NOTE

– COMMITMENTS AND CONTINGENCIES

Fleet Expansion

2017,

the Company entered into an agreement with Ulstein Verft to construct a polar ice class vessel, the

National Geographic Endurance,

with a total purchase price of

1,066.0

million NOK. Subsequently, the Company exercised its right to make payments in United States Dollars, which resulted in a purchase price of

$134.6

million, including hedging costs. The purchase price is subject to potential adjustments from contract specifications for variations in speed, dead weight, fuel consumption and delivery date, and is due in installments. The

first

twenty

percent of the purchase price was paid shortly after execution of the agreement with the remaining

eighty

percent due upon delivery and acceptance of the vessel. The vessel is targeted to be delivered in

January 2020.

During

February 2019,

the Company entered into an agreement with Ulstein Verft, to construct a

second

polar ice class vessel, a sister ship of the

National Geographic Endurance

, with a total purchase price of

1,291.0

million NOK. The purchase price is subject to potential adjustments from contract specifications for variations in speed, dead weight, fuel consumption and delivery date. The purchase price is due in installments, with the

first

20%

paid shortly after execution of the agreement,

50%

to be paid over the duration of the build and the final

30%

due upon delivery and acceptance of the vessel. The vessel is targeted to be delivered in

September

2021.

During

March 2019,

the Company entered into foreign exchange forward contracts to lock in a purchase price for the

second

polar ice class vessel of

$153.5

million, subject to potential contract specification adjustments.

Royalty Agreement – National Geographic

The Company is party to an alliance and license agreement with National Geographic, which allows the Company to use the National Geographic name and logo. In return for these rights, the Company is charged a royalty fee. The royalty fee is included within selling and marketing expense on the accompanying condensed consolidated statements of income. The amount is calculated based upon a percentage of certain ticket revenues less travel agent commission, including the revenues received from cancellation fees and any revenues received from the sale of pre- and post-expedition extensions. A pre- and post-expedition extension occurs when a guest extends his or her trip with pre- or post-voyage hotel nights. Royalty expense was

$1.8

million and

$3.3

million, for the

three

and

six

months ended

June

30,

2019,

respectively, and

$1.3

million and

$2.1

million, for the

three

and

six

months ended

June

30,

2018,

respectively.

The royalty balance outstanding to National Geographic as of

June

30,

2019

and

December 31, 2018

was

$1.4

million and

$1.0

million, respectively, and are included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets.

Royalty Agreement – World Wildlife Fund

Natural Habitat has a license agreement with WWF, which allows it to use the WWF name and logo. In return for these rights, Natural Habitat is charged a royalty fee and a fee based on annual gross sales. The fees are included within selling and marketing expense on the accompanying condensed consolidated statements of income. This royalty fee expense was

$0.2

million and

$0.4

million for the

three

and

six

months ended

June

30,

2019,

respectively, and

$0.1

million and

$0.3

million for the

three

and

six

months ended

June 30, 2018,

respectively.

Charter Commitments

From time to time, the Company enters into agreements to charter vessels onto which it holds its tours and expeditions. Future minimum payments on its charter agreements as of

June 30, 2019

are as follows:

Charter Commitments
For the years ended December 31,	Amount
(In thousands)	(unaudited)
2019 (six months)	$	4,230
2020		11,215
2021		2,765
2022		1,850
Total	$	20,060

Legal Proceedings

From time to time, the Company is party to litigation and regulatory matters and claims. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability will be incurred and the amount or range of the loss can be reasonably estimated. The results of complex proceedings and reviews are difficult to predict and the Company’s view of these matters

may

change in the future as events related thereto unfold. An unfavorable outcome to any legal or regulatory matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations.