hereinafter set forth in this Contract. 6 15 2. TERMS OF PAYMENT The Contract Price shall be paid by the Buyer to the Builder in installments as follows: (a) FIRST INSTALLMENT The First Installment, amounting to US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars) shall be paid on 31 January 1999. (b) SECOND INSTALLMENT The Second Installment, amounting to US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars) shall be paid on 1 June 2000. (c) THIRD INSTALLMENT The Third Installment, amounting to US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars) shall be paid on 1 December 2000. (d) FOURTH INSTALLMENT The remainder of the Contract Price shall be paid upon delivery and acceptance of the Vessel. 3. METHOD OF PAYMENT Any and all payments, whether by the Buyer to the Builder or vice-versa, under this Contract shall be made in United States Dollars. Each of the respective installments shall be remitted by telegraphic transfer to the account of the Builder to be nominated by the Builder by at least five (5) Banking Days prior written notice. With the exception of the installment due upon delivery and acceptance of the Vessel and strictly without prejudice to the Buyer's rights under Article XIII, it is understood and agreed upon that no payments under the provisions of this Article shall be delayed or withheld by the Buyer due to any dispute of whatever nature arising between the parties hereto save in the case of the valid rescission by the Buyer or other valid termination of the Contract. 7 16 4. INSTALLMENT GUARANTEES Notwithstanding the foregoing, the Buyer shall not be obligated to make any of the First, Second or Third Installments until the Builder provides it with a guarantee for the repayment of such installment, issued by a first class international bank or insurance company reasonably acceptable to the Buyer, in the form set forth as Appendix A attached hereto. ARTICLE III - ADJUSTMENT OF CONTRACT PRICE The Contract Price shall be subject to adjustment, as hereafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction is by way of liquidated damages only and not by way of penalty). 1. DELAYED DELIVERY In the event that the Vessel is delivered after the Delivery Date, the Builder shall pay to the Buyer, upon delivery and acceptance of the Vessel, the following liquidated damages: [*] days or fraction thereof of delay: [*] Thereafter for each [*] days or fraction thereof of delay: [*] For this purpose, the delivery of the Vessel shall be deemed to be delayed when and if the Vessel is not delivered by the Delivery Date. However, if the delay in delivery of the Vessel continues for a period of more than [*] days after the Delivery Date then, in such event, the Buyer may, at its option, rescind this Contract by serving upon the Builder written notice of rescission. The Builder may at any time after the expiration of the aforementioned [*] days period of delay in delivery, if the Buyer has not served notice of rescission as above provided, propose a future date for delivery of the Vessel and require in writing that the Buyer make an election, in which case the Buyer shall, within thirty (30) days after such demand is received by the Buyer, either notify the Builder of its intention to rescind this Contract or consent to delivery of the Vessel at the specified future date, it being - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 8 17 understood by the parties that, if the Vessel is not delivered by such date, the Buyer's right of rescission shall be reinstated with immediate effect. 2. INSUFFICIENT SPEED If the Vessel on sea trials at her design draft and even keel and under the sea and weather conditions as stipulated in this Contract and Specification does not attain a speed of 24 knots at 87% of maximum continuous output of the electric propulsion motor shafts, then, as sole compensation, the Contract Price shall be reduced according to the following: For the first [*] of a knot [*] For each further complete [*] of a [*] of the Contract Price, knot up to [*] of a knot For each further complete [*] of a [*] of the Contract Price knot However, if the Vessel shall not achieve a speed of [*] knots, then the Buyer may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract. 3. EXCESSIVE FUEL CONSUMPTION The Builder guarantees that the average fuel consumption of the 5 diesel engines at the test bed trial runs shall be 183 grams per kW (Kilowatt) per hour, using fuel oil which has a lower calorific value of 10,200 kcal per kg as stipulated in Article I.5. The Contract Price shall not be affected or changed, if the actual average fuel consumption is not greater than [*] above 183 grams per kW (Kilowatt) per hour, using fuel oil which has a lower calorific value of 10,200 kcal per kg. If the actual average fuel consumption is over [*] greater than 183 grams per kW (Kilowatt) per hour, using fuel oil which has a lower calorific value of 10,200 kcal per kg, then as sole compensation, the Contract Price shall be reduced by the sum of [*] for each full [*] increase in fuel consumption, above said [*] (fractions of a percent to be prorated). If such actual average fuel consumption is more than [*], greater than 183 grams per kW (Kilowatt) per hour, using fuel oil which - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 9 18 has a lower calorific value of 10,200 kcal per kg, then the Buyer may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract. 4. INSUFFICIENT DEADWEIGHT If the deadweight as stipulated in Article I.4 hereof is not attained, then the Contract Price shall be reduced as follows: In case such deficiency [*] is not more than [*] tons below the aforesaid figure: In case such deficiency [*] for each full ton of is more than [*] deficiency in tons below the deadweight in excess of the aforesaid figure: aforesaid [*] tons, In case such deficiency is greater than [*] tons below the deadweight stipulated in Article I.4 hereof then the Buyer may, at its option, as an alternative to receiving the above mentioned liquidated damages by way of Contract Price reduction, rescind this Contract. 5. EXCESSIVE VIBRATION AND SOUND LEVELS (a) The Contractual Vibration Levels (CVL) in the passenger cabins and passenger public spaces are the single peak values as stated in the Specification taking into account the margins specified in the Specification. The Measured Vibration Levels (MVL) are the single peak levels derived from RMS values by using the measurement procedure described in G5.2.2 of the Specification. If in any cabin or any passenger public space which affects more than [*], the MVL exceeds the CVL, the Builder is to make the necessary changes before delivery to reduce those levels to CVL figures. If after changes made by the Builder, the final MVL exceed the CVL by [*] or more, the Contract Price will be reduced by [*] for each passenger cabin and/or passenger public space affected provided, however, that such reduction shall in no event exceed [*]. The Buyer will have the right, at its option, to rescind this Contract if more than [*] of passenger cabins and/or if more than [*] of the aggregated area of passenger public spaces are affected. - ------------ *MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 10 19 (b) For each passenger cabin and passenger public space, the Contractual Sound Level (CSL) is the upper limits of noise level as per G5.2.1 of the Specification taking into account the margins specified in the Specification. If Measured Sound Levels (MSL) to be taken into consideration as per the Specification exceed the CSL, the Builder is to make the necessary changes before the delivery to reduce those levels to the CSL figures. If after the changes made by the Builder, the final MSL exceed the CSL, the Contract Price shall be reduced for each passenger cabin or passenger public space as follows: from [*] dBA above contractual level: [*] from [*] dBA above contractual level: [*] from [*] dBA above contractual level: [*] from [*] dBA and above: [*] In no event shall such reduction exceed an aggregate of [*]. The Buyer will have the right, at its option, to rescind the Contract if either: - the MSL in more than [*] of the passenger cabins exceeds the CSL by more than [*], - the average value of MSL in more than [*] of the aggregate area of passenger public spaces exceeds the CSL by more than [*]. (c) the Builder will use all reasonable efforts to take corrective measures so as to ensure that the standards set forth in this Article III.5 are met. 6. EXCLUSION OF OTHER LIABILITIES The liquidated damages payable by the Builder hereunder shall represent the sole and exclusive financial compensation payable to the Buyer in respect of the breaches of contract to which they relate provided, however, that such limitation shall not apply where any such breach shall have been willful on the part of the Builder. - ------------ * MARKED TEXT OMITTED PURSURANT TO AN APPLICATION FOR AN ORDER FOR CONFIDENTIAL TREATMENT PURSURANT TO RULE 24b-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. 11 20 ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION 1. APPROVAL OF PLANS AND DRAWINGS The Builder shall, within sixty (60) days after the Effective Date, present to the Buyer for its approval a list of typical drawings, schematic diagrams and other documents, with their preliminary time schedules to be presented to the Buyer for the Buyer's information. The Builder shall at the same time present to the Buyer the Builder's system of identifying drawings and diagrams. Plans, drawings and other documents sent to the Buyer for approval shall be issued in quadruplicate, two sets shall be sent to RCCL A/S in Oslo, Norway, one set to the Buyer's local Inspection Office at the Builder's Shipyard and one set to the Buyer's office in Miami. For the architectural drawings and documents, two sets shall be sent to the Buyer's consulting architect (as advised by the Buyer) for the actual room(s) and public spaces, one set to the Buyer's Technical Department and one set to the Buyer's office in Miami. All approvals will be given through RCCL A/S Oslo, unless otherwise advised by the Buyer. Unless otherwise agreed, the Buyer shall send to the Builder its comments to the received plans, drawings, diagrams and documents within fifteen (15) working days after having received the same for approval. The Buyer may request an extension of such approval period, which such approval shall not be unreasonably withheld by the Builder. In the event that the Buyer or the Representatives shall fail to respond with the Buyer's comments within such time limit, the Builder shall notify the Buyer in writing of the Buyer's failure to respond. In the event the Buyer still fails to respond with the Buyer's comments within three (3) working days of receipt of the Builder's notice to the Buyer of the Buyer's failure to respond, the relevant plans and drawings shall be deemed to have been automatically approved by the Buyer without any comment. Unless otherwise agreed, the Builder shall send its answers to the Buyer's comments within fifteen (15) working days after having received the Buyer's comments. The Builder may request an extension of such response period, which such approval shall not be unreasonably withheld. If no response is received from the Builder within the above time limit, the Builder will not be able to rely upon schedule considerations to refuse the Buyer's comments to the extent that they are within the provisions of the Specification. 12 21 Any deemed approval of plans, drawings or other documents pursuant to this paragraph 1 shall be strictly without prejudice to the obligations of the Builder hereunder, in particular (but without limitation) to complete and deliver the Vessel in accordance with this Contract and the Specification. 2. APPOINTMENT OF BUYER'S REPRESENTATIVES The Buyer may send to and maintain at the Shipyard, at the Buyer's own cost and expense, one or more representatives (herein called the "Representatives") who may act on behalf of the Buyer in connection with any matters in relation to supervision of the construction of the Vessel at the Shipyard, as specifically authorized in writing by the Buyer. The Buyer shall deliver a letter to the Builder describing the scope of authority of the Representatives prior to the arrival of the Representatives at the Shipyard. The Builder shall be entitled to rely upon such letter until it receives notice that such letter has been amended or revoked. The Builder will assist the Buyer in obtaining any necessary German permissions or authorizations for the Representatives to carry out their duties. 3. INSPECTION BY REPRESENTATIVES The necessary inspections and tests of the Vessel shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the Builder throughout the entire period of construction, in order to ensure that the construction of the Vessel is duly performed in accordance with this Contract and the Specification. The Representatives shall, during construction of the Vessel, have the right to attend all such tests and inspections of the Vessel, its machinery and equipment. On the Representatives' arrival at the Shipyard, without prejudice to their right to attend all tests, the Builder shall identify the kinds of tests it will conduct and will agree with the Representatives as to which of such kinds of tests they wish to attend. The Builder shall give a notice to the Representatives reasonably in advance of the date and place of such tests and inspections to be attended by them. In the case of inspections at the Shipyard, such notice shall be given at least twenty-four (24) hours prior to the commencement of such tests, and in the case of tests to be conducted away from the Shipyard, such notice shall be given at least seven (7) days prior to the commencement of such tests. Failure of the Representative to be present 13 22 at such tests and inspections after due notice to him as above provided and without proper cause shall be deemed to be a waiver of his right to be present. In the event that the Representative discovers any construction or material or workmanship which does not conform to the requirements of this Contract and/or the Specification, the Representative shall promptly give the Builder a notice in writing as to such non-conformity. Upon receipt of such notice from the Representative, the Builder shall proceed with due diligence to correct any actual non-conformity. At all times during the construction of the Vessel until delivery and acceptance thereof, provided that the normal progress of the construction is not thereby affected, the Representatives shall be given free and ready access to the Vessel and to any other place where work is being done, or materials are being processed or stored by the Builder or any of its subcontractors or suppliers, in connection with the construction of the Vessel. The inspections exercised by the Buyer's Representatives under this Article or otherwise under this Contract shall not diminish the Builder' obligations under this Contract, including, but not limited to, the Builder's responsibility under this Contract with respect to time of delivery of the Vessel hereunder, workmanship, design or material. 4. FACILITIES The Builder shall furnish promptly, without additional charge, such reasonable facilities and materials at the Shipyard, including suitably furnished offices with telephone, desks, drawing tables, and filing cabinets, as are necessary for the safe and convenient supervision of the Vessel's construction by the Representatives. Provided, however, that the Buyer shall reimburse to the Builder the cost of the Representatives' use of telephone, fax and telex facilities. 5. BUILDER'S LIABILITY TO THE REPRESENTATIVES The Representatives shall, at all times, be deemed to be employees of the Buyer. The Builder shall be under no liability whatsoever to the Buyer or to its Representatives or employees or agents for personal injuries, including death, to such Representatives, employees or agents, or any of them during the time they, or any of them, are on the Vessel or within the premises of the Builder or its subcontractors or are otherwise engaged in and about the construction of the Vessel unless, however, such personal 14 23 injuries, including death, were caused by the negligence of the Builder or of its employees or agents. Nor shall the Builder be under any liability whatsoever for damage to, or loss or destruction of property of, the Buyer or its Representatives, employees or agents in Germany or elsewhere, unless such damage, loss or destruction was caused by the negligence of the Builder or of its employees or agents. 6. RESPONSIBILITY OF BUYER The Builder may request the recall of any or all of the Representatives who are deemed unsuitable or unsatisfactory. If after investigations, the Buyer is satisfied that the request is justified, then it will within thirty (30) days after such request is received effect such recall and if it so desires, may provide replacements thereof simultaneously, or if not so satisfied, it will advise the Builder accordingly within above same period. 7. INTERIOR DESIGN The Buyer will work directly with certain interior designers in connection with the design of certain areas of the Vessel. The Builder and the Buyer shall, within sixty (60) days after the Effective Date, agree on the detailed scope of this work. The Builder shall provide the Buyer and such interior designers with such drawings, schematic diagrams and other information as may be required in connection with the development of such designs in a timely manner so as to allow such schedule to be adhered to. Any delays in the receipt of such information from the Builder shall result in a corresponding delay in the schedule for the development of such designs. Unless otherwise agreed, the Builder shall send to the Buyer and the relevant interior designer its comments to received plans, drawings, diagrams and documents within fifteen (15) working days after having received the same for approval. The Builder may request an extension of such response period, which such approval shall not be unreasonably withheld. In the event that the Builder shall fail to respond with the Builder's comments within such time limit, the Buyer shall notify the Builder of the Builder's failure to respond. In the event the Builder still fails to respond with the Builder's comments within three (3) working days of receipt of the Buyer's notice to the Builder of the Builder's failure to respond, the relevant plans and drawings shall be deemed to have been automatically approved by the Builder without any comment. 15 24 ARTICLE V - MODIFICATIONS; WORKMANSHIP AND CONSTRUCTION 1. VOLUNTARY MODIFICATIONS The Specification may be modified and/or changed at the request of the Buyer provided that such modifications and/or changes or an accumulation thereof will not in the Builder's reasonable judgment materially and adversely affect the Builder's ability to meet its other commitments, and provided, further, that the parties shall first agree, before such modifications and/or changes are carried out, to reasonable alterations, if any, in the Contract Price, the Delivery Date and other terms and conditions of this Contract and Specification directly occasioned by or resulting from such modifications and/or changes. Such agreement may be effected by exchange of letters signed by the authorized representatives of the parties hereto which shall constitute amendments to this Contract and/or the Specification. The Builder acknowledges that the design of a cruise vessel requires a great deal of flexibility and agrees to use all reasonable efforts to accommodate all reasonable requests by the Buyer so that said changes and/or modifications will be made at a reasonable cost reflecting the Builder's actual incremental cost or savings for carrying out such changes and/or modifications, if any, and within the shortest period of time reasonably possible. 2. CHANGES IN CLASS, ETC. In the event that after the Effective Date of this Contract the requirements of the Classification Society or any other rule or regulations to which the construction of the Vessel is required to conform should be altered or changed from those (a) in effect at the Effective Date or (b) as announced as at the Effective Date as intended thereafter to enter into force, the following provisions shall apply: COMPULSORY CHANGES If such alterations or changes are compulsory for the Vessel, either of the parties hereto, upon receipt of such information from the Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the Builder shall thereupon incorporate such alterations or changes into the construction of the Vessel, provided that the Buyer shall first agree to any adjustments reasonably required by the Builder in the Contract Price, the Delivery Date and other terms and 16 25 conditions of this Contract and the Specification directly occasioned by or resulting from such alterations or changes. Agreements as to such alterations or changes under this Paragraph shall be made in the same manner as provided in Article V.1 for modifications or changes to the Specification. NON-COMPULSORY CHANGES If such alterations or changes are not compulsory for the Vessel, but the Buyer desires to incorporate such alterations or changes into the construction of the Vessel, then, the Buyer shall notify the Builder of such intention. The Builder shall accept such alterations or changes, and provided, further, that the Buyer shall first agree to any adjustments reasonably required by the Builder in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the Specification directly occasioned by or resulting from such alterations or changes. CHANGES IN INTERPRETATION OF EXISTING RULES ETC. It is expressly agreed and understood that, should there occur any alteration in the interpretation by the Classification Society or other relevant regulatory bodies of any of their rules, regulations and requirements from that applied at the Effective Date, the Builder shall, at its own cost and without reference to the provisions of this Article, make appropriate changes to the Specification to implement the same. 3. SUBSTITUTION OF MATERIALS In the event that, notwithstanding the exercise of reasonable diligence on the part of the Builder, any of the materials required by the Specification or otherwise under this Contract for the construction of the Vessel cannot be procured in time or are in short supply to maintain the Delivery Date of the Vessel, the Builder may, provided that the Buyer shall so agree in writing (which agreement shall not be unreasonably withheld), supply other materials of comparable quality capable of meeting the requirements of the Classification Society and of the rules, regulations and requirements with which the construction of the Vessel must comply. 4. INFORMATION When requested by the Buyer, the Builder will provide reasonable information relating to the basis and method of formulating any adjustment referred to in this Article. 17 26 5. PRICING OF MODIFICATIONS AND CHANGES Any increase or decrease in the Contract Price resulting from any change or modification shall be priced in United States Dollars. ARTICLE VI - TRIALS 1. NOTICE The Buyer shall receive from the Builder at least thirty (30) days' preliminary prior notice in writing and seven (7) days' final prior notice in writing of the time and place of the Vessel's trials, and the Buyer shall promptly acknowledge receipt of such notice. At the time of trials, the Vessel shall be substantially completed so as to enable the test program to be performed as specified. The Buyer shall have its Representatives on board the Vessel to witness the trials. Failure in attendance of the Representatives of the Buyer at the trials of the Vessel for any reason whatsoever after due notice to the Buyer as above provided shall be deemed to be a waiver by the Buyer of its right to have its Representatives on board of the Vessel at the trials, and the Builder may conduct the trials without the Buyer's Representatives being present, and in such case the Buyer shall be obliged to accept the Vessel on the basis of a certificate of the Builder and of the Classification Society that the Vessel, upon her trials, is found to conform to this Contract and the Specification and is satisfactory in all respects. 2. WEATHER CONDITIONS The trials shall be carried out under weather conditions which are deemed favorable enough in the reasonable judgment of the Builder, in deep water, with clean bottom and in a ballast condition, all as set out in the Specification. In the event of unfavorable weather on the date specified for the trials, the same shall take place on the first available day thereafter that the weather conditions permit. It is agreed that, if during the trials of the Vessel, the weather should suddenly become so unfavorable that orderly conduct of the trials can no longer be continued, the trials shall be discontinued and postponed until the first favorable day next following, unless the Buyer shall assent in writing to acceptance of the Vessel on the basis of the trials already made before such discontinuance has occurred. In the event that the commencement of trials is postponed or the trials are discontinued by reason of unfavorable weather conditions as aforesaid and the number of days thereafter during which the trials cannot be 18 27 undertaken exceed four (4) in total, any further days during which the weather conditions remain unfavorable for the holding of the trials will count as permissible delay within the meaning of this Contract, provided the delivery of the Vessel is actually delayed thereby. 3. HOW CONDUCTED All expenses in connection with the trials are to be for the account of the Builder and the Builder shall provide at its own expense the required quantities of ballast water (if any), freshwater, fuel oil, lubricating oil, greases and ship's stores, as well as the necessary crew to comply with conditions of safe navigation. The trials shall be conducted in the manner prescribed in the Specification, and shall prove fulfillment of the performance requirements for the Vessel as set forth in the Specification. The course of the trials shall be determined by the Builder. 4. METHOD OF ACCEPTANCE OR NON-ACCEPTANCE Within two (2) days of receipt from the Builder of the results of the Vessel's trials, the Buyer shall notify the Builder in writing of its acceptance of the Vessel or its non-acceptance of the Vessel. 5. EFFECT OF ACCEPTANCE Acceptance of the Vessel as above provided shall be final and binding in so far as conformity of the Vessel (as the Vessel is then built and equipped) to this Contract as demonstrated on the trials is concerned and shall preclude the Buyer from refusing to take delivery of the Vessel as hereinafter provided, if the Builder completes the Vessel in accordance with the provisions of the Contract and otherwise complies with all other requirements for delivery as provided in this Contract. It is agreed in this context that the Buyer shall not have the right to refuse to accept the Vessel by reason of minor defects which do not affect the normal operation of the Vessel provided that the Builder agrees in writing to remedy such defects at its own cost as soon as possible after the delivery of the Vessel. 6. CORRECTION OF CAUSES FOR NON-ACCEPTANCE In the event that the Buyer shall notify the Builder of its non-acceptance of the Vessel, the Buyer's notice to such effect shall advise the Builder in writing in what particular or particulars the Vessel, as she is then built and equipped, does not conform to this Contract. 19 28 If the Builder is in agreement with the Buyer's determination as to such non-conformity, the Builder shall forthwith make such alterations and/or corrections as may be necessary to remedy such non-conformity to the satisfaction of the Buyer. Promptly after completion of the necessary alterations and/or corrections, and the giving of notice to such effect by the Builder to the Buyer, the Buyer shall inspect the Vessel and shall within two (2) days thereafter notify the Builder of its acceptance or non-acceptance of the Vessel; where the same is reasonably necessary to prove the Vessel's compliance with the requirements of this Contract, the Buyer may alternatively (by notice to the Builder in writing or by telecopy), demand that new tests or trials be undertaken, in which event the Buyer's notification to the Builder of its acceptance or non-acceptance of the Vessel shall be issued to the Builder promptly after completion of such tests and trials. In the event of the Buyer's non-acceptance of the Vessel, its notice to the Builder shall again indicate in what particular or particulars the Vessel, as she is then built and equipped, does not conform to this Contract. In the event that the Buyer fails to notify the Builder as aforesaid of the acceptance or non-acceptance of the Vessel, together with the reason therefor, within the periods as provided above, the Buyer shall be deemed to have accepted her. The above process shall be repeated as necessary until the earlier of (a) the Buyer's acceptance of the Vessel or (b) the valid and proper rescission of this Contract by either party. 7. DISPOSITION OF SURPLUS CONSUMABLE STORES Should any fuel oil, lubricating oil, greases and ship's stores, including fresh water (except, if the Builder determines, in its sole discretion, to use any fresh water for ballast) furnished by the Builder for the trials remain on board the Vessel at the time of acceptance thereof by the Buyer, the Buyer agrees to buy the same from the Builder at a reasonable price not to exceed that paid by the Builder, and payment by the Buyer shall be effected upon the delivery of the Vessel. 20 29 ARTICLE VII - DELIVERY 1. TIME AND PLACE The Vessel shall be delivered by the Builder to the Buyer at a safe berth with unimpeded access to international waters on 1 June 2002, except that, in the event of delays in the construction of the Vessel or any performance required under this Contract due to (i) agreed changes to the Delivery Date pursuant to Article V or (ii) permissible delays pursuant to Articles VI.2 or VIII, which under the terms of this Contract permit postponement of the date for delivery ("Permissible Delays"), the aforementioned date shall be postponed accordingly. The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to the terms of this Contract as set forth in the preceding sentence, is herein called the "Delivery Date." The Builder shall notify the Buyer of the estimated date of actual delivery of the Vessel at least six (6) months prior thereto. 2. WHEN AND HOW EFFECTED Provided that the Buyer shall have fulfilled all of its obligations stipulated in Article II of this Contract, delivery of the Vessel shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the Protocol of Delivery and Acceptance, acknowledging delivery of the Vessel by the Builder and acceptance thereby by the Buyer. 3. DOCUMENTS TO BE DELIVERED TO THE BUYER Acceptance of the Vessel by the Buyer shall be conditional upon receipt by the Buyer of the following duly authenticated documents which shall accompany the aforementioned Protocol of Delivery and Acceptance: A) PROTOCOL OF TRIALS of the Vessel made pursuant to this Contract; B) PROTOCOL OF INVENTORY of the equipment of the Vessel including spare parts and the like; C) PROTOCOL OF STORES OF CONSUMABLE NATURE such as fuel oil, lubricating oils and greases, fresh water and the like including the purchase price thereof; 21 30 D) ALL DRAWINGS AND PLANS pertaining to the Vessel as stipulated in the Specification and which shall be furnished to the Buyer at no additional cost; E) ALL CERTIFICATES required to be furnished upon delivery of the Vessel pursuant to the Contract and Specification and according to customary shipbuilding practice in the cruise vessel sector; F) DECLARATION OF WARRANTY of the Builder that the Vessel is delivered to the Buyer free and clean of any liens, charges, claims, mortgages or other encumbrances upon the Buyer's title thereto and in particular that the Vessel is free from any burden in the nature of imposts, taxes or charges imposed by the state or country of the port of delivery, as well as all liabilities of the Builder to its subcontractors, employees and crew and of all liabilities arising from the operation of the Vessel in trial runs, or otherwise , prior to delivery, except as otherwise provided under this Contract; G) COMMERCIAL INVOICE; and H) BUILDER'S CERTIFICATE. 4. TITLE AND RISK (a) Title to, and ownership of, the Vessel during construction from keel laying shall pass to the Buyer in accordance with the provisions of the Transfer Agreement. (b) Such transfer of title and ownership is strictly without prejudice to any and all of the obligations of the Builder under or in connection with this Contract, including (but without limitation) the Builder's obligation to complete and deliver the Vessel in accordance with the provisions of this Contract. (c) Notwithstanding the provisions of the Transfer Agreement, all risk of loss of, or damage to, the Vessel shall pass to the Buyer only upon delivery and acceptance of the Vessel having taken place in accordance with the foregoing provisions of this Article VII; it being expressly understood that, until such delivery and acceptance is effected, all risk of loss of, or damage to, the Vessel shall rest exclusively with the Builder. (d) Upon acceptance of the Vessel hereunder the Builder shall transfer to the Buyer physical possession of the Vessel. 22 31 5. REMOVAL OF VESSEL The Buyer shall take possession of the Vessel immediately upon delivery and acceptance thereof and, where appropriate and if so requested, shall remove the Vessel from the premises of the shipyard within seven (7) days after delivery thereof is effected. ARTICLE VIII - DELAYS AND EXTENSIONS OF TIME FOR DELIVERY (FORCE MAJEURE) 1. CAUSES OF DELAY The Delivery Date is subject to force majeure reservations. Force majeure shall occur if at any time either the construction of the Vessel or any performance required hereunder as a prerequisite of delivery of the Vessel is delayed due to acts of princes or rulers, war, blockade, revolution, insurrections, mobilization, civil commotions, riots, strikes, lockouts, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, earthquakes, tidal waves, typhoons, hurricanes or by destruction of, or severe damage to, the Vessel or of the works of the Builder or its subcontractors for important parts of the Vessel by fire or flood, defects in materials and equipment (including casting or forging or machining rejects or the like) which could not have been detected by the Builder using reasonable care, or other causes of similar type and quality. Force majeure shall moreover be regarded as occurring if the delivery is prevented or delayed by delayed deliveries of major parts or important performances by subcontractors, where the cause of the delay would be force majeure under this Article if it had affected the Builder, provided that such circumstances shall not constitute force majeure if they arise within two months of the Delivery Date. No event shall be considered to be force majeure unless it is reasonably beyond the control of the Builder or its subcontractors and could not reasonably have been anticipated by the Builder when signing this Contract. In force majeure circumstances, the Builder may (subject as hereinafter provided) require an extension of the Delivery Date by as many working days as the delivery has been delayed on account of such circumstances. However, up to five (5) force majeure events giving rise to delay(s) lasting for only one (1) working day or less shall not be considered as permissible delay. For the purposes of this Article, if any series of force majeure events occur which are due to a single cause, then, in such case, all such events shall be regarded as one event. 23 32 In all events the Builder undertakes to take all reasonable steps to minimize the effects of such delay. 2. NOTICE OF DELAYS Within five (5) days from the date of commencement of any delay on account of which the Builder claims that he is entitled under this Contract to an extension of the Delivery Date, the Builder shall advise the Buyer in writing the date such delay commenced and the reasons therefor. Likewise, within ten (10) days after such delay ends, the Builder shall advise the Buyer in writing the date that such delay ended and also shall specify the period of time it claims the Delivery Date is extended by reason of such delay. Failure of the Builder to give notice as aforesaid shall constitute a waiver of its right to extension of the Delivery Date. Failure of the Buyer to acknowledge the Builder's notification of any claim for extension of the Delivery Date within ten (10) days after receipt by the Buyer of such notification in writing shall be deemed to be a waiver of its right to object to such extension. The Builder shall promptly advise the Buyer of the status of any pending delay upon the request of the Buyer. 3. PERMISSIBLE DELAYS Delays on account of the foregoing causes shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the price of the Vessel, may be subject to adjustment or liquidated damages payable as provided in Article III hereof. 4. RIGHT TO RESCIND FOR EXCESSIVE DELAY If the total accumulated time of all delays for any reason (except only for delays due to default by the Buyer) amounts to Two Hundred and Forty (240) days or more beyond 1 June 2002 then in such event, the Buyer may, at its option, rescind this Contract. Such right of rescission shall be exercised by appropriate notice to the Builder within thirty (30) days from the lapse of such period of Two Hundred and Forty (240) days and is exercisable regardless of any other provision of this Contract, including, but not limited to, the provisions of Article III.1 hereof. 24 33 ARTICLE IX - WARRANTY OF QUALITY 1. GUARANTEE Subject to the provisions hereinafter set forth, the Builder undertakes to remedy, free of charge to the Buyer, any defects in the Vessel which are due to defective design and/or material and/or workmanship provided that the defects are discovered within a period of twelve (12) months after the date of delivery of the Vessel, as such period may be extended as provided below, and a notice thereof is duly given to the Builder as hereinafter provided. In addition, the Builder shall secure the extension to the Buyer of the full benefit of all guarantees of greater than twelve months' duration which the Builder may be given by subcontractors and suppliers, if any, and shall assist the Buyer in securing performance thereunder. For the purpose of this Article, the Vessel excludes any parts for the Vessel which have been supplied by the Buyer. This guarantee extends to installation of the Buyer's Supplies only if such installation is done by the Builder or its subcontractors. Any parts repaired or replaced by the Builder pursuant to this Article shall be guaranteed on similar terms for a period of twelve months from the date of such replacement or repair but subject to an overall time limit of twenty-four (24) months (thirty-six months in the case of those major components as listed in the Specification) counted from the date of actual delivery of the Vessel. 2. NOTICE OF DEFECTS The Buyer shall notify the Builder in writing of any defects for which claim is made under this guarantee as promptly as practical after discovery thereof. For purposes of this Article, notice to the Guarantee Engineer shall be deemed to be notice to the Builder. The Buyer's written notice shall describe the nature and extent of the defects. The Builder shall have no obligation for any defects, even if discovered prior to the expiry date of the said guarantee period, unless notice of such defects is received by the Builder not later than thirty (30) days after such expiry date. Notwithstanding the foregoing, in the case of defects which could only be discovered on dry docking of the Vessel the Builder will be liable under this guarantee in relation thereto if the Buyer gives notice thereof to the Builder as soon as possible after the first dry docking of the Vessel after delivery to the Buyer hereunder (whether or not such notice is given prior 25 34 to the expiration of the said thirty day period) provided that such dry docking occurs within four (4) years after the delivery of the Vessel. 3. REMEDY OF DEFECTS (a) The Builder shall remedy, at its expense, any defects, against which the Vessel is guaranteed under this Article, by making all necessary repairs or replacements. (b) In the event that the Buyer proposes to cause the necessary repairs or replacements to be made to the Vessel under its own direction, the Buyer shall first give the Builder notice in writing or by telecopy confirmed in writing of the time and place such repairs are intended to be made by it. Prior to commencement of such repair work, provided that the Vessel is not thereby delayed or her operation or working schedule is not thereby impaired, the Builder shall have the right to verify by its own representative(s) the nature and extent of the defects complained of. The Builder shall, in such case, promptly advise the Buyer by telecopy, after such examination has been completed, of its acceptance or rejection of the defects as covered by the guarantee herein provided. Upon the Builder's acceptance of the defects as justifying remedy under this Article, or upon award of the arbitration so determining, the Builder shall immediately pay to the Buyer the actual cost for such repairs or replacements. The Buyer shall use the normal diligence and business practices of a competent shipowner to minimize such cost of repairs or replacements. The Builder shall also reimburse the Buyer for the travel costs charged to the Buyer by contractors carrying out guarantee works on board the Vessel, provided, however, that no such claim by the Buyer shall be paid unless the Buyer shall reasonably demonstrate that the works in question could not have been carried out by either (a) the Vessel's crew or (b) a suitably qualified contractor carrying on business at the Vessel's location during the repairs. In the event that it is necessary to forward the replacement for the defective part under the Builder's guarantee, the Builder shall forward same by sea, road or railfreight at its own expense. However, if the Buyer requires the part to be sent by air, the Buyer shall meet the difference in cost but shall be entitled to reimbursement from the Builder in circumstances in which the Buyer can reasonably demonstrate that provision of an immediate replacement was vital to the continued operation of the Vessel. 26 35 (c) Any dispute under this Article shall be referred to arbitration in accordance of Article XIII hereof. 4. EXTENT OF BUILDER'S RESPONSIBILITY (a) The liability of the Builder under this provision shall be limited to defects directly caused by defective design and/or material and/or workmanship as above provided. If the defect has led to damage to the Vessel or any part thereof, the repair obligation is limited to the repair or renewal of the defective part and/or of the Vessel's part or parts that has (have) been damaged as a direct and immediate consequence of the defect. (b) The Builder shall be under no obligation with respect to defects discovered after the expiration of the period of guarantee specified above nor in any event shall the Builder be liable for any consequential damage or expense occasioned by any defect or for any loss of time in operating the Vessel or for any loss of time due to repair, or both, caused by any defect. (c) In no event shall there be any liability for defects in the Vessel, or any part or equipment thereof, caused by perils of the sea, rivers or navigation or normal wear and tear or fire or accidents at sea or elsewhere or by mismanagement, accidents, negligence, willful neglect, alteration or addition on the part of the Buyer, its employees or agents or any person other than employees or agents of the Builder, on or doing work on the Vessel, including the Vessel's officers, crew and passengers. (d) Likewise, the Builder shall not be liable for defects in the Vessel or any part or equipment thereof that are due to repairs which were made at the direction of the Buyer as hereinabove provided unless such repairs were made by the Builder or with the approval of the Builder. 5. GUARANTEE ENGINEER The Builder shall appoint a Guarantee Engineer to serve on the Vessel as its representative for the full guarantee period unless otherwise agreed by the parties hereto. The Buyer will give reasonable consideration to requests of the Builder for earlier release of the Guarantee Engineer. The Buyer and its employees shall give the Guarantee Engineer full cooperation in carrying out his duties as the representative of the Builder 27 36 on board the Vessel. The Buyer shall accord the Guarantee Engineer treatment comparable to the Vessel's Chief Engineer and shall provide him with a reasonable passenger cabin and subsistence at no cost to the Builder and/or the Guarantee Engineer. All other expenses for the Guarantee Engineer, including wages and traveling expenses, shall be for Builder's account. The Buyer shall be under no liability whatsoever to the Guarantee Engineer or the Builder for personal injuries, including death or loss or damage to the Guarantee Engineer's property unless the same shall have been caused by the negligence of the Buyer, its subcontractors or its employees or agents acting within the scope of their employment. ARTICLE X - RESCISSION BY BUYER 1. NOTICE The payments to be made by the Buyer prior to the delivery of the Vessel shall be in the nature of advances to the Builder. In the event that the Buyer shall exercise its right of rescission of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the Buyer to do so, then the Buyer shall notify the Builder in writing, and such rescission shall be effective as of the date notice thereof is received by the Builder. 2. REFUND BY BUILDER Thereupon the Builder shall within ten (10) days after receipt of such notice refund to the Buyer the full amount of all sums paid by the Buyer to the Builder on account of the Vessel, unless the Builder disputes the Buyer's rescission and proceeds to the arbitration under the provisions of Article XIII hereof within such ten (10) day period. Any such refund shall be sent by telegraphic transfer to the Buyer at a Bank to be designated by the Buyer. In such event the Builder shall also pay the Buyer interest at the rate of eight percent (8%) per annum on the amount required herein to be refunded to the Buyer, computed from the respective dates on which such sums were paid by the Buyer to the Builder to the date of remittance by transfer of such refund to the Buyer by the Builder. In addition, the Builder shall return all Buyer's Supplies to the Buyer or, to the extent not so returned, pay to the Buyer the original cost of such items. 28 37 3. DISCHARGE OF OBLIGATIONS Upon such performance by the Builder of its obligations hereunder to the Buyer, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged, and such title to the Vessel as has been vested in the Buyer under the Transfer Agreement shall revert to the Builder, unless the rescission by the Buyer arose out of a willful breach of the Contract by the Builder. ARTICLE XI - BUYER'S DEFAULT; BUILDER'S DEFAULT 1. DEFINITION OF BUYER'S DEFAULT The Buyer shall be deemed to be in default of performance of its obligations under this Contract in the following cases: (a) The Buyer fails to pay any of the First, Second, Third or Fourth Installments of the Contract Price to the Builder when such Installment becomes due and payable under the provisions of Article II hereof and fails to remedy such default within three (3) Banking Days of receipt of notice of such nonpayment from the Builder; or (b) The Buyer fails to take delivery of the Vessel, when the Vessel is duly tendered for delivery by the Builder under the provisions of Article VII hereof; or (c) The Buyer becomes or is declared, either by effective resolution of the Buyer or by order of any court of competent jurisdiction, insolvent or bankrupt; or (d) The Buyer files a voluntary petition, or an effective resolution is passed, for winding-up or dissolution of the Buyer, save for the purposes of amalgamation or reorganization not involving or arising out of insolvency, or the Buyer enters into an arrangement or composition with its creditors generally; or (e) A receiver, trustee or liquidator of the Buyer is appointed and such appointment is not terminated within thirty (30) days; or (f) Any bona fide petition for the winding-up of the Buyer is filed and not dismissed within thirty (30) days. 29 38 2. INTEREST AND CHARGES If the Buyer is in default of payment as to any Installment as provided in Paragraph 1(a) of this Article, the Buyer shall pay interest on such Installment at the rate of eight percent (8%) per annum from the due date thereof to the date of payment to the Builder of the full amount including interest; in case the Buyer shall fail to take delivery of the Vessel as provided in paragraph 1(b) of this Article, the Buyer shall be deemed in default as regards the whole of the Fourth Installment of the Contract Price and shall pay interest thereon at the same rate as aforesaid from and including the day on which the Vessel is duly tendered for delivery by the Builder. 3. EFFECT OF DEFAULT (a) If any default by the Buyer occurs as provided hereinbefore, the Delivery Date shall be automatically postponed for a period of continuance of such default by the Buyer provided, however, that if the Buyer cures such default within five (5) days, then no such postponement shall occur. (b) Except as set forth in Paragraph 3(c) of this Article, if any default by the Buyer continues for a period of thirty (30) days after notice of such default is given by the Builder to the Buyer in writing, the Builder may, at its option, rescind this Contract by giving notice of such effect to the Buyer by facsimile confirmed in writing. Upon receipt by the Buyer of such notice of rescission, this Contract shall forthwith become null and void and such title to the Vessel as shall have vested in the Buyer under the Transfer Agreement, together with any of the Buyer's Supplies which have become permanently affixed to the Vessel, shall revert to and become the sole property of the Builder and the Buyer shall return any Installment Guarantee to the Guarantor marked "Cancelled". In the event of such rescission of this Contract, the Builder shall be entitled to retain any Installment or Installments theretofore paid by the Buyer to the Builder on account of this Contract to the extent of proven damages and losses including costs and expenses permitted by English law. (c) In the event that Kreditanstalt fur Wiederaufbau fails for any reason to make available the funds to pay the Fourth Installment of the Contract Price pursuant to the Credit Terms and the Buyer fails 30 39 to pay the Fourth Installment to the Builder when due, then the Buyer and the Builder shall meet in good faith to attempt to resolve the situation to the mutual satisfaction of the Buyer and the Builder. In the event the Buyer and the Builder are unable to come to an agreement to resolve the situation within thirty (30) days, then either party may, upon written notice to the other party, rescind this Contract, whereupon the Builder and the Buyer shall enter into a joint venture for the sole purpose of finding a third party to whom the Vessel may be disposed in an attempt to realize the highest practical value for the Vessel. Upon entering into the joint venture, the Buyer will transfer to the Builder, at the Builder's expense, such title to the Vessel as shall have vested in the Buyer under the Transfer Agreement and return any Installment Guarantee to the Guarantor marked "Cancelled". All decisions to be made by such joint venture shall require the consent of both the Builder and the Buyer and the proceeds from the disposition of the Vessel shall be distributed 85% to the Builder and 15% to the Buyer. In the event the Buyer and the Builder are unable to mutually agree upon any decision required to be made by the joint venture, either party may refer the dispute to arbitration pursuant to Article XIII. Except as set forth in this Paragraph (c), neither party shall have any further obligations, duties or liabilities to the other party in the event of a rescission as set forth in this Paragraph (c). The term "Credit Terms" shall mean financing of 80% of the Contract Price over a term of 8 1/2 years, repayable in 17 semi-annual installments, in arrears, bearing interest at a market rate not to exceed 8% per annum and provided on an unsecured basis with no financial covenants. 4. SALE OF VESSEL The following is applicable only in the case of a rescission effected pursuant to Paragraph 3 (b) above. (a) In the event rescission by the Builder of this Contract as provided in Article XI.3(b), the Builder shall have full right and power either to complete or not to complete the Vessel as it deems fit, and to sell the Vessel at public or private sale on such terms and conditions as the Builder thinks fit. (b) In the event of the sale of the Vessel in its completed state, the proceeds of the sale received by the Builder shall be applied firstly to payment of all proven damages and losses permitted by English 31 40 law attending such sale, and then to payment of all unpaid Installments of the Contract Price and interest on such Installments at the rate of eight percent (8%) per annum from the respective due dates thereof to the date of application. (c) In the event of sale of the Vessel in its uncompleted state, the proceeds of sale received by the Builder shall be applied firstly to all proven damages and losses permitted by English law attending such sale, and then to payment of all costs of construction of the Vessel and compensation to the Builder for a loss of reasonable profit due to the rescission of this Contract together with the appropriate interest at the rate of eight percent (8%) per annum, less the Installments retained by the Builder. (d) In either of the above events of sale, if the proceeds of sale exceed the total of amounts to which such proceeds are to be applied as aforesaid, the Builder shall promptly pay the excess to the Buyer without interest. (e) If the proceeds of sale are insufficient to pay to the Builder such total amounts payable as aforesaid, the Buyer shall promptly pay the deficiency to the Builder upon request. 5. DEFAULT BY BUILDER The Buyer shall be entitled but not bound to declare the Builder in default in any one of the following cases: (a) The Builder becomes or is declared, either by effective resolution of the Builder or by order of any court of competent jurisdiction, insolvent or bankrupt; or (b) The Builder files a voluntary petition, or an effective resolution is passed, for winding-up or dissolution of the Builder, save for the purposes of amalgamation or reorganization not involving or arising out of insolvency, or the Builder enters into an arrangement or composition with its creditors generally; or (c) A receiver, trustee or liquidator of the Builder is appointed and such appointment is not terminated within thirty (30) days; or (d) Any bona fide petition for the winding-up of the Builder is filed and not dismissed within thirty (30) days; or 32 41 (e) Any of the circumstances set out in (a) - (d) above (inclusive) or anything analogous thereto arises under the laws of Germany; or (f) Any of the circumstances set out in (a) - (d) above (inclusive) or anything analogous thereto under the laws of the country of its incorporation or domicile arises in relation to any party providing an installment guarantee pursuant to Article II.4 hereof, and such guarantee is not replaced by another guarantee issued by another first class international bank or insurance company reasonably acceptable to the Buyer within thirty (30) days; or (g) The Builder, without prior written consent of the Buyer, removes the Vessel from the Shipyard or assigns, sub-lets or subcontracts performance of the whole or substantial part of its obligations, except as provided for in this Contract and the Specification; or (h) The Builder fails to comply with its obligations under the Transfer Agreement in any material way; or (i) The Builder fails, without due cause, to proceed with the construction of the Vessel in accordance with usual international shipbuilding standards such that in the Buyer's reasonable opinion she cannot be delivered to the Buyer on or before Delivery Date and, after receipt of written notification from the Buyer, the Builder does not forthwith initiate appropriate corrective measures to cure such failure. Upon the occurrence of any of the above events and following the Buyer's declaration as aforesaid, the Buyer shall be entitled to exercise the following remedies (at its option): (a) to complete the Vessel in accordance with the Specification, and for this purpose to enter the Shipyard, to take possession of the Vessel in its then state of completion together with all other property transferred to the Buyer pursuant to the Transfer Agreement and Buyer's Supplies, and transfer the Vessel, all such other property and Buyer's Supplies to another shipyard to complete her. The Buyer shall also be entitled to exercise its rights under the subcontractor assignments referred to in the Transfer Agreement and to exercise its rights in the Expectancies therein defined. In such event, the reasonable expenses incurred by the Buyer in so completing the Vessel shall be deducted from, and go to reduce, the unpaid portion of the Contract Price (and, for the avoidance of doubt, any part of the Contract Price paid to the Builder's bank 33 42 in in accordance with Clause 3.4 of the Bank Undertaking referred to in the Transfer Agreement shall be regarded as having been paid for this purpose). The balance, if any, of the unpaid portion of the Contract Price remaining after such reduction shall be paid by the Buyer to the Builder upon completion of the Vessel and the placement of the Vessel in the Buyer's service. In the event that any such costs and expenses cannot be offset in this manner against the unpaid portion of the Contract Price, then the Builder shall pay such remaining amount upon the completion of the Vessel and the placement of the Vessel in the Buyer's service out of the Installments of the Contract Price previously paid to the Builder by the Buyer under this Contract; or (then or at any time thereafter) (b) to rescind this Contract, in which event the Builder shall make immediate refundment by the Builder of all previously paid installments of the Contract Price, together with interest thereon at the rate of eight percent (8%) per annum from the date of payment by the Buyer, and upon such repayment, such title to the Vessel as shall have vested in the Buyer pursuant to the Transfer Agreement shall revert to the Builder, and the Builder may freely dispose of the Vessel free of claim by the Buyer of any sort; provided, however, that the Builder shall additionally pay the Buyer the costs of the Buyer's Supplies delivered by the Buyer to the Shipyard for inclusion in the Vessel. ARTICLE XII - BUILDER'S INSURANCE The following provisions of this Article XII shall apply notwithstanding the transfer of title to, and ownership of, the Vessel to the Buyer under the Transfer Agreement. 1. EXTENT OF BUILDER'S INSURANCE COVERAGE From the date on which erection of the Vessel is commenced in the building dock until the Vessel is delivered to and accepted by the Buyer, the Builder shall, at its own cost and expense, keep the Vessel and all Buyer's Supplies delivered to the Builder insured under Builder's Risk Policies, in accordance with the ILU "Institute Clauses for Builders Risks" with first-class insurance companies. From the date of her launching, the Vessel shall also be insured for war risks in accordance with the ILU "Institute Clauses for Builders Risks". A copy of the Builder's broker's cover notes evidencing such coverages shall be provided by the Builder to the Buyer within twenty (20) days of the commencement of keel-laying of the Vessel. 34 43 The amount of such insurance shall not be less than (a) the value from time to time of the Buyer's Supplies delivered to the Builder and (b) the Contract Price, which latter element shall be increased to one hundred and ten percent (110%) of the Contract Price at the latest three (3) months before the scheduled date of delivery. The additional 10% shall be covered as owner's interest. The policies referred to herein shall be taken out in the joint names of the Builder and the Buyer as their respective interests may appear, with no liability of the Buyer for any premiums, and all losses under such policies shall be payable to the Builder and the Buyer as their respective interests may appear. 2. APPLICATION OF RECOVERED AMOUNTS PARTIAL LOSSES Should the Vessel be damaged prior to delivery to the Buyer and such does not constitute an actual or constructive total loss of the Vessel under the insurance policies thereon, the Builder shall apply any amount recovered under the insurance policies to the repair of such damage, satisfactory to the Classification Society and the Buyer's Representatives, without remarks, exceptions or recommendations. TOTAL LOSS In the event that the Vessel is agreed by the Underwriters subscribing to the Builder's policies of insurance to be an actual or constructive total loss, the Builder may decide either: (i) Proceed in accordance with the terms of this Contract, in which event the amount recovered under the said insurance cover shall be applied to the reconstruction and/or repair of the Vessel, provided the parties hereto shall first have agreed in writing as to such reasonable postponement of the Delivery Date as may be reasonably necessary for the completion of such reconstruction and/or repair; or (ii) Refund immediately to the Buyer the aggregate of (1) all Installments paid to the Builder under this Contract and (2) interest thereon at eight per cent (8%) from the date of payment to the date of refundment. The Builder shall also pay to the Buyer a sum equivalent to the value at the date of the loss of any Buyer's 35 44 Supplies delivered to the Builder. Upon payment in full as aforesaid this Contract shall be deemed to be at an end on the basis that all rights, duties, liabilities and obligations of each of the parties towards the other shall terminate immediately. The Builder will, unless agreed by the Buyer, exercise the first alternative unless it is unable to do so as a result of capacity restrictions resulting from other fixed commitments. 3. TERMINATION OF BUILDER'S OBLIGATION TO INSURE The Builder's obligation to insure the Vessel hereunder shall cease and terminate forthwith upon delivery and acceptance thereof by the Buyer. ARTICLE XIII - DISPUTE AND ARBITRATION 1. TECHNICAL DISPUTES Should any dispute of a technical nature arise between the parties hereto it may, by mutual agreement, be referred to the decision of the Classification Society (or such other third party as the parties hereto shall mutually agree) which shall act in determining such dispute as an expert (rather than an arbitrator) and whose views in relation to that dispute shall be binding upon the parties hereto. 2. OTHER DISPUTES All other disputes arising in connection with the interpretation and the performance of this Contract which cannot be amicably resolved shall be referred to arbitration under the Rules applicable at the time of commencement of the arbitration proceedings of the London Maritime Arbitrators' Association in London, which rules shall apply subject to the provisions of this Article XIII.2. Unless the parties agree, within seven (7) days from the receipt of the notice to arbitrate by the other party, upon arbitration before a sole arbitrator and on his identity, the dispute shall be settled by a panel of three arbitrators, with one arbitrator to be appointed by each party within a further period of seven (7) days. The arbitrators so appointed shall within seven (7) days from the later of their appointments appoint the third arbitrator, failing which the third arbitrator shall be appointed within a further period of seven (7) days by the Secretary for the time being of the London Maritime Arbitrators' Association. The third arbitrator shall act as the Chairman of the panel. If either party fails to 36 45 appoint an arbitrator as aforementioned, the appointment shall be made by the Secretary for the time being of the London Maritime Arbitrators' Association within seven (7) days from any such request by the other party. If either of the appointed arbitrators refuses to act or is incapable of acting, the party who appointed him shall, within seven (7) days from notice having been received by the other party of the refusal or incapacity respectively appoint a new arbitrator in his place. If no new arbitrator has been appointed within that seven day period, he shall be appointed by the Secretary for the time being of the London Maritime Arbitrators' Association within seven (7) days from any such request by the other party. The arbitrator or arbitrators shall have the power to award costs. The decision or award of the arbitrators shall be final and binding upon both parties, the parties waiving in advance and in any case the right of appeal against decision or award. Judgment on any decision or award may be entered in any court of competent jurisdiction. In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the Vessel, the award may include any postponement of the Delivery Date which the arbitration tribunal may deem appropriate to reflect any delay caused by such reference. ARTICLE XIV - RIGHT OF ASSIGNMENT 1. ASSIGNMENT OF BENEFITS The Buyer may (a) transfer its rights and obligations under this Contract to another Royal Caribbean Cruises Ltd. subsidiary or affiliate upon condition that the Buyer guarantees the obligations of such transferee hereunder in a manner reasonably satisfactory to the Builder or (b) assign the benefit, but not obligations, of this Contract to any bank or financial institution involved in the provision of finance for the Vessel's purchase by the Buyer. Neither of the parties hereto may otherwise assign this Contract without the prior written consent thereto of the other party. 37 46 This Contract shall inure to the benefit of and shall be binding upon the lawful successors or the legitimate assigns of either of the parties hereto. ARTICLE XV - TAXES AND DUTIES 1. TAXES AND DUTIES IN GERMANY, ETC. The Builder shall bear and pay all taxes, duties and similar impositions imposed in Germany, and in the country in which the Vessel is delivered to the Buyer, in connection with execution and/or performance of this Contract. 2. TAXES AND DUTIES OUTSIDE GERMANY, ETC. The Buyer shall bear and pay all taxes, duties and similar impositions imposed outside Germany, or the country in which the Vessel is delivered to the Buyer, in connection with execution and/or performance of this Contract other than those imposed upon machinery, equipment and supplies (other than Buyer's Supplies) purchased in connection with the construction of the Vessel. ARTICLE XVI - PATENTS, TRADEMARKS, COPYRIGHTS, ETC. 1. PATENTS, TRADEMARKS AND COPYRIGHTS ETC. For a period of fifteen (15) years from the delivery of the Vessel, the Builder shall defend any claim, suit or proceeding brought against the Buyer alleging that any design, process, device, apparatus, plans or specifications or the method of construction employed by the Builder hereunder or the tools or implements used by the Builder in the performance of this Contract constitutes an infringement of any patent, trademark or copyright. The Builder shall compensate the Buyer for any security provided to release the Vessel from any arrest brought in pursuance of such a claim and shall indemnify and save the Buyer harmless from any judgment rendered against the Buyer or the Vessel as a result of such claim and the costs and expenses to be incurred by the Buyer in resisting the same. The Buyer shall promptly notify the Builder in writing of any such claim, suit or proceeding and shall take steps, at Builder's expense to defend against such claim and permit the Builder to control the conduct and settlement of such claim, suit or proceeding provided, however, that no settlement shall be entered into without the Buyer's consent which purports to acknowledge on the Buyer's behalf the validity of any patent, 38 47 trademark or copyright. The Buyer shall provide information and assistance to the Builder, as may be reasonably necessary to aid in the conduct and settlement of the claim, suit or proceeding and shall cooperate with Builder in limiting the effects of such claim. The Buyer shall be entitled to participate in the conduct and settlement of such claim, suit or proceeding through its selected representatives and attorneys. The Builder's indemnity hereinabove does not extend to Buyers Supplies provided to the Builder in accordance with Article XVII below. 2. DESIGN OF VESSEL All Intellectual Property Rights in the design of the Vessel in as far as the Builder has rights to such Intellectual Property Rights shall belong to the Buyer and the Builder shall sign any documents as are necessary or desirable to evidence Buyer's ownership of the Intellectual Property Rights. "Intellectual Property Rights" means all patents, registered trade marks, trade and business names, copyrights, design rights and registered designs, know-how and all applications for patents and trade marks and registered designs and all other forms of protection of a similar nature which may subsist in any part of the world for the full term of such rights including any extensions and renewals. ARTICLE XVII - BUYER'S SUPPLIES 1. RESPONSIBILITY OF BUYER (a) The Buyer shall, at its own risk, cost and expense, supply and deliver to the Builder all of the items to be furnished by the Buyer as specified in the Specification (herein called the "Buyer's Supplies") on board the Vessel or at a warehouse or other storage area of the Shipyard in the proper condition ready for installation in or on the Vessel, in accordance with the time schedule designated by the Builder, provided that the Builder shall give to the Buyer adequate prior notice of the schedule. Each shipment of Buyer's Supplies shall be identified as such and shall be plainly marked with the Hull number of the Vessel. (b) In order to facilitate installation by the Builder of the Buyer's Supplies in or on the Vessel, the Buyer shall furnish the Builder with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the applicable 39 48 rules and regulations. The Buyer, if reasonably requested by the Builder, shall, without any charge to the Builder, cause the representatives of the manufacturers of the Buyer's Supplies to advise the Builder on installation thereof in or on the Vessel or to make repairs to or adjustments thereof at the Shipyard. (c) Any and all of the Buyer's Supplies shall be subject to the Builder's reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation. However, if so requested by the Buyer, the Builder may repair or adjust the Buyer's Supplies without prejudice to the Builder's other rights hereunder and without being responsible for any consequences therefrom. In such case, the Buyer shall reimburse the Builder for all costs and expenses incurred by the Builder in such repair or adjustment. The Buyer shall bear the expenses of any manufacturer's representatives for Buyer's Supplies. (d) Should the Buyer fail to deliver any of the Buyer's Supplies within the time designated, and such delay results in delay of the construction of the Vessel, the Delivery Date shall be automatically extended for a period of such delay in construction. If delay in the delivery of any of the Buyer's Supplies exceeds thirty (30) days beyond the time designated, then the Builder shall be entitled to proceed with construction of the Vessel without installation thereof in or on the Vessel, without prejudice to the Builder's other rights as hereinabove provided, and the Buyer shall accept and take delivery of the Vessel so construed. 2. RESPONSIBILITY OF THE BUILDER The Builder, at its own cost and expense, shall be responsible for storing and handling the Buyer's Supplies with reasonable care after delivery thereof at the Shipyard, and shall install them in or on the Vessel, unless otherwise provided herein or agreed by the parties hereto, provided always that the Builder shall not be responsible for quality, efficiency and/or performance of any of the Buyer's Supplies. The Builder shall, however, be responsible for proper installation of the Buyer's Supplies by the Builder or its subcontractors, unless otherwise expressly agreed. All Buyer's Supplies shall be identified as soon as reasonably possible after such equipment has been delivered to the Shipyard by being plainly marked either with the Hull number or other appropriate markings or symbols or identification. 40 49 ARTICLE XVIII - NOTICES 1. ADDRESSES Any and all notices and communications in connection with this Contract shall be in writing addressed as follows (or such other address as either party may from time to time notify the other party); To the Buyer: Royal Caribbean Cruises Ltd. 1050 Caribbean Way Miami, Florida 33132 Attention: Richard D. Fain Chairman and Chief Executive Officer Fax# 305-372 0441 Copy to: Michael J. Smith General Counsel Fax# 305-539 0562 To the Builder: Jos. L. Meyer GmbH & Co. Industriegebiet Sud D-26871 Papenburg Germany Attention: Mr. Bernard Meyer Managing Owner Fax# 011-49-4961-81-300 Copy to: Mr. Peter Motikat Fax# 011-49-4961-81-300 Any and all notices and communications in connection with this Contract shall be written in the English language and shall be effective upon receipt in person or by fax at the above locations. 41 50 ARTICLE XIX - INTERPRETATION 1. LAW APPLICABLE The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof (other than the Transfer Agreement) shall be governed by the laws of England. 2. DISCREPANCIES All general language or requirements embodied in the Specification are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. The Specification and the General Arrangement Plan are also intended to explain each other, and anything shown on the General Arrangement Plan and not stipulated in the Specification or stipulated in the Specification and not shown on the General Arrangement Plan shall be deemed and considered as if embodied in both. In the event of conflict between the Specification and the General Arrangement Plan, the Specification shall prevail and govern. 3. ENTIRE AGREEMENT This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertakings and agreements on any subject matter of this Contract. 4. LANGUAGE Any and all notices, communications and correspondence in connection with this Contract shall be in the English language. 5. EFFECTIVENESS This Contract shall become effective immediately and the Effective Date hereof shall be the date of execution hereof by the parties. ARTICLE XX - RIGHT OF CANCELLATION The Buyer may, at its sole option to be exercised in its unfettered discretion, terminate this Contract upon notice to the Builder on or before January 31, 1999, 42 51 whereupon neither party shall have any obligations or liabilities to the other party hereunder. IN WITNESS WHEREOF the parties hereto have caused this Contract to be duly executed in two original copies, on the date first above written. ROYAL CARIBBEAN CRUISES LTD. JOS. L. MEYER GMBH & CO. By: /s/ Richard D. Fain By: /s/ Bernard Meyer ------------------- -------------------- Richard D. Fain Bernard Meyer Chairman and Chief Managing Partner Executive Officer 43 52 Appendix A Form of Installment Guarantee Royal Caribbean Cruises Ltd. 1050 Caribbean Way Miami, FL 33132 Dear Sirs: Reference is made to the Contract for Construction and Sale of Hull No. S-656 dated as of ___ April 1998 (the "Contract") between Royal Caribbean Cruises Ltd. (the "Buyer") and Jos. L. Meyer GmbH & Co. (the "Builder"). For good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the undersigned, referred to herein as the "Guarantor", hereby unconditionally and irrevocably guarantees the due and prompt repayment to the Buyer of the ____________ Installment under the Contract, amounting to US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars), together with interest thereon as specified in the Contract, (such ____________ Installment plus interest being referred to herein as the "Obligations"), upon receipt by the Guarantor of a certificate executed on behalf of the Buyer stating the event giving rise to the demand and the amount due and setting forth the method of calculation provided, however, that in the event the Builder is engaged in arbitration to dispute the Buyer's right to receive a refund of such Installment, the Guarantor shall not be required to pay the Obligations to the Buyer until the Buyer's right to receive a refund of such Installment has been established in such arbitration. The Guarantor's liability under this Guarantee shall be unconditional and shall not be discharged or impaired by any event other than payment in full of the Obligations to the Buyer, including, but not limited to (a) any granting of time or other indulgence to the Builder or any other failure by the Buyer to pursue collection of the amounts guaranteed from the Builder or any other party; (b) any amendment or other modification of the Contract; (c) the existence or validity of any other security taken by the Buyer in relation to the Contract or any enforcement of, failure to enforce or the release of any such security; (d) any insolvency, bankruptcy, reorganization, dissolution or similar events affecting the Builder. 44 53 Any discharge of the obligations of the Guarantor under this Guarantee as a result of the repayment of the Obligations to the Buyer shall be deemed to be made subject to the condition that it will be void if any payment which the Buyer may receive or has received is set aside or proves invalid for whatever reason. This Guarantee is continuing security and is in addition to and not in substitution for any other security which the Buyer may now or hereafter hold for the obligations of the Builder under or in connection with the Contract and may be called and/or enforced without the Buyer first having recourse to the Builder or any other security party. All payments to be made by or on behalf of the Guarantor to the Buyer pursuant to this Guarantee shall be made (a) without any set-off, counterclaim or condition whatsoever and (b) free and clear of and without deduction for or on account of, any present or future taxes unless the Guarantor is required by law or regulation to make any such payment subject to any taxes in which event the Guarantor shall pay such increased amount as will ensure that the Buyer receives, after the deduction, a net amount equal to the gross amount which it would otherwise have received. The Guarantor will on demand reimburse the Buyer for all costs and expenses incurred by the Buyer in preserving or enforcing its rights under this Guarantee after the making of a demand by the Buyer. This Guarantee shall expire upon the earlier of (i) the payment in full by the Guarantor to the Buyer of the Obligations and any other amounts owing hereunder, (ii) the execution by the Buyer and the Builder of the Protocol of Delivery and Acceptance under the Contract or (iii) the valid rescission of the Contract by the Buyer in accordance with Article XI.3 thereof, whereupon the Buyer will return this Guarantee to the Guarantor marked "Cancelled". The terms of this Guarantee shall be governed by and construed in accordance with English law and the Guarantor submits to the exclusive jurisdiction of the English Courts in connection with any claim hereunder. 45 EX-23 16 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 Exhibit 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form F-3 (No. 333-8708) and Registration Statements on Form S-8 (No. 333-7288, No. 333-7290, No. 33-64326, No. 33-95224 and No. 33-71956) of Royal Caribbean Cruises Ltd. of our report dated February 5, 1999, except for the second paragraph of Note 13, which is as of February 24, 1999 appearing on page F-2 of this Form 20-F. PricewaterhouseCoopers LLP Miami, Florida March 31, 1999 -----END PRIVACY-ENHANCED MESSAGE-----